As filed with the Securities and Exchange Commission on September 8, 1999 Registration No. 333-67389 ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Amendment No. 2 to Form S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Mrs. Fields' Great American The Mrs. Pretzelmaker Pretzel Time, Original Cookie Company, Fields' Brand, Holdings, Inc. Inc. Cookies, Inc. Inc. Inc. (Exact name of (Exact name (Exact name of (Exact name of (Exact name of Registrant as of Registrant Registrant as Registrant as Registrant as specified in as specified in specified in specified in its charter) specified in its charter) its charter) its charter) its charter) DELAWARE DELAWARE DELAWARE DELAWARE (State or other DELAWARE (State or other (State or other (State or other jurisdiction of (State or jurisdiction of jurisdiction of jurisdiction of incorporation other incorporation incorporation incorporation or jurisdiction or or or organization) of organization) organization) organization) incorporation or organization) 6749 6749 6749 6749 (Primary Standard Industrial (Primary (Primary (Primary Standard Standard Standard 6749 Industrial Industrial Industrial Classification (Primary Classification Classification Classification Code Number) Standard Code Number) Code Number) Code Number) Industrial Classification Code Number) 84-1298591 87-0552899 58-1295221 87-0563472 (I.R.S. Employer (I.R.S. (I.R.S. (I.R.S. Employer Employer Employer Identification 87-0499982 Identification Identification Identification No.) (I.R.S. No.) No.) No.) Employer Identification No.) 2855 East 2855 East 2855 East 2855 East Cottonwood Cottonwood Cottonwood Cottonwood Parkway, Parkway, Parkway, Parkway, Suite 400, Salt 2855 East Suite 400, Salt Suite 400, Salt Suite 400, Salt Lake City, Cottonwood Lake City, Lake City, Lake City, Utah 84121 Parkway, Utah 84121 Utah 84121 Utah 84121 (801) 736-5600 Suite 400, (801) 736-5600 (801) 736-5600 (801) 736-5600 (Address, Salt Lake (Address, (Address, (Address, including zip City, including zip including zip including zip code and Utah 84121 code and code and code and telephone (801) 736- telephone telephone telephone number, 5600 number, number, number, including area (Address, including area including including area code, of including zip code, area code, of code, of Registrant's code and of Registrant's Registrant's Registrant's principal telephone principal principal principal executive number, executive executive executive offices) including offices) offices) offices) area code, of Registrant's principal executive offices) Michael Ward, Michael Ward, Michael Ward, Michael Ward, Esq. Esq. Esq. Esq. Pretzelmaker Great American The Mrs. Holdings, Inc. Vice President, Cookie Company, Fields' Brand, General Counsel Inc. Inc. 2855 East Cottonwood Michael Ward, Mrs. Fields' 2855 East 2855 East Parkway, Esq. Original Cottonwood Cottonwood Suite 400, Salt Pretzel Time, Cookies, Inc. Parkway, Parkway, Lake City, Inc. 2855 East Suite 400, Salt Suite 400, Salt Utah 84121 2855 East Cottonwood Lake City, Lake City, (801) 736-5600 Cottonwood Parkway, Utah 84121 Utah 84121 (Name, address, Parkway, Suite 400, Salt (801) 736-5600 (801) 736-5600 including zip Suite 400, Lake City, (Name, address, (Name, address, code, and Salt Lake Utah 84121 including zip including zip telephone City, (801) 736-5600 code, and code, and number, Utah 84121 (Name, address, telephone telephone including area (801) 736- including zip number, number, code, of 5600 code, and including area including area agents for (Name, telephone code, code, of service) address, number, of agents for agents for including zip including area service) service) code, and code, of agents telephone for service) number, including area code, of agents for service) copies to: Randall H. Doud, Esq. Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, New York 10022 (212) 735-3000 -------------- Approximate Date of Commencement of Proposed Sale to the Public: -------------- As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] CALCULATION OF REGISTRATION FEE ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- <TABLE> <CAPTION> Proposed Proposed Amount maximum maximum Amount of Title of each class of to be offering price aggregate registration securities to be registered registered per unit offering price fee ----------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> The Mrs. Fields' Brand, Inc. Guarantee with respect to 10 1/8% Series B Senior Notes due 2004 ----------------------------------------------------------------------------------------------------------- Great American Cookie Company, Inc. Guarantee with respect to 10 1/8% Series B Senior Notes due 2004 ----------------------------------------------------------------------------------------------------------- Pretzelmaker Holdings, Inc. Guarantee with re- spect to 10 1/8% Series B Senior Notes due 2004 ----------------------------------------------------------------------------------------------------------- Pretzel Time, Inc. Guarantee with respect to 10 1/8% Series B Senior Notes due 2004 </TABLE> ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- -------------- The Registrants hereby amend this registration statement on such date or dates as may be necessary to delay its effective date until the Registrants shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. ------------------------------------------------------------------------------- -------------------------------------------------------------------------------

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +The information in this prospectus is not complete and may be changed. We may + +not sell these securities until the registration statement filed with the + +Securities and Exchange Commission is effective. This prospectus is not an + +offer to sell these securities and is not soliciting an offer to buy these + +securities in any state where the offer or sale is prohibited. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ MRS. FIELDS' ORIGINAL COOKIES, INC. PROSPECTUS (Subject to completion) , 1999 Exchange Offer for $53,725,000 10 1/8% Series B Senior Notes due 2004 Guaranteed by The Mrs. Fields' Brand, Inc. Great American Cookie Company, Inc. Pretzelmaker Holdings, Inc. and Pretzel Time, Inc. Terms of the Exchange Offer <TABLE> <S> <C> . Expires 12:00 midnight, . The notes mature on New York City time, December 1, 2004, and pay , 1999, unless interest on June 1 and extended. December 1 of each year, beginning on June 1, . Not subject to any 1999. condition other than that the exchange offer not . We will not receive any violate applicable law or proceeds from the any interpretation of the exchange offer. staff of the Securities and Exchange Commission. . The exchange of notes will not be a taxable . We can amend or terminate exchange for U.S. income the exchange offer. tax purposes. . We will exchange all . The terms of the notes to outstanding notes that be issued are identical are validly tendered and to those of the not validly withdrawn. outstanding notes, except for transfer restrictions . You may withdraw tendered and registration rights. outstanding notes any time before the expiration of the exchange offer. . The notes are senior unsecured debt and are guaranteed. The guarantees are senior general unsecured obligations of the guarantors. </TABLE> For a discussion of specific risks that you should consider before tendering your outstanding notes in the exchange offer, see "Risk Factors" beginning on page 13. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. , 1999

TABLE OF CONTENTS <TABLE> <CAPTION> Page ---- <S> <C> Prospectus Summary....................................................... 4 Summary Historical and Pro Forma Financial and Store Data................ 10 Risk Factors............................................................. 13 Forward-Looking Information.............................................. 23 The Transactions......................................................... 24 Recent Developments...................................................... 26 Use of Proceeds.......................................................... 26 Capitalization........................................................... 27 The Exchange Offer....................................................... 28 Selected Historical Financial Data....................................... 35 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 38 Where You Can Find More Information...................................... 61 Business................................................................. 62 Management............................................................... 76 Beneficial Ownership of Capital Stock.................................... 81 Certain Relationships and Related Transactions........................... 82 Description of Notes..................................................... 85 Description of Certain Indebtedness...................................... 117 Plan of Distribution..................................................... 117 United States Federal Income Tax Considerations.......................... 119 Legal Matters............................................................ 119 Experts.................................................................. 119 Unaudited Pro Forma Condensed Combined Financial Statements.............. P-1 Index to Historical Financial Statements................................. F-1 </TABLE> ---------------- The registrant's principal executive offices are located at 2855 East Cottonwood Parkway, Suite 400, Salt Lake City, Utah 84121, and their telephone number is (801) 736-5600. You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus or incorporated by reference in this prospectus. We are not making offers to exchange notes in the exchange offer or soliciting offers to exchange outstanding notes in any jurisdiction in which an offer or solicitation is not authorized or in which the person making an offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make an offer or solicitation. 3

PROSPECTUS SUMMARY The following summary highlights selected information from this prospectus and may not contain all of the information that is important to you. This prospectus contains specific terms of the notes we are offering, as well as information regarding our business and detailed financial data. We encourage you to read this prospectus in its entirety. The Exchange Offer Registration Rights Holders of 10 1/8% Series C Senior Notes due 2004 are Agreement.............. entitled to exchange their notes for Series B registered notes with substantially identical terms. The exchange offer is intended to satisfy these rights. After the exchange offer is complete, you will no longer be entitled to any exchange or registration rights with respect to your notes. We are also making the exchange offer available to holders of Series A 10 1/8% Senior Notes due 2004. The Exchange Offer...... We are offering to exchange $1,000 principal amount of 10 1/8% Series B Senior Notes due 2004 of Mrs. Fields' Original Cookies, Inc. which have been registered under the Securities Act, for each $1,000 principal amount of our 10 1/8% Series A Senior Notes due 2004 issued in November 1997 and 10 1/8% Series C Senior Notes due 2004 issued in August 1998. The outstanding notes were issued in private offerings. The registered notes will have guarantees that are identical in all material respects to the guarantees on the unregistered notes. All outstanding notes that are validly tendered and not validly withdrawn will be exchanged. As of this date there are $53,725,000 of outstanding notes that are eligible to be exchanged in the exchange offer. We will issue notes registered under the Securities Act on or promptly after the expiration of the exchange offer. Resales................. We believe that you can offer for resale, resell and otherwise transfer the notes issued in the exchange offer without complying with the registration and prospectus delivery requirements of the Securities Act if: . you acquire the notes in the ordinary course of your business; . you are not participating, do not intend to participate, and have no arrangement or understanding with any person to participate, in the distribution of the notes; . you are not an "affiliate" of ours, as defined in Rule 405 of the Securities Act. If any of these conditions is not satisfied and you transfer any new notes without delivering a proper prospectus or without qualifying for a registration exemption, you may incur liability under the Securities Act. We do not assume or indemnify you against this liability. 4

Each broker-dealer acquiring notes issued in the exchange offer for its own account in exchange for outstanding notes, which it acquired through market- making or other trading activities, must acknowledge that it will deliver a proper prospectus when any notes issued in the exchange offer are transferred. A broker-dealer may use this prospectus for an offer to resell, a resale or other retransfer of the notes issued in the exchange offer. Expiration Date.... The exchange offer will expire at 12:00 midnight, New York City time, on , 1999, unless we decide to extend the expiration date. Conditions to the Exchange Offer.... The exchange offer is subject to customary conditions, some of which we may waive. Procedures for Tendering Notes Held in the Form of Book-Entry Interests... Most of the outstanding notes were issued as global securities and were deposited upon issuance with The Bank of New York. The Bank of New York issued certificateless depositary interests in those outstanding notes, which represents a 100% interest in those notes, to The Depository Trust Company. Beneficial interests in the outstanding notes, which are held by direct or indirect participants in The Depository Trust Company through the certificateless depositary interests, are shown on, and transfers of the notes can be made only through, records maintained in book-entry form by The Depository Trust Company. You may tender your outstanding notes: . through a computer-generated message transmitted by The Depository Trust Company's Automated Tender Offer Program system and received by the exchange agent and forming a part of a confirmation of book- entry transfer in which you acknowledge and agree to be bound by the terms of the letter of transmittal; or . by sending a properly completed and signed letter of transmittal, which accompanies this prospectus, and other documents required by the letter of transmittal, or a facsimile of the letter of transmittal and other required documents, to the exchange agent at the address on the cover page of the letter of transmittal; and either: . a timely confirmation of book-entry transfer of your outstanding notes into the exchange agent's account at The Depository Trust Company, under the procedure for book-entry transfers described in this prospectus under the heading "The Exchange Offer--Book Entry Transfers" must be received by the exchange agent on or before the expiration date; or . the documents necessary for compliance with the guaranteed delivery described in "The Exchange Offer--Guaranteed Delivery Procedures" must be received by the exchange agent. 5

Procedures for Tendering Notes Held in the Form of Registered Notes....... If you hold registered notes, you must tender your registered notes by sending a properly completed and signed letter of transmittal, together with other documents required by it, and your certificates, to the exchange agent, in accordance with the procedures described in this prospectus under the heading "The Exchange Offer--Procedures for Tendering Notes." Withdrawal Rights....... You may withdraw your tender of outstanding notes at any time prior to 12:00 midnight, , 1999. United States Federal Income Tax Considerations......... The exchange offer should not result in any income, gain or loss to the holders or Mrs. Fields for United States federal income tax purposes. See "United States Federal Income Tax Considerations." Use of Proceeds......... We will not receive any proceeds from the issuance of notes in the exchange offer. The proceeds from the offering of notes in August 1998 were used to finance the acquisition of Great American Cookie Company, Inc., other acquisitions, and a tender offer for outstanding Great American notes. Exchange Agent.......... The Bank of New York is serving as the exchange agent for the exchange offer. Shelf Registration Statement.............. In limited circumstances, holders of notes may require us to register their notes under a shelf registration statement. 6

The Company Overview Mrs. Fields is one of the largest retailers in the premium snack-food industry, with cookies and pretzels as its major product lines. Based on numbers of retail units, Mrs. Fields is the largest retailer of baked on- premises cookies and the second largest retailer of baked on-premises pretzels in the United States. Mrs. Fields is one of the most widely recognized and respected brand names in the premium cookie industry. Mrs. Fields has recently developed a significant presence in the rapidly growing, health-oriented pretzel market. Mrs. Fields operates and franchises stores located predominantly in shopping malls, and also licenses kiosks and carts at airports, universities, stadiums, hospitals and office building lobbies. How We Have Done For the 52 weeks ended January 2, 1999, Mrs. Fields generated pro forma net revenue and EBITDA of $191.2 million and $20.7 million, respectively. Actual net revenue and EBITDA for the 53 weeks ended January 3, 1998 was $134 million and $18.8 million, respectively. Mrs. Fields generated pro forma net revenue and EBITDA of $92,640 and $10,334, respectively, during the 26 weeks ended July 4, 1998 and actual net revenue and EBITDA of $84,165 and $10,318, respectively, during the 26 weeks ended July 3, 1999. EBITDA consists of earnings before depreciation, amortization, interest, income taxes, minority interest, preferred stock accretion and dividends of subsidiaries and other income or expense. Pro Forma Information Pro forma information is not indicative of actual results and may not be indicative of future results. We have presented pro forma information throughout this prospectus, however, because we believe that the changes to our business since 1996 make the pro forma information more meaningful to you. Our condensed pro forma combined statements of operations data in this prospectus give effect to: 1. our offering of notes in August 1998 2. the acquisitions of Great American and the capital stock and stores of some Great American franchisees, 3. an offering of units consisting of notes and warrants to purchase common stock by Mrs. Fields' Holding Company, Inc., the parent company of Mrs. Fields, and a capital contribution from Mrs. Fields' Holding to Mrs. Fields and 4. the acquisitions of the capital stock of Pretzelmaker Holdings Inc., and Cookie Conglomerate Inc. as if all of these transactions had occurred on January 4, 1998. Our Strategy Our objective is to increase sales and profitability by focusing on continuing company-owned stores. An additional objective is to increase sales and profitability at both our continuing company-owned and franchised stores in prime locations by implementing the key elements of our long-term business strategy. The key elements of our business strategy are as follows: . Enhance Quality of Company-Owned Store Base. . Improve Productivity of Continuing Company-Owned Stores. . Capitalize on the Strong Mrs. Fields Brand Name. . Develop the Great American Brand Name. . Capitalize on the Strong Pretzel Time Brand Name. . Develop New Company-Owned and Franchised Stores, including Internationally. . Realize Purchasing and Overhead Cost Savings As a Result of Recent Acquisitions. . Pursue Further Strategic Acquisitions of Related Businesses. 7

SUMMARY DESCRIPTION OF NOTES The form and terms of the notes to be issued in the exchange offer are the same as the form and terms of the outstanding notes except that the notes to be issued in the exchange offer have been registered under the Securities Act and, therefore, will not bear legends restricting their transfer and will not contain the registration rights and liquidated damages provisions contained in the outstanding notes. The notes issued in the exchange offer will evidence the same debt as the outstanding notes and both the outstanding notes and the notes to be issued in the exchange offer are governed by the same indenture. Aggregate Amount ....... $53,725,000 in principal amount of 10 1/8% Series B Senior Notes due 2004 of Mrs. Fields' Original Cookies, Inc. Maturity Date........... December 1, 2004. Interest Payment June 1 and December 1 of each year, commencing June Dates.................. 1, 1999. Guarantee............... The notes issued in the exchange offer will be guaranteed by our wholly owned subsidiaries, The Mrs. Fields' Brand, Inc., Great American Cookie Company, Inc., Pretzelmaker Holdings, Inc. and Pretzel Time, Inc. The guarantees: . will be identical in all material respects to the guarantees on the outstanding notes . are general unsecured obligations of the guarantors . rank senior in right of payment to all subordinated indebtedness of the guarantors . rank equal in right of payment with all existing and future senior indebtedness of the guarantors Our existing and future subsidiaries may also become guarantors in the future. You should read "Description of Notes--the Guarantees." Ranking................. The notes being issued in the exchange offer: . are general unsecured obligations of Mrs. Fields . rank senior in right of payment to all subordinated indebtedness of Mrs. Fields . rank equal in right of payment with all existing and future senior indebtedness of Mrs. Fields As of July 3, 1999, we had no indebtedness that ranked equal in right of payment with the notes that we will issue in the exchange offer. The notes that we will issue will be effectively subordinated to: . all secured debt of Mrs. Fields, . all secured debt of the guarantors, and . all debt of our subsidiaries that are not guarantors of the notes 8

We and our guarantors together currently have $11.6 million of debt that effectively ranks senior to the notes. Optional Redemption..... At our option, we may redeem the notes at any time on or after December 1, 2001. In addition, at any time before November 20, 2001, we may redeem up to 35% of the total principal amount of notes ever issued under the indenture with the net cash proceeds of one or more equity offerings to the public. Our optional redemption prices for the notes are contained in this prospectus under the heading "Description of Notes-- Optional Redemption." Change of Control....... Upon the occurrence of a change of control of ownership of the stock or assets of Mrs. Fields, the holders of notes have the right to require us to repurchase their notes at a purchase price equal to 101% of their total principal amount on the date of purchase, plus accrued interest to the date of repurchase. For more information, see "Description of Notes--Repurchase at the Option of Holders--Change of Control." Certain Covenants....... The indenture under which the outstanding notes have been and the new notes will be issued contains certain covenants that, among other things and subject to exceptions, restrict our ability to: . pay dividends . redeem capital stock . make restricted payments or investments . incur additional indebtedness . issue preferred equity interests . merge, consolidate or sell all or substantially all of our assets . create liens on assets . sell assets . enter into transactions with affiliates or related persons. All of these limitations and prohibitions are subject to a number of important qualifications and exceptions. For more information, see "Description of Notes--Certain Covenants." Form of Notes Issued in the Exchange Offer .... The notes issued in the exchange offer with respect to notes currently represented by global securities will be represented by one or more permanent global securities in bearer form deposited with The Bank of New York, as book-entry depositary, for the benefit of The Depository Trust Company. Notes that are issued in the exchange offer that have been exchanged for notes in the form of registered definitive certificates will be issued in the form of registered definitive certificates until holders direct otherwise. For more information, see "Description of Notes--Book-Entry, Delivery and Form." 9

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND STORE DATA The following table presents: (1) summary historical financial and store data for Mrs. Fields and its predecessors; namely, Mrs. Fields Inc. and subsidiaries, The Original Cookie Company, Incorporated and the pretzel business of Hot Sam Company, Inc., as of December 28, 1996 and for the 52-weeks then ended; (2) summary consolidated historical financial and store data for Mrs. Fields as of January 3, 1998 and January 2, 1999 and for the 53 weeks ended January 3, 1998, the 52 weeks ended January 2, 1999 and the 26 weeks ended July 4, 1998 and July 3, 1999; and (3) summary combined pro forma financial and store data for Mrs. Fields, Great American, Deblan, Chocolate Chip, the eight Great American stores purchased from a Great American franchisee, Cookie Conglomerate and Pretzelmaker for the 52 weeks ended January 2, 1999 as if each of the following had occurred as of January 4, 1998: . the Mrs. Fields' offering in August 1998, . the acquisition of Great American, . the acquisition of the stock of two Great American franchisees, . the acquisition of eight Great American stores, . the tender offer for outstanding Great American notes, . the offering of units consisting of notes and warrants of Mrs. Fields' Holding and the capital contribution of the net proceeds from the units offering to Mrs. Fields in August 1998, . and the acquisitions of Cookie Conglomerate and Pretzelmaker The summary combined pro forma data do not purport to represent what Mrs. Fields' results actually would have been had the above mentioned transactions occurred as of January 4, 1998 nor do these data purport to project the results of Mrs. Fields for any future period. The summary historical and pro forma financial and store data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," the "Unaudited Pro Forma Condensed Combined Financial Statements," "Selected Historical Financial Data," and the historical financial statements and related notes, contained elsewhere in this Registration Statement. The following information will also assist you in understanding the Mrs. Fields and predecessors historical combined financial and store data: . On September 17, 1996, Mrs. Fields completed the acquisitions of substantially all of the assets and assumed certain liabilities of the predecessors. . The historical combined data for the 52 weeks ended December 28, 1996 reflects the combined results of the predecessors (for the period December 31, 1995 through September 17, 1996) and Mrs. Fields (for the period September 18, 1996 through December 28, 1996). Information for these periods for the predecessors and Mrs. Fields are set out separately in the "Selected Historical Financial Data" but are combined here. This presentation is not in conformity with generally accepted accounting principles. . In order for the data to be comparable for the periods presented, some of the statements of operations data for the predecessors has been reclassified to be consistent with the Mrs. Fields historical financial statement presentation. 10

<TABLE> <CAPTION> Mrs. Fields and Predecessors Mrs. Fields ---------------- -------------------------------------------------------------- Historical Historical Historical Pro Forma Historical Historical Combined Consolidated Consolidated Combined Consolidated Consolidated ---------------- ------------ ------------ --------- ------------ ------------ 52 Weeks 53 Weeks Ended Ended 52 Weeks Ended 26 Weeks Ended December January January January July 4, July 3, 28, 1996 3, 1998 2, 1999 2, 1999 1998 1999 ---------------- ------------ ------------ --------- ------------ ------------ (Dollars in thousands) <S> <C> <C> <C> <C> <C> <C> Statement of Operations Data: Net store and food sales.................. $126,330 $127,845 $140,235 $171,689 $ 58,687 $ 71,915 Net store and food contribution(1)........ 19,308 25,044 20,166 21,015 6,915 8,686 Franchising and licensing, net......... 5,103 6,563 14,001 19,557 2,971 11,562 General and administrative expenses............... 20,557 16,192 19,017 26,488 8,587 10,873 Store closure provision.............. -- 538 7,303 7,303 -- -- Income (loss) from operations............. 1,135 8,415 (5,389) (4,909) (1,536) (945) Net loss................ (5,988) (974) (19,143) (22,471) (7,301) (10,099) Other Data: Cash flows from operating activities... 6,784 919 9,429 8,967 (3,306) 2,708 Cash flows from investing activities... (22,716) (15,505) (40,894) (41,260) (4,270) (2,704) Cash flows from financing activities... 18,793 24,164 19,929 18,853 (445) (110) Interest expense........ 4,842 7,830 13,197 17,123 5,626 8,686 Total depreciation and amortization........... 9,192 10,403 19,820 25,582 6,197 11,263 Capital expenditures.... 3,892 4,678 8,235 N/A 3,342 2,604 EBITDA(2)............... 10,327 18,818 14,431 20,673 4,661 10,318 Negative store contribution for stores in the process of being closed or franchised(1).......... $ (1,933) $ (1,798) $ (2,054) $ (2,284) $ (1,605) $ (863) Ratio of earnings to fixed charges(3)....... -- -- -- -- -- -- Store Data: Percentage change in comparable store sales(4)............... (1.2)% 0.6% (1.6)% NA (1.5)% (0.4)% Total company-owned stores open at end of period................. 482 481 566 566 470 492 Total franchised or licensed stores open at end of period.......... 418 553 972 972 554 1,001 </TABLE> <TABLE> <CAPTION> Mrs. Fields Historical Consolidated July 3, 1999 ---------------------- (Dollars in thousands) <S> <C> Balance Sheet Data: Cash and cash equivalents.............................. $ 4,645 Total assets........................................... 219,313 Mandatorily redeemable cumulative preferred stock of subsidiary............................................ 1,440 Total line of credit, debt and capital lease obligations, including current portion................ 151,026 Total stockholder's equity............................. 32,579 </TABLE> See footnotes on following page 11

<TABLE> <CAPTION> Mrs. Fields and Predecessors Mrs. Fields ---------------- ------------------------------------------------------------- Historical Historical Historical Pro Forma Historical Historical Combined Consolidated Consolidated Combined Consolidated Consolidated ---------------- ------------ ------------ --------- ------------ ------------ 52 Weeks 53 Weeks Ended Ended 52 Weeks Ended 26 Weeks Ended December January January January July 4, July 3, 28, 1996 3, 1998 2, 1999 2, 1999 1998 1999 EBITDA Data: ---------------- ------------ ------------ --------- ------------ ------------ <S> <C> <C> <C> <C> <C> <C> (Dollars in thousands) Income (loss) from operations............. $ 1,135 $ 8,415 $(5,389) $(4,909) $(1,536) $ (945) ADD: Depreciation and amortization.......... 9,192 10,403 19,820 25,582 6,197 11,263 ------- ------- ------- ------- ------- ------- EBITDA................. $10,327 $18,818 $14,431 $20,673 $ 4,661 $10,318 ======= ======= ======= ======= ======= ======= </TABLE> -------- (1) Store contribution is determined by subtracting all store operating expenses including depreciation from net store sales. Management uses store contribution information to measure operating performance at the store level. Store contribution for stores in the process of being closed or franchised as a separate caption is not in accordance with generally accepted accounting principles. Store contribution may not be comparable to other similarly titled measures. (2) EBITDA consists of earnings before depreciation, amortization, interest, income taxes, minority interest, preferred stock accretion and dividends of subsidiaries and other income or expense. EBITDA is not intended to represent cash flows from operations as defined by generally accepted accounting principles and should not be considered as an alternative to net income (loss) as an indicator of operating performance or to cash flows as a measure of liquidity. EBITDA has been included in this prospectus because it is one of the indicators by which Mrs. Fields assesses its financial performance and its capacity to service its debt. (3) For purposes of computing the ratio of earnings to fixed charges, earnings consist of income before income taxes plus fixed charges. Fixed charges consist of interest expense on all indebtedness (whether paid or accrued and net of debt premium amortization), including the amortization of debt issuance costs and original issue discount, noncash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with capital lease obligations, letter of credit commissions, fees or discounts and the product of all dividends and accretion on mandatorily redeemable cumulative preferred stock multiplied by a fraction, the numerator of which is one and the denominator of which is one minus the current combined federal, state and local statutory tax rate. For fiscal year 1996, earnings were insufficient to cover fixed charges by $3,985,000. For the 53 weeks ended January 3, 1998 and the 52 weeks ended January 2, 1999, Mrs. Fields' earnings were insufficient to cover fixed charges by $319,000 and $18,827,000, respectively. For the 26 weeks ended July 4, 1998 and July 3, 1999 earnings were insufficient to cover fixed charges by $7,287,000 and $9,889,000, respectively. For the 52 weeks ended January 2, 1999, pro forma combined earnings were insufficient to cover pro forma combined fixed charges by $22,565,000. (4) Mrs. Fields includes in comparable store sales only those stores that have been in operation for a minimum of 24 consecutive months. The percentage change in comparable store sales is calculated from the previous period. 12

RISK FACTORS You should consider carefully all of the information in this prospectus, including the following risk factors and warnings, before deciding whether to exchange your outstanding notes for the notes to be issued in the exchange offer. Except for the first three risk factors described below, the risks factors generally apply to the outstanding notes as well as to the notes to be issued. You may have difficulty selling the notes which you do not exchange, since outstanding notes will continue to have restrictions on transfer and cannot be sold without registration under securities laws or exemptions from registration If a large number of outstanding notes are exchanged for notes issued in the exchange offer, it may be difficult for holders of outstanding notes that are not exchanged in the exchange offer to sell the notes, since those notes may not be offered or sold unless they are registered or there are exemptions from registration requirements under the Securities Act or state laws that apply to them. In addition, if there are only a small number of notes outstanding, there may not be a very liquid market in those old notes. There may be few investors that will purchase unregistered securities in which there is not a liquid market. See "The Exchange Offer--Consequences of Failure to Exchange Notes." In addition, if you do not tender your outstanding notes or if we do not accept some outstanding notes, those notes will continue to be subject to the transfer and exchange provisions of the indenture and the existing transfer restrictions of the outstanding notes that are described in the legend on such notes and in the offering circulars relating to the outstanding notes. If you do not exchange your outstanding notes in the exchange offer, you will no longer be entitled to an increase in interest payments on outstanding notes that the indenture provides for if we fail to complete the exchange offer Once the exchange offer has been completed, holders of outstanding 10 1/8% Series C Senior Notes due 2004 will not be entitled to any increase in the interest rate on their notes, which the indenture provides for if we fail to complete the exchange offer. Holders of outstanding notes will not have any further rights to have their outstanding notes registered, except in limited circumstances, once the exchange offer is completed. Holders of other outstanding notes are not entitled to any increase in the interest rate on their notes, regardless of whether the exchange offer is completed. If you exchange your outstanding notes, you may not be able to resell the notes you receive in the exchange offer without registering them and delivering a prospectus You may not be able to resell notes you receive in the exchange offer without registering those notes or delivering a prospectus. Based on interpretations by the Commission in no-action letters, we believe, with respect to notes issued in the exchange offer, that: . holders who are not "affiliates" of Mrs. Fields within the meaning of Rule 405 of the Securities Act, . holders who acquire their notes in the ordinary course of business, and . holders who do not engage in, intend to engage in, or have arrangements to participate in a distribution (within the meaning of the Securities Act) of the notes do not have to comply with the registration and prospectus delivery requirements of the Securities Act. Holders described in the preceding sentence must tell us in writing at our request that they meet these criteria. Holders that do not meet these criteria could not rely on interpretations of the Commission in no-action letters, and would have to register the notes they receive in the exchange offer and deliver a prospectus for them. In addition, holders that are broker-dealers may be deemed "underwriters" within the meaning of the Securities Act in connection with any resale of notes acquired in the exchange offer. Holders that are broker-dealers must acknowledge that they acquired their outstanding notes in market-making activities or other 13

trading activities and must deliver a prospectus when they resell the notes they acquire in the exchange offer in order not to be deemed an underwriter. You should review the more detailed discussion in "The Exchange Offer-- Procedures for Tendering Notes and Consequences of Exchanging Outstanding Notes." We have substantial debt, which could adversely affect our financial results and prevent us from fulfilling our debt obligations, including those under the notes We incurred a substantial amount of debt to finance the purchase of Great American and the other companies and assets we acquired. We continue to have a substantial amount of debt. Our substantial indebtedness could have important consequences to you. For example: . we may not be able to satisfy our obligations with respect to the notes; . a substantial portion of our cash flows from operations will be required to be dedicated to debt service and will not be available for other purposes; . our ability to obtain additional financing in the future could be limited; . the indenture contains financial and restrictive covenants that limit our ability to, among other things, borrow additional funds, dispose of assets or pay cash dividends. If we do not comply with these covenants, there could be an event of default, which, if not cured or waived, could have a material adverse effect on us; and . the amount of debt that we have could prevent us from repurchasing all the notes tendered to us upon the occurrence of a change of control of our stock or assets. See "Description of Notes--Repurchase at the Option of Holders--Change of Control." The following chart shows important credit statistics: <TABLE> <CAPTION> At July 3, 1999 ------------ <S> <C> Total indebtedness of Mrs. Fields and subsidiaries............. $151 million </TABLE> Of this indebtedness, $11.6 million was senior to the notes. The number includes liabilities for leases of $1.7 million and preferred stock required to be repurchased at a future date of $1.4 million outstanding, together representing 1.4% of our total liabilities and equity. Substantially all of our subsidiaries' debt is effectively senior to the notes. <TABLE> <S> <C> Stockholders' equity.......................................... $ 32.6 million Debt to equity ratio.......................................... 4.6 to 1 </TABLE> Moreover, in recent periods our earnings have not been sufficient to cover our fixed charges. <TABLE> <CAPTION> 26 weeks ended July 3, 1999 -------------- <S> <C> Approximate deficiency in earnings to fixed charges presented on a combined basis............................. $ 9.9 million </TABLE> Additional borrowings available--despite current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt; this could further exacerbate the risks described above Although the indenture and our existing credit agreement with LaSalle National Bank limits our ability and that of our subsidiaries to incur additional indebtedness and issue preferred stock, including secured 14

indebtedness, we can incur additional indebtedness and issue preferred stock. This can include secured indebtedness, which effectively ranks senior to the notes with respect to the assets securing indebtedness. See "Unaudited Pro Forma Condensed Combined Financial Statements," and "Description of Notes-- Certain Covenants." We currently plan to incur additional debt for working capital purposes, which will be effectively senior to the notes. Ability to service debt--to service our debt, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control Our ability to make scheduled payments of principal, or to pay interest on, or to refinance our indebtedness, including the notes, depends on our future performance. In turn, our future performance depends partly on general economic, financial, competitive, legislative, regulatory and other factors beyond our control. These include possible legislation and regulations affecting franchise businesses or retail food businesses and minimum wage legislation that affects businesses like ours that rely heavily on minimum-wage employees, demographic or economic trends that could affect mall traffic that our business depends on, and food retailing trends, which could include declining interest in products that are perceived as less healthful. We cannot be sure that our business will generate enough cash flows from operations or that future borrowings will be available in an amount that will allow us to pay principal and interest on our indebtedness, including the notes, or to make necessary capital expenditures, or to allow us to obtain refinancing on commercially reasonable terms or at all. In particular, the fact that we have incurred substantial debt in recent years, coupled with the highly seasonal nature of our business, creates a particular risk that large interest payments will come due at a time when the cash flow from our business will not cover them. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." The notes are effectively subordinated to the debt of our credit agreement We entered into an Amended and Restated Loan Agreement, as amended, dated as of February 28, 1998, with LaSalle National Bank for $15.0 million under which we pledged substantially all of our assets as security for amounts that we may borrow under the agreement, including all of the capital stock of Great American, Mrs. Fields' Brand, Pretzelmaker and Pretzel Time. As a result of the pledge, the notes are effectively subordinated to our obligations under the agreement with respect to our assets, including proceeds from those assets. If there is a default on the notes, or we go into bankruptcy, liquidation or reorganization, we would have to use our assets to make payments under the agreement (or any successor or additional financing) before we could use the assets to make payments on the notes. If there is not enough collateral granted under the agreement with LaSalle National Bank (or any successor or additional financing) to pay amounts owing under the agreement, LaSalle National Bank would be entitled to share any amount available for payment with you and other of our creditors. Currently our agreement with LaSalle National Bank would permit borrowing of up to $15.0 million, subject to certain debt incurrence limitation ratios, and all of those borrowings, since they are secured, would be effectively senior to the notes and the guarantees. See "Description of Certain Indebtedness." A default under our credit agreement could cause a default under the notes The agreement with LaSalle National Bank contains restrictive covenants similar to those in the indenture, requiring us to comply with financial ratios. If we are not able to comply with these and other provisions of the agreement because of events beyond our control, there could be a default under the agreement, as a result of which LaSalle National Bank could elect to declare all amounts borrowed under the agreement, together with accrued interest, to be due and payable. If we are unable to repay those borrowings, LaSalle National Bank could proceed against the assets that we have pledged. The acceleration of indebtedness under the agreement with LaSalle National Bank may constitute an event of default under the notes which could also give rise to an acceleration under the notes. If the indebtedness under the agreement is accelerated as a result of a breach of a covenant, we cannot be sure that we would have enough assets to repay in full that indebtedness and our other 15

indebtedness, including the notes, or that we could continue to operate our business as a result of the acceleration. Great American, Mrs. Fields' Brand, Pretzelmaker and Pretzel Time have guaranteed amounts under the agreement with LaSalle National Bank as well as the notes, and we cannot be sure that their guarantees would be sufficient for both sets of obligations. We may not be able to extend or renew the credit agreement or obtain alternative financing; because our business and cash flow are highly seasonal, if we do not have a working capital facility, we may not have enough cash to meet our working capital needs at all times during our fiscal year The agreement with LaSalle National Bank, which is designed to provide us seasonal working capital, will expire on March 31, 2001. We cannot be sure that we will be able to extend or renew the agreement or obtain alternative financing to meet our seasonal working capital needs when the agreement expires. If we do not have a revolving credit facility in place, we may not be able to satisfy our seasonal working capital needs, which would have a material adverse effect on us and our results of operations. Our stock has been pledged by Mrs. Fields' Holding; a default on the Mrs. Fields' Holding notes could trigger a change of control of Mrs. Fields; we may not have the ability to raise the funds necessary to finance the change of control offer required by the indenture Mrs. Fields' Holding, our parent company, has pledged all of our outstanding common stock to secure its obligations under its notes. If Mrs. Fields' Holding defaults on its notes, there could be a foreclosure on our common stock, and the foreclosure would constitute a change of control which would result in an event of default permitting acceleration under the agreement with LaSalle National Bank and the indenture. The change of control would also permit you to require us to repurchase any or all of the notes held by you. We may not have enough resources to repay in full borrowings under the agreement with LaSalle National Bank and to repurchase all of the notes required to be repurchased. We have incurred net losses during the past several years; we may continue to have losses if our business strategies do not succeed We and our predecessors have incurred net losses during the past several years. Although we have put into place new business strategies aimed at enhancing revenues and operating results and we have recorded positive EBITDA since our formation in September 1996, economic, financial, competitive, legal and other factors, many of which are beyond our control, can affect our operations. We cannot be sure that we will be able to put into place our planned strategies without delay or that these strategies will result in future profitability. See "Selected Historical Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Our growth strategy is based on acquisitions, which may not provide the desired economic benefits if we are unable to integrate our businesses so as to achieve efficiencies from increased volumes of production We have achieved growth through acquisitions such as the acquisition of Great American and some of its franchisees and their stores, the acquisitions of Pretzel Time and Pretzelmaker, and the business of H&M and Cookie Conglomerate and intend to continue doing so. While we believe there are significant opportunities for cost savings and volume efficiencies as a result of acquisitions, we cannot be sure that these acquisitions will provide the expected opportunities and economic benefits. Many factors beyond our control, such as general economic conditions, increased operating costs, our response to customers or competitors, and regulatory developments, can affect our ability to realize economic benefits from prior acquisitions and/or any future acquisitions as well as our ability to integrate successfully our businesses with any acquired businesses. Consequently, we cannot be sure that these acquisitions will result in the economic benefits that management expects on a timely basis or at all. See "Business--Business Strategy." 16

We may not be able to obtain leases in the future; our success depends in part on our ability to obtain leases in high quality shopping malls at reasonable rents Our success depends in part on our ability to secure leases in high quality shopping malls at rents we believe to be reasonable. Approximately half of the leases for such stores expire during the next 5 years and generally do not provide for renewal options in our favor. In addition, we currently plan to open approximately 375 new-company owned and franchise stores over the next 5 years. We believe that the market for the type of locations historically leased by us is highly competitive and, as a result, we cannot be sure that we will succeed in obtaining such leases in the future at rents that we believe to be reasonable or at all. See "Business--Properties." We have continuing obligations under real estate leases; if we close an unprofitable store but must still make lease payments on it, we will lose money We lease locations for all the stores we own and, for most of our franchised stores, have leased locations and sublet these locations to our franchisees. Accordingly, we are the primary obligor for payments under these leases. If locations should prove to be unprofitable, we would remain obligated for lease payments if we determined to withdraw from these locations. Although we cannot know how many stores we may close but on which we will continue to have to make lease payments, we will lose money on those leases. If we have a large number of stores like this, there will be an adverse effect on our results of operations. See "Business--Properties." A decline in mall traffic could adversely affect our business, which depends to a large extent on purchases by pedestrians in malls We believe that the amount and proximity of pedestrian traffic near our stores strongly influence sales of our products, which we believe are frequently impulse purchases. In recent years, visits to major shopping malls, where a large percentage of our stores are located, have declined from 3.7 visits per month in 1989 to 3.0 visits per month in 1996. This trend has had a negative impact on our revenues. We cannot be sure that this trend will not continue or that this trend can be offset by increased sales per customer. A continued decline in mall traffic could adversely affect our financial condition and results of operations. Volatility in cost of ingredients we use may adversely affect our results The cost of butter, eggs, sugar, flour, chocolate and other ingredients can fluctuate due to changes in economic conditions, weather, demand and other factors, many of which are beyond our control. Although we believe that there are alternative suppliers of these ingredients, we have no control over fluctuations in the price of commodities and cannot be sure that we will be able to pass on any price increases in our product ingredients to our customers. Failure to integrate our information systems, which is currently underway, could adversely affect us We have made a substantial investment in developing a customized, sophisticated point-of-sale management information system. We are upgrading our back-office system to a Windows NT environment and are currently upgrading all Mrs. Fields stores to Pentium computers, and we plan to install our upgraded back-office system, along with the POS registers and Pentium computers, in our core Original Cookie stores, Hot Sam stores, Pretzelmaker stores, Pretzel Time stores and many of our Great American stores by September 1999. We cannot be sure that we will successfully integrate this system or that we will achieve a fully integrated system within budget. Therefore, we cannot be sure that our attempts to integrate the point-of-sale system will not adversely affect our financial condition and results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Failures in Year 2000 compliance by companies with which we do business could disrupt our operations We have assessed Year 2000 issues with respect to our significant vendors and financial institutions as to their compliance plans and whether any Year 2000 issues will impede the ability of those vendors to continue 17

providing goods and services to us. Failure of our key suppliers to remedy their own Year 2000 issues could delay shipments of essential products, disrupting our operations as a result. Furthermore, we rely on various service providers, such as utility and telecommunication service companies, which are beyond our control. Based on the results of the assessment, management is not aware of any Year 2000 issues relating to our significant vendors, financial institutions or our non-information technology systems. We do not have a contingency plan in place to address untimely or incomplete remediation of Year 2000 issues. We are currently developing contingency plans. These contingency plans are expected to address issues related to significant vendors and financial institutions. The minimum wage increase may adversely impact our financial condition and results of operations As of July 3, 1999, 851 of our 4,086 employees that work at stores owned by us earned the federal hourly minimum wage. As a result of an increase in the minimum wage from $4.75 to $5.15 on September 1, 1997, we have experienced an increase of wages of approximately $354,000 annually. These increased labor costs could adversely affect our financial condition and results of operations. We cannot be sure that we can fully absorb the increased labor costs through our efforts to increase efficiencies in other areas of our operations. We depend upon key franchisees and licensees for revenue; there is no assurance that franchise and license agreements will not be terminated We depended upon 11 franchisees for 19.7% of our franchise revenues for the 52 weeks ended January 2, 1999. For the same period, franchise revenues made up 8.1% of our total net revenues. We cannot be sure that these franchise agreements will not be terminated or that our relations with franchisees will not change, or that our franchisees will continue to perform as they have in the past. The termination of these key franchise agreements or poor performance by our franchisees may have an adverse affect on our financial condition and results of operations. In addition, we depend on three licensees for 68% of our licensing revenue. We cannot be sure that our licenses will not be terminated or that our relations with licensees will not change, or that our licensees will continue to perform as they have in the past. The termination of key license agreements or poor performance by our licensees may have an adverse affect on our financial condition and results of operations. There may be a negative effect on our financial condition if our trademarks are challenged We believe that our trademarks have significant value and are important to the marketing of our retail outlets and products. Although our trademarks are registered in all 50 states and registered or pending in many foreign countries, we cannot be sure that our trademarks cannot be circumvented, or that our trademarks do not or will not violate the proprietary rights of others, or would be upheld if challenged or that we would not be prevented from using our trademarks. Any challenge against us for our use of our trademarks could have an adverse effect on our financial condition and results of operations, through either a negative ruling with regards to our use, validity or enforceability of our trademarks, or through the time consumed and the legal costs of defending against a claim. In addition, we cannot be sure that we will have the financial resources necessary to enforce or defend our trademarks. The loss of key management personnel could adversely affect our operations Our success depends on the continued services of our senior management, particularly Larry A. Hodges, our President and Chief Executive Officer. In addition, our continued growth depends, in part, on attracting and retaining skilled managers and employees as well as management's ability to effectively utilize our key personnel in light of recent and future acquisitions. If Mr. Hodges or other senior management left us, there could be an adverse effect on our operations. We cannot be sure that management's efforts to integrate, utilize, 18

attract and retain personnel will be successful. See "Management." We have entered into employment agreements with all of our senior managers. We may suffer adverse effects from competition with other specialty food retailers, changes in demographic trends and consumer preferences We compete with other cookie and pretzel retailers, as well as other confectionery, sweet snack and specialty food retailers, many of which have greater resources than us. The specialty retail food and snack industry is highly competitive with respect to price, service, location and food quality. Consequently, we cannot be sure that we will compete successfully with these other specialty food retailers. In addition to the risks from current competitors, we cannot be sure that we can successfully compete with any new entrants into the specialty foods or snack foods industry who may have new and successful products or marketing. Inability to compete adequately would result in price reductions, reduced margins and losses of market share for us. Changes in consumer preferences, tastes and eating habits, local, regional and national economic conditions, demographic trends and mall traffic patterns also affect the specialty or snack foods industry. Factors including increased food, labor and benefits costs, the availability of experienced management and hourly employees and difficulties or delays in developing and introducing new products to suit consumer preferences may adversely affect the specialty retail industry in general and our outlets in particular. Consequently, our success will depend on our ability to recognize and react to these trends adequately. Any changes in these factors could adversely affect our profitability. In addition, the failure of customers to respond favorably to our marketing or new products, could have an adverse effect on our profitability. See "Business-- Competition." Our financial condition and results may be affected by adverse publicity, particularly about health concerns Our ability to compete depends in part on maintaining our reputation with the consumer. Publicity resulting from food quality, illness, injury, or other health concerns, including food-borne illness claims, or operating issues stemming from one store, a limited number of stores, or even a competitor's store can adversely affect multi-unit specialty retail food and snack chains such as us. In addition, Mrs. Fields' uses ingredients, such as nuts, to which some people may have allergies, and butter, which is high in fat, and there may be adverse publicity about the health risks relating to these ingredients. We cannot be sure that adverse publicity about these factors will not adversely affect our financial condition and results of operations. Our financial condition and results of operations may be adversely affected by government regulation of our business Numerous governmental authorities have issued regulations that apply to us and our stores, including, without limitation, federal, state and local laws and regulations governing health, sanitation, environmental protection, safety and hiring and employment practices, including laws, such as the Fair Labor Standards Act, governing such matters as minimum wages, overtime and other working conditions. The Food and Drug Administration administers regulations that apply to our products. If we fail to obtain or retain the required food licenses or to comply with applicable governmental regulations, or if there is any increase in the minimum wage rate, employee benefit costs or other costs associated with employees, there could be an adverse effect on our business, financial condition or results of operations. Even if we obtain regulatory approval, a marketed product, its manufacturer and its manufacturing facilities are subject to periodic inspection, and discovery of problems may adversely affect our business. In addition, the sale of franchises is regulated by various state laws as well as by the Federal Trade Commission. The Federal Trade Commission requires that franchisors make extensive disclosure in a Uniform Franchise Offering Circular to prospective franchisees but does not require registration. However, a number of states require registration of the Uniform Franchise Offering Circular with state authorities or other disclosure in connection with franchise offers and sales. In addition, several states have franchise relationship laws or 19

business opportunity laws that limit the ability of the franchisors to terminate agreements or to withhold consent to renewal or transfer of these agreements. While we believe that we are in compliance with existing regulations, we cannot predict the effect of any future legislation or regulation on our business operations or financial condition. Additionally, bills have occasionally been introduced in Congress which would provide for federal regulation of certain aspects of franchisor-franchisee relationships. All full-time store managers and assistant managers are able to enroll in a group health insurance plan. However, there have been a number of proposals before Congress which would require employers to provide health insurance for all of their full-time and part-time employees. The approval of similar proposals could have a material adverse impact on our results of operations and financial condition in particular and the specialty retail industry as a whole. Litigation, including product liability litigation, against us could have an adverse effect on our business, and we may not be able to continue to obtain adequate insurance We are involved in routine litigation in the ordinary course of business, including franchise disputes. Although we have not been adversely affected in the past by litigation, there can be no assurance as to the effect of any future disputes. Although we are not currently subject to any product liability litigation, there can be no assurance that product liability litigation will not occur in the future involving our products. Our quality control program is designed to maintain high standards for food preparation procedures used by stores owned or franchised by us. Products are periodically inspected by our personnel at both the point-of-sale locations and the manufacturing facilities to ensure that they conform to our standards. In addition to insurance held by our suppliers, we maintain insurance relating to personal injury and product liability in amounts that we consider adequate for the retail food industry. While we have been able to obtain insurance in the past, there can be no assurance that we will be able to maintain these insurance policies in the future. Consequently, any successful claim against us, in an amount materially exceeding our coverage, could have a material adverse effect on our business, financial condition and results of operations. Our controlling stockholder may take certain actions that may be contrary to your interests Capricorn Investors II, L.P. is the controlling stockholder of Mrs. Fields' Holding, which controls all of our capital stock. As a result, Capricorn is in a position to elect all of our directors who, in turn, elect all of our executive officers. In addition, Capricorn, through Mrs. Fields' Holding, is in a position to amend our certificate of incorporation and by-laws, effect corporate transactions such as mergers and asset sales and otherwise control our management and policies without the approval of any other security holder, subject to the provisions of the indenture. Accordingly, Capricorn will be able to, directly or indirectly, control all of our affairs in a manner that may be contrary to your interests. See "Beneficial Ownership of Capital Stock." We may not continue to have increased sales in the fourth quarter; without these sales we may experience an adverse effect on our business Our operating results are subject to seasonal fluctuations. Historically, we have realized our highest level of sales in the fourth quarter due to increased mall traffic during the Christmas holiday season. However, we cannot be sure that this seasonal trend will continue or that we can continue to rely on increased sales during the fourth quarter. If this seasonal trend changes, there may be an adverse effect on our financial condition and results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Seasonality." We may be unable to repurchase the notes from you upon a change of control due to insufficiency of funds Upon the occurrence of a change of control of ownership of our stock or assets, you may require us to repurchase all or a portion of your notes at 101% of their total principal amount, together with the accrued and 20

unpaid interest, if any, and liquidated damages, if any, to the date of repurchase. If a change of control of ownership of our stock or assets were to occur, we may not have the financial resources to repay all of our obligations under the notes and the other indebtedness that would become payable upon that event. See "Description of Notes--Repurchase at the Option of Holders--Change of Control." Fraudulent conveyance risks; federal and state statutes allow courts, under specific circumstances, to void payments under the notes and guarantees and require noteholders to return payments received Fraudulent transfer laws of both the federal bankruptcy law and state laws permit creditors or a trustee in bankruptcy to set aside or recover a "fraudulent transfer." Because Mrs. Fields has incurred a substantial amount of debt in connection with the acquisition of Great American and the other assets and capital stock of companies it has recently acquired and because Mrs. Fields and the existing guarantors cannot be sure that their businesses will generate enough cash flows from operations or that future borrowings will be available in an amount that will allow Mrs. Fields and the existing guarantors to pay principal and interest on their indebtedness including the notes and the guarantees, we cannot be sure that a court would not set aside payments made to holders of the notes as a fraudulent transfer. A fraudulent transfer is a payment or obligation that a borrower makes in exchange for less than reasonably equivalent value, if the borrower, when it makes the payment or incurs the obligation: . is insolvent or is rendered insolvent by the payment or the incurring of the obligation, or . is engaged or is about to engage in a business or transaction for which its assets constitute unreasonably small capital, or . intends to incur, or believes that it will incur, debts beyond its ability to repay as they mature. For these purposes, a borrower is generally considered insolvent: . if the sum of its debts, including contingent liabilities, were greater than all of its assets at a fair valuation, . if it had unreasonably small capital to conduct its business, or . if the present fair saleable value of its assets were less than the amount that would be required to pay the probable liability on its existing debts, including contingent liabilities, as they become due. A payment or obligation that the borrower made with actual intent to hinder, delay, or defraud any of its creditors is also a fraudulent transfer. A court may hold any obligation incurred by the borrower in these situations void or unenforceable, may subordinate the obligation to the claims of other creditors, or may require the holders of the obligations or the recipients of any of these payments to return any payments received. If Mrs. Fields or the existing guarantors met any of the fraudulent transfer law's financial condition tests described above when they issued the notes or the guarantees, or when they were called upon to make a payment on the notes or the guarantees, and did not receive reasonably equivalent value in exchange, a court could conclude that the issuance of the notes, the making of the guarantees or the payment under the notes or the guarantees should be set aside or returned. Mrs. Fields and the existing guarantors believe: .they were not insolvent when, or as a result of, the issuance of the notes or the guarantees, . that they will not engage in a business or transaction for which their remaining assets would constitute unreasonably small capital, and . that Mrs. Fields and the existing guarantors did not and do not intend to incur or believe that they will incur debts beyond their ability to pay these debts as they mature. 21

Mrs. Fields has incurred, however, a substantial amount of debt in connection with the purchase of Great American and the other assets and capital stock of companies it acquired. Mrs. Fields' and its subsidiaries' total indebtedness, represents 68.8% of its total liabilities and equity. The debt of our guarantor subsidiaries represents 0.5% of their total liabilities and equity. In addition, Mrs. Fields' cash flow, and consequently its ability to pay dividends and service debt, including its obligations under the notes, depends upon its future performance. In addition, Mrs. Fields and its predecessors have incurred net losses during the past several years and in recent periods we have not had earnings sufficient to cover our fixed charges. In any future fraudulent transfer litigation concerning the notes and the payments made to the holders of the notes, a court may rely on these facts in determining our solvency, the adequacy of our capital and our ability to pay our debts as they become due. The guarantees are limited by their terms so as to not constitute a fraudulent transfer under applicable law. If the guarantees were challenged under this provision, the court would have to, among other things, analyze the direct and indirect benefits obtained by the guarantors in comparison to the probability that the guarantors would be called upon to pay the guarantees. It is possible that a court would limit the guarantees under this provision to an amount that is significantly below the amount of the notes. Management cannot accurately predict what a court would do in this case. If Mrs. Fields or a guarantor caused a subsidiary to pay a dividend when the subsidiary met any of the fraudulent transfer law's financial condition tests described above, in order to enable Mrs. Fields or the guarantor to make a payment in respect of the notes or the guarantees, a court could conclude that the dividend as well as the payment is a fraudulent transfer and that the holders should be required to return the payment, because in the absence of other facts, courts generally conclude that a subsidiary that pays a dividend does not receive reasonably equivalent value in exchange. In addition, subject to defenses, the holders may have to return payments made by Mrs. Fields on the notes or the guarantors on the guarantees within 90 days before the commencement of a bankruptcy case by or against them, if, among other things, Mrs. Fields or the guarantors were insolvent at the time the payments were made. Mrs. Fields or the guarantor would be presumed insolvent on and during the 90 days immediately preceding the date of the filing of its bankruptcy petition. In any of the preceding cases, there could be no assurance that the holders would ultimately recover the amounts owing under the notes and the guarantees. There is no public market for the notes to be issued; transfers of the outstanding notes are restricted The notes to be issued are being offered only to the holders of the outstanding notes. There is no public market for the notes to be issued. If a public market were to develop, the notes could trade at prices that may be higher or lower than the initial offering price of the outstanding notes. The placement agents for the outstanding notes currently make a market in the outstanding notes. The placement agents have informed us that they currently intend to make a market in the notes to be issued. However, the placement agents may cease their market-making at any time. The liquidity of the trading market in these notes, and the market price quoted for these notes, may be adversely affected by changes in the overall market for similar securities, existing interest rates, and by our operating results. As a result, you cannot be sure that an active market will develop for these notes. The outstanding 10 1/8% Series A Senior Notes due 2004 were issued on November 26, 1997 and the outstanding 10 1/8% Series C Senior Notes due 2004 were issued on August 24, 1998, to institutional investors and accredited investors, and are eligible for trading in the Private Offering, Resale and Trading Through Automated Linkages ("PORTAL") Market of the National Association of Securities Dealers, Inc., a screen-based automated market for trading of securities eligible for resale under Rule 144A. To the extent that the outstanding notes are tendered and accepted in the exchange offer, the trading market for the remaining untendered outstanding notes could be adversely affected. 22

FORWARD-LOOKING INFORMATION This prospectus contains forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events, based on the information currently available to us. These forward-looking statements relate to future events or our future performance, including financial performance, growth in net sales and earnings, cash flows from operations, capital expenditures, the ability to refinance indebtedness, and the sale of assets. The forward-looking statements also include, among other things, our expectations and estimates about our business operations following the acquisitions of Great American and certain of its franchisees and their stores, the offering by Mrs. Fields' Holding and its capital contribution to us, other recent transactions discussed in this prospectus and the offering of notes in August 1998, including the integration of the businesses of Great American with Mrs. Fields and our ability to achieve cost savings and other synergies related to those transactions. The forward-looking statements are principally contained in the sections "Summary," "The Transactions," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "contemplates," "anticipates," "believes," "estimates," "projected," "predicts," "potential," or "continue" or the negative of these terms or similar terms. In evaluating these statements, you should specifically consider various factors, including the risks outlined in the "Risk Factors" section above. These factors may cause our actual results to differ materially from any forward-looking statement. Other factors, such as the general state of the economy, could also cause actual results to differ materially from the future results covered in the forward-looking statements. These statements are only predictions, the forward-looking events discussed in this prospectus may not occur and actual events and results may differ materially and are subject to risks, uncertainties and assumptions about us. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 23

THE TRANSACTIONS On August 24, 1998, we completed the offering of notes, the acquisition of Great American and the acquisition of the stock of two Great American franchisees. We also received as a capital contribution from Mrs. Fields' Holding the net proceeds of $29.1 million from a simultaneous offering of units consisting of notes and warrants to purchase common stock by Mrs. Fields' Holding. In addition, we purchased approximately $38.9 million of Great American notes that had been tendered in our tender offer for them at that time. We used the net proceeds of our offering, the capital contribution from Mrs. Fields' Holding, and available cash of Mrs. Fields and Great American, to complete these transactions, to pay for the remaining Great American notes that were tendered after this date, and to pay related expenses. We used the remaining proceeds to finance other acquisitions that had not yet been completed as of the date of the offering, including the purchase of eight stores from a Great American franchisee. The Great American Transactions The Great American Acquisition and the Great American Tender Offer Under a securities purchase agreement, dated as of August 13, 1998, among Cookies USA, the sellers of Cookies USA securities and Mrs. Fields, we acquired all of the outstanding capital stock and subordinated indebtedness of Cookies USA for a total purchase price of approximately $18.4 million. Concurrently, we completed the merger of Cookies USA into Mrs. Fields and the mergers of Deblan and Chocolate Chip into Great American. Great American became a wholly owned subsidiary of Mrs. Fields. As of the expiration of our tender offer for Great American notes at midnight on September 14, 1998, all of the notes had been tendered. We accepted and paid the entire $40.0 million in principal amount of those notes, and none remain outstanding. The Acquisition of Great American Franchisees When we agreed to purchase Cookies USA, we also entered into agreements with the stockholders of Deblan and Chocolate Chip, two of Great American's franchisees, to purchase a total of 29 Great American franchises for total consideration of approximately $15.0 million. The price included the repayment of approximately $0.6 million of debt. We acquired the franchises by acquiring 100% of the capital stock of the two corporations through which the 29 franchises were held. In connection with these transactions, debt on the balance sheet of one corporation was retired with cash on hand, and debt on the balance sheet of the second corporation was retired with funds from the franchisee that controlled the corporation. Agreements with Franchisees of Great American We entered into settlement agreements and waivers with the two franchisees that sold us 29 Great American franchises and with several other Great American franchisees. In addition to these franchisees, at least 80% in total of the Great American franchisees have executed settlement agreements and waivers. These agreements provided that the Great American franchisees that are parties to them released, subject to exceptions, all of their claims against us, Great American, Capricorn and other parties, including claims that Great American franchisees brought in 1997 to prevent a sale of Great American to Mrs. Fields. On August 24, 1998, a motion was filed dismissing with prejudice the claims brought in the 1997 litigation. The settlement agreements and waivers give "tag-along" rights to the Great American franchisees that hold at least five Great American franchises. The tag-along rights provide that, in the event that: (1) either Mrs. Fields or Mrs. Fields' Holding proposes to sell to an unaffiliated party substantially all of its rights as owner of the Great American brand or as the franchisor of Great American, (2) either Mrs. Fields or Mrs. Fields' Holding proposes to make an initial public offering of its common stock, or (3) either Mrs. Fields or Mrs. Fields' Holding sells a controlling interest to an unaffiliated party, 24

we will purchase all of the franchises of those Great American franchisees, provided that their franchises have had positive cash flow in the most recent 12-month fiscal period and sales not more than 20% below the 12- month fiscal period immediately preceding such period, or the number of months it has been operating, if fewer than 12. The purchase price for the franchises will be 5 times their most recent 12- month EBITDA or, if the franchises have operated for fewer than 12 months, the greater of 5 times their most recent EBITDA and documented development cost for the stores. Great American franchisees that hold fewer than 5 Great American franchises do not have tag-along rights but will have the right, upon completion of Mrs. Fields' sale of its rights as owner of the Great American brand or as the franchisor of Great American, the initial public offering or the change of control, and provided they are in compliance with their franchise agreements, to receive in cash the greater of $3,500 or $2,000 per store owned by the franchisee. In the case of an initial public offering, the franchisees could receive shares of common stock with an equivalent value. The form of payment will be at our election. Under the settlement agreements and waivers, we have also undertaken, among other things, (1) to maintain the profit margin over our cost on batter sold to Great American franchisees, (2) to extend franchise agreements, and (3) to permit the Great American franchisees to convert their stores to Mrs. Fields brand stores at their sole expense in areas where there is no overlap with existing Mrs. Fields brand franchise stores. The Mrs. Fields' Holding Units Mrs. Fields' Holding completed its offering of units consisting of notes and warrants to purchase common stock of Mrs. Fields' Holding on August 24, 1998 and received net proceeds of $29.1 million. The notes which are part of the units are senior obligations of Mrs. Fields' Holding and are secured by all of Mrs. Fields' issued and outstanding capital stock. The Prior Transactions Mrs. Fields' Holding acquired substantially all of the assets of H & M on July 25, 1997 for a total purchase price of $13.8 million, excluding the assumption of liabilities. Mrs. Fields' Holding acquired 56.0% of the shares of common stock of Pretzel Time on September 2, 1997 for a total purchase price of $4.2 million and extended a $500,000 loan to the founder and minority stockholder of Pretzel Time. At the time of our previous offering of notes on November 26, 1997: (1) we received the business of H&M and 56.0% of the shares of common stock of Pretzel Time from Mrs. Fields' Holding, (2) we received all of the common stock of Mrs. Fields' Brand from Mrs. Fields' Holding, (3) various debt of Mrs. Fields, Mrs. Fields' Brand and Mrs. Fields' Holding was refinanced, and (4) we paid a dividend of $1,065,000 and repaid an advance of $1,500,000 to Mrs. Fields' Holding. On January 2, 1998, we purchased an additional 4.0% of the shares of the common stock of Pretzel Time. Increase in Pretzel Time Ownership On June 12, 1998, we purchased an additional 10.0% of the common stock of Pretzel Time for a purchase price of $875,000, increasing our equity interest in Pretzel Time to 70.0% at that time. Other Recent Transactions In June 1998, we acquired 5 additional Pretzel Time stores from a franchisee for a purchase price of $657,000. We acquired one additional Pretzel Time store from a franchisee and two cookie stores operating 25

under other brand names, which we converted into Mrs. Fields brand stores at purchase prices aggregating $750,000. We have remodeled the two cookie stores, at a total cost of $156,600. We purchased eight Great American stores from a Great American franchisee for a total purchase price of $1.75 million on September 9, 1998. The franchisee was a holder of some of the securities of Cookies USA that were sold under the agreement to purchase Great American and was a party to that agreement. RECENT DEVELOPMENTS On October 5, 1998, Mrs. Fields purchased all of the retail cookie and related business and operations of eleven Great American stores for a total purchase price of $2,800,000 under an asset purchase agreement dated as of October 5, 1998, among The Cookie Conglomerate, Inc., The Cookie Conglomerate, LLP and two individuals who were the partners of Cookie Conglomerate, LLP and the shareholders of Cookie Conglomerate, Inc. The sellers were franchisees of Great American. The sellers' rights under franchise agreements and subleases with Great American were terminated upon closing of the transaction. The acquisition was funded with financing provided by T&W Financial Services Company, L.L.C. On November 19, 1998, Mrs. Fields purchased all of the outstanding capital stock of Pretzelmaker Holdings, Inc. under an agreement among Mrs. Fields, Pretzelmaker, and the holders of its capital stock. Pretzelmaker is the holding company for a pretzel retail company. The purchase price was approximately $5.7 million and Mrs. Fields assumed indebtedness, including severance payments, totaling approximately $1.6 million. On December 9, 1998, Mrs. Fields purchased three shares of Pretzel Time, Inc. common stock for $500,000 in cash. On December 30, 1998, Mrs. Fields completed the acquisition of the remaining outstanding common stock of Pretzel Time, Inc. under a stock purchase agreement dated December 30, 1998, for a purchase price of approximately $4.7 million, $2.5 million of which was paid in cash on January 5, 1999, $2 million was assumed by Mrs. Fields' Holding, Mrs. Fields sole shareholder as discussed below, and the remaining $200,000 is payable on or before December 30, 1999. USE OF PROCEEDS Neither Mrs. Fields nor the guarantors will receive any cash proceeds in the exchange offer. In consideration for issuing the notes as contemplated in this prospectus, Mrs. Fields will receive an equal principal amount of outstanding notes. The net proceeds received by Mrs. Fields from the offering in August 1998, after deducting the underwriting discounts and commissions and estimated expenses of the offering of notes in August 1998, along with cash from other sources, including the capital contribution of Mrs Fields' Holding and existing company cash, were approximately $85.1 million. Of this amount, Mrs. Fields used approximately $18.4 million for the acquisition of Great American, $41.6 million to pay for the Great American notes tendered, including the tender offer premium of $1.6 million, $15.0 million to pay for the acquisitions of Deblan and Chocolate Chip, including the repayment of approximately $0.6 million of debt, $0.9 million to pay accrued interest on debt being retired, $1.4 million for severance and related expenses, approximately $2.8 million to pay for other recent acquisitions and approximately $5.0 million of fees and expenses related to the offering in August 1998 and some of the other acquisitions described in this prospectus. 26

CAPITALIZATION The following table shows the cash and cash equivalents and capitalization of Mrs. Fields' Original Cookies, Inc. and subsidiaries at July 3, 1999. This table should be read in conjunction with the historical financial statements and related notes included elsewhere in this Registration Statement. See "Selected Historical Financial Data" and "Unaudited Pro Forma Condensed Combined Statement of Operations." <TABLE> <CAPTION> Mrs. Fields' Original Cookies, Inc. and Subsidiaries at July 3, 1999 ---------------------- (Dollars in thousands) <S> <C> Cash and Cash Equivalents............................... $ 4,645 ======== Debt and Capital Lease Obligations, including current portions: Credit Facility(1).................................... $ 7,000 10 1/8% Series A, B and C Senior Notes due 2004(2).... 140,000 Original issue discount on 10 1/8% Series C Senior Notes due 2004....................................... (558) Pretzel Time Debt..................................... 206 Mrs. Fields' Original Cookies, Inc. Other Debt and Capital Lease Obligations............................ 4,202 Pretzelmaker Debt and Capital Lease Obligations....... 176 -------- Total Debt and Capital Lease Obligations, including current portion........................................ 151,026 -------- Mandatorily Redeemable Preferred Stock of Pretzel Time(3)................................................ 1,440 -------- Stockholder's Equity: Common Stock (pledged as collateral for parent company debt)(4)............................................. -- Additional Paid-in Capital(5)......................... 61,899 Accumulated Deficit................................... (29,320) -------- Total Stockholder's Equity............................ 32,579 -------- Total Capitalization.................................... $185,045 ======== </TABLE> -------- (1) Under the indenture, Mrs. Fields is permitted to have one or more credit facilities under which it will be able to borrow up to a maximum total principal amount of $15.0 million on a secured basis. Mrs. Fields' Amended and Restated Loan Agreement, dated as of February 28, 1998, with LaSalle National Bank provides for a maximum commitment of up to $15.0 million secured by essentially all of the assets of Mrs. Fields. As of July 3, 1999, Mrs. Fields had approximately $276,000 of allowable borrowings under its credit facility. See "Description of Certain Indebtedness--Credit Agreement." (2) Includes $100.0 million of 10 1/8% Series A and Series B Senior Notes of Mrs. Fields and $40.0 million of 10 1/8% Series C Senior Notes. (3) Liquidation preference as of July 3, 1999 was approximately $1.5 million. Date of redemption is January 15, 2000. (4) Less than $1,000. (5) Gives effect to the capital contribution of Mrs. Fields' Holding of $29.1 million on August 24, 1998 and $2 million on May 27, 1999. 27

THE EXCHANGE OFFER Terms of the Exchange Offer; Period for Tendering Outstanding Notes On August 24, 1998, Mrs. Fields sold notes to Jefferies & Company, Inc. and BT Alex. Brown. When we sold the notes, we entered into a registration rights agreement with Jefferies and BT Alex. Brown. The registration rights agreement requires that we register the notes sold on August 24, 1998 with the Commission and offer to exchange the new registered notes for the outstanding notes sold on August 24, 1998. We are also making the exchange offer available to holders of notes issued in a private placement on November 26, 1997. We will accept any validly tendered notes that you do not withdraw before 12:00 midnight, New York City time, on the expiration date. We will issue $1,000 of principal amount of new notes in exchange for each $1,000 principal amount of your outstanding notes. You may tender some or all of your notes in the exchange offer. The form and terms of the new notes are the same as the form and terms of the outstanding notes except that: (1) the notes being issued in the exchange offer will be registered under the Securities Act and will not have legends restricting their transfer, (2) the notes being issued in the exchange offer will not contain the registration rights and liquidated damages provisions contained in the outstanding notes issued in August 1998, and (3) interest on the new notes will accrue from the last interest date on which interest was paid on your notes. Outstanding notes that we accept for exchange will not accrue interest after we complete the exchange offer. The exchange offer will expire at 12:00 midnight, New York City time, on , 1999, unless we extend it. If we extend the exchange offer, we will issue a notice by press release or other public announcement before 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. We reserve the right, in our sole discretion: (1) to extend the exchange offer, (2) to delay accepting your notes, (3) to terminate the exchange offer and not accept any notes for exchange if any of the conditions have not been satisfied, or (4) to amend the exchange offer in any manner. We will promptly give oral or written notice of any extension, delay, non- acceptance, termination or amendment. We will also file a post-effective amendment with the Commission if we amend the terms of the exchange offer. If we extend the exchange offer, notes that you have previously tendered will still be subject to the exchange offer and we may accept them. We will promptly return your notes if we do not accept them for exchange for any reason without expense to you after the exchange offer expires or terminates. Procedures for Tendering Notes Only you may tender your notes in the exchange offer. 28

To tender in the exchange offer, you must: (1) complete, sign and date the enclosed letter of transmittal, or a copy of it, (2) have the signature on the letter of transmittal guaranteed if required by the letter of transmittal, and (3) mail, fax or otherwise deliver the letter of transmittal or copy to the exchange agent OR if you tender your notes under The Depository Trust Company's book- entry transfer procedures, transmit an agent's message to the exchange agent on or before the expiration date. In addition, either: (1) the exchange agent must receive certificates for outstanding notes and the letter of transmittal, or (2) the exchange agent must receive a timely confirmation of a book- entry transfer of your notes into the exchange agent's account at The Depository Trust Company, along with the agent's message, or (3) you must comply with the guaranteed delivery procedures described below. An agent's message is a computer-generated message transmitted by The Depository Trust Company through its Automated Tender Offer Program to the exchange agent. To tender your notes effectively, you must make sure that the exchange agent receives a letter of transmittal and other required documents before the expiration date. When you tender your outstanding notes and we accept them, the tender will be a binding agreement between you and us in accordance with the terms and conditions in this prospectus and in the letter of transmittal. The method of delivery of outstanding notes, letters of transmittal and all other required documents to the exchange agent is at your election and risk. We recommend that you use an overnight or hand delivery service instead of mail. If you do deliver by mail, we recommend that you use registered mail, properly insured, with return receipt requested. In all cases, you should allow enough time to make sure your documents reach the exchange agent before the expiration date. Do not send a letter of transmittal or notes directly to us. You may request your brokers, dealers, commercial banks, trust companies, or nominees to make the exchange on your behalf. Unless you are a registered holder who requests that the new notes to be mailed to you and issued in your name, or unless you are an eligible institution, you must have your signature guaranteed on a letter of transmittal or a notice of withdrawal by an eligible institution. An eligible institution is a firm which is a financial institution that is a member of a registered national securities exchange or a member of the participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion Program. If the person who signs the letter of transmittal and tenders the notes is not the registered holder of the notes, the registered holders must endorse the notes or sign a written instrument of transfer or exchange that is included with the notes, with the registered holder's signature guaranteed by an eligible institution. We will decide whether the endorsement or transfer instrument is satisfactory. We will decide all questions about the validity, form, eligibility, acceptance and withdrawal of tendered notes, and our determination will be final and binding on you. We reserve the absolute right to: (1) reject any and all tenders of any particular note not properly tendered, 29

(2) refuse to accept any note if, in our judgment or the judgment of our counsel, the acceptance would be unlawful, and (3) waive any defects or irregularities or conditions of the exchange offer as to any particular note either before or after the expiration date. This includes the right to waive the ineligibility of any holder who seeks to tender notes in the exchange offer. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties. You must cure any defects or irregularities in connection with tenders of notes as we will determine. Neither we, the exchange agent nor any other person will incur any liability for failure to notify you of any defect or irregularity with respect to your tender of notes. If the letter of transmittal is signed by a person or persons other than the registered holder or holders of outstanding notes, the outstanding notes must be endorsed or accompanied by powers of attorney, in either case signed exactly as the name or names of the registered holder or holders that appear on the outstanding notes. If trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity sign the letter of transmittal or any notes or power of attorney on your behalf, those persons must indicate their capacity when signing, and submit satisfactory evidence to us with the letter of transmittal demonstrating their authority to act on your behalf. To participate in the exchange offer, we require that you represent to us that: (1) you or any other person acquiring notes for your outstanding notes in the exchange offer is acquiring them in the ordinary course of business, (2) neither you nor any other person acquiring notes in exchange for your outstanding notes is engaging in or intends to engage in a distribution of the notes issued in the exchange offer, (3) neither you nor any other person acquiring notes in exchange for your outstanding notes has an arrangement or understanding with any person to participate in the distribution of notes issued in the exchange offer, (4) neither you nor any other person acquiring notes in exchange for your outstanding notes is our "affiliate" as defined under Rule 405 of the Securities Act, and (5) if you or another person acquiring notes for your outstanding notes is a broker-dealer, you will receive new notes for your own account, you acquired new notes as a result of market-making activities or other trading activities, and you acknowledge that you will deliver a prospectus in connection with any resale of your notes If you are our "affiliate," as defined under Rule 405 of the Securities Act, you are a broker-dealer who acquired your outstanding notes in the initial offering and not as a result of market-making or trading activities, or if you are engaged in or intend to engage in or have an arrangement or understanding with any person to participate in a distribution of notes acquired in the exchange offer, you or that person: (1) may not rely on the applicable interpretations of the staff of the Commission, and (2) must comply with the registration and prospectus delivery requirements of the Securities Act when reselling the notes. Broker-dealers who cannot make the representations in item (5) of the paragraph above cannot use this exchange offer prospectus in connection with resales of the notes issued in the exchange offer. Acceptance of Outstanding Notes for Exchange; Delivery of Notes Issued in the Exchange Offer We will accept validly tendered notes when the conditions to the exchange offer have been satisfied or we have waived them. We will have accepted your validly tendered notes when we have given oral or written 30

notice to the exchange agent. The exchange agent will act as agent for the tendering holders for the purpose of receiving the new notes from us. If we do not accept any tendered notes for exchange because of an invalid tender or other valid reason, the exchange agent will return the certificates, without expense, to the tendering holder. If a holder has tendered notes by book-entry transfer, we will credit the notes to an account maintained with The Depository Trust Company. We will return certificates or credit the account at The Depository Trust Company as promptly as practicable after the exchange offer terminates or expires. Book-Entry Transfers The exchange agent will make a request to establish an account at The Depository Trust Company for purposes of the exchange offer within two business days after the date of this prospectus. Any financial institution that is a participant in The Depository Trust Company's systems must make book-entry delivery of outstanding notes by causing The Depository Trust Company to transfer those outstanding notes into the exchange agent's account at The Depository Trust Company in accordance with The Depository Trust Company's Automated Tender Offer Procedures. The participant should transmit its acceptance to The Depository Trust Company on or before the expiration date or comply with the guaranteed delivery procedures described below. The Depository Trust Company will verify acceptance, execute a book-entry transfer of the tendered outstanding notes into the exchange agent's account at The Depository Trust Company and then send to the exchange agent confirmation of the book- entry transfer. The confirmation of the book-entry transfer will include an agent's message confirming that The Depository Trust Company has received an express acknowledgment from the participant that the participant has received and agrees to be bound by the letter of transmittal and that we may enforce the letter of transmittal against the participant. Delivery of notes issued in the exchange offer may be effected through book-entry transfer at The Depository Trust Company. However, the letter of transmittal or facsimile of it or an agent's message, with any required signature guarantees and any other required documents, must: (1) be transmitted to and received by the exchange agent at the address listed below under "Exchange Agent" on or before the expiration date, or (2) the guaranteed delivery procedures described below must be complied with. Guaranteed Delivery Procedures If you are a registered holder of outstanding notes who desires to tender notes but your notes are not immediately available, or time will not permit your notes or other required documents to reach the exchange agent before the expiration date, or the procedure for book-entry transfer cannot be completed on a timely basis, you may effect a tender if: (1) you tender the notes through an eligible institution, (2) before the expiration date, the exchange agent received from the eligible institution a notice of guaranteed delivery in the form we have provided. The notice of guaranteed delivery will state the name and address of the holder of the notes being tendered and the amount of notes being tendered, that the tender is being made and guarantee that within five New York Stock Exchange trading days after the notice of guaranteed delivery is signed, the certificates for all physically tendered notes, in proper form for transfer, or a book-entry confirmation, together with a properly completed and signed letter of transmittal with any required signature guarantees and any other documents required by the letter of transmittal will be deposited by the eligible institution with the exchange agent, and (3) the certificates for all physically tendered outstanding notes, in proper form for transfer, or a book-entry confirmation, together with a properly completed and signed letter of transmittal with any required signature guarantees and all other documents required by the letter of transmittal, are received by the exchange agent within five New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery. 31

Withdrawal Rights You may withdraw your tender of outstanding notes at any time before 12:00 midnight, New York City time, on the expiration date. For a withdrawal to be effective, you must make sure that, before 12:00 midnight on the expiration date, the exchange agent receives a written notice of withdrawal at one of the addresses below or, if you are a participant of The Depository Trust Company, an electronic message using The Depository Trust Company's Automated Tender Offer Program. A notice of withdrawal must: (1) specify the name of the person that tendered the notes to be withdrawn, (2) identify the notes to be withdrawn, including the principal amount of the notes, (3) be signed by the holder in the same manner as the original signature on the letter of transmittal by which the notes were tendered or be accompanied by documents of transfer, and (4) if you have transmitted certificates for outstanding notes, specify the name in which the notes are registered, if different from that of the withdrawing holder, and identify the serial numbers of the certificates. If you have tendered notes under the book-entry transfer procedure, your notice of withdrawal must also specify the name and number of an account at The Depository Trust Company to which your withdrawn notes can be credited. We will decide all questions as to the validity, form and eligibility of the notices and our determination will be final and binding on all parties. Any tendered notes that you withdraw will be not be considered to have been validly tendered. We will return any outstanding notes that have been tendered but not exchanged, or credit them to The Depository Trust Company account, as soon as practicable after withdrawal, rejection of tender, or termination of the exchange offer. You may retender properly withdrawn notes by following one of the procedures described above before the expiration date. Certain Conditions to the Exchange Offer We are not required to accept for exchange, or to issue notes in exchange for, any outstanding notes. We may terminate or amend the exchange offer, if at any time before the acceptance of outstanding notes: (1) any federal law, statute, rule or regulation has been adopted or enacted which, in our judgment, would reasonably be expected to impair our ability to proceed with the exchange offer, (2) if any stop order is threatened or in effect with respect to this registration statement or the qualification of the indenture under the Trust Indenture Act of 1939, or (3) there is a change in the current interpretation by the staff of the Commission which permits holders who have made the required representations to us to resell, offer for resale, or otherwise transfer notes issued in the exchange offer without registration of the notes and delivery of a prospectus, as discussed above. These conditions are for our sole benefit and we may assert or waive them at any time and for any reason. However, the exchange offer will remain open for at least five business days following any waiver of the preceding conditions. Our failure to exercise any of the foregoing rights will not be a waiver of our rights. 32

Exchange Agent You should direct all signed letters of transmittal to the exchange agent, The Bank of New York. You should direct questions, requests for assistance, and requests for additional copies of this prospectus, the letter of transmittal and the notice of guaranteed delivery to the exchange agent addressed as follows: Main Delivery to: The Bank of New York, <TABLE> <CAPTION> As Exchange Agent <S> <C> By Mail, By Hand and Overnight By Facsimile: Courier: (For Eligible Institutions Only) The Bank of New York (212) 815-6339 101 Barclay Street 7 East Confirm by telephone: New York, New York 10286 (212) 815-6337 Attention: Odell Romeo </TABLE> Delivery or fax of the letter of transmittal to an address or number other than those above is not a valid delivery of the letter of transmittal. Fees and Expenses We will not make any payment to brokers, dealers, or others soliciting acceptances of the exchange offer except for reimbursement of mailing expenses. We will pay the estimated cash expenses connected with the exchange offer. We estimate that these expenses will be approximately $500,000. Transfer Taxes If you tender outstanding notes for exchange you will not be obligated to pay any transfer taxes. However, if you instruct us to register new notes in the name of, or request that your notes not tendered or not accepted in the exchange offer be returned to, a person other than you, you will be responsible for paying any transfer tax owed. You May Suffer Adverse Consequences if You Fail to Exchange Outstanding Notes If you do not tender your outstanding notes, you will not have any further registration rights, except for the rights described in the registration rights agreements and described above, and your notes will continue to be subject to restrictions on transfer when we complete the exchange offer. Accordingly, if you do not tender your notes in the exchange offer, your ability to sell your notes could be adversely affected. Once we have completed the exchange offer, holders who have not tendered notes will not continue to be entitled to any increase in interest rate that the indenture provides for if we do not complete the exchange offer. Holders of the notes issued in the exchange offer and notes that are not tendered in the exchange offer will vote together as a single class under the indenture. Consequences of Exchanging Outstanding Notes If you make the representations that we discuss above, we believe that you may offer, sell or otherwise transfer the new notes to another party without registration of your notes or delivery of a prospectus. We base our belief on interpretations by the staff of the Commission in no- action letters issued to third parties. If you cannot make these representations, you cannot rely on this interpretation by the Commission's staff and you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a resale of the notes. A broker-dealer that receives new notes for its own account in exchange 33

for its outstanding notes must acknowledge that it acquired as a result of market-making activities or other trading activities and that it will deliver a prospectus in connection with any resale of the new notes. Broker-dealers who can make these representations may use this exchange offer prospectus, as supplemented or amended, in connection with resales of notes issued in the exchange offer. However, because the Commission has not issued a no-action letter in connection with this exchange offer, we cannot be sure that the staff of the Commission would make a similar determination regarding the exchange offer as it has made in similar circumstances. Shelf Registration The registration rights agreement also requires that we file a shelf registration statement if: (1) we cannot file a registration statement for the exchange offer because the exchange offer is not permitted by law, (2) law or Commission policy prohibits a holder from participating in the exchange offer, (3) a holder cannot resell the notes it acquires in the exchange offer without delivering a prospectus and this prospectus is not appropriate or available for resales by the holder, or (4) a holder is a broker-dealer and holds notes acquired directly from us or one of our affiliates. We will also register the notes under the securities laws of jurisdictions that holders may request before offering or selling notes in a public offering. We do not intend to register notes in any jurisdiction unless a holder requests that we do so. Notes will be subject to restrictions on transfer until: (1) a person other than a broker-dealer has exchanged notes in the exchange offer, (2) a broker-dealer has exchanged notes in the exchange offer and sells them to a purchaser that receives a prospectus from the broker- dealer on or before the sale, (3) the notes are sold under an effective shelf registration statement that we have filed, or (4) the notes are sold to the public under Rule 144 of the Securities Act. 34

SELECTED HISTORICAL FINANCIAL DATA The following table presents historical financial data for Mrs. Fields' Original Cookies, Inc. and subsidiaries and its predecessors; namely, Mrs. Fields Inc. and subsidiaries, The Original Cookie Company, Incorporated and the pretzel business of Hot Sam Company, Inc. as of the dates and for the periods indicated. The results of operations for the periods December 31, 1995 through September 17, 1996 and September 18, 1996 through December 28, 1996 are not indicative of the results for the full fiscal year. The selected historical financial data has been derived from the audited financial statements of Mrs. Fields and its predecessors. Due to the acquisitions of the net assets of Mrs. Fields Inc., Original Cookie and Hot Sam on September 17, 1996, the financial data is not comparable for all periods. However, in order for the presentations to be meaningful for the periods presented, some of the statement of operations information for the predecessors has been reclassified to be consistent with the Mrs. Fields historical financial statement presentation. Mrs. Fields and its predecessors operate using a 52/53-week year ending near December 31. The selected historical financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical financial statements and related notes, contained elsewhere in this prospectus. <TABLE> <CAPTION> Predecessors ---------------------------------------------------------------------------- The Original Cookie Company, Incorporated and the Carved- out Portion of Hot Mrs. Fields Inc. and Subsidiaries Sam Company, Inc. (Combined) -------------------------------------- ----------------------------------- December December 52 Weeks Ended 31, 1995 52 Weeks Ended 31, 1995 ----------------------- through ---------------------- through December December September December December September 31, 1994 30, 1995 17, 1996 31, 1994 30, 1995 17, 1996 ----------- ---------- ------------ ---------- --------- ---------- (Dollars in thousands) <S> <C> <C> <C> <C> <C> <C> Statement of Operations Data: Net store and fund sales.................. $ 87,863 $ 59,956 $ 29,674 $ 89,648 $ 85,581 $ 54,366 Net store contribution(1)........ 8,083 6,591 3,797 13,912 13,063 5,854 Franchising and licensing, net......... 7,241 5,993 3,786 -- -- -- General and administrative expenses............... 16,379 15,612 8,984 12,546 9,216 7,538 Income (loss) from operations............. (1,691) (3,526) (1,742) (750) 2,435 (2,772) Net loss................ (5,320) (2,368) (2,304) (5,355) (2,096) (5,645) Other Data: Cash flows from operating activities... 1,728 (4,478) (447) 3,699 4,451 (378) Cash flows from investing activities... (2,030) 2,526 (385) (3,779) (568) (1,200) Cash flows from financing activities... (732) (185) (58) 3,134 (4,599) (1,380) Interest expense........ 2,155 51 80 4,381 4,356 2,895 Total depreciation and amortization........... 4,415 3,525 1,911 7,423 6,902 4,937 Capital expenditures.... 4,895 4,146 1,054 3,779 568 1,200 EBITDA(2)............... 2,724 (1) 169 6,673 9,337 2,165 Store contribution for stores in the process of being closed or franchised(1).......... $ 319 $ (802) $ (695) $ (542) $ (1,542) $ (1,751) Ratio of earnings to fixed charges(3)....... -- -- -- -- -- -- Balance Sheet Data: Working capital (deficit).............. $ (1,067) $ (3,114) $ (21,704) $ (46) $ 128 $ (3,640) Total assets............ 30,128 23,033 19,144 74,490 66,282 59,024 Debt and capital lease obligations, including current portion........ 22,850 21,226 21,224 36,956 32,357 30,977 Total stockholders' equity (deficit)....... (25,419) (28,017) (30,318) 24,684 22,588 16,943 </TABLE> See footnotes on page 36 35

<TABLE> <CAPTION> Mrs. Fields ------------------------------------------------------ September 18, 53 Weeks 52 Weeks 26 Weeks 26 Weeks 1996 through Ended Ended Ended Ended December 28, January 3, January 2, July 4, July 3, 1996 1998 1999 1998 1999 ------------- ---------- ---------- -------- -------- (Dollars in thousands) <S> <C> <C> <C> <C> <C> Statement of Operations Data: Net store and food sales.................. $ 40,849 $127,845 $140,235 $ 56,687 $ 71,915 Net store contribution(1)........ 9,707 25,044 20,166 6,915 8,686 Franchising and licensing, net......... 1,267 6,563 14,001 2,971 11,562 General and administrative expenses............... 4,035 16,192 19,017 8,587 10,873 Store closure provision.............. -- 538 7,303 -- -- Income (loss) from operations............. 5,649 8,415 (5,389) (1,536) (945) Net income (loss)....... 1,961 (974) (19,143) (7,301) (10,099) Other Data: Cash flows from operating activities... 7,609 919 9,429 (3,306) 2,708 Cash flows from investing activities... (21,131) (15,505) (40,894) (4,270) (2,704) Cash flows from financing activities... 20,231 24,164 19,929 (445) (110) Interest expense........ 1,867 7,830 13,197 5,626 8,686 Total depreciation and amortization........... 2,344 10,403 19,820 6,197 11,263 Capital expenditures.... 1,638 4,678 8,235 3,342 2,604 EBITDA(2)............... 7,993 18,818 14,431 4,661 10,318 Store contribution for stores in the process of being closed or franchised(1).......... $ 513 $ (1,798) $ (2,054) $ (1,605) $ (863) Ratio of earnings to fixed charges(3)....... 2.85x -- -- -- -- Balance Sheet Data: Working capital (deficit).............. $ (2,889) $ 13,133 $(12,727) $ 8,844 $(13,434) Total assets............ 110,055 149,684 231,906 137,408 219,313 Mandatorily redeemable cumulative preferred stock of subsidiaries.. 3,597 902 1,261 1,081 1,440 Line of credit, debt and capital lease obligations, including current portion........ 67,563 101,081 150,989 100,815 151,026 Total stockholder's equity................. 16,961 30,765 40,678 23,464 32,579 </TABLE> <TABLE> <CAPTION> Predecessors --------------------------------------------------------- The Original Cookie Company, Incorporated and the Carved-out Portion of Hot Mrs. Fields Inc. and Sam Company, Inc. Subsidiaries (Combined) ----------------------------- --------------------------- December December 52 Weeks Ended 31, 1995 52 Weeks Ended 31, 1995 ------------------ through ----------------- through December December September December December September 31, 1994 30, 1995 17, 1996 31, 1994 30, 1995 17, 1996 -------- -------- --------- -------- -------- --------- (Dollars in thousands) <S> <C> <C> <C> <C> <C> <C> EBITDA Data: Income (loss) from operations............. $(1,691) $(3,526) $(1,742) $ (750) $2,435 $(2,772) ADD: Depreciation and amortization.......... 4,415 3,525 1,911 7,423 6,902 4,937 ------- ------- ------- ------ ------ ------- EBITDA................. $ 2,724 $ (1) $ 169 $6,673 $9,337 $ 2,165 ======= ======= ======= ====== ====== ======= </TABLE> <TABLE> <CAPTION> Mrs. Fields ------------------------------------------------------ September 18, 53 Weeks 52 Weeks 26 Weeks 26 Weeks 1996 through Ended Ended Ended Ended December 28, January 3, January 2, July 4, July 3, 1996 1998 1999 1998 1999 ------------- ---------- ---------- -------- -------- (Dollars in thousands) <S> <C> <C> <C> <C> <C> <C> EBITDA Data: Income (loss) from operations............. $5,649 $ 8,415 $(5,389) $(1,536) $ (945) ADD: Depreciation and amortization.......... 2,344 10,403 19,820 6,197 11,263 ------ ------- ------- ------- ------- EBITDA.................. $7,993 $18,818 $14,431 $ 4,661 $10,318 ====== ======= ======= ======= ======= </TABLE> -------- (1) Store contribution is determined by subtracting all store operating expenses including depreciation from net store sales. Management uses store contribution information to measure operating performance at the store level. Store contribution for stores in the process of being closed or franchised as a separate caption is not in accordance with generally accepted accounting principles. Store contribution may not be comparable to other similarly titled measures reported by other companies. (footnotes continue on next page) 36

(2) EBITDA consists of earnings before depreciation, amortization, interest, income taxes, minority interest, preferred stock accretion and dividends of subsidiaries and other income or expense. EBITDA is not intended to represent cash flows from operations as defined by generally accepted accounting principles and should not be considered as an alternative to net income (loss) as an indicator of operating performance or to cash flows as a measure of liquidity. EBITDA has been included in this prospectus because it is one of the indicators upon which Mrs. Fields assesses its financial performance and its capacity to service its debt (see footnote 3 below). EBITDA may not be comparable to similarly titled measures reported by other companies. (3) For purposes of computing the ratio of earnings to fixed charges, earnings consist of income before income taxes plus fixed charges. Fixed charges consist of interest expense on all indebtedness (whether paid or accrued and net of debt premium amortization), including the amortization of debt issuance costs and original issue discount, noncash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with capital lease obligations, letter of credit commissions, fees or discounts and the product of all dividends and accretion on mandatorily redeemable cumulative preferred stock multiplied by a fraction, the numerator of which is one and the denominator of which is one minus the current combined federal, state and local statutory tax rate. For fiscal years 1994 and 1995 and the period December 31, 1995 through September 17, 1996, Mrs. Fields Inc. and subsidiaries' earnings were insufficient to cover fixed charges by $5,129,000, $2,127,000 and $2,099,000, respectively. For fiscal years 1994 and 1995 and the period December 31, 1995 through September 17, 1996, Original Cookie and Hot Sam (combined) earnings were insufficient to cover fixed charges by $5,131,000, $1,833,000 and $5,645,000, respectively. For the 53 weeks ended January 3, 1998 and the 52 weeks ended January 2, 1999, Mrs. Fields' earnings were insufficient to cover fixed charges by $319,000 and $18,827,000, respectively. For the 26 weeks ended July 4, 1998 and July 3, 1999, Mrs. Fields' earnings were insufficient to cover fixed charges by $7,287,000 and $9,889,000, respectively. 37

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview In 1996, an investor group led by Capricorn Investors II, L.P. formed Mrs. Fields' Original Cookies, Inc. and The Mrs. Fields' Brand, Inc. as subsidiaries of Mrs. Fields' Holding Company, Inc. On September 17, 1996, Mrs. Fields initiated operations when it purchased substantially all of the assets and assumed certain liabilities of Mrs. Fields Inc. and subsidiaries, The Original Cookie Company, Incorporated and the pretzel business of Hot Sam Company, Inc. Mrs. Fields set out to increase sales and profitability of its cookie and pretzel operations by implementing key elements of its business plan coupled with strategic acquisitions. A key element of the business plan is closing or franchising certain company-owned stores that do not meet specific financial and geographical criteria established by management. Implementation of this element of the business plan is expected to result in enhanced operating margins as these stores are franchised or closed. In some of our tables we refer to stores not planned to be franchised or closed as "core" stores, meaning continuing company-owned stores. Continuing company-owned stores will be operated by Mrs. Fields into the foreseeable future. As a result of converting certain stores to franchises, royalty revenues are expected to increase and net store sales and overhead expenses associated with operating those stores are expected to be reduced. As Mrs. Fields exits stores it has identified for closure through closing or franchising, results from operations are expected to improve on both a short- term and long-term basis. With respect to these specific stores both ongoing operating losses and negative cash flows are expected to cease. Cash payments to landlords for early lease termination costs negatively impact our immediate liquidity position. However, our overall financial position is expected to be strengthened over time as cash flows from operating activities increase. As cash is used to fund the store closure plans, corresponding store closure reserves are reduced which has a neutral impact on working capital and financial position. Should Mrs. Fields' cost estimates for exiting the remaining stores not prove sufficient, it would have a negative impact on both liquidity and results of operations. Mrs. Fields believes that it has sufficient liquidity to complete its store closure plans. A complete analysis of Mrs. Fields' store closure plans is included in Note 5 to the Consolidated Financial Statements. Mrs. Fields is pursuing growth in both its cookie and pretzel businesses through strategic acquisitions. Management expects that significant operating synergies, expense leveraging and geographic market share can be achieved through targeted acquisitions. On July 25, 1997, a subsidiary of Mrs. Fields' Holding, Mrs. Fields' Pretzel Concepts, Inc., acquired substantially all of the assets and assumed liabilities of H&M Concepts Ltd. Co., the largest franchisee of Pretzel Time, Inc. On September 2, 1997, Mrs. Fields' Holding acquired 56% of the common stock of Pretzel Time, the franchisor of the Pretzel Time concept. On November 26, 1997, Mrs. Fields received as a contribution from Mrs. Fields' Holding all of the common stock of The Mrs. Fields' Brand, Inc., the business of Mrs. Fields' Pretzel Concepts and 56% of the shares of common stock of Pretzel Time. On January 2, 1998 and June 12, 1998, Mrs. Fields acquired an additional 4% and 10%, respectively, of Pretzel Time common stock, bringing its total ownership to 70%. On December 9, 1998, Mrs. Fields purchased three percent of Pretzel Time common stock for $0.5 million in cash and on December 30, 1998 Mrs. Fields completed the acquisition of the remaining outstanding common stock of Pretzel Time under a stock purchase agreement, for a purchase price of approximately $4.7 million. On August 24, 1998, Mrs. Fields acquired all of the outstanding capital stock and subordinated indebtedness of Cookies USA, the parent company of Great American Cookie Company, Inc., for a total purchase price of $18.4 million. Mrs. Fields also retired approximately $38.9 million of outstanding Great 38

American notes. Concurrently, Cookies USA was merged into Mrs. Fields, at which time Great American became a wholly owned subsidiary of Mrs. Fields. At the same time Mrs. Fields also purchased the stock of two Great American franchisees, Deblan Corporation and Chocolate Chip Cookies of Texas, Inc., together owning and operating 29 Great American franchised stores, for total consideration of $14.4 million. Deblan and Chocolate Chip were merged into Great American at that time. On September 9, 1998, Mrs. Fields acquired eight Great American franchise stores from a Great American franchisee ("Karp"), for a purchase price of $1.9 million. On October 5, 1998, Mrs. Fields purchased all of the retail cookie and related business and operations of eleven Great American franchise stores from a Great American franchisee ("Cookie Conglomerate") for a total purchase price of $2.8 million. On November 19, 1998, Mrs. Fields, under a stock purchase agreement among Pretzelmaker Holdings, Inc., holders of all outstanding capital stock of Pretzelmaker, and Mrs. Fields, acquired all of the outstanding capital stock of Pretzelmaker for $5.7 million, including $5.4 million related to outstanding capital stock and $320,000 related to severance payments in lieu of outstanding stock options, and assumed liabilities totaling $1.3 million. Year 2000 Management has assessed the Year 2000 issue and has determined that all internal information technology systems including financial software, corporate networks, the AS400 system and all other systems are Year 2000 compliant with the exception of systems used for collecting and communicating sales data from retail locations. This assessment was based primarily on independent, third- party verification from Mrs. Fields' vendors and suppliers. Mrs. Fields is currently replacing its sales collection systems with software and hardware that is Year 2000 compliant. Programming and development of the software is complete and has been installed in approximately 80% of its stores. Mrs. Fields projects installation will be complete by September 1999. The estimated cost of this project is $1.9 million and includes software development and new store computers and registers. The costs to complete this project are included in Mrs. Fields' 1999 budget. Funding for this project is being provided by internal cash flow and by a lease finance company. Upgrades of the plant production and distribution software were completed in the first and second quarters of 1999 at an estimated cost of $10,000. No information technology projects have been deferred as a result of Mrs. Field's Year 2000 efforts. Mrs. Fields is not dependent on the proper operation of the sales collection systems to run the day-to-day operations of the business. Therefore, failure or malfunction of these systems due to untimely or incomplete remediation would not have a material adverse effect on its results of operations. Mrs. Fields has assessed Year 2000 issues with respect to its significant vendors and financial institutions as to their compliance plans and whether any Year 2000 issues will impede the ability of such vendors to continue providing goods and services to Mrs. Fields. Failure of Mrs. Fields' key suppliers to remedy their own Year 2000 issues could delay shipments of essential products, thereby disrupting Mrs. Fields' operations. Furthermore, Mrs. Fields relies on various service providers, such as utility and telecommunication service companies, which are beyond its control. Based upon the results of the assessment, Mrs. Fields is not aware of any Year 2000 issues relating to its significant vendors, financial institutions or its non-information technology systems. Mrs. Fields does not have a contingency plan in place to address untimely or incomplete remediation of Year 2000 issues, but it is currently developing contingency plans. These contingency plans are expected to address issues related to significant vendors and financial institutions. 39

Results of Operations of Mrs. Fields and its Predecessors The following table shows, for the periods indicated, information relating to the operations of Mrs. Fields and its predecessors expressed in thousands of dollars and percentage changes from period to period. Annual data in the table reflects the combined results of the predecessors (for the period December 31, 1995 through September 17, 1996) and Mrs. Fields (for the period September 18, 1996 through December 28, 1996) and the consolidated results of Mrs. Fields for the 53 weeks ended January 3, 1998 ("fiscal year 1997"), for the 52 weeks ended January 2, 1999 ("fiscal year 1998") and for the 26 weeks ended July 4, 1998 and July 3, 1999. In order for the presentations to be comparable, some of the historical financial statement information for the predecessors has been reclassified to be consistent with the Mrs. Fields historical financial statement presentation. <TABLE> <CAPTION> For the 26 Weeks % of Ended For the 53 Change % of ----------------- For the 52 Weeks from For the 52 Change % Change Weeks Ended Ended 1996 Weeks Ended from from December 28, January 3, to January 2, 1997 to July 4, July 3, 1998 to 1996 1998 1997 1999 1998 1998 1999 1999 ------------ ---------- ------ ----------- ------- ------- -------- -------- (dollars in thousands) <S> <C> <C> <C> <C> <C> <C> <C> <C> Statement of Operations Data: Revenues: Net store and food sales................. $126,330 $127,845 1.2 % $140,235 9.7 % $58,687 $ 71,915 22.5 % Franchising, net....... 3,447 4,535 31.6 12,464 174.8 2,971 11,562 289.2 Licensing, net......... 1,656 2,028 22.5 1,537 (24.2) 683 688 0.7 -------- -------- -------- ------- -------- Total revenues......... 131,433 134,408 2.3 154,236 14.8 62,341 84,165 35.0 -------- -------- -------- ------- -------- Operating costs and expenses: Selling and store occupancy costs....... 69,209 66,832 (3.4) 75,003 12.2 33,908 41,118 21.3 Cost of sales.......... 31,340 32,028 2.2 38,482 20.2 15,185 21,856 43.9 General and administrative expenses.............. 20,557 16,192 (21.2) 19,017 17.4 8,587 10,873 26.6 Store closure provision............. -- 538 -- 7,303 1,257.4 -- -- -- Depreciation and amortization.......... 9,192 10,403 13.2 19,820 90.5 6,197 11,263 81.7 -------- -------- -------- ------- -------- Total operating costs and expenses.......... 130,298 125,993 (3.3) 159,625 26.7 63,877 85,110 33.2 Interest expense........ (4,842) (7,830) 61.7 (13,197) 68.5 (5,626) (8,686) 54.4 Interest income......... 141 246 74.4 623 153.3 417 78 (81.3) Other income (expense).. (2,422) (1,805) (25.5) (1,180) (34.6) (556) (546) (1.8) -------- -------- -------- ------- -------- Net loss................ $ (5,988) $ (974) (83.7)% $(19,143) 1,865.4 % $(7,301) $(10,099) 38.3 % ======== ======== ======== ======= ======== Supplemental Information: Continuing company-owned stores: Net store and food sales................. $ 95,635 $108,174 13.1 % $122,713 13.4 % $51,695 $ 63,905 23.6 % -------- -------- -------- ------- -------- Operating costs and ex- penses: Selling and store occupancy costs....... 44,963 50,858 13.1 60,900 19.7 27,550 34,866 26.6 Cost of sales.......... 24,499 26,578 8.5 33,621 26.5 13,204 14,962 13.3 Depreciation and amortization.......... 4,932 3,896 (21.0) 5,972 53.3 2,421 4,528 87.0 -------- -------- -------- ------- -------- Total operating costs and expenses.......... 74,394 81,332 9.3 100,493 23.6 43,175 54,356 25.9 -------- -------- -------- ------- -------- Continuing company-owned store contribution..... $ 21,241 $ 26,842 26.4 % $ 22,220 (17.2)% $ 8,520 $ 9,549 12.1 % ======== ======== ======== ======= ======== Stores in the Process of Being Closed or Franchised: Net store and food sales.................. $ 30,695 $ 19,671 (35.9)% $ 17,522 (10.9)% $ 6,992 $ 8,010 14.6 % -------- -------- -------- ------- -------- Operating costs and expenses: Selling and store occupancy costs....... 24,246 15,974 (34.1) 14,103 (11.7) 6,358 6,252 (1.7) Cost of sales.......... 6,841 5,450 (20.3) 4,861 (10.8) 1,981 2,431 22.7 Depreciation and amortization.......... 1,541 45 (97.1) 612 1,260.0 258 190 (26.4) -------- -------- -------- ------- -------- Total operating costs and expenses.......... 32,628 21,469 (34.2) 19,576 (8.8) 8,597 8,873 3.2 -------- -------- -------- ------- -------- Stores in the process of being closed or franchised negative contribution........... $ (1,933) $ (1,798) (7.0) $ (2,054) 14.2 % $(1,605) $ (863) (46.2)% ======== ======== ======== ======= ======== </TABLE> 40

26 Weeks Ended July 3, 1999 Compared to the 26 Weeks Ended July 4, 1998 As of July 3, 1999, there were 492 Company-owned stores and 1,001 franchised or licensed stores in operation. The store activity for the 26 weeks ended July 3, 1999 is summarized as follows: Company-owned and Franchised or Licensed Store Activity <TABLE> <CAPTION> July 3, 1999 July 4, 1998 -------------------- -------------------- Company- Franchised Company- Franchised Owned or Licensed Owned or Licensed -------- ----------- -------- ----------- <S> <C> <C> <C> <C> Stores open as of the beginning of the 26 weeks ended.................. 566 972 481 553 Stores opened (including relocations)...................... 10 49 5 42 Stores closed (including relocations)...................... (23) (38) (7) (42) Stores sold to franchisees......... (7) 7 (1) 1 Non-core (exit plan) stores closed (September 18, 1996 forward)...... (43) -- (8) -- Non-core (exit plan) stores franchised (September 18, 1996 forward).......................... (14) 14 (11) 11 Stores acquired from franchisees... 3 (3) 11 (11) --- ----- --- --- Stores open as of the end of the 26 weeks ended......................... 492 1,001 470 554 === ===== === === </TABLE> Revenues Net Store and Food Sales. Total net store sales increased $13,228,000, or 22.5%, from $58,687,000 to $71,915,000 for the 26 weeks ended July 3, 1999 compared to the 26 weeks ended July 4, 1998. Net store sales from core stores increased $12,210,000, or 23.6%, from $51,695,000 to $63,905,000 for the 26 weeks ended July 3, 1999 compared to the 26 weeks ended July 4, 1998. The increase in net store sales from core stores was primarily attributable to the operation of 66 Great American and 2 Pretzelmaker core stores obtained in connection with the acquisitions in August and November 1998, respectively. Net store sales from stores in the process of being closed or franchised increased $1,018,000, or 14.6%, from $6,992,000 to $8,010,000 for the 26 weeks ended July 3, 1999 compared to the 26 weeks ended July 4, 1998. This increase results from the addition of 41 to be closed stores and 13 to be franchised stores in the fourth quarter 1998. Franchising Revenues. Franchising revenues increased $8,591,000, or 289.2%, from $2,971,000 to $11,562,000 for the 26 weeks ended July 3, 1999 compared to the 26 weeks ended July 4, 1998. The increase in franchising revenues was primarily attributable to batter sales made to franchisees from the Atlanta batter facility purchased in August 1998 and the addition of 201 Great American and 205 Pretzelmaker franchisees due to the acquisitions of these companies in August and November 1998, respectively. Licensing Revenues. Licensing revenues increased $5,000, or 0.7%, from $683,000 to $688,000 for the 26 weeks ended July 3, 1999 compared to the 26 weeks ended July 4, 1998. Operating Costs and Expenses Selling and Store Occupancy Costs. Total selling and store occupancy costs increased $7,210,000, or 21.3%, from $33,908,000 to $41,118,000 for the 26 weeks ended July 3, 1999 compared to the 26 weeks ended July 4, 1998. Selling and store occupancy costs for core stores increased by $7,316,000, or 26.6%, from $27,550,000 to $34,866,000 for the 26 weeks ended July 3, 1999 compared to the 26 weeks ended July 4, 1998. Within this 41

overall increase, selling expenses increased by $4,047,000, or 34.1%, from $11,865,000 to $15,912,000 for the 26 weeks ended July 3, 1999 compared to the 26 weeks ended July 4, 1998. Store occupancy costs increased $2,112,000, or 18.3%, from $11,569,000 to $13,681,000 for the 26 weeks ended July 3, 1999 compared to the 26 weeks ended July 4, 1998. These increases were primarily attributable to the 66 Great American and 2 Pretzelmaker core stores obtained in connection with the acquisitions in August and November 1998, respectively, coupled with lease renewal increases. Selling and store occupancy costs for stores in the process of being closed or franchised decreased $106,000, or 1.7%, from $6,358,000 to $6,252,000 for the 26 weeks ended July 3, 1999 compared to the 13 weeks ended July 4, 1998. This decrease was primarily the result of closing or franchising 57 stores during the 26 weeks ended July 3, 1999. Cost of Sales. Total food cost of sales increased $6,671,000, or 43.9%, from $15,185,000 to $21,856,000 for the 26 weeks ended July 3, 1999 compared to the 26 weeks ended July 4, 1998. Food cost of sales for core stores increased $1,758,000, or 13.3%, from $13,204,000 to $14,962,000 for the 26 weeks ended July 3, 1999. This increase was primarily the result of the addition of 66 Great American and 2 Pretzelmaker core stores in August and November 1998, respectively. Food cost of sales for stores in the process of being closed or franchised increased $450,000, or 22.7%, from $1,981,000 to $2,431,000 for the 26 weeks ended July 3, 1999 compared to the 26 weeks ended July 4, 1998. This increase was primarily the result of the addition of 41 to be closed stores and 13 to be franchised stores in the fourth quarter 1998. General and Administrative Expenses. General and administrative expenses increased $2,286,000, or 26.6%, from $8,587,000 to $10,873,000 for the 26 weeks ended July 3, 1999 compared to the 26 weeks ended July 4, 1998. The increase in general and administrative expenses was primarily attributable to the acquisitions of Great American and Pretzelmaker. During the 26 weeks ended July 3, 1999, the Company incurred unanticipated consulting and other costs related to the Company's product offering and marketing programs as well as additional compensation and other expenses incurred by the Company due to the resignation of its Chief Financial Officer. Depreciation and Amortization. Total depreciation and amortization expense increased by $5,066,000, or 81.7%, from $6,197,000 to $11,263,000 for the 26 weeks ended July 3, 1999 compared to the 26 weeks ended July 4, 1998. This increase was primarily attributable to increased goodwill and fixed assets from the Great American and Pretzelmaker acquisitions. Depreciation and amortization expense for core stores increased $2,107,000, or 87.0%, from $2,421,000 to $4,528,000 for the 26 weeks ended July 3, 1999 compared to the 26 weeks ended July 4, 1998. This increase in depreciation and amortization expense was primarily attributable to the acquisitions of 66 Great American and 2 Pretzelmaker core stores in August and November 1998, respectively. Interest Expense. Interest expense increased $3,060,000, or 54.4%, from $5,626,000 to $8,686,000 for the 26 weeks ended July 3, 1999 compared to the 26 weeks ended July 4, 1998. This increase was primarily attributable to interest on the $40,000,000 in high yield notes, which were issued in August 1998. Interest Income. Interest income decreased $339,000, or 81.3%, from $417,000 to $78,000 for the 26 weeks ended July 3, 1999 compared to the 26 weeks ended July 4, 1998. This decrease was primarily the result of interest income earned in 1998 on excess cash provided by the $100,000,000 in high yield notes which were put in place in November 1997 that was not earned in fiscal 1999. Other Expenses. Other expenses for the 26 weeks ended July 3, 1999 were comparable to the 26 weeks ended July 4, 1998. 42

Net Loss. The net loss increased by $2,798,000, or 38.3%, from $7,301,000 to $10,099,000 for the 26 weeks ended July 3, 1999 compared to the 26 weeks ended July 4, 1998 due to the combination of factors described above. Contribution from Core Stores. Contribution from core stores increased by $1,029,000, or 12.1%, from $8,520,000 to $9,549,000 for the 26 weeks ended July 3, 1999 compared to the 26 weeks ended July 4, 1998, primarily due to the operation of 66 Great American and 2 Pretzelmaker core stores obtained in connection with the acquisitions in August and November 1998, respectively. Negative Contribution from Stores in the Process of Being Closed or Franchised. The negative contribution from stores in the process of being closed or franchised decreased by $742,000, or 46.2%, from $1,605,000 to $863,000 for the 26 weeks ended July 3, 1999 compared to the 26 weeks ended July 4, 1998. This decrease was primarily the result of closing 43 stores and franchising 14 stores during the 26 weeks ended July 3, 1999 and the effect of closing or franchising 19 stores during the 26 weeks ended July 4, 1998. In addition, 22 stores were closed and 4 franchised over the remainder of fiscal year 1998, which were in operation during the 26 weeks ended July 4, 1998. 52 Weeks Ended January 2, 1999 Compared to the 53 Weeks Ended January 3, 1998 Company-owned and Franchised or Licensed Store Activity As of January 2, 1999, there were 566 company-owned stores and 972 franchised or licensed stores in operation. The store activity for the 53 weeks ended January 3, 1998 ("fiscal 1997") and the 52 weeks ended January 2, 1999 ("fiscal 1998") is summarized as follows: <TABLE> <CAPTION> Fiscal 1997 Fiscal 1998 -------------------- -------------------- Company- Franchised Company- Franchised owned or Licensed Owned or Licensed -------- ----------- -------- ----------- <S> <C> <C> <C> <C> Stores open as of the beginning of the fiscal year..................... 482 418 481 553 Stores opened (including relocations and acquisitions)................... 86 217 128 504 Stores closed (including relocations)........................ (7) (89) (20) (78) Non-continuing company-owned (exit plan) stores closed (September 18, 1996 forward)....................... (73) -- (30) -- Stores sold to franchisees........... (3) 3 (11) 11 Non-continuing company-owned (exit plan) stores franchised (September 18, 1996 forward)................... (9) 9 (15) 15 Stores acquired from franchisees..... 5 (5) 33 (33) --- --- --- --- Stores open as of the end of the fis- cal year............................ 481 553 566 972 === === === === </TABLE> Revenues Net Store and Food Sales. Total net store and food sales, which includes sales from stores and the mail order facility, increased $12,390,000, or 9.7%, from $127,845,000 to $140,235,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998. Net store sales from continuing company-owned stores and mail order increased $14,539,000, or 13.4%, from $108,174,000 to $122,713,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998. The increase in net store sales from continuing company-owned stores was primarily attributable to: (1) the operation of 85 Pretzel Time continuing company-owned stores acquired in connection with the acquisition of H&M and Pretzel Time in July 1997, (2) the operation of 65 Great American stores acquired in connection with the acquisitions of Great American, Deblan, Chocolate Chip, and Karp in August and September 1998, and 43

(3) a 35.5% increase in mail order sales. This increase in net store sales from continuing company-owned stores was offset in part by the negative effect of a calendar shift. Mrs. Fields' year end was December 28 in 1996 and January 3, 1998 in 1997. As a result, the New Year's holiday week fell in the first quarter of fiscal 1997 and again in the fourth quarter of fiscal 1997. The first quarter of 1998 did not benefit from the New Year's holiday sales. The increase in net store sales was also offset in part by negative same store sales. Based on stores that have been open for at least two years (adjusted for the calendar shift), system-wide continuing company-owned store sales were down 1.8% during the 52 weeks ended January 2, 1999 compared to the same period in fiscal 1997. Additionally, there were only 52 weeks in fiscal 1998 compared to 53 weeks in fiscal 1997. Net store sales from stores in the process of being closed or franchised decreased $2,149,000, or 10.9%, from $19,671,000 to $17,522,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998. This decrease results from closing or franchising 45 stores during the 52 weeks ended January 2, 1999 and the effect of closing or franchising 82 stores during the 53 weeks ended January 3, 1998. Franchising Revenues. Franchising revenues increased $7,929,000, or 174.8%, from $4,535,000 to $12,464,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998. The increase in franchising revenues was primarily attributable to royalties earned from 141 Pretzel Time franchised stores obtained in connection with the acquisition of H&M and Pretzel Time in 1997, the 211 Great American franchised stores obtained in connection with the acquisitions of Great American, Deblan, Chocolate Chip and Karp in August and September 1998 and the 199 Pretzelmaker franchised stores acquired in November 1998. Licensing Revenues. Licensing revenues decreased $491,000, or 24.2%, from $2,028,000 to $1,537,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998. The decrease in licensing revenues was primarily attributable to reduced concept licensing royalties. Total Revenues. Total revenues increased by $19,828,000, or 14.8%, from $134,408,000 to $154,236,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998 due to the reasons discussed above. Operating Costs and Expenses Selling and Store Occupancy Costs. Total selling and store occupancy costs increased $8,171,000, or 12.2%, from $66,832,000 to $75,003,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998. Selling and store occupancy costs for continuing company-owned stores increased by $10,042,000, or 19.7%, from $50,858,000 to $60,900,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998. Within this overall increase, selling expenses for continuing company-owned stores increased by $4,836,000, or 21.9%, from $22,094,000 to $26,930,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998. The increase in selling expenses was primarily attributable to the 85 Pretzel Time continuing company-owned stores acquired in connection with the acquisitions of H&M and Pretzel Time in 1997, the 65 Great American continuing company-owned stores acquired in connection with the acquisitions of Great American, Deblan, Chocolate Chip and Karp in August and September 1998, the 2 Pretzelmaker stores acquired in November 1998, and the effect of the minimum wage increasing to $5.15 from $4.75 on September 1, 1997. Store occupancy costs for continuing company-owned stores increased $5,206,000, or 18.1%, from $28,764,000 to $33,970,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998. The increase in store occupancy costs was primarily attributable to the increase in the number of stores discussed above, Mrs. Fields' reacquiring 33 continuing company-owned stores from franchisees during the 52 weeks ended January 2, 1999, rent escalations in existing leases and lease renewal increases. 44

Selling and store occupancy costs for stores in the process of being closed or franchised decreased $1,871,000, or 11.7%, from $15,974,000 to $14,103,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998. This decrease was primarily the result of closing or franchising 45 stores during the 52 weeks ended January 2, 1999 and the effect of closing or franchising 82 stores during the 53 weeks ended January 3, 1998. Cost of Sales. Total cost of sales increased $6,454,000, or 20.2%, from $32,028,000 to $38,482,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998. Cost of sales for continuing company-owned stores increased $7,043,000, or 26.5%, from $26,578,000 to $33,621,000 for the 52 weeks ended January 2, 1999. This increase was primarily the result of the addition of 85 Pretzel Time continuing company-owned stores in July 1997, 65 Great American continuing company-owned stores acquired in connection with the acquisitions of Great American, Deblan, Chocolate Chip and Karp in August and September 1998 and 2 Pretzelmaker stores acquired in November 1998. Cost of sales also increased due to the addition of the Great American batter facility in August 1998 which produces batter for the Great American stores, food costs associated with increased mail order sales and the increasing cost of butter. Butter is one of the main ingredients in a variety of our products and is a condiment for other products. The price of butter has increased from $0.78/lb. at the beginning of fiscal 1997 to a peak of $2.92/lb. in September 1998. Additionally, distribution costs increased during the 52 weeks ended January 2, 1999 as Mrs. Fields' changed distributors to improve product availability and the reliability of service to the stores. Cost of sales for stores in the process of being closed or franchised decreased $589,000, or 10.8%, from $5,450,000 to $4,861,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998. This decrease was primarily the result of closing or franchising 45 stores during the 52 weeks ended January 2, 1999 and the effect of closing or franchising 82 stores during the 53 weeks ended January 3, 1998. General and Administrative Expenses. General and administrative expenses increased $2,825,000, or 17.4%, from $16,192,000 to $19,017,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998. The increase in general and administrative expenses was primarily attributable to the acquisitions of H&M and Pretzel Time in 1997, the acquisitions of Great American, Deblan, Chocolate Chip, Karp and Pretzelmaker in 1998. Store Closure Provision. During the fourth quarter of 1998, management reassessed its strategy with respect to acceptable levels of contribution from certain existing stores. This resulted in management setting out a plan to close or franchise 54 existing stores. Mrs. Fields recorded an additional $7,303,000 in store closure reserves to cover early lease termination costs. Management believes that the level of store closure reserves is adequate to provide for all closure costs for these stores. Depreciation and Amortization Expense. Total depreciation and amortization expense increased by $9,417,000, or 90.5%, from $10,403,000 to $19,820,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998. This increase was primarily attributable to increased goodwill amortization from the acquisitions of H&M and Pretzel Time in fiscal 1997 and the acquisitions of Great American, Deblan, Chocolate Chip and Pretzelmaker in fiscal 1998. For stores with negative contribution that were determined to be closed or franchised, Mrs. Fields wrote down the related long-lived assets to net realizable value. This expense is included in depreciation and amortization in the 1998 statement of operations and totaled $3,098,000. Mrs. Fields also assessed the realization of goodwill associated with these stores and recorded an impairment of goodwill totaling $1,033,000 during fiscal 1998. Depreciation and amortization expense for continuing company-owned stores increased $ 2,076,000, or 53.3%, from $3,896,000 to $5,972,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998. This increase in depreciation and amortization expense was primarily attributable to the 45

addition of 85 Pretzel Time continuing company-owned stores in July 1997, 65 Great American continuing company-owned stores in August and September 1998 and the acquisition of 2 Pretzelmaker continuing company-owned stores in 1998. Total Operating Costs and Expenses. Total operating costs and expenses increased by $33,632,000, or 26.7%, from $125,993,000 to $159,625,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998, for the reasons discussed above. Interest Expense. Interest expense increased $5,367,000, or 68.5%, from $7,830,000 to $13,197,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998. This increase was primarily attributable to interest expense on the $100,000,000 notes that were placed in November 1997 and the $40,000,000 notes placed in August 1998. Interest Income. Interest income increased $377,000, or 153.3%, from $246,000 to $623,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998. This increase was primarily the result of interest earned on excess cash provided by the $100,000,000 notes that were placed in November 1997 and the $40,000,000 notes placed in August 1998. Other Expenses. Other expenses decreased $625,000, or 34.6%, from $1,805,000 to $1,180,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998. This decrease was primarily attributable to minority interest from the acquisitions of H&M and Pretzel Time in 1997 and a decrease in the income tax provision during the 52 weeks ended January 2, 1999. Net Loss. The net loss increased by $18,169,000, or 1,865.4%, from $974,000 to $19,143,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998 due to the combination of factors described above. Income from Continuing Company-Owned Stores. Income from continuing company- owned stores decreased by $4,622,000, or 17.2%, from $26,842,000 to $22,220,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998. Income from continuing company-owned stores was negatively impacted by a 1.8% decline in sales from stores that have been open at least two years and by the increases in selling and store occupancy costs, food cost of sales and depreciation and amortization described above. Income from continuing company- owned stores was also negatively impacted by a calendar shift whereby Mrs. Fields' year end was December 28 for fiscal 1996 and January 3, 1998 for fiscal 1997. As a result, the New Year's holiday week fell in the first quarter of 1997 and again in the fourth quarter fiscal 1997. The first quarter of fiscal 1998 did not benefit from the New Year's holiday sales. Additionally, there were only 52 weeks in fiscal year 1998 compared to 53 weeks in fiscal 1997. Loss from Stores in the Process of Being Closed or Franchised. The loss from stores in the process of being closed or franchised increased by $256,000, or 14.2%, from $1,798,000 to $2,054,000 for the 52 weeks ended January 2, 1999 compared to the 53 weeks ended January 3, 1998. The increased loss was primarily attributable to the addition of 65 stores from the acquisitions of Great American, Deblan, Chocolate Chip and Karp in August and September 1998, offset in part by closing or franchising 45 stores during the 52 weeks ended January 2, 1999. 46

53 Weeks Ended January 3, 1998 ("Fiscal Year 1997") Compared to the 52 Weeks Ended December 28, 1996 ("Fiscal Year 1996") (Comprised of the Mrs. Fields Inc., Original Cookie and Hot Sam Pre-Acquisition Period of December 31, 1995 through September 17, 1996 and the Mrs. Fields Post-Acquisition Period of September 18, 1996 through December 28, 1996) Company-owned and Franchised or Licensed Store Activity As of January 3, 1998, there were 481 company-owned stores and 553 franchised or licensed stores in operation. The store activity for the 52 weeks ended December 28, 1996 and the 53 weeks ended January 3, 1998 is summarized as follows: <TABLE> <CAPTION> Fiscal 1996 Fiscal 1997 -------------------- -------------------- Company- Franchised Company- Franchised owned or Licensed owned or Licensed -------- ----------- -------- ----------- <S> <C> <C> <C> <C> Stores open as of the beginning of the fiscal year..................... 540 415 482 418 Stores opened (including relocations)........................ 5 118 3 76 Stores acquired through business acquisitions........................ -- -- 83 141 Stores closed (including relocations)........................ (39) (122) (7) (89) Non-continuing company-owned (exit plan) stores closed (September 18, 1996 forward)....................... (17) -- (73) -- Stores sold to franchisees........... (9) 9 (3) 3 Non-continuing company-owned (exit plan) stores franchised (September 18, 1996 forward)................... (3) 3 (9) 9 Stores acquired from franchisees..... 5 (5) 5 (5) --- ---- --- --- Stores open as of the end of the fiscal year......................... 482 418 481 553 === ==== === === </TABLE> Revenues Net Store and Food Sales. Total net store and food sales, which includes sales from stores and the mail order facility, increased $1,515,000, or 1.2%, from $126,330,000 to $127,845,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. Net store sales from continuing company-owned stores and mail order increased $12,539,000, or 13.1%, from $95,635,000 to $108,174,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. The increase in net store sales from continuing company-owned stores was primarily attributable to the operation of Pretzel Time continuing company-owned stores obtained in connection with the acquisitions of H&M and Pretzel Time in July 1997 and an increase in average transaction amounts resulting from the introduction of product line extensions and aggressive marketing initiatives, offset in part by declining transaction counts in some of our product lines. Also, three new continuing company-owned stores were opened and five stores were acquired from franchises during the 53 weeks ended January 3, 1998. Based on stores that have been open for at least two years (adjusted for the calendar shift), system-wide continuing company-owned store sales were up 0.8% during the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. Net store sales from stores in the process of being closed or franchised decreased $11,024,000, or 35.9%, from $30,695,000 to $19,671,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. This decrease results from the partial year effect of closing 73 stores and franchising 7 (net) stores during fiscal year 1997 and the full year effect of closing 56 stores and franchising 7 (net) stores during fiscal year 1996. Franchising Revenues. Franchising revenues increased $1,088,000, or 31.6%, from $3,447,000 to $4,535,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. The 47

increase in franchising revenues was primarily attributable to royalties earned from Pretzel Time franchised stores obtained in connection with the acquisitions of H&M and Pretzel Time coupled with new franchise openings in fiscal year 1997 and the full year effect of new franchise openings in fiscal year 1996. Licensing Revenues. Licensing revenues increased $372,000, or 22.5%, from $1,656,000 to $2,028,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. The increase in licensing revenues is primarily attributable to licensing fees earned on new license agreements entered into during the 53 weeks ended January 3, 1998, and increased royalties received from existing licensees. Total Revenues. Total revenues increased by $2,975,000, or 2.3%, from $131,433,000 to $134,408,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996, for the reasons discussed above. Operating Costs and Expenses Selling and Store Occupancy Costs. Total selling and store occupancy costs decreased $2,377,000, or 3.4%, from $69,209,000 to $66,832,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. Selling and store occupancy costs for continuing company-owned stores increased by $5,895,000, or 13.1%, from $44,963,000 to $50,858,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. Within this overall increase, selling expenses increased by $4,029,000, or 15.7%, from $25,650,000 to $29,679,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. The increase in selling expenses was primarily attributable to an increase in the minimum wage during the third quarter of 1996 from $4.15 to $4.75 an hour and an increase in labor hours to support the increase in sales. Store occupancy costs increased $1,866,000, or 9.7%, from $19,313,000 to $21,179,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. The increase in store occupancy costs was primarily attributable to the addition of Pretzel Time continuing company-owned stores in July 1997, and the opening of three continuing company-owned stores and acquiring five stores from franchises during the 53 weeks ended January 3, 1998 coupled with lease renewal increases. Selling and store occupancy costs for stores in the process of being closed or franchised decreased $8,272,000, or 34.1%, from $24,246,000 to $15,974,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. This decrease is primarily the result of closing 73 stores and franchising seven (net) stores during fiscal year 1997 and the full year effect of closing 56 stores and franchising seven (net) stores during fiscal year 1996. Cost of Sales. Total cost of sales increased $688,000, or 2.2%, from $31,340,000 to $32,028,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. Cost of sales for continuing company-owned stores increased $2,079,000, or 8.5%, from $24,499,000 to $26,578,000 for the 53 weeks ended January 3, 1998. This increase is primarily the result of the addition in July 1997 of Pretzel Time continuing company-owned stores, offset by an aggressive product waste control program which was uniformly applied to all product lines early in the year. Additionally, Mrs. Fields re-negotiated certain vendor contracts to capitalize on Mrs. Fields' economies of scale. Cost of sales for stores in the process of being closed or franchised decreased $1,391,000, or 20.3%, from $6,841,000 to $5,450,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. This decrease is primarily the result of closing 73 stores and franchising seven (net) stores during fiscal year 1997 and the full year effect of closing 56 stores and franchising seven (net) stores during fiscal year 1996. General and Administrative Expenses. General and administrative expenses decreased $4,365,000, or 21.2%, from $20,557,000 to $16,192,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks 48

ended December 28, 1996. The decrease in expenses was primarily attributable to the cost savings achieved by combining the operations of Mrs. Fields Inc. and subsidiaries, Original Cookie, Hot Sam and Pretzel Time which resulted in: (1) reduced headcount with corresponding decreases in administrative salaries and benefits; (2) decreased professional service fees, including legal and accounting services; and (3) decreased corporate office expenditures, including general insurance, repairs and maintenance and utilities as a direct result of closing the Original Cookie and Hot Sam headquarters in Cleveland, Ohio, the Pretzel Time headquarters in Harrisburg, Pennsylvania and the H&M headquarters in Boise, Idaho. Depreciation and Amortization Expense. Total depreciation and amortization expense increased by $1,211,000, or 13.2%, from $9,192,000 to $10,403,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. Depreciation and amortization expense for continuing company-owned stores decreased $1,036,000, or 21.0%, from $4,932,000 to $3,896,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. The decrease in depreciation and amortization expense was primarily attributable to Mrs. Fields recording the acquired assets of Mrs. Fields Inc. and subsidiaries, Original Cookie and Hot Sam at their fair values at the time of purchase on September 17, 1996, resulting in an overall reduction to the store asset base and the corresponding depreciation. This decrease is partially offset by additional depreciation expense resulting from the addition of Pretzel Time continuing company-owned stores in July 1997, three newly opened continuing company-owned stores and five stores acquired from franchises in fiscal year 1997. Total Operating Costs and Expenses. Total operating costs and expenses decreased by $4,305,000, or 3.3%, from $130,298,000 to $125,993,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996, for the reasons discussed above. Interest Expense. Interest expense increased $2,988,000, or 61.7%, from $4,842,000 to $7,830,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. This increase is primarily attributable to an increase in interest expense as a result of the debt incurred to fund the purchase of the assets of Mrs. Fields Inc. and subsidiaries, Original Cookie and Hot Sam on September 17, 1996. Other Expenses. Other expenses decreased $617,000, or 25.5%, from $2,422,000 to $1,805,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. This decrease was primarily attributable to a decrease in income tax provision, offset in part by an increase in accretion and dividends on preferred stock of subsidiaries. Net Loss. The net loss decreased by $5,014,000, or 83.7%, from $5,988,000 to $974,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. The net loss equaled 0.7% of total revenues during the 53 weeks ended January 3, 1998 compared to 4.6% of total revenues during the 52 weeks ended December 28, 1996. The decrease in net loss is primarily due to cost savings achieved by combining the operations of Mrs. Fields Inc. and subsidiaries, Original Cookie and Hot Sam, cost savings associated with the acquisitions of H&M and Pretzel Time and improved store operations. Income from Continuing Company-Owned Stores. The income from continuing company-owned stores increased by $5,601,000, or 26.4%, from $21,241,000 to $26,842,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996 due to the combination of the factors described above. Loss from Stores in the Process of Being Closed or Franchised. The loss from stores in the process of being closed or franchised decreased by $135,000, or 7.0%, from $1,933,000 to $1,798,000 for the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28, 1996. The decrease in negative income 49

was primarily attributable to closing 73 stores and franchising seven (net) stores during fiscal year 1997 and the full year effect of closing 56 stores and franchising seven (net) stores during fiscal year 1996. Liquidity and Capital Resources General Mrs. Fields' principal sources of liquidity are cash flows from operations, cash on hand and available borrowings under Mrs. Fields' existing lease and revolving credit facilities. As of July 3, 1999, Mrs. Fields has $4,645,000 of cash and cash equivalents on hand and $276,000 additional borrowings allowable under its revolving credit facilities. Mrs. Fields expects to use its existing cash, cash flows from operating activities and its credit facilities to provide working capital, finance capital expenditures and to meet debt service requirements. Based on current operations and anticipated cost savings, Mrs. Fields believes that its sources of liquidity will be adequate to meet its anticipated requirements for working capital, capital expenditures, scheduled debt service requirements and other general corporate purposes. There can be no assurance, however, that Mrs. Fields' business will continue to generate cash flows at or above current levels or that cost savings can be achieved. July 3, 1999 Compared to January 2, 1999 As of July 3, 1999, Mrs. Fields had liquid assets (cash and cash equivalents and accounts receivable) of $11,023,000, a decrease of 21.0%, or $2,939,000, from January 2, 1999 when liquid assets were $13,962,000. Cash decreased $106,000, or 2.2%, to $4,645,000 at July 3, 1999 from $4,751,000 at January 2, 1999. Accounts receivable decreased $2,833,000, or 30.8%, to $6,378,000 at July 3, 1999 from $9,211,000 at January 2, 1999 due to the seasonality of the business and improved collections. Mrs. Field's working capital decreased by $707,000 to a negative $13,434,000 at July 3, 1999 from a negative $12,727,000 at January 2, 1999. This decrease is due to decreases in current assets, as discussed above, which more than offset decreases in current liabilities. Long-term assets decreased $8,915,000, or 4.3%, to $198,648,000 at July 3, 1999 from $207,563,000 at January 2, 1999. This decrease was primarily the result of scheduled depreciation and amortization of fixed assets, goodwill and deferred loan costs. During the 26 weeks ended July 3, 1999, Capricorn Investors II L.P., the majority shareholder in Mrs. Fields' Holdings, Mrs. Fields' 100% owner, assumed a $2,000,000 contract payment due in the future. This transaction enhanced Mrs. Fields' tax planning and financial flexibility. Mrs. Fields' cash flows from operating activities of $2,708,000 for the 26 weeks ended July 3, 1999, resulted primarily from store sales and franchising and licensing revenues net of costs and expenses incurred to generate these sales and better management of cash flows. Mrs. Fields utilized $2,704,000 of cash in investing activities during the 26 weeks ended July 3, 1999, primarily for capital expenditures relating to store remodels and renovations. Mrs. Fields utilized $110,000 of cash in financing activities during the 26 weeks ended July 3, 1999, primarily for the payment of debt related to the Pretzel Time acquisition. The specialty cookie and pretzel businesses do not require the maintenance of significant receivables or inventories; however, Mrs. Fields continually invests in its business by upgrading and remodeling stores and adding new stores, carts, and kiosks as opportunities arise. Investments in these long- term assets, which are key to generating current sales, reduce Mrs. Fields' working capital. During the 26 weeks ended July 3, 1999 and July 4, 1998, Mrs. Fields expended $2,604,000 and $3,342,000, respectively, for capital assets and expects to 50

expend a total of approximately $7,000,000 in 1999. Management anticipates that these expenditures will be funded with cash generated from operating activities and short-term borrowings under its credit facility as needed. Year 2000 Management has assessed the Year 2000 issue and has determined that all internal information technology systems including financial software, corporate networks, the AS400 system and all other systems are Year 2000 compliant with the exception of systems used for collecting and communicating sales data from retail locations. This assessment was based primarily on independent, third-party verification from Mrs. Fields' vendors and suppliers. Mrs. Fields is currently replacing its sales collection systems with software and hardware that is Year 2000 compliant. Programming and development of the software is complete and has been installed in approximately 80% of its stores. Mrs. Fields projects installation will be complete by August 1999. The estimated cost of this project is $1.9 million and includes software development and new store computers and registers. The costs to complete this project are included in Mrs. Fields' 1999 budget. Funding for this project is being provided by internal cash flow and by a lease finance company. Upgrades of the plant production and distribution software were completed in the first and second quarters of 1999 at an estimated cost of $10,000. No information technology projects have been deferred as a result of Mrs. Field's Year 2000 efforts. Mrs. Fields is not dependent on the proper operation of the sales collection systems to run the day-to-day operations of the business. Therefore, failure or malfunction of these systems due to untimely or incomplete remediation would not have a material adverse effect on its results of operations. Mrs. Fields has assessed Year 2000 issues with respect to its significant vendors and financial institutions as to their compliance plans and whether any Year 2000 issues will impede the ability of such vendors to continue providing goods and services to Mrs. Fields. Failure of Mrs. Fields' key suppliers to remedy their own Year 2000 issues could delay shipments of essential products, thereby disrupting Mrs. Fields' operations. Furthermore, Mrs. Fields relies on various service providers, such as utility and telecommunication service companies, which are beyond its control. Based upon the results of the assessment, Mrs. Fields is not aware of any Year 2000 issues relating to its significant vendors, financial institutions or its non-information technology systems. Mrs. Fields does not have a contingency plan in place to address untimely or incomplete remediation of Year 2000 issues, but it is currently developing contingency plans. These contingency plans are expected to address issues related to significant vendors and financial institutions. Inflation The impact of inflation on the earnings of the business has not been significant in recent years. Most of Mrs. Fields' leases contain escalation clauses (however, such leases are accounted for on a straight-line basis as required by generally accepted accounting principles which minimizes fluctuations in operating income) and many of Mrs. Fields' employees are paid hourly wages at the Federal minimum wage level. Minimum wage increases will negatively impact Mrs. Fields' payroll costs in the short term, but management believes such impact can be offset in the long term through operational efficiency gains and, if necessary, through product price increases. 51

Consolidated Results of Operations of Cookies USA and Its Wholly Owned Operating Subsidiary, Great American, Prior to the Great American Acquisition As Great American is a significant subsidiary of Mrs. Fields, management's discussion and analysis of financial condition and results of operations is also included for the consolidated operations of Cookies USA and Great American for the 52 weeks ended June 28, 1998 compared to the 52 weeks ended June 29, 1997, for the 52 weeks ended June 29, 1997 compared to the 52 weeks ended June 30, 1996, and the 52 weeks ended June 30, 1996 compared to the 52 weeks ended June 29, 1995. See the historical financial statements and the related notes to the historical financial statements of Cookies USA, Inc. and subsidiary contained elsewhere in this prospectus. References to the beliefs of the management of Great American or Cookies USA in this discussion are to management prior to the acquisition of Great American by Mrs. Fields. As used in this discussion, "management" refers to David Barr, the chief executive officer of Great American and Cookies USA at the time of its acquisition by Mrs. Fields. The factors cited in the following discussion as contributing to changes in operating results are listed in order of importance; however, unless otherwise indicated in the discussion, the quantitative importance of any such factors cannot be determined by Great American management and have not been stated. The "forward-looking statements" contained in this section represent Great American's expectations or beliefs concerning future events, including statements regarding unit growth and cash requirements. Management cautions that a number of important factors could, individually or in the total, cause actual results to differ materially from those stated in the forward-looking statements including, without limitation, the following: . consumer spending trends and habits, . mall traffic trends, . increased competition among snack retailers, . economic conditions in the regions where Great American and its franchisees operate stores, . the ability to identify and secure suitable locations for new stores, . the availability of experienced management and hourly employees, and . the laws and regulations affecting labor and employee benefit costs. Accounting Period During the 52 weeks ended June 30, 1996, Great American changed its year end from the last Thursday in the month of June to the last Sunday in the month of June. As a result, three days were added to the fifty-two week period ended Thursday, June 27, 1996 to effectively change Great American's fiscal year end to Sunday, June 30, 1996. This change does not materially impact the comparability of the years presented in the accompanying consolidated financial statements. 52

52 Weeks Ended June 28, 1998 ("Fiscal Year 1998") Compared to 52 Weeks Ended June 29, 1997 ("Fiscal Year 1997") Company and Franchise Store Activity As of June 28, 1998, there were 77 company-operated stores and 247 franchised stores in operation. The store activity for fiscal year 1997 and for fiscal year 1998 is summarized as follows: <TABLE> <CAPTION> Fiscal 1997 Fiscal 1998 ------------------- ------------------- Company- Company- operated Franchised operated Franchised -------- ---------- -------- ---------- <S> <C> <C> <C> <C> Stores open as of beginning of the fiscal year.......................... 104 225 91 233 Stores opened (including relocations)......................... 1 12 3 7 Stores closed (including relocations)......................... (10) (8) (2) (8) Stores sold to franchisees............ (12) 12 (15) 15 Stores acquired from franchisees...... 8 (8) 0 0 --- --- --- --- Stores open as of the end of the year................................. 91 233 77 247 Satellite locations as of the end of the year............................. 9 30 4 32 --- --- --- --- Total outlets as of the end of the year............................... 100 263 81 279 === === === === </TABLE> The above activity results in 5,161 company-operated equivalent store weeks and 11,858 franchisee-operated equivalent store weeks during the fiscal year ended June 29, 1997 compared to 4,288 company-operated equivalent store weeks and 12,581 franchisee-operated equivalent store weeks during the fiscal year ended June 28, 1998. Total Revenue Total revenue decreased approximately $2,696,000, or 6.7%, during the fiscal year ended June 28, 1998 compared to the fiscal year ended June 29, 1997. Each of Great American's revenue sources is discussed below: . Cookie and beverage sales at company-operated retail stores decreased approximately $3,521,000, or 15.7%, during the fiscal year ended June 28, 1998 compared to the fiscal year ended June 29, 1997. The decrease in revenue from company-operated retail stores was attributable to: (a) a 16.9% decrease in company-operated equivalent store weeks offset by (b) a 1.2% increase in the average retail sales volume for company- operated stores. Based on those stores which were company-operated during the entire 1998 and 1997 fiscal years, sales volumes did not change. . Batter sales to franchisees increased approximately $944,000, or 8.4%, during the fiscal year ended June 28, 1998 compared to the fiscal year ended June 29, 1997. The increase in batter sales to franchisees was primarily attributable to (a) a 6.1% increase in franchisee-operated equivalent store weeks and (b) a 2.3% increase in the volume of batter sold per franchisee- operated equivalent store week. . Franchise royalties increased approximately $538,000, or 11.4%, during the fiscal year ended June 28, 1998 compared to the fiscal year ended June 29, 1997. The increase in franchise royalties was attributable to: (a) a 6.1% increase in franchisee-operated equivalent store weeks and (b) an increase in the average retail sales volume per franchisee- operated store of 5.3%. 53

Based on those stores which were franchisee-operated during the entire 1998 and 1997 fiscal years, management estimates franchisees' sales volumes increased 3.5%. . Revenue from franchise license fees decreased approximately $172,000, or 25.5%, during the fiscal year ended June 28, 1998 compared to the fiscal year ended June 29, 1997. Revenue from selling existing and new stores to franchisees is summarized as follows (rounded): <TABLE> <CAPTION> Fiscal 1998 Fiscal 1997 ----------- ----------- <S> <C> <C> Number of licenses sold to franchisees --existing stores................................ 15 12 --new stores..................................... 5 12 Cash and notes from sale of existing stores........ $1,980,000 $2,045,000 Less: net book value of existing stores sold....... 1,235,000 818,000 ---------- ---------- Revenue from sale of existing stores............... 745,000 1,227,000 ---------- ---------- Revenue from license fees for new stores........... 125,000 300,000 Revenue from other fees............................ 3,000 75,000 ---------- ---------- Revenue from license fees for new stores and other fees.............................................. 128,000 375,000 ---------- ---------- Total revenue from sale of existing and new stores to franchisees.................................... 873,000 1,602,000 Less: Gain on sale of existing stores.............. 370,000 927,000 ---------- ---------- Revenue from franchise license fees................ $ 503,000 $ 675,000 ========== ========== </TABLE> . Other revenue increased approximately $73,000, or 111.6%, during the fiscal year ended June 28, 1998 compared to the fiscal year ended June 29, 1997. The increase in other revenue was primarily attributable to: (a) an increase in construction assistance revenue derived from construction assistance performed by the company for the benefit of franchisees and (b) an increase in sales of miscellaneous supplies to franchise stores, offset by (c) an increase in batter discounts given to franchisees as a result of increased batter sales to franchisees in fiscal 1998. Cost of Sales Cost of sales decreased approximately $1,559,000, or 8.4%, during the fiscal year ended June 28, 1998 compared to the fiscal year ended June 29, 1997. The decrease in cost of sales was primarily attributable to: (a) a decline in cookie and beverage sales due to less company-operated equivalent store weeks and (b) an improvement in batter facility margins, offset by (c) an increase in batter sales to franchisees. Retail Store Occupancy Retail store occupancy costs decreased approximately $1,318,000, or 18.7%, during the fiscal year ended June 28, 1998 compared to the fiscal year ended June 29, 1997. The decrease was primarily attributable to a 16.9% decrease in company-operated equivalent store weeks. Other Retail Store Expenses Other retail store expenses decreased approximately $149,000, or 14.6%, during the fiscal year ended June 28, 1998 compared to the fiscal year ended June 29, 1997. The decrease in other retail store expenses was primarily attributable to a 16.9% decrease in company-operated equivalent store weeks. 54

Selling, General and Administrative Expenses Selling, general and administrative expenses decreased approximately $399,000, or 5.2%, during the fiscal year ended June 28, 1998 compared to the fiscal year ended June 29, 1997. This decrease was primarily attributable to: (a) a decrease in development and testing expense, (b) a decrease in salaries and benefits at the support center, and (c) a decrease in expenses associated with the franchise convention because a franchise convention was not held in fiscal 1998, offset by (d) an increase in marketing expenses and (e) an increase in the cost of training materials related to the rollout of a new training program. In addition, in 1998 Great American revised its estimate of the useful life of some of its computer equipment from five to three years decreasing pre-tax income by $111,000. Management believes that this revision better reflects the equipment's economic useful life. Other Expenses, Net Other expenses, net, increased approximately $557,000, or 60.0%, during the fiscal year ended June 28, 1998 compared to the fiscal year ended June 29, 1997. The increase was primarily attributable to a decrease in gains on the sale of existing stores. Net Loss Net loss decreased approximately $544,000, or 72.9%, for the fiscal year ended June 28, 1998 compared to the fiscal year ended June 29, 1997. The decrease in net loss was primarily attributable to: (a) a 12.7% increase in operating income, (b) a 1.7% decrease in other expenses, net, offset by (c) a 111.0% increase in state and federal income tax expense. 52 Weeks Ended June 29, 1997 ("Fiscal Year 1997") Compared to 52 Weeks Ended June 30, 1996 ("Fiscal Year 1996") Great American-owned and Franchise Store Activity As of June 29, 1997, there were 91 Great American-owned stores and 233 franchised stores in operation. The store activity for fiscal year 1996 and for fiscal year 1997 is summarized as follows: <TABLE> <CAPTION> Fiscal Year 1996 Fiscal Year 1997 -------------------------- -------------------------- Great American- Great American- owned Franchised owned Franchised --------------- ---------- --------------- ---------- <S> <C> <C> <C> <C> Stores open as of beginning of the fiscal year................... 108 215 104 225 Stores opened (including relocations)........... 12 14 1 12 Stores closed (including relocations)........... (10) (10) (10) (8) Stores sold to franchisees............ (9) 9 (12) 12 Stores acquired from franchisees............ 3 (3) 8 (8) --- --- --- --- Stores open as of the end of the year........ 104 225 91 233 Satellite locations as of the end of the year................... 11 28 9 30 --- --- --- --- Total outlets as of the end of the year........ 115 253 100 263 === === === === </TABLE> 55

The above activity resulted in 5,661 Great American-owned equivalent store weeks and 11,544 franchised equivalent store weeks during fiscal year 1996 compared to 5,161 Great American-owned equivalent store weeks and 11,858 franchised equivalent store weeks during fiscal year 1997. Total Revenue Total revenue decreased approximately $342,000, or 0.9%, during fiscal year 1997 compared to fiscal year 1996. Each of Great American's revenue sources is discussed below: Cookie and beverage sales at Great American-owned retail stores decreased approximately $2,344,000, or 9.5%, during fiscal year 1997 compared to fiscal year 1996. The decrease in revenue from Great American-owned retail stores was attributable to: (a) an 8.8% decrease in Great American-owned equivalent store weeks and (b) a 0.7% decrease in the average retail sales volume for Great American- owned stores. Based on those stores which were Great American-owned during the entire 1996 and 1997 fiscal years, sales volumes increased 1.3%. The change in average store volume does not equal the change in sales volume from stores that have been open at least two years due to differences in the stores being compared as a result of opening, closing, selling, and acquiring stores throughout the year. Batter sales to franchisees increased approximately $1,166,000, or 11.5%, during fiscal year 1997 compared to fiscal year 1996. The increase in batter sales to franchisees was primarily attributable to: (a) an 8.8% increase in the volume of batter sold per franchised equivalent store week and (b) a 2.7% increase in franchised equivalent store weeks. Franchise royalties increased approximately $440,000, or 10.3%, during fiscal year 1997 compared to fiscal year 1996. The increase in franchise royalties was attributable to: (a) an increase in the average retail sales volume per franchised store of 7.6% and (b) a 2.7% increase in franchised equivalent store weeks. Based on those stores which were franchised during the entire 1996 and 1997 fiscal years, management estimates franchisees' sales volumes increased 5.5%. Revenue from franchise license fees increased approximately $154,000, or 29.6%, during fiscal year 1997 compared to fiscal year 1996. Revenue from selling existing and new stores to franchisees is summarized as follows (rounded): <TABLE> <CAPTION> Fiscal Year Fiscal Year 1996 1997 ----------- ----------- <S> <C> <C> Number of licenses sold to franchisees: Existing stores.................................... 9 12 New stores......................................... 11 12 Cash and notes from sale of existing stores.......... $1,602,000 $2,045,000 Less: net book value of existing stores sold......... (741,000) (818,000) ---------- ---------- Revenue from sales of existing stores................ 861,000 1,227,000 ---------- ---------- Revenue from license fees for new stores............. 275,000 300,000 Revenue from other fees.............................. 21,000 75,000 ---------- ---------- Revenue from license fees for new stores and other fees................................................ 296,000 375,000 ---------- ---------- Total................................................ 1,157,000 1,602,000 Less: Gain on sale of existing stores................ 636,000 927,000 ---------- ---------- Revenue from franchise licensing fees................ $ 521,000 $ 675,000 ========== ========== </TABLE> 56

Other revenue, net decreased approximately $49,000, or 42.6%, during fiscal year 1997 compared to fiscal year 1996. The decrease in other revenue, net was primarily attributable to: (a) a decrease in construction assistance revenue derived from construction assistance performed by Great American for the franchisees and (b) an increase in batter discounts given to franchisees as a result of increased batter sales to franchisees in fiscal year 1997. Cost of Sales Cost of sales decreased approximately $908,000, or 4.7%, during fiscal year 1997 compared to fiscal year 1996. The decrease in cost of sales was primarily attributable to: (a) a decline in cookie and beverage sales due to less Great American-owned equivalent store weeks, and (b) a decrease in the cost of packaging and freight for Great American- owned retail stores, offset by (c) an increase in batter sales to franchisees. Retail Store Occupancy Retail store occupancy costs decreased approximately $324,000, or 4.4%, during fiscal year 1997 compared to fiscal year 1996. The decrease was primarily attributable to an 8.8% decrease in Great American-owned equivalent store weeks. Other Retail Store Expenses Other retail store expenses decreased approximately $297,000, or 22.6%, during fiscal year 1997 compared to fiscal year 1996. The decrease in other retail store expenses was primarily attributable to: (a) a decrease in operating supplies expense within Great American-owned stores in fiscal year 1997 due to (1) the opening of 11 less Great American-owned stores in fiscal year 1997 versus fiscal year 1996 and (2) additional costs incurred in fiscal year 1996 related to the rollout of a new cookie merchandising program, and (b) an 8.8% decrease in Great American-owned equivalent store weeks, offset by (c) an increase in point-of-sale marketing expenses in Great American-owned stores. Selling, General, and Administrative Expenses Selling, general and administrative expenses increased approximately $310,000, or 4.2%, during fiscal year 1997 compared to fiscal year 1996. This increase was primarily attributable to: (a) an increase in professional service fees, (b) an increase in point-of-sale marketing expenses on behalf of franchisee- owned stores, and (c) an increase in salaries, offset by (d) a decrease in travel expense, and (e) a decrease in insurance costs. Other Expenses, Net Other expenses, net decreased approximately $484,000, or 8.7%, during fiscal year 1997 compared to fiscal year 1996. The decrease was primarily attributable to an increase in gains on the sale of existing stores. 57

Net Loss Net loss decreased approximately $615,000, or 45.2%, for fiscal year 1997 compared to fiscal year 1996. The decrease in net loss was primarily attributable to: (a) an $877,000 increase in operating income, and (b) a $193,000 decrease in other expenses, net, offset by (c) a $455,000 increase in state and federal income tax expense. 52 Weeks Ended June 30, 1996 ("Fiscal Year 1996") Compared to 52 Weeks Ended June 29, 1995 ("Fiscal Year 1995") Great American-owned and Franchise Store Activity As of June 30, 1996 there were 104 Great American-owned stores and 225 franchised stores in operation. The store activity for fiscal year 1995 and for fiscal year 1996 is summarized as follows: <TABLE> <CAPTION> Fiscal Year 1995 Fiscal Year 1996 -------------------------- -------------------------- Great American- Great American- owned Franchised owned Franchised --------------- ---------- --------------- ---------- <S> <C> <C> <C> <C> Stores open as of beginning of the fiscal................. 111 204 108 215 Stores opened (including relocations)........... 16 11 12 14 Stores closed (including relocations)........... (8) (11) (10) (10) Stores sold to franchisees............ (12) 12 (9) 9 Stores acquired from franchisees............ 1 (1) 3 (3) --- --- --- --- Stores open as of the end of the fiscal year................... 108 215 104 225 Satellite locations as of the end of the fiscal year............ 12 36 11 28 --- --- --- --- Total outlets as of the end of the fiscal year................... 120 251 115 253 === === === === </TABLE> The activity reflected above resulted in 5,879 and 5,661 Great American-owned equivalent store weeks and 10,716 and 11,544 franchised equivalent store weeks during fiscal year 1995 and fiscal year 1996, respectively. Total Revenue Total revenue decreased approximately $1,024,000, or 2.5%, during fiscal year 1996 compared to fiscal year 1995, primarily attributable to the following: Cookie and beverage sales at Great American-owned retail stores decreased approximately $1,629,000, or 6.2%, during fiscal year 1996 compared to fiscal year 1995. The decrease in revenue from Great American-owned retail stores was primarily attributable to: (a) an approximately 3.7% decrease in Great American-owned equivalent store weeks and (b) a decrease in the average retail sales volume for Great American- owned stores. Specifically, the average retail sales volume for Great American-owned stores decreased approximately 2.6% per equivalent store week. Based on those stores which were Great American-owned during the entire 1995 and 1996 fiscal years, sales volumes decreased 0.3%. Batter sales to franchisees increased approximately $729,000, or 7.8%, during fiscal year 1996 compared to fiscal year 1995. The increase in batter sales to franchisees was primarily attributable to: (a) an increase of approximately 7.7% in franchised equivalent store weeks and (b) a 0.1% increase in the volume of batter sold per franchised equivalent store week. 58

Franchise royalties increased approximately $313,000, or 7.9%, during fiscal year 1996 compared to fiscal year 1995. The increase in franchise royalties was primarily attributable to: (a) an increase of approximately 7.7% in equivalent franchised retail store weeks and (b) an increase in the average franchised equivalent store sales volume of 0.2%. Based on those stores which were franchised during the entire 1995 and 1996 fiscal years, management estimates that franchisees' sales volumes did not change materially. Revenue from franchise license fees decreased approximately $391,000, or 25.3%, during fiscal year 1996 compared to fiscal year 1995. Revenue from selling existing and new stores to franchisees is summarized below (rounded): <TABLE> <CAPTION> Fiscal Year Fiscal Year 1995 1996 ----------- ----------- <S> <C> <C> Number of licenses sold to franchisees: Existing stores................................. 12 9 New stores...................................... 11 11 Cash proceeds from sale of existing stores........ $ 2,558,000 $1,602,000 Less: net book value of existing stores sold...... (1,346,000) (741,000) ----------- ---------- Revenue from sales of existing stores............. 1,212,000 861,000 ----------- ---------- Revenue from license fees for new stores.......... 280,000 275,000 Revenue from other fees........................... 56,000 21,000 ----------- ---------- Revenue from license fees for new stores and other fees............................................. 336,000 296,000 ----------- ---------- Total............................................. 1,548,000 1,157,000 Less: Gain on sale of existing stores............. 912,000 636,000 ----------- ---------- Revenue from franchise license fees............... $ 636,000 $ 521,000 =========== ========== </TABLE> Other revenue, net decreased approximately $46,000, or 28.6%, during fiscal year 1996 compared to fiscal year 1995. The decrease in other revenue, net is primarily attributable to: (a) an increase in batter discounts taken by franchisees, which was consistent with the increase in batter sales to franchisees, partially offset by (b) an increase in sales of miscellaneous supplies to franchise stores. Cost of Sales Cost of sales decreased approximately $452,000, or 2.3%, during fiscal year 1996 compared to fiscal year 1995. The decrease was primarily attributable to: (a) a decline in retail cookie and beverages sales volume in Great American-owned stores and (b) an improvement in wholesale batter margins, partially offset by (c) an increase in the volume of batter sold to franchisees. Retail Store Occupancy Retail store occupancy costs decreased approximately $209,000, or 2.8%, during fiscal year 1996 compared to fiscal year 1995. The decrease in retail store occupancy costs was primarily attributable to: (a) a decrease of approximately 3.7% in Great American-owned store weeks, partially offset by (b) an increase in depreciation due to Great American revising its estimate of the useful life of certain leasehold improvements. 59

Great American began amortizing leasehold improvements using accelerated methods over an average of eight years instead of using the straight-line method over ten years. The effect of this change in estimate was to increase fiscal year 1996 pre-tax loss by $214,000. Management believes that this revision better reflects the leasehold improvements' useful life. Other Retail Store Expenses Other retail store expenses decreased approximately $223,000, or 14.5%, during fiscal year 1996 compared to fiscal year 1995. The decrease in other retail store expenses was primarily attributable to: (a) a decrease in marketing expenses and (b) a decrease in bank charges and supplies expense as a result of cost containment efforts. Selling, General and Administrative Expenses Selling, general and administrative expenses decreased approximately $376,000, or 4.9%, during fiscal year 1996 compared to fiscal year 1995. The decrease in selling, general and administrative expenses was primarily attributable to: (a) a reduction in administrative salaries and benefits, (b) a decrease in professional service fees, including legal and accounting services, and (c) a decrease in various home office expenditures, including postage, supplies, and training materials, partially offset by (d) an increase in travel costs due to additional review of stores by field supervisors. Other Expenses, Net Other expenses, net increased approximately $231,000, or 4.4%, during fiscal year 1996 compared to fiscal year 1995. The increase was primarily attributable to: (a) decrease gains on the sale of existing stores, (b) a decrease in interest income due to lower average cash balances, and (c) an increase in interest expense due to an increase in capital lease obligations. Non-Recurring Litigation Charge During the third quarter of fiscal year 1995, a non-recurring litigation charge of $439,000 was recorded to cover a potential forthcoming judgment against Great American in the Haagen-Burbank lawsuit. In June 1993, Great American won a judgment for breach of written contract to a lease entered into with a developer, Haagen-Burbank. On appeal, the Court of Appeals of the State of California Second Appellate District overturned the jury's verdict and directed the trial court to determine the amount of attorney fees and costs due to Haagen-Burbank as the prevailing party in the litigation. Haagen- Burbank had submitted to the court a request for legal fees totaling $439,000; however, on April 27, 1995, the trial court entered a judgment of $417,985. On September 15, 1995 Great American paid $395,966 to Haagen-Burbank as settlement of the judgment against Great American. Net Loss Net loss decreased approximately $469,000, or 25.6%, for fiscal year 1996 compared to fiscal year 1995. The decrease in net loss was primarily attributable to: (a) a $236,000 increase in operating income, and the occurrence of the non- recurring litigation charge in fiscal 1995, offset by (b) a $118,000 decrease in state and federal income tax benefit, and (c) a $45,000 increase in other expenses, net. 60

WHERE YOU CAN FIND MORE INFORMATION We file reports and other information with the Commission under the Exchange Act. We have agreed that, whether or not it is required to do so by the rules and regulations of the Commission, we will deliver to The Bank of New York, as trustee under the indenture, to each holder of notes and to each prospective purchaser of notes identified to us by a placement agent for the offering in August 1998, annual and quarterly financial statements substantially equivalent to financial statements that would be included in reports filed with the Commission, if we were subject to the reporting and other informational requirements of the Exchange Act. Mrs. Fields and Great American, Mrs. Fields' Brand, Pretzelmaker and Pretzel Time, the guarantors of the notes, have filed with the Commission a registration statement on Form S-4 (in this prospectus, together with all amendments and exhibits, referred to as the "Registration Statement") under the Securities Act, with respect to the notes offered in this prospectus. This prospectus, which forms a part of the Registration Statement, does not contain all of the information in the Registration Statement and its exhibits, parts of which are omitted in accordance with the rules and regulations of the Commission. For further information with respect to Mrs. Fields, the guarantors and the notes offered in this prospectus, we refer you to the Registration Statement. With respect to any statements made in this prospectus concerning the provisions of any documents, we refer you to the copy of that document filed as an exhibit to the Registration Statement otherwise filed with the Commission. Great American, Pretzelmaker and Pretzel Time intend to submit separately and Mrs. Fields' Brand has separately submitted to the staff of the Commission, no- action requests that they not be subject to the informational requirements of the Exchange Act in connection with the notes offered in this prospectus. If the Commission grants these requests, Great American, Mrs. Fields' Brand, Pretzelmaker and Pretzel Time would not be required to make such filings but Mrs. Fields, as the issuer of the notes offered in this prospectus, would be required to include summarized financial information regarding Great American, Mrs. Fields' Brand, Pretzelmaker and Pretzel Time in the periodic reports and certain other documents that Mrs. Fields files with the Commission. If this request is not granted, Great American, Mrs. Fields' Brand, Pretzelmaker and Pretzel Time would be required to file with the Commission periodic reports, but would not be required to file proxy or information statements. You may read and copy the Registration Statement, the exhibits forming a part of it and the reports and other information filed by Mrs. Fields with the Commission in accordance with the Exchange Act, at the Public Reference Section of the Commission located at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the following regional offices of the Commission: 7 World Trade Center, 13th Floor, Suite 1300, New York, New York 10004; and Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. You may obtain copies of all or any portion of the material by mail from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. This information is also available electronically on the Commission's home page on the Internet (http://www.sec.gov). If Mrs. Fields is not required to be subject to the reporting requirements of the Exchange Act in the future, Mrs. Fields will be required under the indenture to furnish the holders of the notes with: (1) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if Mrs. Fields were required to file those forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report on the financial information by Mrs. Fields' independent public accountants, and (2) all current reports that would be required to be filed with the Commission on Form 8-K if Mrs. Fields were required to file those reports, in each case, within the time periods specified in the Commission's rules and regulations. This prospectus incorporates documents by reference that are not presented in or delivered with this prospectus. These documents are available upon request from Michael Ward, Esq., Mrs. Fields' Original Cookies, Inc., 2855 East Cottonwood Parkway, Suite 400, Salt Lake City, Utah 84121, (801) 736-5600. In order to ensure timely delivery, any request should be made by , 1999. 61

BUSINESS General Mrs. Fields is one of the largest retailers in the premium snack-food industry, with cookies and pretzels as its major product lines. Mrs. Fields is the largest retailer of baked on-premises cookies and the second largest retailer of baked on-premises pretzels in the United States. Mrs. Fields is one of the most widely recognized and respected brand names in the premium cookie industry. Based on a 1994 study that we commissioned from Corey, Canapary and Galanis, 94% of customers in the study were aware of the Mrs. Fields brand. Twenty percent named our brand without prompting, and 74% knew of our brand when prompted. Mrs. Fields has recently developed a significant presence in the rapidly growing, health-oriented pretzel segment as a result of the acquisitions of the pretzel businesses of Hot Sam, Pretzel Time, Pretzelmaker and H&M, which was formerly the largest Pretzel Time franchisee. As of July 3, 1999, our retail network consisted of 1,493 locations, of which 986 were cookie stores and 507 were pretzel stores. Of the total 1,493 stores, 492 were company-owned and 1,001 were franchised or licensed. Mrs. Fields' stores average approximately 600 to 700 square feet in size and are located predominantly in shopping malls. Mrs. Fields, through licensed locations, also operates kiosks and carts at airports, universities, stadiums, hospitals and office building lobbies. Mrs. Fields' objective is to increase sales and profitability by focusing on its continuing company-owned stores. As a result, by the end of fiscal year 2000, Mrs. Fields plans to close or franchise approximately 40 company-owned cookie stores and 7 company-owned pretzel stores that do not meet certain financial and geographical criteria established by management after giving effect to the acquisitions of Great American and the stock and stores of several of its franchises. For the year ended January 2, 1999, Mrs. Fields generated pro forma net revenue and EBITDA of $191.2 million and $20.7 million, respectively. Actual net revenue and EBITDA for the year ended January 3, 1998 was $134.4 million and $18.8 million, respectively. For the 26 weeks ended July 4, 1998 and July 3, 1999, Mrs. Fields generated pro forma net revenue and EBITDA of $92,640 and $10,334, and actual net revenue and EBITDA of $84,165 and $10,318, respectively. Cookies We operate and franchise 986 retail cookie stores: 574 under the Mrs. Fields brand, 105 under the Original Cookie brand and 307 under the Great American brand. As a result of the acquisition of Great American, Mrs. Fields has cookie stores in 48 states, with Great American stores concentrated in the southeastern and south central states and Mrs. Fields and Original Cookie stores strongly represented in the western, midwestern and eastern states. There is little overlap between Mrs. Fields and Great American stores, with a dual presence in 9 malls. Management believes that Mrs. Fields is positioned in the premium quality, baked on-premises segment of the approximately $12 billion U.S. cookie industry. We offer over 50 different types of cookies, brownies and muffins, which are baked continuously and served fresh throughout the day. Baked products are made using only high quality ingredients, and all dough is centrally manufactured and frozen or refrigerated to maintain product quality and consistency. All products pass strict quality assurance and control steps at both the manufacturing plants and the stores. In addition, Mrs. Fields continually creates and tests new products to attract new customers and satisfy current customers. Product development is currently focused on sugar-free dough and reduced-fat cookies and brownies. Mrs. Fields Inc., one of the predecessors of Mrs. Fields, was founded in 1977 by Debbi Fields and, following its initial success, embarked on an aggressive national expansion program in the early 1980s. By the late 1980s, however, Mrs. Fields Inc. experienced financial difficulty as a result of excessive debt levels, certain poor real estate locations, and a recessionary retailing environment. In connection with a financial restructuring by its lenders, Mrs. Fields put a new management team into place in mid-1994 under the leadership of Larry A. Hodges, who has extensive experience in the food and retailing industries. Mr. Hodges introduced a new strategic plan for Mrs. Fields, which involved the following key elements: (1) identifying stores to close or franchise, (2) introducing company-wide operating procedures to improve store income before interest, taxes and other expenses 62

(3) developing a marketing strategy and promotional calendar to turn around sales of stores that have been open at least two years, and (4) improving employee morale through selective new senior hires, increased training and various incentive plans. Mrs. Fields reinvested the savings from the improved store operations in marketing and other measures designed to improve sales from stores that have been open at least two years. Mrs. Fields' Original Cookies, Inc. was formed in September 1996 in connection with the acquisitions of Mrs. Fields Inc., Original Cookie and Hot Sam by Mrs. Fields' Holding, a subsidiary of Capricorn. As of January 2, 1999, Capricorn had invested more than $28 million in Mrs. Fields through Mrs. Fields' Holding. Capricorn retained Mr. Hodges as Chief Executive Officer of Mrs. Fields. Great American, incorporated in 1977, is a leading operator and franchisor of mall-based specialty retail cookie outlets, including full-size stores and satellite sites, consisting of carts, wagons and kiosks. As of July 3, 1999, Great American had 307 in-line stores, including 100 Great American-operated and 207 franchised retail units, operating primarily in the southeastern and south central United States, generating $109.3 million in estimated system-wide annual sales for the 52-week period ended June 28, 1998. Great American derives its revenue principally from: (1) the sale of cookies and beverages at Great American-operated stores, (2) the sale of proprietary batter to franchised stores, and (3) the receipt of royalty payments based on gross sales of franchisees. In addition, Great American generates revenues from initial franchise fees and the sale of existing Great American-operated stores to franchisees. Great American outlets sell a variety of cookies and brownies, including "cookie cakes," as well as assorted soft drinks, frozen drinks, coffee and tea. Cookie cakes are extra-large cookies, decorated with customer-selected personalized messages, for special occasions. Although cookie sales are generally the result of impulse buying, we believe that cookie cakes, which are often purchased as gifts for special occasions, differentiate Great American from other specialty cookie retailers by making Great American stores destination outlets. Pretzels We operate and franchise 507 retail pretzel stores: 235 under the Pretzel Time brand, 56 under the Hot Sam brand and 216 under the Pretzelmaker brand, which offer "sweet dough" soft pretzels and "Bavarian" style pretzels with a variety of toppings. Pretzel Time's primary product is an all-natural, hand- rolled soft pretzel, freshly baked from scratch at each store location. Pretzel Time stores prepare pretzels with a variety of flavors and specialty toppings, including cheddar cheese, cream cheese and pizza sauce. The stores also offer soft drinks and freshly squeezed lemonade. The Hot Sam pretzel stores specialize in the Bavarian style pretzel. This product has declined in popularity in recent years as sweet dough pretzel sales have grown dramatically. In addition, Pretzel Time stores have, during fiscal year 1998, achieved higher average revenue for the continuing company-owned stores than Hot Sam stores ($277,000 versus $232,000). As a result, Mrs. Fields intends to continue converting its continuing company-owned and to-be-franchised Hot Sam stores to Pretzel Time stores, which it believes will result in an increase in net sales, sales from stores that have been open at least two years, and income from store operations. Management believes that retail pretzel stores have similar operating characteristics to retail cookie stores that will permit us to offer our products with those of other well-known brand names. In addition, the retail pretzel business has grown more quickly than the retail cookie business in recent years. Hot Sam was acquired by 63

Mrs. Fields in connection with the acquisition of Original Cookie. In order to expand its presence in the retail pretzel industry, Mrs. Fields acquired the business of H&M and the common stock of Pretzel Time and Pretzelmaker. Business Strategy Mrs. Fields' objective is to increase sales and profitability at its continuing company-owned and franchised stores by implementing the key elements of its long-term business strategy. The percentage change in sales from stores that have been open at least two years was a negative 1.6% for the fiscal year ended January 2, 1999 compared to a positive 0.6% for the fiscal year ended January 3, 1998 and a negative 0.4% for the 26 weeks ended July 3, 1999 compared to a negative 1.5% for the same period of 1998. Net franchising and licensing revenues increased by 29.9% for the fiscal year ended January 3, 1998 over the fiscal year ended December 28, 1996, by 113.3% for the fiscal year ended January 2, 1999 compared to the fiscal year ended January 3, 1998 and by 235.2% for the 26 weeks ended July 3, 1999 compared to the same period of 1998. The key elements of Mrs. Fields' business strategy are as follows: . Enhance Quality of Company-Owned Store Base. Since current management assumed responsibility in 1994, we have focused on closing and franchising company-owned stores that do not meet certain financial and geographical criteria. From June 1994 through January 2, 1999, Mrs. Fields closed 178 Mrs. Fields brand stores and franchised an additional 136 Mrs. Fields brand stores. We have targeted 129 additional stores that sell our various products to be either closed or franchised by the end of 2000. These measures are expected to result in increased income before interest, tax and other expenses, as unprofitable stores are closed and other stores are converted into franchises, with the result of increasing royalty payments and eliminating administrative and other costs of Mrs. Fields associated with those stores. . Improve Productivity of Continuing Company-Owned Stores. We have embarked on a program to improve the performance of our continuing company-owned stores by: (1) expanding product offerings to include breakfast items, such as muffins, croissants and bagels, and low-fat cookies, brownies and muffins, (2) raising the average sales by tying sales of products together, (3) promoting catering services by individual stores to corporate customers, (4) decreasing store expenses by reducing waste in the cookie baking process and controlling the cost of ingredients and supplies, (5) improving merchandising by enhancing product presentation and refining the selection of products and (6) increasing training and various incentive programs for management and sales staff. . Capitalize on the Strong "Mrs. Fields" Brand Name. Management believes that the Mrs. Fields brand is the most widely recognized and respected brand name in the retail premium cookie industry, and that Mrs. Fields brand stores, for fiscal year 1998, achieved higher average revenue ($347,000 versus $276,000) for the continuing company-owned Mrs. Fields stores than Original Cookie stores. As a result, we intend to continue selectively converting our continuing company-owned and to-be-franchised Original Cookie stores to Mrs. Fields brand stores, which we believe will result in an increase in net sales, sales from stores that have been open at least two years, and income from store operations. We will also test the success of converting selected Great American company-owned stores to Mrs. Fields brand stores. In addition, any Great American franchisee will have the option to convert to Mrs. Fields brand stores, at its sole expense, in areas where there is no overlap with existing Mrs. Fields brand franchise stores. Original Cookie stores represent 31% and Great American stores represent 29% of all 64

company-owned cookie stores. In addition, we intend to further capitalize on the Mrs. Fields brand name by: (1) further developing and expanding the ways we distribute our products, including kiosks and carts in malls, airports, convention centers, office buildings, street fronts and sports complexes, (2) increasing the emphasis on the mail order business, and (3) developing and capitalizing on licensing opportunities, such as linking sales of Mrs. Fields with prominent names in the retailing and food service industry, expanding licensing agreements with our existing licensees, entering into new licensing agreements with food service operators and developing product line extensions, such as frozen cookie dough and in-store bakery products to be sold in supermarkets and other convenient locations. . Develop Great American Brand Name. Management believes that the Great American brand name has high consumer awareness in the southeast United States. We intend to build on the Great American brand name by continuing to franchise additional Great American stores and by testing the success of converting selected company-owned Original Cookie stores into Great American stores. . Capitalize on the Strong "Pretzel Time" Brand Name. Through the acquisition of Pretzel Time, we have obtained the use of the "Pretzel Time" brand name, one of the leading brand names in pretzel retailing. Management believes that there are significant opportunities to improve its existing Hot Sam store operations by continuing to convert our continuing company-owned and to-be-franchised Hot Sam stores to Pretzel Time stores. Pretzel Time stores have, during fiscal year 1998, achieved higher average revenue per continuing company-owned store than Hot Sam stores ($277,000 vs. $232,000). Hot Sam stores represent 38% of all company-owned pretzel stores. Management believes that the conversion to the Pretzel Time name will result in an increase in net sales, sales from stores that have been open at least two years, and income from store operations for Mrs. Fields' pretzel business. In addition, we believe there are significant new Pretzel Time franchising opportunities. . Develop New Company-Owned and Franchised Stores. We plan to build and franchise new stores, as well as carts and kiosks, in existing and new markets. We have identified over 100 mall and non-traditional locations, such as amusement parks and other entertainment centers, that we believe would be ideal for cookie and pretzel stores. By the end of fiscal year 2000, we intend to franchise approximately 27 existing cookie and 15 existing pretzel stores. Beginning in fiscal year 1999, we intend to add approximately 20 new company-owned stores per year and to franchise approximately 38 new cookie and 36 new pretzel stores per year. In addition to pursuing new store development opportunities within the United States, we plan to grow internationally by expanding our franchise operations. As of July 3, 1999, there were 125 franchised Mrs. Fields and Pretzelmaker brand stores open internationally. . Realize Purchasing and Overhead Cost Savings. As a result of the acquisitions of Great American and the stock and stores of several of its franchisees, we expect to realize significant cost savings from the elimination of duplicative administrative functions, the consolidation of management information systems and the reduction of the cost of food and other supplies as a result of our enhanced purchasing power with vendors. Management believes that incremental pre-tax cost savings would have totaled approximately $4.1 million for the year ended January 2, 1999. The savings include $2.2 million of savings on administrative and other costs associated with stores of Mrs. Fields and $1.9 million of cost savings related to one-time expenses of eliminating multiple headquarter facilities. . Pursue Further Strategic Acquisitions of Related Businesses. We intend to selectively pursue strategic acquisitions, in addition to the acquisitions of Great American and the stock and stores of several of its franchises and other recent acquisitions, in order to expand our geographic presence and to achieve efficiencies from consolidating and reducing administrative and other costs shared by stores. Our management has demonstrated its ability to identify and integrate new businesses through its acquisitions of the cookie and pretzel businesses of Original Cookie and Hot Sam, respectively, in September 1996 and the majority interest in Pretzel Time and the business of H&M in 1997. 65

Product Offerings Our product offerings consist primarily of: (1) fresh baked cookies, brownies, muffins, and other baked goods and (2) fresh baked sweet dough and "Bavarian" style pretzels. During the fiscal year 1998, pro forma for the acquisitions of Great American and the stock and stores of several of its franchisees, our revenue by product category consisted of the following: <TABLE> <S> <C> Cookies and Brownies................................................... 56% Pretzels............................................................... 21% Beverages.............................................................. 22% Other.................................................................. 1% </TABLE> Cookies. The primary products of our cookie stores are a variety of cookies, which are baked in view of customers throughout the day. Secondary product lines include several varieties of brownies, muffins, other baked goods, gourmet coffees, frozen drinks and other beverages. Mrs. Fields stores, Original Cookie stores and Great American stores also sell decorated cookie cakes, which are extra-large cookies decorated with customer-selected slogans purchased as gifts for special occasions, such as birthdays, Valentine's day, Father's day and Easter. Based on pounds of batter shipped, cookie cakes constitute the second largest volume product of Great American stores. We plan to utilize Great American's superior expertise in baking and marketing cookie cakes to enhance sales of the existing cookie cake products in Mrs. Fields and Original Cookie stores. Baked products are made using only pure, high quality, vanilla, chocolate, raisins, nuts and other ingredients. To maintain product quality and consistency at both company-owned and franchised stores, Mrs. Fields and Original Cookie stores use centrally manufactured frozen dough, which is manufactured by outside suppliers according to proprietary formulas of Mrs. Fields. Great American stores use refrigerated batter that is shipped daily from the Atlanta production facility. All products must pass strict quality assurance and control steps at both the manufacturing plants and the stores. Pretzels. Through its Hot Sam and Pretzel Time stores, Mrs. Fields offers a wide variety of fresh-baked pretzels. Pretzels have become a popular snack due to consumers' attraction to salted snacks and the increased demand for snacks that are low in fat and cholesterol. Hot Sam is the largest U.S. retailer of fresh-baked "Bavarian" style pretzels. Pretzel Time stores offer all natural, hand-rolled sweet dough pretzels prepared with a variety of flavors and special toppings, including cheddar cheese, cream cheese and pizza sauce. In addition, Pretzel Time stores offer specialty pretzels and related products, such as cinnamon pretzels and cinnamon twists, as well as several recently introduced pretzel products, such as pretzel dogs, chocolate chip pretzels and caramel crunch pretzels. Product Development. We maintain a product development department which continually creates and tests new products to attract new customers and revitalize the interest of current customers. Once a new product is identified, we develop prototypes to determine the initial formula. For Mrs. Fields products, the formula is then scaled up for test production runs at one or more approved facilities. Once the product has been successfully produced, ingredient specifications, formulas, manufacturing processes, finished product specifications, shelf life, storage and distribution procedures are established. The new product is either immediately launched throughout the system, as in the case of seasonal items or simple line extensions, or test marketed in a limited number of stores. After a trial period to evaluate both consumer response and store operations' ability to handle the new product, it is fully commercialized, modified or discontinued. We continually review our selection of products in an effort to maximize daytime offerings and profitability. For example, new muffin flavors, bagels, croissants and a revitalized coffee program were recently introduced to enhance morning offerings, as cookies begin selling primarily after mid-day. 66

In the cookie business, product development efforts are currently focused on a fresh-baked, sugar-free cookie dough and other products, such as low-fat brownies, reduced-fat cookies and seasonal items that are designed to capitalize on consumer trends and draw interest to our store locations. In the pretzel business, we have been testing "made-from-scratch" hand rolled pretzels, which serve as a platform for a variety of other products, such as jalapeno, cinnamon raisin and garlic pretzels with a sweet dough base, meat and cheese filled pretzel pockets and pretzelwiches (pretzel bun sandwiches). Store Operations Store Base. As of July 3, 1999, Mrs. Fields' store portfolio consisted of 492 company-owned stores, 705 domestic franchised locations, 125 international franchised locations and 171 licensed locations. By brand, the stores are distributed as follows: <TABLE> <CAPTION> Company-owned ---------------------------- Continuing Company- To Be To Be Domestic International Owned Closed Franchised Franchised Franchised Licensed Total ---------- ------ ---------- ---------- ------------- -------- ----- <S> <C> <C> <C> <C> <C> <C> <C> Mrs. Fields............. 131 2 6 190 86 159 574 Original Cookie......... 86 7 12 -- -- -- 105 Great American.......... 59 31 10 207 -- -- 307 --- --- --- --- --- --- ----- Cookie Subtotal........ 276 40 28 397 86 159 986 --- --- --- --- --- --- ----- Pretzel Time............ 86 2 -- 147 -- -- 235 Hot Sam................. 46 2 8 -- -- -- 56 Pretzelmaker............ 1 3 -- 161 39 12 216 --- --- --- --- --- --- ----- Pretzel Subtotal....... 133 7 8 308 39 12 507 --- --- --- --- --- --- ----- Totals................ 409 47 36 705 125 171 1,493 === === === === === === ===== </TABLE> 67

As of July 3, 1999, Mrs. Fields' domestic stores were located in 48 states. The following table represents states with ten or more outlets: STORE GEOGRAPHY LIST <TABLE> <CAPTION> % of Domestic Company- Retail State owned Franchised Licensed Total Outlets ----- -------- ---------- -------- ----- ------------- <S> <C> <C> <C> <C> <C> California..................... 70 89 17 176 12.90% Texas.......................... 43 57 5 105 7.70% Florida........................ 20 42 14 76 5.57% New York....................... 33 23 16 72 5.28% Ohio........................... 49 9 9 67 4.91% Illinois....................... 28 20 11 59 4.33% Georgia........................ 14 27 3 44 3.23% Michigan....................... 27 16 -- 43 3.15% Missouri....................... 3 38 1 42 3.08% Pennsylvania................... 16 12 13 41 3.01% Virginia....................... 20 17 3 40 2.93% Colorado....................... 3 23 10 36 2.64% Arizona........................ 12 17 4 33 2.42% North Carolina................. 6 22 3 31 2.27% New Jersey..................... 10 12 8 30 2.20% Indiana........................ 14 10 6 30 2.20% Utah........................... 7 20 1 28 2.05% Iowa........................... 3 24 -- 27 1.98% Washington..................... 9 17 -- 26 1.91% Louisiana...................... 12 10 2 24 1.76% Wisconsin...................... 16 7 -- 23 1.69% Tennessee...................... 2 19 2 23 1.69% Minnesota...................... 3 17 3 23 1.69% Massachusetts.................. 7 8 7 22 1.61% Connecticut.................... 7 10 5 22 1.61% Alabama........................ -- 19 3 22 1.61% Maryland....................... 10 8 3 21 1.54% Nevada......................... 3 9 8 20 1.47% South Carolina................. 9 6 3 18 1.32% Oklahoma....................... 5 6 2 13 0.95% Nebraska....................... 4 8 -- 12 0.88% Kentucky....................... 3 8 1 12 0.88% Kansas......................... 2 9 1 12 0.88% West Virginia.................. 4 6 1 11 0.81% </TABLE> Configuration. We have developed a number of retail configurations that have wide application and adaptability to a variety of retail environments. In addition to the stores that have been designed for prime mall locations, we have developed other formats intended to extend our presence within and beyond mall locations. The introduction of frozen dough technology has led to a number of new store configurations, expanded product offerings in smaller outlets and non-traditional formats. Cookie Stores. All stores are uniformly designed in accordance with the Mrs. Fields, Original Cookie or Great American prototype, making extensive use of glass, painted wood, brass, mirrors, lighting and point-of-sale displays intended to create an upscale, open and inviting look. Stores also attractively and efficiently display their fresh-baked products using custom-made showcases. Store size ranges from 350 to 800 square 68

feet, and the typical company-owned store is about 600 to 700 square feet with a minimum of about 15 linear feet of counter space. Locational possibilities for new stores include high traffic regional malls, central downtown shopping districts and recreational shopping environments. Mrs. Fields and its franchisees and licensees also operate cookie kiosks and carts in a number of malls on a year-round basis. Kiosks have 100 to 250 square feet of retail space, supported by off-site storage and preparation space. Carts range in size from 30 to 92 square feet. Currently only the Great American kiosks have self-contained baking ovens. Because of their small size, carts and kiosks do not have baking equipment, and are supplied cookie products by a fully-equipped store usually located in the same mall. We plan to add baking equipment to carts and kiosks in malls, airports, convention centers, office buildings, street fronts and sports complexes, giving these outlets greater flexibility in the products they can offer. All designs contain retail display, small freezers and cash registers. We see expansion opportunities from the use of carts, which create incremental revenue at a relatively low cost. All of the retail store configurations are executed to include the same high- quality marketing, merchandising and design features which customers have come to expect from Mrs. Fields. The store designs are bright with high-profile trademark identity. All products are baked throughout the day on the premises with ovens located in full view of the customer to support the "fresh-baked" image. Pretzel Stores. Hot Sam stores are uniformly designed in accordance with the Hot Sam brand, making extensive use of tile, stained wood, lighting and point- of-sale displays intended to create an upscale, open and inviting look. Stores also attractively and efficiently display their products using custom-made showcases. The typical company-owned pretzel store is about 500 square feet. Pretzel Time outlets have an average size of 700 square feet in both kiosks and store locations. Pretzel Time stores are designed to enable customers to enjoy watching the pretzels being rolled, twisted and baked, which underscores freshness and lends to the product's growing appeal. Location and Leasing. Locational possibilities include any high pedestrian traffic areas, including second locations within malls, airport concourses, office building lobbies, hospitals, universities, stadiums, and supermarket foyers. Taking the impulse nature of its business into consideration, Mrs. Fields tries to locate its outlets in areas of high pedestrian traffic, with easy proximity to pedestrian traffic flow and at a distance from other food providers of any kind. The majority of Mrs. Fields' stores are located in shopping malls, with the vast majority of Mrs. Fields brand stores in malls falling into the "A" and "B" classifications, or the better-quality malls in the country. As of July 3, 1999, Mrs. Fields, including franchise locations, has a presence in 90% of the top 150 (as measured in sales per foot) "A" and "B" malls in the country. Malls in "A" and "B" classifications generally have the following characteristics: . Size greater than 700,000 square feet . Sales per square foot greater than $300 . Population density greater than 150,000 people within a five-mile radius . Median family income greater than $50,000 . Generally supported by national fashion anchor tenants . Located to minimize competition from other malls Great American stores are located primarily in high-traffic "B" malls. Marketing and Advertising. Mrs. Fields' in-house marketing department and an outside promotional agency emphasize product sampling, local store marketing and brand name identification. We advertise at the 69

store level, using the aroma of fresh-baked cookies and the attractive arrangement of finished products to create a store ambiance that is conducive to sales. Recently we experimented with an advertising campaign with nationally televised commercials during peak holiday periods. We cultivate local customer loyalty by offering regular 20% discounts to employees in malls where stores are located and occasional other discounts. Historically we have spent relatively little on paid advertising, relying mainly on in-store signage, promotions and the public relations of Debbi Fields, who makes store visits and local media appearances throughout the country and internationally for Mrs. Fields. In addition to posters and display of products, we promote products by offering special packaging and selling other promotional items. A promotion for Mrs. Fields' 20th anniversary featured a tie-in with the popular Peanuts characters from the syndicated comic strip, a sweepstakes, and gifts with purchases. Mrs. Fields is currently working on developing catered corporate accounts for both company-owned and franchised stores and will be building awareness of products geared toward corporate accounts at the store level for the local market area and through catalogue sales. We also promote our products as gifts, particularly at holiday time. Great American's marketing strategy has emphasized strong merchandising of its products and the use of proactive sales techniques, including the free sampling of products and other methods intended to increase the size of customer orders. Mail Order Business. Our mail order division markets a variety of fresh-baked and other gift items through its mail order gift catalogue using toll free telephone numbers, including "1-800-COOKIES." The mail order division had $5.2 million in revenues during fiscal year 1998. We believe that there is significant potential in the mail order business and are developing this division by targeting both corporate customers and individuals with a history of purchases at Mrs. Fields stores. Sales from the mail order division for the fiscal year 1999 have increased approximately 9.4% over sales for the prior fiscal year. Customer Profile. We believe that our products are best targeted to a demographic profile which is relatively young, with upper-middle income levels. At the time of a May 1994 study, 66% of Mrs. Fields' customers were female and 34% were male, the mean age of a customer was 35.1 years of age, and 57% of customers had a household income of $50,000 or more. We believe that this demographic profile remains valid. Seasonality. Our sales and profitability in both the cookie business and the pretzel business are subject to seasonal fluctuation and are traditionally higher during the Thanksgiving and Christmas holiday season and other gift- giving holidays due to increased mall traffic and holiday gift purchases. Supplies and Distribution Ingredients and Supplies. We rely primarily on outside suppliers and distributors for the ingredients used in our products and other items used in our stores. Mrs. Fields stores receive frozen products, made according to proprietary recipes of Mrs. Fields, from its primary supplier, Pennant Food Corp. Pennant uses stringent quality controls in testing ingredients and manufacturing, and products are not released for distribution unless they pass all quality control steps, including an evaluation of the finished baked product. Pennant's contract for making frozen products for Mrs. Fields expires on December 31, 2000 and is renewable every three years. Pennant supplies the majority of Mrs. Fields and Original Cookie frozen bakery product. J&J Foods, Inc. supplies the majority of the frozen pretzel dough to Hot Sam Stores. We have identified alternative suppliers for frozen dough at Mrs. Fields and Hot Sam. Pretzel Time stores buy a proprietary dry mix from selected distributors and mix and bake pretzels at individual stores. Pretzel Time franchisees buy from various distributors. Most supplies other than dough are ordered from distributors by either Mrs. Fields or the franchisee and are directly shipped to the store. We sell exclusively Coca-Cola soft drinks in Mrs. Fields, Original Cookie, Pretzel Time, Hot Sam and Great American stores under agreements with Coca-Cola USA Fountain. Great American stores receive "ready to bake" refrigerated batter from a batter facility in Atlanta, which Mrs. Fields acquired in the acquisition of Great American. The batter, which has a shelf life of about 90 days, 70

is stored at the batter facility for an average of one to three weeks, depending on demand, before being shipped. Most other supplies are ordered from third-party vendors by Great American or the franchisee and are shipped directly to the store. Distribution. Regional distributors handle distribution of perishable and non-perishable items to Mrs. Fields and Original Cookie stores weekly. Regional distributors own and maintain all of the inventory, but are authorized to purchase inventory items only from authorized vendors at prices that have been negotiated by Mrs. Fields. Hot Sam distributes perishable and non-perishable items weekly to stores using seven different regional distribution companies. Pretzel Time franchisees use a variety of distributors. Mrs. Fields ships equipment related items, including smallwares equipment and oven parts, directly from public warehouses. Great American stores receive batter from the Atlanta batter facility by refrigerated common carrier. Management Information Systems We have made a substantial investment in developing our point-of-sale system, which gathers information transmitted daily to corporate headquarters from most of our Mrs. Fields brand continuing company-owned stores. We also plan to install our upgraded back-office system, along with the point-of-sale registers and Pentium computers, in our continuing company-owned Original Cookie stores, Hot Sam stores, Pretzelmaker stores, Pretzel Time stores and certain Great American stores by September 1999. We are currently replacing our sales collection systems with software and hardware that is Year 2000 compliant. Replacement of the plant production and distribution software was completed in the first half of 1999 at an estimated cost of $10,000. For more information on our information technology, see "Management's Discussion and Analysis of Financial Conditions and Results of Operations--Year 2000." Management has assessed Year 2000 issues with respect to its significant vendors and financial institutions as to their compliance plans and whether any Year 2000 issues will impede the ability of such vendors to continue providing goods and services to us. See "Risk Factors--failures in Year 2000 compliance could disrupt our operations." Store Management Management Structure. We monitor all company-owned stores with a regionally based staff of district sales managers. District sales managers are responsible for monitoring all cookie and pretzel stores in their territory. Until recently, a separate staff of regionally based franchise operations consultants had monitored franchisees. We plan to consolidate the franchise operations consultants with the district sales managers. As a result, each district sales manager is responsible for overseeing approximately 30 company-owned or franchised cookie and pretzel stores within his or her region. Each district sales manager reports to one of the four regional vice-presidents of store operations. The field staff is also responsible for introducing new products and processes to the stores, ensuring proper implementation and quality control. Management Incentives. Each store has an on-site management team consisting of a manager and an assistant manager. The store manager is responsible for hiring, training and motivating store personnel. Each manager of a company- owned store is eligible for salary increases and bonuses based upon the performance of his or her store, including sales, profits and store appearance. We believe that our incentive and other programs for management have achieved a strong retention rate for managers. Without giving effect to the acquisition of Great American, 72% of Mrs. Fields' district sales managers have been with Mrs. Fields for at least four years (67% for over five years), and 51% of Mrs. Fields' store managers have been with Mrs. Fields for at least four years (40% for over five years). Training. We believe store managers are a critical component in creating an effective retail environment, and accordingly have developed ongoing programs to improve the quality and effectiveness of our store managers and to increase retention rates. New store managers are required to attend a two-week training 71

program at our Salt Lake City training facility and ongoing training courses in new products, standards, and procedures are available throughout the year to all Mrs. Fields personnel. New franchisees and store managers of Great American are required to attend a one-week training program at Great American's Atlanta training facility, known as "Cookie University." In addition, training courses are available throughout the year to all Great American and franchisee personnel. Franchise Operations In accordance with our business strategy, we have been selling, and expect to continue to sell, selected company-owned stores to franchisees to reduce costs, increase profitability and provide for liquidity and development of additional stores in the future. We are also actively seeking to franchise new stores. Cookie Business. Each franchisee pays Mrs. Fields an initial licensing fee of $25,000 per Mrs. Fields store location and is responsible for funding the building-out of the new store and purchasing initial dough inventory and supplies, at a total cost of approximately $200,000, including the initial franchise fee. However, the cost of opening a new store can vary based on individual operating and location costs. We also charge franchisees a fee to handle equipment purchases and to provide other assistance in helping the franchisee to set up operations. After a store is set up, a franchisee pays royalty fees to us of 6% of the franchised store's annual gross sales, and an advertising fee of 1% of annual gross sales. We do not currently anticipate franchising Original Cookie stores. Franchisees come from a wide variety of business backgrounds and bring with them different operating styles and business objectives. Among our franchisees are full-time store operators, passive investors, retired professionals and people seeking a second source of income. The majority of Mrs. Fields franchisees own one store. As of January 2, 1999, the 22 largest Mrs. Fields franchisees operated 164 stores, and the largest Mrs. Fields franchisee operated 14 stores. Each Great American franchisee pays an initial licensing fee of $25,000 per store and is responsible for funding the build-out of the new store and purchasing initial batter inventory and supplies, at a total cost of approximately $164,000, including the initial licensing fee. However, the cost of opening a new store can be significantly higher for franchisees who purchase existing company-owned stores and otherwise varies based on individual operating and location costs. We also charge franchisees a fee to purchase equipment and to provide other assistance in helping the franchisee to set up operations. Pretzel Business. We do not franchise Hot Sam stores. We are a franchisee of 87 Pretzel Time stores, with rights to sub-franchise, if desired. Each franchisee pays Pretzel Time an initial licensing fee of $25,000 per new Pretzel Time store location and is responsible for funding the building-out of the new store and supplies, at a total cost of approximately $190,000 to $240,000, including the initial franchise fee. However, the cost of opening a new store can vary based on individual operating and location costs. Pretzel Time also charges franchisees a fee to handle equipment purchases and to provide other assistance in helping the franchisee to set up operations. After a store is set up, a franchisee pays royalty fees to Pretzel Time of 7% of the franchised store's annual gross sales, and a marketing fee of 1% of annual gross sales. Franchisee Recruiting and Training. We have been successful in recruiting franchisees and completing franchise transactions and believe we will continue to realize significant cash flow from franchising by: (1) emphasizing the use of proprietary dough that minimizes product quality issues and ensures a consistent product across all outlets, (2) frequent quality, service and cleanliness evaluations of franchised stores by operations support staff, and (3) initial and continuing training of franchisees to improve their financial and retail sales skills. 72

We believe our franchisees are a critical component in creating an effective retail environment, and accordingly we make our ongoing programs available to franchisees to improve their quality and effectiveness. Franchisees are required to attend a two-week training program at our Salt Lake City training facility and ongoing training courses in new products, standards, and procedures are available throughout the year to all franchisee personnel. Licensing In the past few years, we have utilized a "branding" strategy which has capitalized on the highly-recognized Mrs. Fields brand to build traffic, expand sales, improve market share, and to increase profits through cultivating different ways of distributing our products. The following is a comprehensive list of branding strategies, with examples of current licensees within Mrs. Fields' system: Concept Licensing. We have developed a licensing program for non-mall retail outlets that enables us to enter difficult-to-reach markets and facilitate brand exposure through "presence" and "prestige" marketing. Our licensees duplicate the Mrs. Fields store concept and purchase dough from our various distributors. Several of these licensees are contract management companies that manage and operate food service in host locations. Our licensees include Host Marriott, which sells our product in airports and travel plazas, ARAMark, which sells our product in stadiums and convention centers and Holiday Inn Worldwide, which sells our product in hotels. Retail Licensing. We plan to capitalize on our brand awareness and the perception of quality among consumers to expand the product line to include products sold in other retail environments, including refrigerated dough, dry-mix and non-food products, and other applications outside the original scope of our retail cookie store concept. A current example is Maxfield's Chocolates, which has the exclusive United States rights to retail boxed chocolates. Another licensee is Wham-O, Inc., which has a license to market the Mrs. Fields Baking Oven for children sold in most toy stores and through mass merchandisers. Supply Licensing. We currently have arrangements with United Airlines and TWA under which our mail order division sells cookies to the airlines and allows the airlines to promote the Mrs. Fields brand and products to their first-class customers. We are pursuing similar relationships to compete with other manufacturers' brands selling in this business. Competition We compete for both leasing opportunities and customers with other cookie and pretzel retailers, as well as other confectionery, sweet snack and specialty food retailers, including cinnamon rolls, yogurt, ice cream, baked goods and candy shops. The specialty retail food and snack industry is highly competitive with respect to price, service, location and food quality, and there are many well-established competitors with greater resources than those of Mrs. Fields. We compete with these retailers on the basis of price, quality, location and service. We face competition from a wide variety of sources, including such companies as Cinnabon, Inc., TCBY Yogurt Inc., Auntie Anne's Soft Pretzels, and Baskin-Robbins 31 Flavors. Properties As of July 3, 1999, we leased 796 retail stores, of which 304 were subleased to franchisees under terms which cover all obligations of Mrs. Fields thereunder. Under our franchise agreements, we have rights to gain control of a retail site in the event of default under the lease or the franchise agreement. Most of our operating leases provide for the payment of lease rents plus real estate taxes, utilities, insurance, common area charges and certain other expenses, as well as contingent rents which generally range from 8% to 10% of net retail store sales in excess of stipulated amounts. See "Risk Factors--We may not be able to obtain leases in the future; our success depends in part on our ability to obtain leases in high quality shopping malls at reasonable rents" and "--We have continuing obligations under real estate leases; if we close an unprofitable store but must still make lease payments on it, we will lose money." 73

We lease 31,000 square feet of office space in Salt Lake City, Utah, which we use as our corporate headquarters. We also lease approximately 20,000 square feet of office space in Salt Lake City, Utah for our product development, training and mail order operations. We own substantially all of the equipment used in both of these facilities and in company-owned retail outlets. Great American owned its headquarters and batter production facility, located in a building of approximately 28,000 square feet in Atlanta, Georgia. We acquired this facility in the acquisition of Great American. Great American's headquarters have been transferred to Salt Lake City since the acquisition of Great American. The batter facility remains in Atlanta. Employees As of July 3, 1999, we had approximately 4,086 employees in company-owned stores, of whom approximately 802 were store managers and assistant store managers and 3,284 were part-time sales assistants. The typical Mrs. Fields store employs 5 to 13 employees. During the period from November through February, we may hire as many as 750 additional part-time employees to handle additional mall traffic. Most employees are paid on an hourly basis, except store managers. Our employees are not unionized. We have never experienced any significant work stoppages and believe that our employee relations are good. Many of our employees are paid hourly rates based upon the federal minimum wage. The federal minimum wage increased from $4.75 to $5.15 on September 1, 1997. As of July 3, 1999, 851 of our 4,086 employees in company-owned stores earned the federal minimum wage. The September 1, 1997 minimum wage increase is expected to negatively impact our labor costs, increasing wages by approximately $354,000 annually, but management believes this impact can be negated in the long-term through increased efficiencies in our operations and, as necessary, through retail price increases. Trademarks We are the holder of numerous trademarks that have been federally registered in the United States and in other countries located throughout the world. We are a party to disputes with respect to trademarks, none of which, in the opinion of management of Mrs. Fields, is material to our business, financial condition or results of operations. We currently hold 52 trademarks that are federally registered in the United States and 141 trademarks that are registered in 48 countries outside the United States. Our trademarks consist of various brand and product names and logos. Trademarks are registered under United States laws for periods of 7 to 10 years and in other countries for periods of 7 to 20 years, and at any time, we may have trademarks whose registration will soon expire and must be renewed. Under our license agreements, our licensees receive the rights to use our recipes and our registered trademarks. We view our trademarks and the ability to license them to third parties, as some of our most valuable assets. Legal Proceedings; Government Regulation In the ordinary course of business, we are involved in routine litigation, including franchise disputes and trademark disputes. Except as described below, we are not a party to any legal proceedings which, in the opinion of management of Mrs. Fields, after consultation with legal counsel, is material to our business, financial condition or results of operations. In connection with the initial discussions relating to the acquisition of Great American, on or about September 12, 1997, 9 franchisees of Great American filed an action challenging a possible acquisition of Great American by Mrs. Fields. Under settlement agreements and waivers with most Great American franchisees, those franchisees released all claims with respect to this litigation. It was a condition of the acquisition of Great 74

American that this litigation be dismissed with prejudice. A motion dismissing the litigation with prejudice was filed on August 24, 1998. See "The Transactions--The Great American Transactions." Our stores and products are subject to regulation by numerous governmental authorities, including, without limitation, federal, state and local laws and regulations governing health, sanitation, environmental protection, safety and hiring and employment practices. 75

MANAGEMENT Directors and Executive Officers The following table sets forth certain information regarding the executive officers and directors of Mrs. Fields as of July 3, 1999. The directors are also directors of Mrs. Fields' Holding. <TABLE> <CAPTION> Name Age Title ---- --- ----- <S> <C> <C> Larry A. Hodges.......... 50 Director, President and Chief Executive Officer Pat W. Knotts............ 44 Senior Vice President of Operations Garry Remington.......... 47 Senior Vice President of Real Estate Mark S. Tanner........... 45 Senior Vice President and Chief Financial Officer Michael R. Ward.......... 41 Vice President, General Counsel and Secretary Herbert S. Winokur, Jr... 55 Chairman of the Board of Directors Richard Ferry............ 61 Director Debbi Fields............. 43 Director Nat Gregory.............. 50 Director Walker Lewis............. 54 Director Peter Mullin............. 58 Director Gilbert Osnos............ 69 Director </TABLE> Mr. Hodges has been President and Chief Executive Officer of Mrs. Fields Inc. and Mrs. Fields since March 1994, and a Director of Mrs. Fields and Mrs. Fields Holding since April 1993. From 1992 to 1994, Mr. Hodges was the Chief Executive Officer of Food Barn Stores, Inc. (Kansas City, Missouri). Earlier Mr. Hodges was a consultant to various manufacturers and retailers. For 25 years, Mr. Hodges was with American Stores Company where he served as President of two of its subsidiaries ranging in annual sales from $600 million to $2.3 billion. Mr. Hodges has over 32 years of experience in the retail field serving as president of four supermarket chains and consultant and director to large food companies. Mr. Hodges is a director of Ameristar Casinos, Inc. and Coinstar, Inc. Mr. Knotts has been Senior Vice President of Mrs. Fields since October 1996. Mr. Knotts' responsibilities include all aspects of store operations and related support functions. Between January 1992 and October 1996, Mr. Knotts served as Executive Vice President of Operations for Original Cookie and Hot Sam, where he was responsible for store operations, marketing, purchasing, construction and store design. Mr. Knotts also held the position of Regional Vice President of Stores for Silo Inc., a $1 billion consumer electronics and major appliance chain. Mr. Remington has been Senior Vice President of Real Estate of Mrs. Fields since July 1997. Mr. Remington's responsibilities include all aspects of real estate, store construction, remodels and lease negotiations. Between October 1996 and July 1997, Mr. Remington served as Vice President of Real Estate for Sbarro, Inc. From 1994 to 1996, Mr. Remington held the position of Senior Vice President of Leasing for the Woolworth Corporation, with responsibilities for Footlocker, Champ Sports, Northern Reflections, Afterthoughts, and seven other divisions, and from 1992 to 1994, Mr. Remington was Vice President and Director of Leasing for the Woolworth Corporation, which he joined in 1972. Mr. Tanner has been Chief Financial Officer and Senior Vice President of Finance & Administration since June 1999. Prior to Mrs. Fields, Mr. Tanner held the position of CFO and Sr. Vice President with the Salt Lake Organizing Committee for the XIX Olympic Winter Games, where he was responsible for finance and administration. Prior to SLOC, Mr. Tanner was Vice President and CFO for Pepsi Cola International's operations in Asia, the Middle East, and Africa (AMEA). He also held the positions of Vice President of Strategic Planning & Finance for Pepsi Cola North America, and Chief Financial Officer, Eastern Division of Pepsi Cola during his tenure with Pepsi Cola. 76

Mr. Ward serves as Vice President, General Counsel and Secretary for Mrs. Fields. Mr. Ward's responsibilities include management of our Legal Department. Between 1991 and 1996, Mr. Ward's responsibilities were overseeing the Legal Department and the Human Resources Department for Mrs. Fields Inc. He is admitted to practice law in the State of Utah. Mr. Ward was appointed acting Chief Financial Officer on April 30, 1999 and acted in that capacity prior to Mr. Tanner's assuming responsibilities of Chief Financial Officer. Mr. Winokur has been Chairman of the Board of Directors of Mrs. Fields and Mrs. Field's Holding since their inception in September 1996. Mr. Winokur is managing member of Capricorn Holdings, L.L.C., the General Partner of Capricorn. Mrs. Fields is owned by Mrs. Fields' Holding, a portfolio company of Capricorn which owns the majority of Mrs. Field's Holding's stock. Mr. Winokur is President of Winokur Holdings, Inc. (an investment company) and Managing General Partner of Capricorn Investors, L.P. and Capricorn, private investment partnerships concentrating on investments in restructure situations, organized by Mr. Winokur in 1987 and 1994, respectively. Prior to his current appointment, Mr. Winokur was Senior Executive Vice President and Director of Penn Central Corporation. Mr. Winokur is also a Director of NAC Re Corporation, The WMF Group, Ltd., C.C.C. Information Services Corp., Inc., DynCorp., and Enron Corp. Mr. Ferry has been a Director of Mrs. Fields since its inception in September 1996. Mr. Ferry is co-founder and Chairman of Korn/Ferry International, the world's leading executive search firm. Mr. Ferry is on the Board of Directors of Avery Dennison, Dole Food Company and Pacific Life Insurance Company. Debbi Fields has been a Director of Mrs. Fields since its inception in September 1996. Debbi Fields founded a predecessor to Mrs. Fields in 1977 and served as President and Chief Executive Officer until 1993. She currently serves on the Board of several non-profit organizations and lectures throughout the United States to Fortune 500 companies. Debbi Fields is a director of Outback Steakhouse, Inc. Mr. Gregory has been a Director of Mrs. Fields since its inception in September 1996. Since 1993, Mr. Gregory has served as Chairman and Chief Executive Officer of NATCO, an international supplier of oilfield production equipment, which is a portfolio company of Capricorn. Mr. Gregory is a member and managing director of Capricorn Holdings, L.L.C., the General Partner of Capricorn, and a director of Marine Drilling Companies, Inc. Mr. Lewis has been a Director of Mrs. Fields since its inception in September 1996. Mr. Lewis is the Chairman of Devon Value Advisers. Mr. Lewis served as Chairman of Strategic Planning Associates, specializing in shareholder value strategies. Mr. Lewis was a Senior Advisor at Dillon Read & Co., Inc. and his company, Devon Value Advisors, continues to act as a consultant to Dillon Read. He was a Managing Director of Kidder, Peabody & Co., Inc., President of Avon North America and Executive Vice President of Avon Products, Inc. Mr. Lewis has served on the Board of Directors of Owens Corning, American Management Systems, Incorporated, Jostens, Inc., Marakon Associates and London Fog. Mr. Mullin has been a Director of Mrs. Fields since its inception in September 1996. Mr. Mullin founded Mullin Consulting, Inc. in Los Angeles in 1969, and serves as its Chairman and Chief Executive Officer. He also co- founded Strategic Compensation Associates and serves as Chairman of the firm's Executive Committee. Mr. Mullin is a member of the Board of Directors of Avery Dennison Corporation, 1st Business Bank, Process Technology Holdings, Inc., Golden State Vintners, M Life Insurance Company and the Board of Advisors of CMS Companies. Mr. Osnos has been a Director of Mrs. Fields since its inception in September 1996. Mr. Osnos has served since 1992 as Chairman of Osnos & Company, which provides interim management to companies. He has served as Interim President/CEO/COO to a large array of companies in manufacturing, distribution, retailing and service industries. In 1979 he joined the predecessor firm and became a partner in 1981. He has been Chairman of the Turnaround Management Association and a member of its Board since prior to 1993. He is also on the Board of Directors of Furr's/Bishop's, Inc. He serves on the Advisory Committee of Business Executive for National Security in the New York Chapter. 77

Executive Compensation The following table sets forth information with regard to compensation for services rendered in all capacities to Mrs. Fields by its Chief Executive Officer and the four other most highly compensated executive officers of Mrs. Fields other than the CEO who were serving as executive officers at the end of the last completed fiscal year. Information described in the table reflects compensation earned by these individuals for services with Mrs. Fields or its subsidiaries. SUMMARY COMPENSATION TABLE <TABLE> <CAPTION> Long Term Compensation Annual Compensation Awards -------------------------------------- ---------------------------- Other Restricted Securities Annual Stock Underlying All Other Name and Salary Bonus Compensation Award(s) Options/SARS(7) Compensation Principal Position Year ($) ($) ($) ($) (#) ($) ------------------ ---- -------- -------- ------------ ---------- --------------- ------------ <S> <C> <C> <C> <C> <C> <C> <C> Larry Hodges 1998 $339,583 $150,000 $4,833 $ -- -- $471,000(8) President and CEO 1997 300,000 185,412 2,177 50,000(6) -- -- 1996 262,834 -- 1,656 -- 229,992 -- L. Tim Pierce(9) 1998 193,430 70,000 2,634 -- -- -- Senior Vice President 1997 175,000 103,607 1,287 -- -- 71,867(8) and CFO 1996 167,723 -- 1,107 -- 32,856 33,000(1) Pat Knotts 1998 191,699 70,000 -- -- -- -- Senior Vice President 1997 162,500 27,321 -- -- -- 23,920(3) Operations 1996 172,490 267,212(2) -- -- 32,856 2,912(4) Michael Ward 1998 135,385 50,000 1,370 -- -- -- Vice President 1997 109,904 56,393 619 -- -- 39,488(8) Legal and Administration 1996 83,020 -- 526 -- 24,642 -- Garry Remington 1998 180,000 33,945 -- -- -- -- Senior Vice President 1997 82,859 -- -- -- 24,642 46,707(5) Real Estate 1996 -- -- -- -- -- -- </TABLE> -------- (1) Represents forgiveness of a loan made by Mrs. Fields Inc. in 1993. (2) Represents payments under retention and employment agreements from Original Cookie/Hot Sam. (3) Represents payment of relocation expenses of $20,920 and a grant of $3,000 under the Original Cookie 401(k) plan. (4) Represents a grant under the Original Cookie 401(k) plan. (5) Represents payment of relocation expenses. (6) 50% of the restricted shares vested on January 1, 1999 and the other 50% vest on January 1, 2000. (7) The stock options for common stock of Mrs. Fields' Holding have 10-year terms and were granted as of September 1996, with the exception of Garry Remington's, which were granted as of July 1997. All options have an exercise price of $10.00 per share, with the exception of Garry Remington's, which have an exercise price of $13.00 per share. (8) Represents payment under Mrs. Field's Inc. Management Value Creation Plan. (9) Mr. Pierce resigned from Mrs. Fields on April 30, 1999. Mrs. Fields bought back his vested shares of stock for $291,560 and entered into a severance agreement with him for $20,000. Option Grants and Exercises The Board of Directors of Mrs. Fields' Holding approved the provisions of a director stock option plan (the "Director Stock Option Plan"), providing for the issuance of common stock, par value $.001 per share, of Mrs. Fields' Holding to directors of Mrs. Fields' Holding, and an employee stock option plan (the "Employee Stock Option Plan" and, together with the Director Stock Option Plan, the "Plans"), providing for the issuance of options to purchase common stock of Mrs. Fields' Holding to officers and other employees of Mrs. Fields' Holding and its subsidiaries, including Mrs. Fields. The Plans provide for the issuance of options to purchase an total of 542,840 shares of common stock of Mrs. Fields' Holding to directors of Mrs. Field's Holding and officers and employees of Mrs. Fields' Holding's subsidiaries, including Mrs. Fields, of which 375,840 shares, representing approximately 10% of the total common stock of Mrs. Fields' Holding on a fully 78

diluted basis, after giving effect to the issuance of stock under the warrants to purchase common stock of Mrs. Fields' Holding and to issuances of stock under options currently issued to directors and employees under the Plans, have been issued. See "Beneficial Ownership of Capital Stock." Board Compensation The Board of Directors of Mrs. Fields meets regularly on a quarterly basis and more often as required. Board members, other than officers of Mrs. Fields and Mr. Winokur, Mr. Gregory and Ms. Fields, are compensated for services rendered annually as follows: (1) $12,000 cash; and (2) grants of options to purchase common stock of Mrs. Fields' Holding, under the Director Stock Option Plan. The Board of Directors of Mrs. Fields' Holding approved the award of options under the Director Stock Option Plan to purchase 3,350 shares of common stock of Mrs. Fields' Holding to each of Messrs. Ferry, Gregory, Lewis, Osnos and Winokur as of January 1, 1997, at an exercise price of $10.00 per share, and the award of options to purchase 1,792 shares of common stock of Mrs. Fields' Holding as of January 1, 1998, at an exercise price of $16.74 to each of the same directors, with the options of Messrs. Gregory and Winokur being issued to Capricorn. The Board members were also offered an opportunity to acquire shares of common stock of Mrs. Fields' Holding under a director stock purchase plan (the "Director Stock Purchase Plan"). The compensation in shares that would be payable or issuable to Messrs. Winokur and Gregory will be paid to Capricorn. A total of 51,667 vested shares of common stock of Mrs. Fields' Holding and 28,333 restricted shares of common stock of Mrs. Fields' Holding have been issued to directors and officers of Mrs. Fields under the Director Stock Purchase Plan. Board Committees Three functioning committees of the Board have been organized: an Executive Committee, a Compensation Committee and an Audit Committee. Following is a brief description of each of these committees. Executive Committee. The Executive Committee is composed of Messrs. Winokur (Chairman), Gregory and Hodges. The purpose of this committee is to act on the behalf of the entire Board of Directors between Board meetings. Compensation Committee. The Compensation Committee is composed of Messrs. Gregory (Chairman), Mullin and Lewis. The purpose of this committee is to ensure that Mrs. Fields has a broad plan of executive compensation that is competitive and motivating to the degree that it will attract, hold and inspire performance of managerial and other key personnel of a quality and nature that will enhance the growth and profitability of Mrs. Fields. Audit Committee. The Audit Committee is comprised of Messrs. Ferry (Chairman) and Osnos. The purpose of the Audit Committee is to provide oversight and review of Mrs. Fields' accounting and financial reporting process in consultation with Mrs. Fields' independent and internal auditors. Indemnification and Compensation Mrs. Fields' By-Laws authorize Mrs. Fields to indemnify its present and former directors and officers and to pay or reimburse expenses for those individuals in advance of the final disposition of a proceeding upon receipt of an undertaking by or on behalf of those individuals to repay any amounts if so required. 79

Employment Agreements All of the executive officers are parties to employment agreements with Mrs. Fields. Each employment agreement provides for a period of employment of two years (or three years, in the case of Larry Hodges) from the date of the agreement, subject to termination provisions and to automatic extension of the agreement. Each employment agreement permits the employee to participate in any incentive compensation plan adopted by Mrs. Fields to replace the Fiscal 1994 Incentive Compensation Plan of Mrs. Fields Inc., benefit plans and an equity- based plan or arrangement. If Mrs. Fields terminates employment for cause or if the employee terminates employment without good reason, Mrs. Fields has no further obligation to pay the employee. If Mrs. Fields terminates employment without cause, or the employee terminates employment with good reason, the employee can receive in severance pay the amount equal to the product of his or her then current semi-monthly base salary by the greater of the number of semi- monthly periods from the notice of termination or 36 semi-monthly periods, plus a portion of any discretionary bonus that would otherwise have been payable. The employment agreement prohibits the employee, for a year from the date of termination of employment under the agreement, from becoming an employee, owner, officer, agent or director of a firm or person that directly competes with Mrs. Fields in a line or lines of business of Mrs. Fields' that accounts for 10% or more of Mrs. Fields' gross sales, revenues or earnings before taxes. An exception is made for investments of not more than 3% of the equity of a company listed or traded on a national securities exchange or an over-the- counter securities exchange. The employment agreements have customary provisions for vacation, fringe benefits, payment of expenses and automobile allowances. The employees who have employment agreements, and their base salaries, are: Larry Hodges, President and Chief Executive Officer, $350,000, Pat Knotts, Senior Vice President of Operations, $215,000, Michael Ward, Vice President, General Counsel and Secretary, $150,000 and Garry Remington, Senior Vice President of Real Estate, $190,000. 80

BENEFICIAL OWNERSHIP OF CAPITAL STOCK As of the date of this prospectus, all of the capital stock of Mrs. Fields is owned by Mrs. Fields' Holding, whose address is 2855 East Cottonwood Parkway, Suite 400, Salt Lake City, Utah 84121. The following table shows certain information, as of June 1, 1999, believed by us to be accurate based on information provided to it concerning the beneficial ownership of common stock by each stockholder who is known by Mrs. Fields to own beneficially in excess of 5% of the outstanding common stock, and by each director, Mrs. Fields' Chief Executive Officer, each of Mrs. Fields' other four most highly compensated executive officers and all officers and directors as a group, as of June 1, 1999. The stockholders listed below are deemed beneficial owners of common stock of Mrs. Fields as a result of their ownership of common stock of Mrs. Fields' Holding, the owner of 100% of the capital stock of Mrs. Fields. Except as otherwise indicated, all persons listed below have (1) sole voting power and investment power with respect to their shares, except to the extent that authority is shared by spouses under applicable law, and (2) record and beneficial ownership with respect to their shares. The shares and percentages described below include shares of common stock which were outstanding or issuable within 60 days upon the exercise of options outstanding as of June 1, 1999 and give effect to the exercise of the warrants issued by Mrs. Fields' Holding. See "Management--Option Grants and Exercises" and "--Board Compensation," As of June 1, 1999, there were eight record holders of common stock of Mrs. Fields' Holding. <TABLE> <CAPTION> Common Stock -------------------- Number of Percentage Title of Class Name of Beneficial Owner Shares of Class -------------- ------------------------ --------- ---------- <C> <S> <C> <C> Capricorn Investors II, Common stock, par L.P.(1)(2)(3).................. 3,181,513 86.1% value $0.001 per share, Larry Hodges(2)(3)............. 89,141 2.5% of Mrs. Fields' Holding Peter Mullin(2)(3)............. 17,123 0.5% Richard Ferry(2)(3)............ 12,123 0.3% Walker Lewis(2)(3)............. 9,623 0.3% Gilbert Osnos(2)(3)............ 9,623 0.3% Pat Knotts(3).................. 14,785 0.4% Michael Ward(3)................ 11,500 0.3% Garry Remington(3)............. 6,435 0.2% All executive officers and directors as a group (8 persons)(2)(3)(4)............. 3,351,866 90.9% </TABLE> -------- (1) The address of Capricorn is 30 East Elm Street, Greenwich, CT 06830. (2) Larry Hodges, Peter Mullin, Richard Ferry, Walker Lewis and Gilbert Osnos are directors of the Company. Herbert Winokur and Nat Gregory are managing member and member, respectively, of Capricorn Holdings, L.L.C., the General Partner of Capricorn, and are directors of Mrs. Fields. See "Management." (3) The shares and percentages include shares subject to options granted to directors and officers of Mrs. Fields that are currently vested as of June 1, 1999, as follows: Capricorn, 4,246 shares; Mr. Hodges, 59,141 shares; Mr. Mullin, 2,123 shares; Mr. Ferry, 2,123 shares; Mr. Lewis, 2,123 shares; Mr. Osnos, 2,123 shares; Mr. Knotts, 14,785 shares; Mr. Ward, 11,500 shares; and Mr. Remington, 6,434 shares; all executive officers and directors as a group, 104,598. Capricorn's shares include the 101,419 shares to be issued under the Assignment and Assumption Agreement. An economically equivalent transaction may be entered into instead. See "Certain Relationships and Related Transactions." (4) Includes shares beneficially owned by Capricorn. 81

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Agreements with Debbi Fields and Affiliates. In November 1996, Mrs. Fields entered into a consulting agreement with Debbi Fields, a director of Mrs. Fields, under which Debbi Fields travels and performs public relations and advertising activities on behalf of Mrs. Fields for at least 50 days a year for a fee of $250,000 per year, with an option to perform 20 additional days a year for additional pay of $5,000 per day. The compensation increased by 10% a year beginning on January 1, 1999. The consulting agreement expires on December 31, 1999. Mrs. Fields may terminate the consulting agreement for cause and Debbi Fields may terminate the consulting agreement at any time. Under the consulting agreement, Debbi Fields may not disclose any confidential information of Mrs. Fields, including recipes and trade secrets, and may not, without the prior written consent of Mrs. Fields, compete with Mrs. Fields. In addition, Mrs. Fields has a license agreement with FSG Holdings, Inc., a Delaware Corporation, under which Debbi Fields has a nonexclusive license to use certain trademarks, names, service marks and logos of Mrs. Fields in connection with book and television series projects. Debbi Fields is required to pay 50 percent of any gross revenues in excess of $200,000 that she receives from the book and television series projects to Mrs. Fields as a license fee. Mrs. Fields, until recently, leased certain office space to an entity which is owned in part by Debbi Fields. Billings to the entity for the fiscal years ended January 3, 1998 and January 2, 1999 totaled approximately $274,000 and $0, respectively, of which approximately $23,000 and $0 is included in accounts receivable as of January 3, 1998 and January 2, 1999, respectively. The lease was terminated in the first quarter of fiscal year 1998. Mrs. Fields believes that the arrangements were on terms that could have been obtained from an unaffiliated third party. Arrangements with Walker Lewis. Mr. Lewis, a director of Mrs. Fields, acts as a consultant and an advisor to Dillon Read. Mr. Lewis' company, Devon Value Advisers, received a fee of $250,000, plus expenses, from Mrs. Fields in the first quarter of 1998 under an agreement to provide advisory acquisition and consulting services to Mrs. Fields. Mrs. Fields believes that the arrangements were on terms that could have been obtained from an unaffiliated third party. Korn/Ferry Agreement. Mrs. Fields has paid fees of approximately $157,000 and $70,600 during the years ended January 3, 1998 and January 2, 1999, respectively, to Korn/Ferry International, an executive search firm of which Richard Ferry, a director of Mrs. Fields, is the Chairman, in connection with the hiring of employees for Mrs. Fields. Mrs. Fields believes that the arrangements are on terms that could have been obtained from an unaffiliated third party. Arrangements With Mrs. Fields' Holding. Mrs. Fields and Mrs. Fields' Holding expect to enter into a Tax Sharing Agreement as defined in and permitted by the indenture. See "Description of Notes--Certain Covenants." As of January 3, 1998 and January 2, 1999, Mrs. Fields had payables of $105,000 and $150,000 due to Mrs. Fields' Holding, respectively, and as of July 3, 1999, a receivable of $16,500 due from Mrs. Fields' Holding. The receivables stem primarily from goods sold and an allocation of payroll and other operating expenses. Mrs. Fields believes that the terms of the sale and allocations are essentially equivalent to the terms that would have been obtained from an unaffiliated third party in a similar transaction. Incentive Arrangements. Under a senior management value creation plan that was adopted by Mrs. Fields Inc. and assumed by Mrs. Fields at the time of its formation in September 1996, the following payments were made in 1998: $471,484 to Mr. Hodges; $71,867 to Mr. Pierce; $39,488 to Mr. Ward; and $71,078 to a vice president of Mrs. Fields Inc. Mr. Hodges used $250,000, representing substantially all of this payment after his payment of related taxes, to purchase 25,000 shares of common stock of Mrs. Fields' Holding at $10.00 per share. 82

Director Stock Purchase Plan. Each of the directors of Mrs. Fields was offered an opportunity to purchase common stock of Mrs. Fields Holding under the Director Stock Purchase Plan. Under the Director Stock Purchase Plan, shares of common stock of Mrs. Fields' Holding, either restricted or vested, can be issued to outside directors of Mrs. Fields' Holding and its subsidiaries, including Mrs. Fields. Restricted shares vest 50% on January 1, 1999 and 50% on January 1, 2000, or earlier, upon a change of control of Mrs. Fields' Holding or Mrs. Fields. See "Management--Board Compensation." A total of 51,667 vested shares of common stock of Mrs. Fields Holding and 28,333 restricted shares of common stock of Mrs. Fields Holding have been issued to directors and officers of Mrs. Fields under the Director Stock Purchase Plan. The Plans. Under the Employee Stock Option Plan, a committee of the Board of Directors is authorized to administer the Employee Stock Option Plan and has the power, among other things, to grant awards to officers and other employees of Mrs. Fields' Holding and its subsidiaries, including Mrs. Fields, of options for common stock of Mrs. Fields' Holding. The Employee Stock Option Plan provides for the issuance of three types of options. Performance vested options are deemed to be vested 20% for fiscal year 1997 and vest an additional 20% per year for each subsequent fiscal year in which there is a 10% increase in the implied valuation of Mrs. Fields, which is equal to the excess of 5.5 times Adjusted EBITDA for that fiscal year over net debt at the end of that fiscal year. Time vested options vest 25% per year on the anniversaries of the dates on which they are granted, and vest in full upon a change of control of Mrs. Fields' Holding or Mrs. Fields. Upside options vest upon the earlier to occur of the expiration of the option and a change of control, in accordance with internal rate of return targets: (1) if the IRR through the vesting date is less than 20%, the option will not vest; (2) if the IRR is from 20% to 24.99%, the option will vest one-third; (3) if the IRR is from 25% to 29.99%, the option will vest two-thirds; and (4) if the IRR is at least 30%, the option will vest in full. IRR means, as of any date, the internal rate of return, determined in accordance with generally accepted practice, on one share of common stock of Mrs. Fields' Holding calculated from September 18, 1996, through the date as of which the determination is being made, using (1) a value of $10.00 per share at September 18, 1996 (subject to adjustments), (2) if the relevant date is the date of a change of control, the value paid under or implicit in the change of control transaction (as determined in good faith by a committee of the Board of Directors), and (3) if the relevant date of determination is the expiration of such option, the value determined in good faith based on the implied valuation for the four most recent fiscal quarters for which financial statements are available. A total of 492,840 shares of common stock of Mrs. Fields' Holding have been reserved for issuance under the Employee Stock Option Plan. Stock issued under the Employee Stock Option Plan is subject to customary restrictions on transfer. Under the Director Stock Option Plan, a committee of the Board is authorized to administer the Director Stock Option Plan and has the power, among other things, to grant awards of options for common stock of Mrs. Fields' Holding to outside directors of Mrs. Fields' Holding and its subsidiaries, including Mrs. Fields. The Director Stock Option Plan provides for the issuance of time vested options, which vest 25% per year on the anniversaries of the dates on which they are granted, and vest in full upon a change of control of Mrs. Fields' Holding or Mrs. Fields. An total of 50,000 shares of common stock of Mrs. Fields' Holding are reserved for issuance under the Director Stock Option Plan. Common stock of Mrs. Fields' Holding issued under the Director Stock Option Plan is subject to customary restrictions on transfer. Options have been awarded under the Director Stock Option Plan to each of Messrs. Ferry, Gregory, Lewis, Osnos and Winokur 83

to purchase 3,350 shares of common stock of Mrs. Fields' Holding as of January 1, 1997, at an exercise price of $10.00 per share, and to purchase 1,792 shares of common stock of Mrs. Fields' Holding as of January 1, 1998, at an exercise price of $16.74 per share, with the options of Messrs. Gregory and Winokur being issued to Capricorn. The Stockholders' Agreement. Mrs. Fields' Holding has entered into a stockholders' agreement with its stockholders. The stockholders' agreement gives rights of first refusal to Mrs. Fields' Holding if any Mrs. Fields' Holding stockholder receives an offer to purchase common stock of Mrs. Fields' Holding and, if Mrs. Fields' Holding does not exercise its rights, gives the rights of first refusal to other Mrs. Fields' Holding stockholders. In the event of a sale to a third party approved by Capricorn, Capricorn has the right to require the other Mrs. Fields' Holding stockholders to sell their common stock of Mrs. Fields' Holding (the "Drag Along"). If Capricorn sells any common stock of Mrs. Fields' Holding, the other Mrs. Fields' Holding stockholders will have the opportunity to sell their common stock of Mrs. Fields' Holding in proportion to their holdings (the "Tag Along"). The stockholders' agreement also provides for piggyback registration rights for all Mrs. Fields' Holding stockholders, and gives one Mrs. Fields' Holding stockholder demand registration rights. The stockholders' agreement gives Mrs. Fields' Holding the option to purchase all of the common stock of Mrs. Fields' Holding held by an officer or director that holds common stock of Mrs. Fields' Holding if the officer or director is terminated. If an officer or director is terminated other than for cause, the officer or director has the right to sell shares to Mrs. Fields' Holding. The stockholders' agreement provides for customary restrictions on transfer of common stock of Mrs. Fields' Holding. The holders of warrants to purchase common stock of Mrs. Fields' Holding will be subject to the Drag Along and benefit from the Tag Along. Arrangements With Capricorn. On May 27, 1999, Mrs. Fields, Mrs. Fields' Holding, Pretzel Time, Martin Lisiewksi and Capricorn entered into an assignment and assumption agreement under which Capricorn agreed to assume a payment obligation of Mrs. Fields of $2,000,000 for Pretzel Time stock held by Mr. Lisiewksi that is due on December 31, 1999. In a related transaction on the same date, Capricorn and Mrs. Fields' Holding entered into a contribution agreement under which Mrs. Fields' Holding and Capricorn agreed to treat the assumption by Capricorn of the Mrs. Fields payment obligation described above as a capital contribution from Capricorn to Mrs. Fields' Holding, and Mrs. Fields' Holding agreed either to issue 101,419 shares of its common stock to Capricorn at the request of Capricorn or to enter into an economically equivalent transaction that is permitted under the debt instruments of Mrs. Fields' Holding and its subsidiaries or no consideration. This transaction enhanced Mrs. Fields' tax planning and financial flexibility. 84

DESCRIPTION OF NOTES You can find the definitions of certain terms used in this description under the subheading "Certain Definitions." In this description, the word "Mrs. Fields" refers only to Mrs. Fields' Original Cookies, Inc. and not to any of its subsidiaries. We will issue the new notes under an indenture among Mrs. Fields, the guarantors and The Bank of New York, as trustee. The terms of the new notes being offered in the exchange offer include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939. The following description is a summary of the material provisions of the indenture and the registration rights agreement. It does not restate those agreements in their entirety. We urge you to read the indenture and the registration rights agreement because they, and not this description, define your rights as holders of these notes. We have filed copies of the indenture and the registration rights agreement as exhibits to the registration statement which includes this prospectus. Brief Description of the Notes and the Guarantees The notes These notes: . are general unsecured obligations of Mrs. Fields; . are senior in right of payment to all subordinated Indebtedness of Mrs. Fields; . are equal in right of payment to all existing and future senior Indebtedness of Mrs. Fields; and . are unconditionally guaranteed on a senior basis by the guarantors. As of July 3, 1999, Mrs. Fields had approximately $11.6 million in Indebtedness other than the notes. The Guarantees "guarantors" means each of: (1) The Mrs. Fields' Brand; and (2) any other Subsidiary that executes a guarantee in accordance with the provisions of the indenture and their respective successors and assigns. A "Subsidiary" means, with respect to any person, (1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that person or one or more of the other Subsidiaries of that person (or a combination of the preceding) and (2) any partnership (a) the sole general partner or the managing general partner of which is that person or a Subsidiary of that person or (b) the only general partners of which are that person or of one or more Subsidiaries of such person (or any combination of the preceding). These notes are guaranteed by the following subsidiaries of Mrs. Fields: The Mrs. Fields' Brand, Inc. Great American Cookie Company, Inc. Pretzelmaker Holdings, Inc. Pretzel Time, Inc. 85

The guarantees of these notes: . are general unsecured obligations of each guarantor; . are senior in right of payment to all subordinated Indebtedness of each guarantor; and . are equal in right of payment to any existing and future senior Indebtedness of each guarantor. As of July 3, 1999, Mrs. Fields' subsidiaries had approximately $382,000 in indebtedness and had preferred stock with a value upon liquidation of $1.5 million, substantially all of which is senior in right of payment to the notes. The indenture will permit us and the guarantors to incur additional Indebtedness. The notes will be guaranteed by any additional guarantors. Principal, Maturity and Interest Mrs. Fields can issue up to $200.0 million of notes under the indenture. Before August 1998, Mrs. Fields had issued $100.0 million of notes under the indenture. Mrs. Fields issued an additional $40.0 million of notes on August 24, 1998. . Interest on the notes will accrue at the rate of 10 1/8% per annum. . We will pay interest on the new notes semi-annually in arrears on June 1 and December 1 of each year, commencing June 1, 1999. We will make each interest payment to holders of record of the new notes on the immediately preceding May 15 and November 15. . Interest on the new notes will accrue from the date it was most recently paid. We will compute interest on the basis of a 360-day year comprised of twelve 30-day months. . Old notes that are accepted for exchange will cease to accrue interest from and after the date the exchange offer is completed. . The notes mature on December 1, 2004. Methods of Receiving Payments on the Notes If a holder has given wire transfer instructions to us, we will make all principal, premium and interest and, if any, liquidated damages, payments on those notes in accordance with those instructions. All other payments on the notes will be made at the office or agency that we maintain within the City and State of New York unless we elect to make interest payments by check mailed to the holders at their addresses described in the register of holders. Until we designate otherwise, our office or agency in New York will be the office of the trustee. Transfer and Exchange A holder may transfer or exchange notes in accordance with the indenture. The registrar and the trustee may require a holder, among other things, to furnish appropriate endorsements and transfer documents and Mrs. Fields may require a holder to pay any taxes and fees required by law or permitted by the indenture. We are not required to transfer or exchange any note selected for redemption. Also, we are not required to transfer or exchange any note for a period of 15 days before a selection of notes to be redeemed. The registered holder of a note will be treated as the owner of it for all purposes. Guarantees The guarantors will, jointly and severally, unconditionally guarantee Mrs. Fields' obligations under these notes on a senior unsecured basis. The obligations of each guarantor under its guarantee will be limited as 86

necessary to prevent that guarantee from constituting a fraudulent conveyance under applicable law. See "Risk Factors--Fraudulent conveyance risks; federal and state statutes allow courts, under specific circumstances, to void payments under the notes and guarantees and require noteholders to return payments received." A guarantor may not consolidate with or merge with or into (whether or not such guarantor is the surviving person), another person unless: (1) the person formed by or surviving the consolidation or merger assumes all the obligations of that guarantor under a supplemental indenture satisfactory to the trustee; (2) immediately after giving effect to that transaction, no Default or Event of Default exists; (3) the guarantor, or any person formed by or surviving the consolidation or merger, would have Consolidated Net Worth immediately after giving effect to the transaction equal to or greater than the Consolidated Net Worth of the guarantor immediately preceding the transaction; and (4) Mrs. Fields would be permitted by virtue of giving effect to its pro forma Fixed Charge Coverage Ratio, immediately after giving effect to the transaction, to incur at lest $1.00 of additional Indebtedness under the Fixed Charge Coverage Ratio test described in the covenant described below under the caption: "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock." A Default means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. Events of Default are listed under "Event of Default and Remedies" below. The guarantee of a guarantor will be released: (1) in connection with any sale or other disposition of all of the assets of that guarantor (including by way of merger or consolidation), if Mrs. Fields applies the Net Proceeds of that sale or other disposition, in accordance with the applicable provisions of the indenture; or (2) in connection with any sale of all of the capital stock of a guarantor (including by way of a merger or consolidation), if Mrs. Fields applies the Net Proceeds of that sale in accordance with the applicable provisions of the indenture. In the event of a sale or other disposition of all of the assets of a guarantor, the corporation acquiring the property will be released. See "Redemption at the Option of Holders--Asset Sales." Optional Redemption Until November 20, 2001, Mrs. Fields may on any one or more occasions redeem up to 35% of the total principal amount of notes ever issued under the indenture at a redemption price of 110.125% of the principal amount of those notes, plus accrued and unpaid interest and liquidated damages, if any, to the redemption date, with the net cash proceeds of one or more Public Equity Offerings; provided that (1) at least 65% of the in total principal amount of notes ever issued under the indenture remains outstanding immediately after the occurrence of the redemption; and (2) the redemption must occur within 60 days of the date of the closing of the Public Equity Offering. Except under the preceding paragraph, the notes will not be redeemable at Mrs. Fields' option prior to December 1, 2001. 87

After December 1, 2001, Mrs. Fields may redeem all or a part of these notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) described below plus accrued and unpaid interest and liquidated damages, if any, on those notes, to the applicable redemption date, if redeemed during the twelve-month period beginning on December 1 of the years indicated below: <TABLE> <CAPTION> Year Percentage ---- ---------- <S> <C> 2001.............................................................. 103.375% 2002.............................................................. 101.688% 2003 and thereafter............................................... 100.000% </TABLE> Repurchase at the Option of Holders Change of Control If a Change of Control occurs, each holder of notes will have the right to require Mrs. Fields to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of that holder's notes under the Change of Control Offer. In the Change of Control Offer, Mrs. Fields will offer a Change of Control Payment in cash equal to 101% of the total principal amount of notes repurchased plus accrued and unpaid interest on those notes, if any, and liquidated damages, if any, to the date of purchase. Within 60 days following any Change of Control, Mrs. Fields will mail a notice to each holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase notes on the Change of Control Payment Date specified in the notice, under the procedures required by the indenture and described in the notice. Mrs. Fields will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations under the Exchange Act to the extent those laws and regulations are applicable in connection with the repurchase of the notes as a result of a Change of Control. On the Change of Control Payment Date, Mrs. Fields will, to the extent lawful: (1) accept for payment all notes or portions thereof properly tendered under the Change of Control Offer; (2) deposit with the paying agent an amount equal to the Change of Control Payment in respect of all notes or portions of notes so tendered; and (3) deliver or cause to be delivered to the trustee the notes so accepted together with an officers' certificate stating the total principal amount of notes or portions of notes being purchased by Mrs. Fields. The paying agent will promptly mail to each holder of notes so tendered the Change of Control Payment for those notes, and the trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each holder a new note equal in principal amount to any unpurchased portion of the notes surrendered, if any; provided that each new note will be in a principal amount of $1,000 or an integral multiple of $1,000. Mrs. Fields will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. The provisions described above that require Mrs. Fields to make a Change of Control Offer following a Change of Control will be applicable regardless of whether or not any other provisions of the indenture are applicable. Except as described above with respect to a Change of Control, the indenture does not contain provisions that permit the holders of the notes to require that Mrs. Fields repurchase or redeem the notes in the event of a takeover, recapitalization or similar transaction. Indebtedness of Mrs. Fields currently prohibits, and it is expected that future Indebtedness of Mr. Fields will prohibit, events that would constitute a Change of Control. In addition, the exercise by the holders of notes 88

of their right to require Mrs. Fields to repurchase the notes could cause a default under that Indebtedness, even if the Change of Control itself does not, due to the financial effect of those repurchases on Mrs. Fields. Finally, Mrs. Fields' ability to pay cash to the holders of notes upon a repurchase may be limited by Mrs. Fields' then existing financial resources. Mrs. Fields will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements described in the indenture applicable to a Change of Control Offer made by Mrs. Fields and purchases all notes validly tendered and not withdrawn under the Change of Control Offer. The definition of Change of Control includes a phrase relating to the sale, lease, transfer, conveyance or other disposition of "all or substantially all" of the assets of Mrs. Fields and its Subsidiaries taken as a whole. Although there is a limited body of case law interpreting, the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of notes to require Mrs. Fields to repurchase its notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of Mrs. Fields and its Subsidiaries taken as a whole to another person or group may be uncertain. Asset Sales Mrs. Fields will not, and will not permit any of its Subsidiaries to, consummate an Asset Sale unless: (1) Mrs. Fields (or the Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of; (2) the fair market value is (a) evidenced by an officers' certificate delivered to the trustee, in the case of an Asset Sale or Asset Sales aggregating $10,000 or more; or (b) determined by Mrs. Fields' Board of Directors and evidenced by a resolution of the Board of Directors described in an officers' certificate delivered to the trustee, in the case of any Asset Sale having a fair market value or resulting in net proceeds in excess of $5.0 million; and (3) at least 75% of the consideration therefor received by Mrs. Fields or the Subsidiary is in the form of cash. For purposes of this provision, each of the following shall be deemed to be cash: (a) any liabilities (as shown on Mrs. Fields' or the Subsidiary's most recent balance sheet), of Mrs. Fields or any Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the notes or any guarantee of those liabilities) that are assumed by the transferee of any assets under a customary novation agreement that releases Mrs. Fields or the Subsidiary from further liability; and (b) any securities, notes or other obligations received by Mrs. Fields or any the Subsidiary from the transferee that are immediately converted by Mrs. Fields or the Subsidiary into cash (to the extent of the cash received in that conversion). "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). Within 270 days after the receipt of any Net Proceeds from an Asset Sale, Mrs. Fields may apply the Net Proceeds at its option: (1) to repay senior Indebtedness of Mrs. Fields or any guarantor; 89

(2) to make a Permitted Investment; (3) to make a capital expenditure in the same or a similar line of business as Mrs. Fields and its Subsidiaries were engaged in on November 26, 1997, including, without limitation, the specialty retail snack-food business; or (4) to acquire long-term assets in the same or a similar line of business as Mrs. Fields and its Subsidiaries were engaged in on November 26, 1997, including, without limitation, the specialty retail snack-food business. Pending the final application of the Net Proceeds, Mrs. Fields may temporarily reduce Indebtedness under a credit facility with a maximum total amount of $15.0 million that is permitted under the indenture, including the credit agreement with La Salle National Bank, or otherwise invest the Net Proceeds in any manner that is not prohibited by the indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph will constitute Excess Proceeds. When the total amount of Excess Proceeds exceeds $5.0 million, Mrs. Fields will make an Asset Sale Offer to all holders of notes to purchase the maximum principal amount of notes that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of principal amount plus accrued and unpaid interest, if any, and liquidated damages, if any, to the date of purchase, and will be payable in cash. If any Excess Proceeds remain after completion of an Asset Sale Offer, Mrs. Fields may use those Excess Proceeds for general corporate purposes. If the total principal amount of notes tendered into the Asset Sale Offer exceeds the amount of Excess Proceeds, the trustee shall select the notes to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. Selection and Notice If less than all of the notes are to be redeemed at any time, the trustee will select notes for redemption as follows: (1) if the notes are listed, in compliance with the requirements of the principal national securities exchange on which the notes are listed; or (2) if the notes are not so listed, on a pro rata basis, by lot or by any method as the trustee shall deem fair and appropriate. No notes of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each holder of notes to be redeemed at its registered address. Notices of redemption may not be conditional. If any note is to be redeemed in part only, the notice of redemption that relates to that note shall state the portion of the principal amount thereof to be redeemed. A new note in principal amount equal to the unredeemed portion of the original note will be issued in the name of the holder of that note upon cancellation of the original note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on notes or portions of them called for redemption. Certain Covenants Restricted Payments Mrs. Fields will not, and will not permit any of its Subsidiaries to, directly or indirectly: (1) declare or pay any dividend or make any other payment or distribution on account of Mrs. Fields' or any of its Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving Mrs. Fields) or to the direct or indirect 90

holders of Mrs. Fields' or any of its Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of Mrs. Fields or dividends or distributions payable to Mrs. Fields or any Wholly Owned Subsidiary of Mrs. Fields that is a guarantor); (2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving Mrs. Fields) any Equity Interests of Mrs. Fields or any direct or indirect parent of Mrs. Fields or other Affiliate of Mrs. Fields (other than the Equity Interests owned by Mrs. Fields or any Wholly Owned Subsidiary of Mrs. Fields); (3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the notes, except a payment of interest or principal at the Stated Maturity of that Indebtedness; or (4) make any Investment other than a Permitted Investment (all of the payments and other actions (1) through (4) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to that Restricted Payment: (1) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence of the Restricted Payment, and (2) Mrs. Fields would, at the time of the Restricted Payment and after giving pro forma effect to it as if the Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness under the Fixed Charge Coverage Ratio test described in the first paragraph of the covenant described below under the caption "Incurrence of Indebtedness and Issuance of Preferred Stock"; and (3) the Restricted Payment, together with the total amount of all other Restricted Payments made by Mrs. Fields and its Subsidiaries after November 26, 1997 (excluding Restricted Payments permitted by clauses (2), (3) or (4) of the next succeeding paragraph), is less than the sum of (a) 50% of the Consolidated Net Income of Mrs. Fields for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after November 26, 1997 to the end of Mrs. Fields' most recently ended fiscal quarter for which internal financial statements are available at the time of the Restricted Payment (or, if the Consolidated Net Income for that period is a deficit, less 100% of the deficit), plus (b) 100% of the total net cash proceeds (other than proceeds referred to in the proviso to the first sentence of the definition of "Investments") received by Mrs. Fields since November 26, 1997 of Equity Interests of Mrs. Fields (other than Disqualified Stock, but including the capital contribution from Mrs. Fields Holding on August 24, 1998) or Disqualified Stock or convertible debt securities that have been converted into Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of Mrs. Fields and other than Disqualified Stock or convertible debt securities that have been converted into Disqualified Stock), plus (c) to the extent that any Investment other than a Permitted Investment that was made after November 26, 1997 is sold for cash or otherwise liquidated or repaid for cash, the lesser of (1) the cash return of capital with respect to that Investment (less the cost of disposition, if any) and (2) the initial amount of that Investment. "Wholly Owned Subsidiary" of any person means a Subsidiary of that person, all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be 91

owned by that person or by one or more Wholly Owned Subsidiaries of that person and one or more Wholly Owned Subsidiaries of that person. The preceding provisions will not prohibit: (1) the payment of any dividend within 60 days after the date of declaration of the dividend, if at said date of declaration the payment would have complied with the provisions of the indenture; (2) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness or Equity Interests of Mrs. Fields in exchange for, or out of the net cash proceeds of, the substantially concurrent sale (other than to a Subsidiary of Mrs. Fields) of, other Equity Interests of Mrs. Fields (other than Disqualified Stock); provided that the amount of any net cash proceeds that are utilized for that redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (3)(b) of the preceding paragraph; (3) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (4) the payment of any dividend by a Subsidiary of Mrs. Fields to the holders of any Equity Interests on a pro rata basis; and (5) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of Mrs. Fields or any Subsidiary of Mrs. Fields held by any member of Mrs. Fields' (or any of its Subsidiaries') management under any management equity subscription agreement or stock option agreement; provided that the total price paid for all of those repurchased, redeemed, acquired or retired Equity Interests shall not exceed, in any twelve-month period, $250,000, plus the amount of cash proceeds received by Mrs. Fields from any reissuance of Equity Interests by Mrs. Fields to members of management of Mrs. Fields or its Subsidiaries during such period, which total amount shall in no event exceed $500,000 in that period, and no Default or Event of Default shall have occurred and be continuing immediately after the transaction; (6) payments to Mrs. Fields Holding under the Tax Sharing Agreement; (7) payments pursuance to the Employment Agreement, dated as of September 2, 1997, between Pretzel Time and Martin E. Lisiewski and the Management Agreement, dated as of September 2, 1997, between Mrs. Fields and Pretzel Time; and (8) the redemption or repurchase of preferred stock of Pretzel Time outstanding on November 26, 1997. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by Mrs. Fields or its Subsidiary, as the case may be, under the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this covenant shall be determined by the Board of Directors whose resolution with respect to it shall be delivered to the trustee. The Board of Directors' determination must be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if the fair market value exceeds $2.0 million. Not later than the date of making any Restricted Payment, Mrs. Fields shall deliver to the trustee an officers' certificate stating that the Restricted Payment is permitted and setting forth the basis upon which the calculations required by this "Restricted Payments" covenant were computed, together with a copy of any fairness opinion or appraisal required by the indenture. Incurrence of Indebtedness and Issuance of Preferred Stock Mrs. Fields will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Indebtedness), and Mrs. Fields will not 92

issue any Disqualified Stock and will not permit any of its Subsidiaries to issue any shares of preferred stock; provided that Mrs. Fields may incur Indebtedness (including Acquired Indebtedness) or issue Disqualified Stock, if: (1) the Fixed Charge Coverage Ratio for Mrs. Fields' most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which the additional Indebtedness is incurred or the Disqualified Stock is issued would have been at least (a) From the date of the indenture to December 31, 1999, 2.25 to 1 and (b) thereafter, 2.5 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock had been issued, as the case may be, at the beginning of that four- quarter period; and (2) the Weighted Average Life to Maturity of the Indebtedness is equal to or greater than the remaining Weighted Average Life to Maturity of the notes, provided that this clause (2) shall not apply in the case of Acquired Indebtedness. The first paragraph of this covenant will not prohibit the incurrence of any of the following, items of Indebtedness (collectively, "Permitted Indebtedness"): (1) the incurrence by Mrs. Fields and its Subsidiaries of the Existing Indebtedness other than the notes; (2) the incurrence by Mrs. Fields and its Subsidiaries on November 26, 1997 of Indebtedness represented by the notes in a total principal amount not to exceed $100.0 million and the guarantees of that Indebtedness by the guarantors; (3) the incurrence by Mrs. Fields or any of its Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case, incurred for the purpose of improvement of property, plant or equipment used in the business of Mrs. Fields or the Subsidiary, in a total principal amount not to exceed $5.0 million at anytime outstanding; (4) the incurrence by Mrs. Fields or any of its Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness that was permitted by the indenture to be incurred; (5) the incurrence by Mrs. Fields or any of its Subsidiaries of intercompany Indebtedness between or among Mrs. Fields and any of its Wholly Owned Subsidiaries; provided, that: (a) if Mrs. Fields is the obligor on that Indebtedness, the Indebtedness must be expressly subordinated to the prior payment in full in cash of all obligations with respect to the notes; and (b) (1) any subsequent issuance or transfer of Equity Interests that results in any of that Indebtedness being held by a person other than Mrs. Fields or a Wholly Owned Subsidiary of Mrs. Fields and (2) any sale or other transfer of that Indebtedness to a person that is not either Mrs. Fields or a Wholly Owned Subsidiary of Mrs. Fields shall be deemed, in each case, to constitute an incurrence of that Indebtedness by Mrs. Fields or that Subsidiary, as the case may be; (6) the incurrence by Mrs. Fields of Hedging Obligations in the ordinary course of business; (7) the incurrence of Indebtedness in connection with one or more standby letters of credit, guarantees, performance or surety bonds or other reimbursement obligations, in each case, issued 93

in the ordinary course of business and not in connection with the borrowing of money or the obtaining of advances or credit other than: (a) advances or credit on open account, includible in current liabilities, for goods and services in the ordinary course of business and on terms and conditions customary in the same or a similar line of business as Mrs. Fields and its Subsidiaries were engaged in on November 26, 1997, including, without limitation, the speciality retail snack-foods business and (b) the extension of credit represented by the letter of credit, guarantee, bond or other obligation itself, provided that any draw under or call upon any of the foregoing is repaid in full within 45 days, and provided further that the total amount of all Indebtedness incurred under this clause (7) shall not exceed $5.0 million at any time outstanding; (8) the incurrence of Indebtedness arising from agreements of Mrs. Fields or a Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or Subsidiary (other than guarantees of Indebtedness incurred by any person acquiring all or a portion of the business, assets or Subsidiary for the purpose of financing the acquisition), provided that the maximum total liability of that Indebtedness shall at no time exceed 50% of the gross proceeds actually received by Mrs. Fields or the Subsidiary in connection with the disposition; (9) the guarantee by Mrs. Fields or any of the guarantors of Indebtedness of Mrs. Fields or a Subsidiary of Mrs. Fields that is a guarantor that was permitted to be incurred by another provision of this covenant; (10) the incurrence by Pretzel Time of Indebtedness under a working capital facility, provided that the total principal amount of all Indebtedness (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of Pretzel Time thereunder) outstanding thereunder after giving effect to the incurrence, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any other Indebtedness incurred under this clause (10), does not exceed an amount equal to $1.0 million; (11) the incurrence by Mrs. Fields of additional Indebtedness (including Indebtedness under a credit facility) in a total principal amount (or accreted value, as applicable), including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any other Indebtedness incurred under this clause (11), not to exceed $15.0 million at any time outstanding; (12) the incurrence by Mrs. Fields or any of its subsidiaries of Acquired Indebtedness in a total amount not to exceed $5.0 million at any time outstanding; (13) the guarantee by Mrs. Fields or any of its Subsidiaries (other than Mrs. Fields' Brand) of operating store lease obligations of Mrs. Fields or any of its Subsidiaries or any franchisee of Mrs. Fields or any of its Subsidiaries in the ordinary course of business and consistent with past practice; (14) the guarantee by any Subsidiary of Mrs. Fields of Indebtedness of the Mrs. Fields under any credit facility with a maximum total amount of $15.0 million otherwise permitted to be incurred under the indenture; (15) the incurrence by Mrs. Fields of Indebtedness in the form of notes issued in connection with the repurchase, redemption, acquisition or retirement of Equity Interests of Mrs. Fields or any Subsidiary of Mrs. Fields in an amount not to exceed $500,000 at any time outstanding and subordinated in right of payment to the notes; and 94

(16) the incurrence by Mrs. Fields of Indebtedness or the guarantee by Mrs. Fields of Indebtedness incurred by franchisees in connection with the cost of purchasing a franchise and the cost of equipment in connection with the set-up of a franchise, provided that the Indebtedness or guarantee does not exceed $3.0 million at any time outstanding. For purposes of determining compliance with this "Incurrence of Indebtedness and Issuance of Preferred Stock" covenant, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (16) above, or is entitled to be incurred under the first paragraph of this covenant, Mrs. Fields will be permitted to classify that item of Indebtedness on the date of its incurrence in any manner that complies with this covenant. Accrual of interest and the accretion of accreted value will not be deemed to be an incurrence of Indebtedness for purposes of this covenant. Liens Mrs. Fields will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien except Permitted Liens. Dividend and Other Payment Restrictions Affecting Subsidiaries Mrs. Fields will not, and will not permit any of its Subsidiaries, directly or indirectly, to create or permit to exist or become effective any encumbrance or restriction on the ability of any Subsidiary to: (1) pay dividends or make any other distributions on its Capital Stock to Mrs. Fields or any of Mrs. Fields' Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to Mrs. Fields or any of Mrs. Fields' Subsidiaries; (2) make loans or advances to Mrs. Fields or any of Mrs. Fields' Subsidiaries; or (3) transfer any of its properties or assets to Mrs. Fields or any of Mrs. Fields' Subsidiaries. However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of: (1) Existing Indebtedness as in effect on November 27, 1997 (2) the indenture and the notes; (3) applicable law; (4) any instrument governing Indebtedness or Capital Stock of a person acquired by Mrs. Fields or any of its Subsidiaries as in effect at the time of the acquisition (except to the extent the Indebtedness was incurred in connection with or in contemplation of the acquisition), which encumbrance or restriction is not applicable to any person, or the properties or assets of any person, other than the person, or the property or assets of the person, so acquired, provided that, in the case of Indebtedness, the Indebtedness was permitted by the terms of the indenture to be incurred; (5) customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (6) purchase money obligations for property acquired in the ordinary course of business that impose restrictions on the property so acquired of the nature described in clause (4) above; (7) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing the Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced; 95

(8) customary restrictions imposed on the transfer of copyrighted or patented materials and customary provisions in agreements that restrict the assignees of the agreements or any rights thereunder; or (9) restrictions with respect to a Subsidiary of Mrs. Fields imposed under a binding agreement relating to the sale or disposition of all or substantially all of the Capital Stock or assets of the Subsidiary. Merger, Consolidation, or Sale of Assets Mrs. Fields may not: (1) consolidate or merge with or into another person (whether or not Mrs. Fields is the surviving corporation); or (2) sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to another person; unless: (a) either: (1) Mrs. Fields is the surviving corporation; or (2) the person formed by or surviving the consolidation or merger (if other than Mrs. Fields) or the entity to which the sale, assignment, transfer, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state of the United States or the District of Columbia; (b) the person formed by or surviving the consolidation or merger (if other than Mrs. Fields) or the person to which the sale, assignment, transfer, conveyance or other disposition shall have been made assumes all the obligations of Mrs. Fields under the notes and the indenture under a supplemental indenture reasonably satisfactory to the trustee; (c) immediately after the transaction no Default or Event of Default exists; and (d) except in the case of a merger of Mrs. Fields with or into a Wholly Owned Subsidiary of Mrs. Fields, Mrs. Fields or the person formed by or surviving the consolidation or merger (if other than Mrs. Fields), or to which the sale, assignment, transfer, lease, conveyance or other disposition shall have been made: (1) will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of Mrs. Fields immediately preceding the transaction; and (2) will, on the date of the transaction after giving pro forma effect to it and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness under the Fixed Charge Coverage Ratio test described in the first paragraph of the covenant described above under the caption "Incurrence of Indebtedness and Issuance of Preferred Stock." Transactions with Affiliates Mrs. Fields will not, and will not permit any of its Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each, an "Affiliate Transaction"), unless: (1) the Affiliate Transaction is on terms that are no less favorable to Mrs. Fields or the relevant Subsidiary than those that would have been obtained in a comparable transaction by Mrs. Fields or the Subsidiary with an unrelated person; and 96

(2) Mrs. Fields delivers to the trustee: (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving total consideration in excess of $1.0 million, a resolution of the Board of Directors contained in an officers' certificate certifying that the Affiliate Transaction complies with this covenant and that the Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving total consideration in excess of $5.0 million, an opinion as to the fairness to the holders of the Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. The following items shall not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph: (1) payments to Mrs. Fields Holding under the Tax Sharing Agreement; (2) any employment agreement entered into by Mrs. Fields or any of its Subsidiaries in the ordinary course of business and consistent with the past practice of Mrs. Fields or the Subsidiary; (3) transactions between or among Mrs. Fields and/or its Subsidiaries; (4) Restricted Payments that are permitted by the provisions of the indenture described above under the caption "Restricted Payments"; (5) the payment of reasonable fees, expense reimbursements and customary indemnification, advances and other similar arrangements to directors and officers of Mrs. Fields and its Subsidiaries; and (6) reasonable loans or advances to employees of Mrs. Fields and its Subsidiaries in the ordinary course of business of Mrs. Fields or the Subsidiary. Additional Subsidiary Guarantees If: (1) Mrs. Fields or any of its Subsidiaries acquires or creates another domestic wholly owned Subsidiary after the date of the Indenture having assets (a) with a fair market value in excess of $100,000 or (b) consisting of one or more stores; or (2) Mrs. Fields acquires all remaining common stock of Pretzel Time, then the newly acquired or created Subsidiary or Pretzel Time, as the case may be, must become a guarantor and execute a supplemental indenture and deliver an opinion of counsel, in accordance with the terms of the indenture. Limitation on Issuances and Sales of Capital Stock of Wholly Owned Subsidiaries Mrs. Fields will not, and will not permit any of its Wholly Owned Subsidiaries to, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any Wholly Owned Subsidiary of Mrs. Fields to any person (other than Mrs. Fields or a Wholly Owned Subsidiary of Mrs. Fields), unless: (1) the transfer, conveyance, sale, lease or other disposition is of all the Capital Stock of the Wholly Owned Subsidiary; and 97

(2) the cash Net Proceeds from the transfer, conveyance, sale, lease or other disposition are applied in accordance with the covenant described above under the caption "Repurchase at the Option of Holders--Asset Sales." In addition, Mrs. Fields will not permit any Wholly Owned Subsidiary of Mrs. Fields to issue any of its Equity Interests (other than, if necessary, shares of its Capital Stock constituting directors' qualifying shares) to any person other than to Mrs. Fields or a Wholly Owned Subsidiary of Mrs. Fields. Limitations on Issuances of Guarantees of Indebtedness Mrs. Fields will not permit any of its Subsidiaries, directly or indirectly, to guarantee or pledge any assets to secure the payment of (other than as a result of a Permitted Lien) any other Indebtedness of Mrs. Fields or any subsidiary of Mrs. Fields unless the Subsidiary simultaneously executes and delivers a supplemental indenture providing for the guarantee of the payment of the notes by the Subsidiary, which guarantee shall be senior to or rank equal in right to payment with the Subsidiary's guarantee of or pledge to secure the other Indebtedness. Notwithstanding the preceding paragraph, any guarantee by a Subsidiary of the notes will provide by its terms that it will be automatically and unconditionally released and discharged under the circumstances described above under the caption "Guarantees." The form of the guarantee is attached as an exhibit to the indenture. Business Activities Mrs. Fields will not, and will not permit any Subsidiary to, engage in any business other than the same or a similar line of business as Mrs. Fields and its Subsidiaries were engaged in on November 26, 1997, including, without limitation, the specialty retail snack-food business, except to an extent as would not be material to Mrs. Fields and its Subsidiaries taken as a whole. In addition, (1) Mrs. Fields will not engage in any Asset Sale involving Mrs. Fields' Brand, (2) neither Mrs. Fields nor Mrs. Fields' Brand will engage in any Asset Sale involving the "Mrs. Fields" or "Pretzel Time" brand name, and (3) for so long as Mrs. Fields' Brand is a Subsidiary of Mrs. Fields, Mrs. Fields' Brand will not incur any Indebtedness (other than its guarantee of the notes and any guarantee of Indebtedness under a credit facility with a maximum total amount of $15.0 million that is permitted under the indenture). Payments for Consent Mrs. Fields will not, and will not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any holder of notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the indenture or the notes unless the consideration is offered to be paid and is paid to all holders of the notes that consent, waive or agree to amend in the time frame described in the solicitation documents relating to the consent, waiver or agreement. Reports Whether or not required by the Commission, so long as any notes are outstanding, Mrs. Fields will furnish to the holders of notes, within the time periods specified in the Commission's rules and regulations: (1) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if Mrs. Fields were required to file those Forms, 98

including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report on the annual financial statements by Mrs. Fields' certified independent accountants; and (2) all current reports that would be required to be filed with the Commission on Form 8-K if Mrs. Fields were required to file those reports. In addition, whether or not required by the Commission, Mrs. Fields will file a copy of all of the information and reports referred to in clauses (1) and (2) above with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept the filing) and make the information available to securities analysts and prospective investors upon request. In addition, Mrs. Fields and the guarantors have agreed that, for so long as any notes remain outstanding, they will furnish to the holders of notes and to securities analysts and prospective investors, upon their request, the information required to be delivered under Rule 144A(d)(4) under the Securities Act. Events of Default and Remedies Each of the following is an Event of Default: (1) default for 30 days in the payment when due of interest or liquidated damages, if any, with respect to the notes; (2) default in payment when due of the principal of or premium, if any, on the notes; (3) failure by Mrs. Fields for 30 days after notice to comply with any of its other agreements in the indenture or the notes; (4) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by Mrs. Fields or any of its Subsidiaries (or the payment of which is guaranteed by Mrs. Fields or any of its Subsidiaries) whether the Indebtedness or guarantee now exists, or is created after November 26, 1997, if that default: (a) is caused by a failure to pay principal of or premium, if any, or interest on that Indebtedness prior to the expiration of the grace period provided in that Indebtedness on the date of that default (a "Payment Default"); or (b) results in the acceleration of that Indebtedness prior to its express maturity, and, in each case, the principal amount of that Indebtedness, together with the principal amount of any other Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, totals $2.5 million or more; (5) failure by Mrs. Fields or any of its Subsidiaries to pay final judgments aggregating in excess of $2.5 million, which judgments are not paid, discharged or stayed for a period of 60 days; (6) events of bankruptcy or insolvency with respect to Mrs. Fields or any of its Subsidiaries; and (7) except as permitted by the indenture, any guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any guarantor, or any person acting on behalf of any guarantor, shall deny or disaffirm its obligations under its guarantee. In the case of an Event of Default arising from events of bankruptcy or insolvency, with respect to Mrs. Fields, any Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a 99

Significant Subsidiary, all outstanding notes will become due and payable without further action or notice. If any other Event of Default occurs and is continuing, the trustee or the holders of at least 25% in principal amount of the then outstanding notes may declare all the notes to be due and payable immediately. Holders of the notes may not enforce the indenture or the notes except as provided in the indenture. Subject to certain limitations, holders of a majority in principal amount of the then outstanding notes may direct the trustee in its exercise of any trust or power. The trustee may withhold from holders of the notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The holders of a majority in total principal amount of the notes then outstanding by notice to the trustee may on behalf of the holders of all of the notes waive any existing Default or Event of Default and its consequences under the indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the notes. In the case of any Event of Default occurring by reason of any willful action or inaction taken or not taken by or on behalf of Mrs. Fields with the intention of avoiding payment of the premium that Mrs. Fields would have had to pay if Mrs. Fields then had elected to redeem the notes under the optional redemption provisions of the indenture, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the notes. If an Event of Default occurs prior to December 1, 2001 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of Mrs. Fields with the intention of avoiding the prohibition on redemption of the notes before December 1, 2001, then the premium specified in the indenture shall also become immediately due and payable to the extent permitted by law upon the acceleration of the notes. If an Event of Default occurs prior to December 1, 2001 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of Mrs. Fields with the intention of avoiding the prohibition on redemption of the notes prior to December 1, 2001, then the premium specified in the indenture shall also become immediately due and payable to the extent permitted by law upon acceleration of the notes. Mrs. Fields is required to deliver to the trustee annually a statement regarding compliance with the indenture. Upon becoming aware of any Default or Event of Default, Mrs. Fields is required to deliver to the trustee a statement specifying the Default or Event of Default. No Personal Liability of Directors, Officers, Employees and Stockholders No director, officer, employee, incorporator or stockholder of Mrs. Fields or any guarantor, as such, shall have any liability for any obligations of Mrs. Fields or the guarantor under the notes, the guarantees the indenture, or for any claim based on, in respect of, or by reason of, those obligations or their creation. Each holder of notes by accepting a note waives and releases all liability of this kind. The waiver and release are part of the consideration for issuance of the notes. The waiver may not be effective to waive liabilities under the federal securities laws. Legal Defeasance and Covenant Defeasance Mrs. Fields may, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding notes ("Legal Defeasance") except for: (1) the rights of holders of outstanding notes to receive payments in respect of the principal of, premium, if any, and interest and liquidated damages, if any, on those notes when those payments are due from the trust referred to below; (2) Mrs. Fields' obligations with respect to the notes concerning issuing temporary notes, registration of notes, mutilated, destroyed, lost or stolen notes and the maintenance of an office or agency for payment and money for security payments held in trust; 100

(3) the rights, powers, trusts, duties and immunities of the trustee, and Mrs. Fields' obligations in connection with them; and (4) the Legal Defeasance provisions of the indenture. In addition, Mrs. Fields may, at its option and at any time, elect to have the obligations of Mrs. Fields released with respect to certain covenants that are described in the indenture ("Covenant Defeasance") and thereafter any omission to comply with those covenants shall not constitute a Default or Event of Default with respect to the notes. In the event Covenant Defeasance occurs, some of the events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under "Events of Default and Remedies" will no longer constitute a Default or an Event of Default with respect to the notes. In order to exercise either Legal Defeasance or Covenant Defeasance: (1) Mrs. Fields must irrevocably deposit with the trustee, in trust, for the benefit of the holders of the notes, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in amounts that will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest and liquidated damages, if any, on the outstanding notes on the stated maturity or on the applicable redemption date, as the case may be, and Mrs. Fields must specify whether the notes are being defeased to maturity or to a particular redemption date; (2) in the case of Legal Defeasance, Mrs. Fields shall have delivered to the trustee an opinion of counsel reasonably acceptable to the trustee confirming that (a) Mrs. Fields has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since November 26, 1997, there has been a change in the applicable federal income tax law, in either case to the effect that, and based on which the opinion of counsel shall confirm that, the holders of the outstanding notes will not recognize income, gain or loss for federal income tax purposes as a result of the Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the Legal Defeasance had not occurred; (3) in the case of Covenant Defeasance, Mrs. Fields shall have delivered to the trustee an opinion of counsel reasonably acceptable to the trustee confirming that the holders of the outstanding notes will not recognize income, gain or loss for federal income tax purposes as a result of the Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the Covenant Defeasance had not occurred; (4) no Default or Event of Default shall have occurred and be continuing either: (a) on the date of the deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to the deposit); or (b) insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (5) the Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the indenture) to which Mrs. Fields or any of its Subsidiaries is a party or by which Mrs. Fields or any of its Subsidiaries is bound; (6) Mrs. Fields must have delivered to the trustee an opinion of counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; 101

(7) Mrs. Fields must deliver to the trustee an officers' certificate stating that the deposit was not made by Mrs. Fields with the intent of preferring the holders of notes over the other creditors of Mrs. Fields with the intent of defeating, hindering, delaying or defrauding creditors of Mrs. Fields or others; and (8) Mrs. Fields must deliver to the trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with. Amendment, Supplement and Waiver Without the consent of each holder affected, an amendment or waiver may not (with respect to any notes held by a non-consenting holder): (1) reduce the principal amount of notes whose holders must consent to an amendment, supplement or waiver; (2) reduce the principal of or change the fixed maturity of any note or alter the provisions with respect to the redemption of the notes (other than provisions relating to the covenants described above under the caption "Repurchase at the Option of Holders"); (3) reduce the rate of or change the time for payment of interest on any note; (4) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the notes (except a rescission of acceleration of the notes by the holders of at least a majority in total principal amount of the notes and a waiver of the payment default that resulted from the acceleration); (5) make any note payable in money other than that stated in the notes; (6) make any change in the provisions of the indenture relating to waivers of past Defaults or the rights of holders of notes to receive payments of principal of or premium, if any, or interest on the notes; (7) waive a redemption payment with respect to any note (other than a payment required by one of the covenants described above under the caption "Repurchase at the Option of Holders"); or (8) make any change in the preceding amendment and waiver provisions. Notwithstanding the preceding, without the consent of any holder of notes, Mrs. Fields and the trustee may amend or supplement the indenture or the notes: (1) to cure any ambiguity, defect or inconsistency; (2) to provide for uncertificated notes in addition to or in place of certificated notes; (3) to provide for the assumption of Mrs. Fields' obligations to holders of notes in the case of a merger or consolidation or sale of all or substantially all of Mrs. Fields' assets; (4) to make any change that would provide any additional rights or benefits to the holders of notes or that does not adversely affect the legal rights under the indenture of any holder; or (5) to comply with requirements of the Commission in order to effect or maintain the qualification of the indenture under the Trust Indenture Act. Concerning the Trustee If the trustee becomes a creditor of Mrs. Fields, the indenture limits its right to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. 102

The trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate the conflict within 90 days, apply to the Commission for permission to continue or resign. The holders of a majority in principal amount of the then outstanding notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the trustee, subject to certain exceptions. The indenture provides that in case an Event of Default shall occur and be continuing, the trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to those provisions, the trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request of any holder of notes, unless that holder shall have offered to the trustee security and indemnity satisfactory to it against any loss, liability or expense. Book-Entry, Delivery and Form The new notes exchanged for old notes through the Book-Entry Transfer Facility will be represented by a Global Note (the "New Global Note"). One New Global Note shall be issued with respect to each $100 million or less in total principal amount at maturity of the New Global Note. The New Global Note will be issued on the date of the closing of the exchange offer with the trustee, as custodian of The Depository Trust Company, under a FAST Balance Certificate Agreement between the trustee and The Depository Trust Company and registered in the name of Cede & Co., as nominee of The Depository Trust Company (that nominee being referred to as the "Global Holder"). New notes exchanged for old notes which are in the form of registered definitive certificates will be issued in the form of certificated notes. The certificated notes may, unless the New Global Note has previously been exchanged for certificated notes, be exchanged for an interest in the New Global Note representing the principal amount of new notes being transferred. The Depository Trust Company has advised us that it is a limited-purchase trust company that was created to hold securities for its participating organizations (collectively, the "Participants") and to facilitate the clearance and settlement of transactions in those securities between Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers (including the placement agents for the old notes), banks and trust companies, clearing corporations and certain other organizations. Access to The Depository Trust Company's system is also available to the other entities such as banks, brokers, dealers and trust companies (collectively, the "Indirect Participants") that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. Persons who are not Participants may beneficially own securities held by or on behalf of The Depository Trust Company only through the Participants or the Indirect Participants. We expect that under procedures established by The Depository Trust Company: (1) upon deposit of the New Global Note, The Depository Trust Company will credit the accounts of Participants with portions of the New Global Note; and (2) ownership of the notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by The Depository Trust Company, the Participants and the Indirect Participants. The laws of some states require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer notes may be limited. For so long as the Global Holder is the registered owner of any New Global Notes, the Global Holder will be considered the sole owner of those new notes represented by those New Global Notes outstanding under the indenture. Except as provided below, owners of beneficial interests in a New Global Note will not be entitled to have new notes represented by the New Global Note registered in their names, will not receive or be entitled to receive physical delivery of certificated notes, and will not be considered the owners or holders thereof under 103

the indenture for any purpose. As a result, the ability of a person having a beneficial interest in new notes represented by a New Global Note to pledge that interest to persons or entities that do not participate in The Depository Trust Company's system or to otherwise take actions in respect of that interest, may be affected by the lack of physical certificate evidencing that interest. Accordingly, each person owning a beneficial interest in a New Global Note must rely on the procedures of The Depository Trust Company, if that person is not a Participant or an Indirect Participant, on the procedures of the Participant through which that person owns its interest, to exercise any rights of a holder under that New Global Note of the indenture. Neither Mrs. Fields nor the trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of new notes by The Depository Trust Company, or for maintaining, supervising or reviewing any records of The Depository Trust Company relating to those new notes. The trustee will make payments in respect of the principal of, premium, if any, interest and liquidated damages, if any, on any new notes registered in the name of a Global Holder on the applicable record date to or at the direction of such Global Holder in its capacity as the registered holder under the indenture. Under the terms of the indenture, Mrs. Fields and the trustee may treat the persons in whose name the notes, including the New Global Notes, are registered as the owners of such notes for the purpose of receiving such payments and all other purposes. We expect that The Depository Trust Company or its nominee, upon receipt of payments of principal, premium, if any, interest and liquidated damages, if any, on the New Global Notes, will credit their Participants' or Indirect Participants' accounts with payments in amounts proportionate to their respective interests in the principal amount of the New Global Notes as shown on the records of The Depository Trust Company. Neither Mrs. Fields nor the trustee has any responsibility or liability for those payments. Payments by the Participants and the Indirect Participants to the beneficial owners of new notes will be governed by standing instructions and customary practice. Those payments will be the responsibility of the Participants or the Indirect Participants. Certificated Securities If: (1) Mrs. Fields notifies the trustee in writing that The Depository Trust Company is no longer willing or able to act as a depository and Mrs. Fields is unable to locate a qualified successor within 90 days or (2) Mrs. Fields, at its option, notifies the trustee in writing that it elects to cause the issuance of the new notes in definitive form under the indenture, then, upon surrender by the relevant Global Holder of its New Global Note, new notes in that form will be issued to each person that the Global Holder and The Depository Trust Company identifies as the beneficial owner of the related new notes. In addition, subject to certain conditions, any person having a beneficial interest in the New Global Note may, upon request to the trustee, exchange that beneficial interest for certificated notes. Upon issuance, the trustee is required to register the new notes in the name of, and cause the same to be delivered to, that person or persons (or the nominee of any of them). The new notes would be issued in fully registered forms. Exchange Offer; Registration Rights Mrs. Fields, Mrs. Fields Brand, Great American and the placement agents for the 10 1/8% Series C Senior Notes due 2004 entered into the registration rights agreement on August 24, 1998. The registration rights agreement requires Mrs. Fields and the guarantors to file with the Commission the Registration Statement on the appropriate form under the Securities Act with respect to an offer to exchange the 10 1/8% Series C Senior Notes due 2004 for the new notes, which will have terms substantially similar in all material respects to the old 104

notes. Upon the effectiveness of the Registration Statement, Mrs. Fields will offer to the holders of notes that are subject to restrictions on transfer under the exchange offer who are able to make the necessary representations the opportunity to exchange their notes for new notes. If: (1) Mrs. Fields and the guarantors had not been required to file the exchange offer Registration Statement or are not permitted to consummate the exchange offer because the exchange offer is not permitted by applicable law or Commission policy; or (2) any holder of notes that are subject to restrictions on transfer notifies Mrs. Fields prior to the 20th day following consummation of the exchange offer that: (a) it is prohibited by law or Commission policy from participating in the exchange offer or (b) that it may not resell the new notes acquired by it in the exchange offer to the public without delivering a prospectus and the prospectus contained in the Registration Statement is not appropriate or available for resales; (c) that it is a broker-dealer and owns 10 1/8% Series C Senior Notes due 2004 acquired directly from Mrs. Fields or an affiliate of Mrs. Fields, then Mrs. Fields and the guarantors will file with the Commission a Shelf Registration Statement to cover resales of the 10 1/8% Series C Senior Notes due 2004 by the holders of those notes who satisfy specific conditions relating to the provision of information in connection with the Shelf Registration Statement. Mrs. Fields and the guarantors will use their best efforts to cause the applicable registration statement to be declared effective as promptly as possible by the Commission. Notes will be subject to restrictions on transfer until: (1) a person other than a broker-dealer has exchanged notes in the exchange offer, (2) a broker-dealer has exchanged notes in the exchange offer and sells them to a purchaser that receives this prospectus from the broker- dealer on or before the sale, (3) the notes are sold under an effective shelf registration statement that we have filed, or (4) the notes are sold to the public under Rule 144 of the Securities Act. The registration rights agreement requires that: (1) Mrs. Fields and the guarantors must file a Registration Statement with the Commission on or prior to 90 days after August 24, 1998, (2) Mrs. Fields and the guarantors must use their best efforts to have the Registration Statement declared effective by the Commission on or prior to 150 days after August 24, 1998, (3) unless the exchange offer would not be permitted by applicable law or Commission policy, Mrs. Fields will commence the exchange offer and use its best efforts to issue on or prior to 30 business days after the date on which the exchange offer Registration Statement was declared effective by the Commission, new notes in exchange for all old notes tendered prior to it in the exchange offer, and (4) if obligated to file the Shelf Registration Statement, Mrs. Fields and the guarantors will use their best efforts to file the Shelf Registration Statement with the Commission on or prior to 90 days after that filing obligation arises and to cause the Shelf Registration to be declared effective by the Commission on or prior to 150 days after that obligation arises. If: (1) Mrs. Fields and the guarantors fail to file any of the Registration Statements required by the registration rights agreement on or before the date specified for the filing, 105

(2) any of the Registration Statements is not declared effective by the Commission on or prior to the date specified for effectiveness (the "Effectiveness Target Date"), or (3) Mrs. Fields fails to consummate the exchange offer within 30 business days of the Effectiveness Target Date with respect to the Registration Statement, or (4) the Shelf Registration Statement or the Registration Statement is declared effective but thereafter ceases to be effective or usable in connection with resales of notes that are subject to restrictions on transfer during the periods specified in the registration rights agreement each event referred to in clauses (1) through (4) above a "Registration Default", then Mrs. Fields and the guarantors will pay liquidated damages to each holder of old notes, with respect to the first 90-day period immediately following the occurrence of the first Registration Default in an amount equal to $.05 per week per $1,000 principal amount of 10 1/8% Series C Senior Notes due 2004 held by the holder. The amount of the liquidated damages will increase by an additional $.05 per week per $1,000 principal amount of notes with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of liquidated damages of $.50 per week per $1,000 principal amount of 10 1/8% Series C Senior Notes due 2004. Mrs. Fields will pay all accrued liquidated damages on each damages payment date to the Global Note Holder by wire transfer of immediately available funds or by federal funds check and to holders of certificated old notes by wire transfer to the accounts specified by them or by mailing checks to their registered addresses if no accounts have been specified. Following the cure of all Registration Defaults, the accrual of liquidated damages will cease. Since the Registration Statement was not effective by January 21, 1999, Mrs. Fields has incurred liquidated damages of approximately $56,000 as of July 3, 1999. On June 1, 1999, Mrs. Fields paid $42,000 of this amount to the holders of 10 1/8% Series C Senior Notes due 2004. Holders of old notes will be required to make certain representations to Mrs. Fields in order to participate in the exchange offer and will be required to deliver information to be used in connection with the Shelf Registration Statement and to provide comments on the Shelf Registration Statement within the time periods described in the registration rights agreement in order to have their notes included in the Shelf Registration Statement and benefit from the provisions regarding liquidated damages described above. Certain Definitions Set forth below are certain defined terms used in the Indenture. Reference is made to the indenture for a full disclosure of all of these terms, as well as any other capitalized terms used in this prospectus for which no definition is provided. "Accounting Firm" means any of Arthur Andersen LLP, Deloitte & Touche LLP, Ernst & Young LLP, KPMG Peat Marwick LLP and PricewaterhouseCoopers LLP or any of their successor firms. "Acquired Indebtedness" means, with respect to any specified person: (1) Indebtedness of any other person existing at the time the other person is merged with or into or became a Subsidiary of the specified person, excluding, however, Indebtedness incurred in connection with, or in contemplation of, the other person merging with or into or becoming a Subsidiary of the specified person; and (2) Indebtedness secured by a Lien encumbering any asset acquired by the specified person. "Affiliate" of any specified person means any other person directly or indirectly controlling or controlled by or under direct or indirect common control with the specified Person. For purposes of this definition, "control," as used with respect to any person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the person, whether through the ownership of 106

voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the voting stock of a person shall be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" shall have correlative meanings. "Asset Sale" means: (1) the sale, lease, conveyance or other disposition of any assets or rights, other than sales of inventory in the ordinary course of business consistent with past practices; provided that the sale, conveyance or other disposition of all or substantially all of the assets of Mrs. Fields and its Subsidiaries taken as a whole will be governed by the provisions of the indenture described above under the caption "Change of Control" and/or the provisions described above under the caption "Merger, Consolidation or Sale of Assets" and not by the provisions of the Asset Sale covenant; and (2) the issuance of Equity Interests of any of Mrs. Fields' Subsidiaries or the sale of Equity Interests in any of its Subsidiaries. Notwithstanding the preceding, the following items shall not be deemed to be Asset Sales: (1) any single transaction or series of related transactions that: (a) involves assets having a fair market value equal to or less than $1.0 million; or (b) results in net proceeds equal to or less than $1.0 million; (2) a transfer of assets between or among Mrs. Fields and its Wholly Owned Subsidiaries, (3) an issuance of Equity Interests by a Wholly Owned Subsidiary to Mrs. Fields or to another Wholly Owned Subsidiary; (4) a Restricted Payment that is permitted by the covenant described above under the caption "Restricted Payments"; (5) arrangements providing for the receipt by Mrs. Fields of franchise and royalty fees but not otherwise involving the sale of assets of Mrs. Fields or any of its Subsidiaries (other than inventory in the ordinary course of business); and (6) a disposition of any Non-Core Stores. "Beneficial Owner" has the meaning assigned to that term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), that "person" shall be deemed to have beneficial ownership of all securities that the "person" has the right to acquire, whether that right is currently exercisable or is exercisable only upon, the occurrence of a subsequent condition. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with generally accepted accounting principles in effect on November 26, 1997. "Capital Stock" means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and (4) any other interest or participation that confers on a person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing person. 107

"Cash Equivalents" means: (1) United States dollars; (2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of any of them having maturities of not more than six months from the date of acquisition; (3) marketable direct obligations issued by any State of the United States or any local government or other political subdivision of any of them rated (at the time of the acquisition of the security) at least "AA" by Standard & Poor's Rating Service or an equivalent rating by Moody's Investors Service, Inc. and having maturities of not more than one year from the acquisition of the security; (4) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers acceptances with maturities not exceeding six months and overnight bank deposits, in each case, with any domestic commercial bank having capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of B or better or with any registered broker-dealer whose commercial paper is rated at least A-1 by Standard & Poor's Rating Service or an equivalent rating by Moody's Investors Service, Inc.; (5) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (4) above entered into with any financial institution meeting the qualifications specified in clause (4) above; (6) commercial paper rated at least A-1 by Standard & Poor's Rating Service or an equivalent rating by Moody's Investors Service, Inc. and, in each case, maturing within six months after the date of acquisition; and (7) investments in money market funds all of whose assets consist of securities described in clauses (2) through (6) above. "Change of Control" means the occurrence of any of the following: (1) the sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of Mrs. Fields and its Subsidiaries taken as a whole to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act) other than Herbert S. Winokur, Jr. and Capricorn Investors II, L.P. or their Related Parties. (2) the adoption of a plan relating to the liquidation or dissolution of Mrs. Fields; (3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than Herbert S. Winokur, Jr. and Capricorn Investors II, L.P. or their Related Parties becomes the Beneficial Owner, directly or indirectly, of more than 50% of the voting stock of Mrs. Fields, measured by voting power rather than number of shares; or (4) the first day on which a majority of the members of the Board of Directors of Mrs. Fields are not Continuing Directors; For purposes of this definition, any transfer of an equity interest of an entity that was formed for the purpose of acquiring voting stock of Mrs. Fields will be deemed to be a transfer of that portion of the voting stock as corresponds to the portion of the equity of the entity that has been so transferred. "Consolidated Cash Flow" means, with respect to any person for any period, the Consolidated Net Income of that person for that period plus: (1) an amount equal to any extraordinary loss plus any net loss realized in connection with an Asset Sale, to the extent those losses were deducted in computing the Consolidated Net Income; plus 108

(2) provision for taxes based on income or profits of that person and its Subsidiaries for that period, to the extent that the provision for taxes was deducted in computing the Consolidated Net Income; plus (3) consolidated interest expense of that person and its Subsidiaries for that period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments, if any, under Hedging Obligations), to the extent that the expense was deducted in computing the Consolidated Net Income; plus (4) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding the non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of the person and its Subsidiaries for that period to the extent that the depreciation, amortization and other non-cash expenses were deducted in computing the Consolidated Net Income; minus (5) non-cash items increasing the Consolidated Net Income for that period, in each case, on a consolidated basis and determined in accordance with generally accepted accounting principles in effect on November 26, 1997. Notwithstanding the preceding, the provision for taxes based on the income or profits of, and the depreciation and amortization and other non-cash charges of, a Subsidiary of the specified person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent and in the same proportion that the net income of the Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended to Mrs. Fields by the Subsidiary without prior governmental approval (that has not been obtained), under the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "Consolidated Net Income" means, with respect to any specified person for any period, the total of the Net Income of the Person and its Subsidiaries for that period, on a consolidated basis, determined in accordance with generally accepted accounting principles in effect on November 26, 1997; provided that: (1) the Net Income (but not loss) of any person that is not a Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the specified person or a Wholly Owned Subsidiary of the person that is a guarantor; (2) the Net Income of any Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary or its stockholders; (3) the Net Income of any person acquired in a pooling of interests transaction for any period prior to the date of the acquisition shall be excluded; and (4) the cumulative effect of a change in accounting principles shall be excluded. 109

"Consolidated Net Worth" means, with respect to any person as of any date, the sum of: (1) the consolidated equity of the common stockholders of the person and its consolidated Subsidiaries as of that date plus (2) the respective amounts reported on that person's balance sheet as of that date with respect to any series of preferred stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless those dividends may be declared and paid only out of net earnings in respect of the year of declaration and payment, but only to the extent of any cash received by the person upon issuance of the preferred stock, less (a) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to November 26, 1997 in the book value of any asset owned by the person or a consolidated Subsidiary of the person, (b) all investments as of that date in unconsolidated Subsidiaries and in persons that are not Subsidiaries (except, in each case, Permitted Investments), and (c) all unamortized debt discount and expense and unamortized deferred charges as of that date, all of the foregoing determined in accordance with generally accepted accounting principles in effect on November 26, 1997. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of Mrs. Fields who: (1) was a member of the Board of Directors on the date of the indenture; or (2) was nominated for election or elected to the Board of Directors with the approval of a majority of the Continuing Directors who were members of the Board at the time of the nomination or election. "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, under a sinking fund obligation or otherwise, or redeemable at the option of its holder, in whole or in part, on or prior to the date that is 91 days after the date on which the notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely as a result of any maturity or redemption of that Capital Stock shall not constitute Disqualified Stock if that maturity or redemption or redemption complies with the covenant described above under the caption "--Certain Covenants--Restricted Payments." "Existing Indebtedness" means Indebtedness of Mrs. Fields and its Subsidiaries (including preferred stock of Pretzel Time outstanding on November 26, 1999 but excluding any Indebtedness of Mrs. Fields or any of its Subsidiaries under any credit facility with a maximum total amount of $15.0 million that is permitted under the indenture existing on November 26, 1999) in existence on November 26, 1999, until those amounts are repaid. "Fixed Charges" means, with respect to any person for any period, the sum, without duplication, of (1) the consolidated interest expense of the Person and its Subsidiaries for that period, whether paid or accrued (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers acceptance financings, and net payments (if any) under Hedging Obligations); (2) the consolidated interest expense of the Person and its Subsidiaries that was capitalized during that period; 110

(3) any interest expense on Indebtedness of another person that is guaranteed by that person or one of its Subsidiaries or secured by a Lien on assets of that person or one of its Subsidiaries (whether or not that guarantee or Lien is called upon); and (4) the product of (a) all dividend payments, whether or not in cash, on any series of preferred stock of the Person or any of its Subsidiaries, other than dividend payments on Equity Interests payable solely in Equity Interests of Mrs. Fields, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of the person, expressed as a decimal, in each case, on a consolidated basis and in accordance with generally accepted accounting principles in effect on August 29, 1998. "Fixed Charge Coverage Ratio" means with respect to any person for any period, the ratio of the Consolidated Cash Flow of that person for that period to the Fixed Charges of that person for that period. In the event that Mrs. Fields or any of its Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness (other than revolving credit borrowings) or issues preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to that incurrence, assumption, guarantee or redemption of Indebtedness, or that issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of making the computation referred to above: (1) acquisitions that have been made by Mrs. Fields or any of its Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four- quarter reference period or subsequent to that reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for that reference period shall be calculated without giving effect to clause (3) of the proviso described in the definition of Consolidated Net Income; (2) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with generally accepted accounting principles in effect on November 26, 1997, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, (3) the Fixed Charges attributable to discontinued operations, as determined in accordance with generally accepted accounting principles in effect on November 26, 1997, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to those Fixed Charges will not be obligations of the specified person or any of its Subsidiaries following the Calculation Date; and (4) the financial information of Mrs. Fields with respect to any portion of the four fiscal quarters prior to generally accepted accounting principles in effect on November 26, 1997 may be adjusted to eliminate certain historical expenses that are not expected to recur after the consummation of the Pretzel Contributions so long as those adjustments are not deemed to be contrary to the requirements of Regulation S-X under the Securities Act by an Accounting Firm. In calculating the Fixed Charge Coverage Ratio for any period, to the extent that the proceeds from the incurrence of any Indebtedness are to be used to fund the acquisition of Equity Interests or assets in the same or a similar line of business as Mrs. Fields and its Subsidiaries were engaged in on November 26, 1997, including, without limitation, the specialty retail snack- food business, Mrs. Fields may include any pro forma adjustments permitted by Regulation S-X under the Securities Act in its calculation of the amount of Consolidated Cash Flow that relate solely to the acquisition, so long as these pro forma adjustments are not deemed to be contrary to the requirements of Rule 11-02 of Regulation S-X under the Securities Act in writing by an Accounting Firm. 111

"Hedging Obligations" means, with respect to any person, the obligations of that person under: (1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and (2) other agreements or arrangements designed to protect that person against fluctuations in interest or foreign currency exchange rates. "Indebtedness" means, with respect to any specified person, any indebtedness of that person, whether or not contingent, in respect of: (1) borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect of those instruments); (3) banker's acceptances; (4) representing Capital Lease Obligations; (5) the balance deferred and unpaid of the purchase price of any property, except any balance that constitutes an accrued expense or trade payable; or (6) representing any Hedging Obligations, if and to the extent any of the preceding (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified person prepared in accordance with generally accepted accounting principles in effect on November 26, 1997. In addition, the term "Indebtedness" includes all Indebtedness of others secured by a Lien on any asset of the specified person (whether or not such Indebtedness is assumed by the specified person) and, to the extent not otherwise included, the guarantee by the person of any Indebtedness of any other person. The amount of any Indebtedness outstanding as of any date shall be: (1) the accreted value of the Indebtedness, in the case of any Indebtedness that does not require current payments of interest; and (2) the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more than 30 days past due, in the case of any other Indebtedness. "Investments" means, with respect to any person, all investments by that person in other persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with generally accepted accounting principles in effect on November 26, 1997, provided that an acquisition of assets, Equity Interests or other securities by Mrs. Fields for consideration consisting of common stock of Mrs. Fields shall not be deemed to be an Investment. If Mrs. Fields or any Subsidiary of Mrs. Fields sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of Mrs. Fields such that, after giving effect to the sale or disposition, the person is no longer a Subsidiary of Mrs. Fields, Mrs. Fields shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of the Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described above under the caption "Certain Covenants--Restricted Payments". "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of that asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, 112

any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction), provided that the definition of Lien shall not include any option, call or similar right relating to treasury shares of Mrs. Fields to the extent that the option, call or right is granted: (1) under any employee stock option plan, employee stock ownership plan or similar plan or arrangement of Mrs. Fields or its Subsidiaries or (2) in connection with the issuance of Indebtedness permitted to be incurred under the covenant described under the caption "Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock". "Net Income" means, with respect to any person, the net income (loss) of that person, determined in accordance with generally accepted accounting principles in effect on November 26, 1997 and before any reduction in respect of preferred stock dividends, excluding, however: (1) any gain (but not loss), together with any related provision for taxes on that gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions under sale and leaseback transactions) or (b) the disposition of any securities by the person or any of its Subsidiaries or the extinguishment of any Indebtedness of the person or any of its Subsidiaries; and (2) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on that extraordinary or nonrecurring gain (but not loss). "Net Proceeds" means the total cash proceeds received by Mrs. Fields or any of its Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non- cash consideration received in any Asset Sale but only as and when received), net of the direct costs relating to the Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the permanent repayment of, or permanent reduction in availability or commitment under, Indebtedness secured by a Lien on the asset or assets that were the subject of the Asset Sale and any reserve for adjustment in respect of the sale price of the asset or assets established in accordance with generally accepted accounting principles in effect on November 26, 1997. "Non-Core Stores" means the stores listed in Exhibit B to the Indenture. "Permitted Investments" means: (1) any Investment in Mrs. Fields or in a Wholly Owned Subsidiary of Mrs. Fields that is a guarantor and that is engaged; (2) any Investment in Cash Equivalents; (3) any Investment by Mrs. Fields or any Subsidiary of Mrs. Fields in a person, if as a result of the Investment (a) the person becomes a Wholly Owned Subsidiary of Mrs. Fields and a guarantor that is engaged in the same or a similar line of business as Mrs. Fields and its Subsidiaries were engaged in on November 26, 1997, including without limitation, the specialty retail snack-food business or (b) the person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, Mrs. Fields or a Wholly Owned Subsidiary of Mrs. Fields that is a guarantor and that is engaged in the same or a similar line of business as Mrs. Fields and its Subsidiaries were engaged in on November 26, 1997, including without limitation, the specialty retail snack-food business; 113

(4) any Investment other than a Permitted Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made under and in compliance with the covenant described above under the caption "Repurchase at the Option of Holders -- Asset Sales"; (5) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of Mrs. Fields; (6) any Investments in accounts and notes receivable acquired in the ordinary course of business; (7) any Investments in notes of employees, officers, directors and their transferees and Affiliates issued to Mrs. Fields representing payment of the exercise price of options to purchase common stock of Mrs. Fields; (8) any Investments by Mrs. Fields in Hedging Obligations otherwise permitted to be incurred under the indenture; (9) any Investments existing on November 26, 1997 (including, without limitation, a $500,000 loan to Martin E. Lisiewski outstanding as of November 26, 1997); and (10) any purchase of any and all remaining common stock of Pretzel Time. "Permitted Liens" means: (1) Liens securing Indebtedness under a credit facility with a maximum total amount of $15.0 million that is permitted under the indenture that was permitted by the terms of the indenture to be incurred; (2) Liens in favor of Mrs. Fields; (3) Liens on property of a person existing at the time the person is merged into or consolidated with Mrs. Fields or any Subsidiary of Mrs. Fields, provided that those Liens were in existence prior to the contemplation of the merger or consolidation and do not extend to any assets other than those of the person merged into or consolidated with Mrs. Fields; (4) Liens on property existing at the time of acquisition thereof by Mrs. Fields or any Subsidiary of Mrs. Fields, provided that those Liens were in existence prior to the contemplation of the acquisition and do not extend to any assets of Mrs. Fields other than the property so acquired; (5) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (6) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clauses (3) and (10) of the second paragraph of the covenant entitled "Incurrence of Indebtedness" and Issuance of Preferred Stock, provided that, in the case of Indebtedness permitted by clause (3), covering only the assets acquired with that Indebtedness; (7) Liens existing on November 26, 1997; (8) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as shall be required in conformity with generally accepted accounting principles in effect on November 26, 1997 shall have been made therefor; and (9) Liens incurred in the ordinary course of business of Mrs. Fields or any Subsidiary of Mrs. Fields that (a) are not incurred in connection with the borrowing of money or the obtaining of advances or credit (other than trade credit in the ordinary course of business) and (b) do not in the total materially detract from the value of the property or materially impair the use thereof in the operation of business by Mrs. Fields or the Subsidiary. 114

"Permitted Refinancing Indebtedness" means any Indebtedness of Mrs. Fields or any of its Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of Mrs. Fields or any of its Subsidiaries, provided that (1) the principal amount (or accreted value, if applicable) of the Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses incurred in connection therewith); (2) the Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the notes, the Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the notes on terms at least as favorable to the holders of notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (4) the Indebtedness is incurred either by Mrs. Fields or by the Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Public Equity Offering" means a public offering registered under the Securities Act (except for any registration under Form S-8) of common stock of: (1) Mrs. Fields or (2) Mrs. Fields Holding to the extent that the net proceeds thereof are contributed to Mrs. Fields as a capital contribution, provided that the total proceeds from the public offering shall in no event be less than $20.0 million. "Related Party" with respect to Herbert S. Winokur, Jr. and Capricorn Investors II, L.P. means: (1) any greater than 50% owned Subsidiary, or spouse or immediate family member (in the case of an individual) of Herbert S. Winokur, Jr. or Capricorn Investors II, L.P. or (2) trust, corporation, general partnership or other entity, the beneficiaries, stockholders, partners, owners or persons beneficially holding a greater than 50% controlling interest of which consist, or a limited partnership, the general partner of which consists, of Herbert S. Winokur, Jr. or Capricorn Investors II, L.P. and/or any other persons referred to in the immediately preceding clause (1). "Significant Subsidiary" means any Subsidiary that would be a significant subsidiary as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated under the Securities Act, as that Regulation is in effect on November 26, 1997. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which that payment of interest or principal was scheduled to be paid in the original documentation governing that Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any that interest or principal prior to the date originally scheduled for the payment thereof. "Tax Sharing Agreement" means any tax allocation agreement between Mrs. Fields or any of its Subsidiaries with Mrs. Fields or any direct or indirect shareholder of Mrs. Fields with respect to consolidated or combined tax returns including Mrs. Fields or any of its Subsidiaries, but, in each case, only to the extent that 115

amounts payable from time to time by Mrs. Fields or any Subsidiary under any agreement do not exceed the corresponding tax payments that Mrs. Fields or the Subsidiary would have been required to make to any relevant taxing authority had Mrs. Fields or the Subsidiary not joined in those consolidated or combined returns, but instead had filed returns including only Mrs. Fields and its Subsidiaries. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between that date and the making of that payment; by (2) the then outstanding principal amount of that Indebtedness. 116

DESCRIPTION OF CERTAIN INDEBTEDNESS Credit Agreement Mrs. Fields entered into an Amended and Restated Loan Agreement, dated as of February 28, 1998, with LaSalle National Bank. Under the agreement, LaSalle National Bank will provide Mrs. Fields with a revolving loan commitment of up to $15.0 million until the maturity date of March 31, 2001 or until the agreement is otherwise terminated or accelerated by LaSalle National Bank. Principal amounts due on revolving loans made under the agreement bear interest at Mrs. Fields option at either the Prime rate or LIBOR plus two percent per annum. Any amount of principal or interest that is not paid when due bears interest payable on demand at the default rate of interest, which is the regular interest rate plus two percent. The agreement also provides that LaSalle National Bank may issue letters of credit on behalf of Mrs. Fields in a total amount not to exceed $500,000. The total amount of letters of credit issued plus the total amount of revolving loans outstanding cannot exceed $15.0 million. Substantially all of the assets of Mrs. Fields have been pledged to LaSalle National Bank under the agreement, as a result of which the notes to be issued in the exchange offer will be effectively subordinated to amounts outstanding under the agreement. The agreement contains certain restrictions on, among other things, payments, the incurrence of indebtedness and liens, which are substantially similar to the restrictions in the indenture. As of July 3, 1999, there was $7.0 million outstanding under the agreement. Under the borrowing base, Mrs. Fields is limited to borrowing an additional $ 276,000 in accordance with restrictions of the indenture. On May 27, 1999, Pretzel Time entered into agreements with LaSalle National Bank under which Pretzel Time borrowed, on May 28, 1999, $1,000,000 in aggregate principal amount from LaSalle. Pretzel Time issued a revolving note to LaSalle to evidence its borrowing, which bears interest at the Prime rate, or Prime plus 2% for any balance payable after the note has matured on June 30, 2000. Pretzel Time has pledged its assets to LaSalle to secure its obligations, and Mrs. Fields has guaranteed Pretzel Time's obligations to LaSalle. PLAN OF DISTRIBUTION Each broker-dealer that receives notes issued in the exchange offer for its own account must acknowledge that it will deliver a prospectus in connection with any resale of those notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of notes received in exchange for outstanding notes where those outstanding notes were acquired as a result of market-making activities or other trading activities. Mrs. Fields has agreed that, for a period of 120 days after the consummation of the exchange offer, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any resale. In addition, until , 1999, all dealers effecting transactions in the notes issued in the exchange offer may be required to deliver a prospectus. Mrs. Fields will not receive any proceeds from any sale of notes issued in the exchange offer by broker-dealers. Notes issued in the exchange offer received by broker-dealers for their own account under the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the notes issued in the exchange offer or a combination of these methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any broker-dealer or the purchasers of any of the notes issued in the exchange offer. Any broker-dealer that resells notes that were received by it for its own account in the exchange offer and any broker or dealer that participates in a distribution of those notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any resale of notes issued in the exchange offer and any commission or concessions received by those persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 117

For a period of 120 days after the consummation of the exchange offer, Mrs. Field will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests those documents in the letter of transmittal or agent's message. Mrs. Fields has agreed to pay all expenses incident to the exchange offer (including the expenses of one counsel for the holders of the notes in an amount up to $50,000) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the notes (including any broker-dealer) against some related liabilities, including liabilities under the Securities Act. 118

UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following is a general summary of U.S. federal income tax consequences associated with the exchange of the outstanding notes for the notes issued in the exchange offer. The summary is based upon current laws, regulations, rulings and judicial decisions all of which are subject to change, possibly with retroactive effect. The discussion below does not address all aspects of U.S. federal income taxation that may be relevant to particular holders of outstanding notes or notes issued in the exchange offer. In addition, the discussion does not address any aspect of state, local or foreign taxation. The exchange of the outstanding notes for the notes issued in the exchange offer should not be treated as an "exchange" for U.S. federal income tax purposes because the notes issued in the exchange offer should not be considered to differ materially in kind or extent from the outstanding notes. Rather, the notes issued in the exchange offer received by a holder should be treated as a continuation of the outstanding notes in the hands of such holder. As a result there should be no U.S. federal income tax consequences to holders exchanging the outstanding notes for the notes issued in the exchange offer, and any exchanging holder of outstanding notes should have the same tax basis and holding period in, and income in respect of, the notes as such holder had in the outstanding notes immediately prior to the exchange. Prospective holders of the notes being issued in the exchange offer are being urged to consult their tax advisors concerning the particular tax consequences of exchanging such holders' outstanding notes for the notes being issued in the exchange offer including the applicability and effect of any state, local or foreign income and other tax laws. LEGAL MATTERS The validity of the notes and the guarantees of Mrs. Fields' Brand and Great American offered in this prospectus will be passed upon by Skadden, Arps, Slate, Meagher & Flom LLP. The validity of the guarantee of Pretzelmaker will be passed upon by Smith, McCullough, P.C. and Skadden, Arps, Slate, Meagher & Flom LLP. The validity of the guarantee of Pretzel Time will be passed upon by Mette, Evans & Woodside and Skadden, Arps, Slate, Meagher & Flom LLP. EXPERTS The historical consolidated financial statements of Mrs. Fields' Original Cookies, Inc. and subsidiaries as of January 3, 1998 and January 2, 1999, and for the period from inception (September 18, 1996) to December 28, 1996 and for the years ended January 3, 1998 and January 2, 1999; the historical financial statements of Mrs. Fields Inc. and subsidiaries as of September 17, 1996 and for the period from December 31, 1995 to September 17, 1996; the historical combined financial statements of The Original Cookie Company, Incorporated and the Carved-Out Portion of Hot Sam Company, Inc. as of September 17, 1996 and for the year ended December 30, 1995 and for the period ended September 17, 1996; the historical financial statements of Chocolate Chip Cookies of Texas, Inc. as of September 30, 1996 and 1997 and for the years ended September 30, 1995, 1996 and 1997; the historical financial statements of the Combined Karp Entities as of December 31, 1996 and 1997 and for the years ended December 31, 1995, 1996 and 1997 included in this prospectus, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect to it, and are included in this prospectus in reliance upon the authority of said firm as experts in accounting and auditing in giving said reports. The financial statements of Mrs. Fields Inc. and subsidiaries for the year ended December 30, 1995 included in this prospectus, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing in this prospectus, and is included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 119

The financial statements of Deblan Corporation as of December 31, 1996 and 1997, and for the years ended December 31, 1995, 1996 and 1997 included in this prospectus, have been audited by Weinstein Spira & Company, P.C., independent auditors, as stated in their report appearing in this prospectus. The financial statements of Cookies USA, Inc. and subsidiary as of June 29, 1997 and June 28, 1998 and for each of the three years in the period ended June 28, 1998 included in this prospectus, have been audited by PricewaterhouseCoopers LLP, independent accountants, as stated in their report appearing in this prospectus. The financial statements of Cookie Conglomerate, Inc. as of December 31, 1997 and 1996, and for the years ended December 31, 1997 and 1996 included in this prospectus, have been audited by Habif, Arogeti & Wynne, P.C., independent auditors, as stated in their report appearing in this prospectus. The financial statements of Pretzelmaker Holdings, Inc. and subsidiaries as of December 31, 1997 and for the year ended December 31, 1997 included in this prospectus, has been audited by AJ. Robbins, PC, independent public accountants as stated in their report appearing in this prospectus. The financial statements of Pretzelmaker Holdings, Inc. as of December 31, 1996 and for the period from inception (February 24, 1995) to December 31, 1995 and for the year ended December 31, 1996 included in this prospectus, have been audited by BDO Seidman, LLP, independent public accountants, as stated in their report appearing in this prospectus. 120

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS On August 24, 1998, Mrs. Fields sold $40,000,000 in total principal amount of Series C Senior Notes due 2004. The net proceeds of the Mrs. Field's offering and the capital contribution of the net proceeds of the offering of units consisting of notes and warrants of Mrs. Fields' Holding to Mrs. Fields, together with existing Mrs. Field's cash were used to: (i) finance the acquisition of all of the outstanding capital stock of Great American; (ii) finance the tender offer to repurchase all of Great American's $40,000,000 total principal amount of 10 7/8% Senior Secured Notes due 2001, including accrued but unpaid interest and a premium of $1,600,000; (iii) finance the repayment of all of Great American's $10,000,000 total principal amount of 12.5% Subordinated Notes, including accrued but unpaid interest; (iv) finance the retirement of Great American's Senior Redeemable Preferred Stock and Junior Redeemable Preferred Stock at an total discounted purchase price of $8,400,000; (v) finance the acquisition of all of the outstanding capital stock of Deblan and Chocolate Chip, two franchisees of Great American, including the repayment of assumed debt; and (vi) finance the asset purchase of eight stores controlled by another Great American franchisee, defined as the Combined Karp Entities. On October 5, 1998, Mrs. Fields purchased all of the retail cookie and related business and operations of Cookie Conglomerate for an total purchase price of $2,800,000. The Cookie Conglomerate acquisition was funded with financing provided by T&W Financial Services, L.L.C. and such funding is secured by the assets of the acquired stores. On November 19, 1998, Mrs. Fields acquired all of the outstanding capital stock of Pretzelmaker for $5,739,000, including $5,419,000 related to outstanding capital stock and $320,000 related to severance payments in lieu of outstanding stock options, and assumed liabilities totaling $1,299,000. The transaction was financed with notes issued to the sellers that were paid by Mrs. Fields in installments through January 4, 1999. Of the assumed indebtedness, $722,000 was paid by Mrs. Fields in installments through January 4, 1999. The unaudited pro forma condensed combined statements of operations for the 52 weeks ended January 2, 1999 are based upon the historical financial statements of Mrs. Fields, Great American, Deblan, Chocolate Chip, the Combined Karp Entities, Cookie Conglomerate and Pretzelmaker, and should be read in conjunction with the audited and unaudited financial statements and related notes of these entities included elsewhere in this Registration Statement. The unaudited pro forma condensed combined financial statements have been prepared using the purchase method of accounting for the acquisitions of Great American, Deblan, Chocolate Chip, the Combined Karp Entities, Cookie Conglomerate and Pretzelmaker. Mrs. Fields operates using a 52/53-week year ending near December 31. Great American operates using a 52/53-week year ending near June 30. Deblan, Cookie Conglomerate and Pretzelmaker operate using a year ending December 31, Chocolate Chip operates using a year ending September 30, and the Combined Karp Entities operate using a year ending December 31. We have recast the historical financial statements for those entities that did not operate using a year ending near December 31 to be comparable for the 52 weeks ended January 2, 1999. None of the revenues and income (loss) of any entity has been excluded or included more than once in the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined statements of operations for the 52 weeks ended January 2, 1999 assumes that the above transactions occurred as of January 4, 1998 (the first day of fiscal 1998) and combine the historical results of operations of the entities for those periods with pro forma adjustments to give effect to Mrs. Fields' offering in August 1998, the capital contribution of the net proceeds of the offering of units consisting of notes and warrants of Mrs. Fields' Holding to Mrs. Fields and the acquisitions. The unaudited pro forma condensed combined financial statements included in this Registration Statement are for illustrative purposes only. Such information does not purport to be indicative of the results which would actually have been effected on the date and for the periods indicated, nor is it indicative of actual or future operating results or financial position that may occur. See also "Risk Factors" included elsewhere in this Registration Statement. P-1

MRS. FIELDS PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS For the 52 Weeks Ended January 2, 1999 (unaudited) <TABLE> <CAPTION> Combined Great Chocolate Karp American Deblan Chip Entities Mrs. Fields (See Note 2) (See Note 3) (See Note 4) (See Note 5) ----------- ------------ ------------ ------------ ------------ (dollars in thousands) <S> <C> <C> <C> <C> <C> REVENUES: Net store and food sales................ $140,235 $18,932 $6,370 $1,873 $1,489 Franchising, net...... 12,464 3,531 -- -- -- Licensing, net........ 1,537 -- -- -- -- -------- ------- ------ ------ ------ Total revenues...... 154,236 22,463 6,370 1,873 1,489 -------- ------- ------ ------ ------ OPERATING COSTS AND EXPENSES: Selling and store occupancy costs...... 75,003 7,645 3,523 1,000 914 Cost of sales......... 38,482 6,428 1,108 454 373 General and administrative....... 19,017 5,288 1,067 421 141 Store closure provision 7,303 -- -- -- -- Depreciation and amortization......... 19,820 1,510 182 22 82 -------- ------- ------ ------ ------ Total operating costs and expenses........... 159,625 20,871 5,880 1,897 1,510 -------- ------- ------ ------ ------ Income (loss) from operations....... (5,389) 1,592 490 (24) (21) INTEREST EXPENSE........ (13,197) (4,077) (43) (2) (8) INTEREST INCOME......... 623 258 24 4 -- OTHER INCOME (EXPENSE), net.................... (409) (149) 40 11 -- -------- ------- ------ ------ ------ Income (loss) before provision for income taxes, preferred stock accretion and dividends of subsidi- aries and minority interest............. (18,372) (2,376) 511 (11) (29) PROVISION (BENEFIT) FOR INCOME TAXES........... 316 (38) 115 27 6 -------- ------- ------ ------ ------ Income (loss) before preferred stock ac- cretion and dividends of subsidiaries and minority interest.... (18,688) (2,338) 396 (38) (35) PREFERRED STOCK ACCRETION AND DIVIDENDS OF SUBSIDIARIES........ (444) -- -- -- -- MINORITY INTEREST....... (11) -- -- -- -- -------- ------- ------ ------ ------ Net income (loss)..... $(19,143) $(2,338) $ 396 $ (38) $ (35) ======== ======= ====== ====== ====== </TABLE> See accompanying notes to pro forma condensed combined financial statements. P-2

MRS. FIELDS PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (Continued) For the 52 Weeks Ended January 2, 1999 (unaudited) <TABLE> <CAPTION> Pro Forma Cookie Conglomerate Pretzelmaker Adjustments Pro Forma (See Note 6) (See Note 7) (See Note 1) Combined ------------------- ------------ ------------ --------- <S> <C> <C> <C> <C> REVENUES: Net store and food sales................ $2,906 $1,222 $(1,338)(a) $171,689 Franchising, net...... -- 2,634 (609)(b) 18,020 Licensing, net........ -- -- -- 1,537 ------ ------ ------- -------- Total revenues...... 2,906 3,856 (1,947) 191,246 ------ ------ ------- -------- OPERATING COSTS AND EXPENSES: Selling and store occupancy costs...... 1,580 1,401 (609)(b) 90,457 Cost of sales......... 733 85 (1,338)(a) 46,325 General and administrative....... 303 2,085 (1,834)(c) 26,488 Store closure provision -- -- -- 7,303 Depreciation and amortization......... 118 657 3,191 (d) 25,582 ------ ------ ------- -------- Total operating costs and expenses........... 2,734 4,228 (590) 196,155 ------ ------ ------- -------- Income (loss) from operations....... 172 (372) (1,357) (4,909) INTEREST EXPENSE........ (17) (179) 400 (e) (17,123) INTEREST INCOME......... -- -- -- 909 OTHER INCOME (EXPENSE), net.................... 32 -- -- (475) ------ ------ ------- -------- Income (loss) before provision for income taxes, preferred stock accretion and dividends of subsidiaries and minority interest.... 187 (551) (957) (21,598) PROVISION (BENEFIT) FOR INCOME TAXES........... -- (8) -- 418 ------ ------ ------- -------- Income (loss) before preferred stock accretion and dividends of subsidiaries and minority interest.... 187 (543) (957) (22,016) PREFERRED STOCK ACCRETION AND DIVIDENDS OF SUBSIDIARIES........ -- -- -- (444) MINORITY INTEREST....... -- -- -- (11) ------ ------ ------- -------- Net income (loss)..... $ 187 $ (543) $ (957) $(22,471) ====== ====== ======= ======== </TABLE> See accompanying notes to pro forma condensed combined financial statements. P-3

MRS. FIELDS NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (unaudited) 1. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS (a) Adjustment to reflect the elimination of batter sales and batter cost of sales as a result of combining Great American, Deblan, Chocolate Chip, the Combined Karp Entities and Cookie Conglomerate. (b) Adjustment to reflect the elimination of franchise fees and related costs as a result of combining Great American, Deblan, Chocolate Chip, the Combined Karp Entities and Cookie Conglomerate. (c) Adjustment to reflect the impact of the reduction in salaries and payroll expenses related to employees of Great American, Deblan, Chocolate Chip, the Combined Karp Entities, Cookie Conglomerate and Pretzelmaker terminated at the date of the acquisitions assuming that the acquisitions were completed at January 4, 1998. The terminations were a contractual component of the acquisition agreements and occurred concurrent with and were a direct result of the acquisitions. These terminations will have a continuing impact, as the positions occupied by the terminated employees have been eliminated. The terminated employees will not be replaced as Mrs. Fields has sufficient resources with existing staff to fulfill the applicable responsibilities. Other costs will not be incurred that will offset these reductions. The impact is factually supportable as the employees were terminated at the time of the acquisitions. (d) Adjustment to reflect amortization of goodwill totaling $84,404,000 (including acquisition costs of $1,003,000), which was recorded in connection with the purchase of the net assets of Great American, Deblan, Chocolate Chip, the Combined Karp Entities, Cookie Conglomerate and Pretzelmaker. Goodwill is being amortized over a 15-year period. Also includes adjustment to reflect a reduction in depreciation expense as a result of reducing Great American, Deblan, Chocolate Chip and the Combined Karp Entities property and equipment and increasing Cookie Conglomerate's property and equipment to estimated fair market value in connection with each respective acquisition. The average estimated depreciable lives for these assets is seven years. (e) Adjustment to reflect the reduction in interest expense related to: (i) the retirement of $40,000,000 of Great American 10.875% Senior Secured Notes; (ii) the retirement of $10,000,000 of Great American 12.5% Subordinated Notes; (iii) the elimination of Great American's original issue discount; (iv) the elimination of Great American's deferred loan costs; (v) the additional interest expense related to approximately $5,007,000 of new deferred loan costs amortized over a seven-year period; and (vi) the additional interest expense on the $40,000,000 of Series C Senior Notes and amortization of $600,000 of assumed discount; (vii) the interest expense on $2,800,000 of financing related to the acquisition of Cookie Conglomerate, and (viii) the interest expense on $4,682,000 of financing related to the acquisition of Pretzelmaker. 2. GREAT AMERICAN ACQUISITION On August 24, 1998, Mrs. Fields acquired all of the outstanding capital stock and subordinated indebtedness of Great American for an total purchase price of $18,400,000. The purchase price was allocated based on the estimated fair values of the net assets acquired, as presented below: <TABLE> <S> <C> Current assets acquired........................................... $ 11,439,000 Fixed assets acquired............................................. 2,978,000 Other assets acquired............................................. 3,128,000 Current liabilities acquired...................................... (7,825,000) Other liabilities acquired........................................ (42,194,000) Goodwill acquired................................................. 50,874,000 ------------ Total purchase price............................................ $ 18,400,000 ============ </TABLE> P-4

In the accompanying pro forma condensed combined statement of operations for the 52 weeks ended January 2, 1999, Great American's results of operations from December 29, 1997 to August 23, 1998 are included under the "Great American" column heading. Great American's results of operations from August 24, 1998 to January 2, 1999 are included under the "Mrs. Fields" column heading. None of Great American's revenues and income (loss) has been excluded from or included more than once in the pro forma condensed combined statements of operations for the 52 weeks ended January 2, 1999. The following data reconciles the key components of Great American's results of operations in the pro forma condensed combined statement of operations for the 52 weeks ended January 2, 1999 with the key components of Great American's results of operations in its historical financial statements for the 52 weeks ended June 28, 1998: <TABLE> <CAPTION> Less Add 52 Weeks Ended 26 Weeks Ended June 29, 1998 To December 29, 1997 June 28, 1998 December 28, 1997 August 23, 1998 To August 23, 1998 -------------- ----------------- ---------------- ------------------ (Dollars in thousands) <S> <C> <C> <C> <C> Net store sales......... $18,854 $10,382 $2,753 $11,225 Batter sales to franchisees............ 12,214 6,140 1,633 7,707 Franchising, net........ 5,770 2,884 563 3,449 Other, net.............. 139 72 15 82 Operating costs and expenses............... 31,133 16,044 5,782 20,871 Income (loss) from operations............. 5,844 3,738 (514) 1,592 Net income (loss)....... (202) 1,182 (954) (2,338) </TABLE> 3. DEBLAN ACQUISITION On August 24, 1998, Mrs. Fields acquired all of the outstanding capital stock of Deblan for an total purchase price of $10,465,000. Accordingly, in the accompanying pro forma condensed combined statement of operations for the 52 weeks ended January 2, 1999, Deblan's results of operations from January 1, 1998 to August 23, 1998 are included under the "Deblan" column heading. Deblan's results of operations from August 24, 1998 to January 2, 1999 are included under the "Mrs. Fields" column heading. The purchase price was allocated based on the estimated fair values of the net assets acquired, as presented below: <TABLE> <S> <C> Current assets acquired............................................ $ 1,241,000 Fixed assets acquired.............................................. 1,649,000 Other assets acquired.............................................. 245,000 Current liabilities acquired....................................... (1,006,000) Other liabilities acquired......................................... (565,000) Goodwill acquired.................................................. 8,901,000 ----------- Total purchase price............................................. $10,465,000 =========== </TABLE> The following data reconciles the key components of Deblan's results of operations in the pro forma condensed combined statement of operations for the 52 weeks ended January 2, 1999 with the key components of Deblan's results of operations in its unaudited historical financial statements for the six months ended June 30, 1998: <TABLE> <CAPTION> Six Months Ended July 1, 1998 To January 1, 1998 To June 30, 1998 August 23, 1998 August 23, 1998 ---------------- --------------- ------------------ (Dollars in thousands) <S> <C> <C> <C> Net store sales........... $4,768 $1,602 $6,370 Operating costs and expenses................. 4,418 1,462 5,880 Income from operations.... 350 140 490 Net income................ 232 164 396 </TABLE> P-5

4. CHOCOLATE CHIP ACQUISITION On August 24, 1998, Mrs. Fields acquired all of the outstanding capital stock of Chocolate Chip for a total purchase price of $3,965,000. The purchase price was allocated based on the estimated fair values of the net assets acquired, as presented below: <TABLE> <S> <C> Current assets acquired............................................. $ 174,000 Fixed assets acquired............................................... 108,000 Other assets acquired............................................... 46,000 Current liabilities acquired........................................ (111,000) Goodwill acquired................................................... 3,748,000 ---------- Total purchase price.............................................. $3,965,000 ========== </TABLE> In the accompanying pro forma condensed combined statement of operations for the 52 weeks ended January 2, 1999, Chocolate Chip's results of operations from January 1, 1998 to August 23, 1998 are included under the "Chocolate Chip" column heading. Chocolate Chip's results of operations from August 24, 1998 to January 2, 1999 are included under the "Mrs. Fields" column heading. None of Chocolate Chip's revenues and income (loss) has been excluded or included more than once in the pro forma condensed combined statements of operations for the 52 weeks ended January 2, 1999. The following data reconciles the key components of Chocolate Chip's results of operations in the pro forma condensed combined statement of operations for the 52 weeks ended January 2, 1999 with the key components of Chocolate Chip's results of operations in its historical financial statements for the nine months ended June 30, 1998: <TABLE> <CAPTION> Less Nine Months Three Months Add Ended Ended July 1, 1998 To January 1, 1998 June 30, 1998 December 31, 1997 August 23, 1998 To August 23, 1998 ------------- ----------------- --------------- ------------------ (Dollars in thousands) <S> <C> <C> <C> <C> Net store sales......... $2,266 $803 $410 $1,873 Operating costs and expenses............... 2,100 646 443 1,897 Income (loss) from operations............. 166 157 (33) (24) Net income (loss)....... 116 155 1 (38) </TABLE> 5. COMBINED KARP ENTITIES ACQUISITION On September 9, 1998, Mrs. Fields acquired the Combined Karp Entities for a total purchase price of $1,888,000. Accordingly, in the accompanying pro forma condensed combined statement of operations for the 52 weeks ended January 2, 1999, the Combined Karp Entities' results of operations from January 1, 1998 to September 9, 1998 are included under the "Combined Karp Entities" column heading. The Combined Karp Entities' results of operations from September 10, 1998 to January 2, 1999 are included under the "Mrs. Fields" column heading. The purchase price was allocated based on the estimated fair values of the net assets acquired, as presented below: <TABLE> <S> <C> Current assets acquired............................................. $ 54,000 Fixed assets acquired, net.......................................... 1,054,000 Goodwill acquired................................................... 780,000 ---------- Total purchase price.............................................. $1,888,000 ========== </TABLE> P-6

The following data reconciles the key components of the Combined Karp Entities' results of operations in the pro forma condensed combined statement of operations for the 52 weeks ended January 2, 1999 with the key components of the Combined Karp Entities' results of operations in its historical financial statements for the six months ended June 30, 1998: <TABLE> <CAPTION> Six Months Ended July 1, 1998 To January 1, 1998 To June 30, 1998 September 9, 1998 September 9, 1998 ---------------- ----------------- ------------------ (Dollars in thousands) <S> <C> <C> <C> Net store sales......... $1,181 $308 $1,489 Operating costs and expenses............... 1,259 251 1,510 Income (loss) from operations............. (78) 57 (21) Net income (loss)....... (91) 56 (35) </TABLE> 6. COOKIE CONGLOMERATE ACQUISITION On October 5, 1998, Mrs. Fields acquired Cookie Conglomerate for a total purchase price of $2,800,000. Accordingly, in the accompanying pro forma condensed combined statement of operations for the 52 weeks ended January 2, 1999, Cookie Conglomerate's results of operations from January 1, 1998 to September 30, 1998 are included under the "Cookie Conglomerate" column heading. The purchase price was allocated based on the estimated fair values of the net assets acquired, as presented below: <TABLE> <S> <C> Fixed assets acquired............................................... $1,270,000 Other intangibles acquired.......................................... 100,000 Goodwill acquired................................................... 1,430,000 ---------- Total purchase price.............................................. $2,800,000 ========== </TABLE> 7. PRETZELMAKER ACQUISITION On November 19, 1998, Mrs. Fields acquired all of the outstanding capital stock of Pretzelmaker for $5,419,000 and assumed liabilities of $320,000 related to severance payments in lieu of outstanding stock options to be paid at closing. Mrs. Fields paid $1,100,000 in cash upon closing of the acquisition and signed a promissory note for $4,319,000, which was paid in three installments through January 4, 1999. Accordingly, in the accompanying pro forma condensed combined financial statements of operations for the 52 weeks ended January 2, 1999, Pretzelmaker's results of operations from January 1, 1998 to November 19, 1998 are included under the "Pretzelmaker" column heading. The purchase price was allocated based on the estimated fair values of the net assets (liabilities) acquired, as presented below: <TABLE> <S> <C> Current assets acquired............................................ $ 577,400 Fixed assets acquired.............................................. 248,700 Other assets acquired.............................................. 50,000 Current liabilities acquired....................................... (1,991,700) Other liabilities acquired......................................... (1,108,400) Goodwill acquired.................................................. 7,643,000 ----------- Total purchase price............................................. $ 5,419,000 =========== </TABLE> P-7

INDEX TO HISTORICAL FINANCIAL STATEMENTS <TABLE> <CAPTION> Page ---- <S> <C> Mrs. Fields' Original Cookies, Inc. and Subsidiaries Report of Independent Public Accountants................................. F-4 Consolidated Balance Sheets as of January 3, 1998 and January 2, 1999 ... F-5 Consolidated Statements of Operations for the period from inception (September 18, 1996) to December 28, 1996, for the 53 weeks ended January 3, 1998 and for the 52 weeks ended January 2, 1999 ............. F-7 Consolidated Statements of Stockholder's Equity for the period from inception (September 18, 1996) to December 28, 1996, for the 53 weeks ended January 3, 1998 and for the 52 weeks ended January 2, 1999........ F-8 Consolidated Statements of Cash Flows for the period from inception (September 18, 1996) to December 28, 1996, for the 53 weeks ended January 3, 1998 and for the 52 weeks ended January 2, 1999.............. F-9 Notes to Consolidated Financial Statements............................... F-12 Unaudited Condensed Consolidated Balance Sheets as of January 2, 1999 and July 3, 1999............................................................ F-43 Unaudited Condensed Consolidated Statements of Operations for the 26 weeks ended July 4, 1998 and July 3, 1999............................... F-45 Unaudited Condensed Consolidated Statements of Cash Flows for the 26 weeks ended July 4, 1998 and July 3, 1999............................... F-46 Unaudited Notes to Condensed Consolidated Financial Statements........... F-47 Mrs. Fields Inc. and Subsidiaries Report of Independent Public Accountants (Arthur Andersen LLP)........... F-56 Independent Auditors' Report (Deloitte & Touche LLP)..................... F-57 Consolidated Balance Sheet as of September 17, 1996...................... F-58 Consolidated Statements of Operations for the year ended December 30, 1995 and for the period ended September 17, 1996........................ F-60 Consolidated Statements of Stockholders' Deficit for the year ended December 30, 1995 and for the period ended September 17, 1996........... F-61 Consolidated Statements of Cash Flows for the year ended December 30, 1995 and for the period ended September 17, 1996........................ F-62 Notes to Consolidated Financial Statements............................... F-64 The Original Cookie Company, Incorporated and the Carved-out Portion of Hot Sam Company, Inc. (Combined) Report of Independent Public Accountants................................. F-72 Combined Balance Sheet as of September 17, 1996.......................... F-73 Combined Statements of Operations for the year ended December 30, 1995 and for the period ended September 17, 1996............................. F-75 Combined Statements of Stockholders' Equity for the year ended December 30, 1995 and for the period ended September 17, 1996.................... F-76 Combined Statements of Cash Flows for the year ended December 30, 1995 and for the period ended September 17, 1996............................. F-77 Notes to Combined Financial Statements................................... F-78 Cookies USA, Inc. and Subsidiary Report of Independent Accountants........................................ F-82 Consolidated Balance Sheets as of June 29, 1997 and June 28, 1998........ F-83 Consolidated Statements of Operations for the fifty-two week periods ended June 30, 1996, June 29, 1997 and June 28, 1998.................... F-85 Consolidated Statements of Changes in Stockholders' Deficit for the fifty-two week periods ended June 30, 1996, June 29, 1997 and June 28, 1998.................................................................... F-86 Consolidated Statements of Cash Flows for the fifty-two week periods ended June 30, 1996, June 29, 1997 and June 28, 1998.................... F-87 Notes to Consolidated Financial Statements............................... F-89 </TABLE> F-1

INDEX TO HISTORICAL FINANCIAL STATEMENTS--(Continued) <TABLE> <CAPTION> Page ----- <S> <C> Deblan Corporation Independent Auditors' Report............................................ F-101 Balance Sheets as of December 31, 1996 and 1997 and June 30, 1998 (unaudited)............................................................ F-102 Statements of Earnings for the years ended December 31, 1995, 1996 and 1997 and for the six months ended June 30, 1997 (unaudited) and 1998 (unaudited)............................................................ F-104 Statements of Shareholders' Equity for the years ended December 31, 1995, 1996 and 1997 and for the six months ended June 30, 1998 (unaudited)............................................................ F-105 Statements of Cash Flows for the years ended December 31, 1995, 1996 and 1997 and for the six months ended June 30, 1997 (unaudited) and 1998 (unaudited)............................................................ F-106 Notes to Financial Statements........................................... F-108 Chocolate Chip Cookies of Texas, Inc. Report of Independent Public Accountants................................ F-114 Balance Sheets as of September 30, 1996 and 1997 and June 30, 1998 (unaudited)............................................................ F-115 Statements of Operations for the years ended September 30, 1995, 1996 and 1997 and for the nine months ended June 30, 1997 (unaudited) and 1998 (unaudited)....................................................... F-117 Statements of Stockholders' Equity for the years ended September 30, 1995, 1996, and 1997 and for the nine months ended June 30, 1998 (unaudited)............................................................ F-118 Statements of Cash Flows for the years ended September 30, 1995, 1996 and 1997 and for the nine months ended June 30, 1997 (unaudited) and 1998 (unaudited)....................................................... F-119 Notes to Financial Statements........................................... F-121 The Combined Karp Entities Report of Independent Public Accountants................................ F-126 Combined Balance Sheets as of December 31, 1996 and 1997 and June 30, 1998 (unaudited)....................................................... F-127 Combined Statements of Operations for the years ended December 31, 1995, 1996 and 1997 and for the six months ended June 30, 1997 (unaudited) and 1998 (unaudited)................................................... F-129 Combined Statements of Stockholders' Equity for the years ended December 31, 1995, 1996, and 1997 and for the six months ended June 30, 1998 (unaudited)............................................................ F-130 Combined Statements of Cash Flows for the years ended December 31, 1995, 1996 and 1997 and for the six months ended June 30, 1997 (unaudited) and 1998 (unaudited)................................................... F-131 Notes to Combined Financial Statements.................................. F-133 The Cookie Conglomerate Independent Auditors' Report............................................ F-140 Combined Balance Sheets as of December 31, 1997 and 1996................ F-141 Combined Statements of Operations for the years ended December 31, 1997 and 1996............................................................... F-143 Combined Statements of Changes in Equity for the years ended December 31, 1997 and 1996...................................................... F-144 Combined Statements of Cash Flows for the years ended December 31, 1997 and 1996............................................................... F-145 Notes to Combined Financial Statements.................................. F-146 Combined Balance Sheet as of September 30, 1998 (unaudited)............. F-150 Combined Statements of Operations for the nine month periods ended September 30, 1998 and 1997 (unaudited)................................ F-151 Combined Statements of Cash Flows for the nine month periods ended September 30, 1998 and 1997 (unaudited)................................ F-152 Notes to Combined Financial Statements.................................. F-153 Pretzelmaker Holdings, Inc. Report of Independent Certified Public Accountants (AJ. Robbins, PC).... F-154 Report of Independent Certified Public Accountants (BDO Seidman, LLP)... F-155 Consolidated Balance Sheets as of December 31, 1996 and 1997 and September 30, 1998 (unaudited)......................................... F-156 </TABLE> F-2

INDEX TO HISTORICAL FINANCIAL STATEMENTS--(Continued) <TABLE> <CAPTION> Page ----- <S> <C> Consolidated Statements of Operations For the Period from February 24 (Inception) to December 31, 1995 and the Years Ended December 31, 1996 and 1997 and the Nine Months Ended September 30, 1997 (unaudited) and 1998 (unaudited)........................................................ F-158 Consolidated Statements of Stockholders' Equity For the Period from February 24 (Inception) to December 31, 1995 and the Years Ended December 31, 1996 and 1997 and the Nine Months Ended September 30, 1998 (unaudited)............................................................. F-159 Consolidated Statements of Cash Flows For the Period from February 24 (Inception) to December 31, 1995 and the Years Ended December 31, 1996 and 1997 and the Nine Months Ended September 30, 1997 (unaudited) and 1998 (unaudited)........................................................ F-160 Notes to the Consolidated Financial Statements........................... F-161 </TABLE> F-3

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Mrs. Fields' Original Cookies, Inc.: We have audited the accompanying consolidated balance sheets of Mrs. Fields' Original Cookies, Inc. (a Delaware corporation) and subsidiaries as of January 3, 1998 and January 2, 1999, and the related consolidated statements of operations, stockholder's equity and cash flows for the period from inception (September 18, 1996) to December 28, 1996 and for each of the two years in the period ended January 2, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Mrs. Fields' Original Cookies, Inc. and subsidiaries as of January 3, 1998 and January 2, 1999, and the consolidated results of their operations and their cash flows for the period from inception (September 18, 1996) to December 28, 1996 and for each of the two years in the period ended January 2, 1999 in conformity with generally accepted accounting principles. Arthur Andersen LLP Salt Lake City, Utah April 1, 1999 F-4

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) ASSETS <TABLE> <CAPTION> January 3, January 2, 1998 1999 ---------- ---------- <S> <C> <C> CURRENT ASSETS: Cash and cash equivalents............................. $ 16,287 $ 4,751 Accounts receivable, net of allowance for doubtful accounts of $32 and $74, respectively................ 1,535 3,208 Amounts due from franchisees and licensees, net of allowance for doubtful accounts of $582 and $1,078, respectively......................................... 2,176 6,003 Inventories........................................... 3,100 5,503 Prepaid rent and other................................ 2,960 4,017 Deferred income tax assets............................ 2,765 861 -------- -------- Total current assets................................ 28,823 24,343 -------- -------- PROPERTY AND EQUIPMENT, at cost: Leasehold improvements................................ 21,099 29,914 Equipment and fixtures................................ 14,100 17,108 Land.................................................. 128 240 -------- -------- 35,327 47,262 Less accumulated depreciation and amortization........ (6,125) (15,465) -------- -------- Net property and equipment.......................... 29,202 31,797 -------- -------- DEFERRED INCOME TAX ASSETS.............................. 734 2,638 -------- -------- GOODWILL, net of accumulated amortization of $4,980 and $11,231, respectively.................................. 68,501 145,782 -------- -------- TRADEMARKS AND OTHER INTANGIBLES, net of accumulated amortization of $1,409 and $2,615, respectively........ 15,193 14,296 -------- -------- DEFERRED LOAN COSTS, net of accumulated amortization of $70 and $1,320, respectively........................... 5,906 11,718 -------- -------- OTHER ASSETS............................................ 1,325 1,332 -------- -------- $149,684 $231,906 ======== ======== </TABLE> The accompanying notes to consolidated financial statements are an integral part of these balance sheets. F-5

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) (Dollars in thousands, except per share data) LIABILITIES AND STOCKHOLDER'S EQUITY <TABLE> <CAPTION> January 3, January 2, 1998 1999 --------- ---------- <S> <C> <C> CURRENT LIABILITIES: Current portion of long-term debt....................... $ 472 $ 8,046 Current portion of capital lease obligations............ 142 299 Accounts payable........................................ 3,805 10,723 Bank overdraft.......................................... -- 4,133 Accrued liabilities..................................... 2,826 3,597 Current portion of store closure reserve................ 3,664 4,577 Accrued salaries, wages and benefits.................... 1,891 3,155 Accrued interest payable................................ 1,082 1,260 Sales taxes payable..................................... 937 962 Deferred credits........................................ 871 318 -------- -------- Total current liabilities............................. 15,690 37,070 LONG-TERM DEBT, net of current portion and discount....... 100,284 141,647 STORE CLOSURE RESERVE, net of current portion............. 1,802 10,134 CAPITAL LEASE OBLIGATIONS, net of current portion......... 183 997 -------- -------- Total liabilities..................................... 117,959 189,848 -------- -------- COMMITMENTS AND CONTINGENCIES (Notes 3, 7 and 8) MANDATORILY REDEEMABLE CUMULATIVE PREFERRED STOCK of Pretzel Time (a wholly owned subsidiary), aggregate liquidation preference of $1,437 and $1,495, respectively............................................. 902 1,261 -------- -------- MINORITY INTEREST......................................... 58 119 -------- -------- STOCKHOLDER'S EQUITY: Common stock, $.01 par value; 1,000 shares authorized and 400 shares outstanding............................. -- -- Additional paid-in capital.............................. 30,843 59,899 Accumulated deficit..................................... (78) (19,221) -------- -------- Total stockholder's equity............................ 30,765 40,678 -------- -------- $149,684 $231,906 ======== ======== </TABLE> The accompanying notes to consolidated financial statements are an integral part of these balance sheets. F-6

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands) <TABLE> <CAPTION> Inception 53 52 (September 18, Weeks Weeks 1996) to Ended Ended December 28, January 3, January 2, 1996 1998 1999 -------------- ---------- ---------- <S> <C> <C> <C> REVENUES: Net store and food sales................ $40,849 $127,845 $140,235 Franchising, net........................ 503 4,535 12,464 Licensing, net.......................... 764 2,028 1,537 ------- -------- -------- Total revenues........................ 42,116 134,408 154,236 ------- -------- -------- OPERATING COSTS AND EXPENSES: Selling and store occupancy costs....... 19,492 66,832 75,003 Cost of sales........................... 10,596 32,028 38,482 General and administrative.............. 4,035 16,192 19,017 Store closure provision................. -- 538 7,303 Depreciation and amortization........... 2,344 10,403 19,820 ------- -------- -------- Total operating costs and expenses.... 36,467 125,993 159,625 ------- -------- -------- Income (loss) from operations....... 5,649 8,415 (5,389) ------- -------- -------- OTHER INCOME (EXPENSE), net: Interest expense........................ (1,867) (7,830) (13,197) Interest income......................... 74 246 623 Other expense........................... -- (368) (409) ------- -------- -------- Total other expense, net.............. (1,793) (7,952) (12,983) ------- -------- -------- Income (loss) before provision for income taxes, preferred stock accretion and dividends of subsidiaries and minority interest...................... 3,856 463 (18,372) PROVISION FOR INCOME TAXES................ (1,798) (655) (316) ------- -------- -------- Income (loss) before preferred stock accretion and dividends of subsidiaries and minority interest.................. 2,058 (192) (18,688) PREFERRED STOCK ACCRETION AND DIVIDENDS OF SUBSIDIARIES............................. (97) (644) (444) MINORITY INTEREST......................... -- (138) (11) ------- -------- -------- Net income (loss)..................... $ 1,961 $ (974) $(19,143) ======= ======== ======== </TABLE> The accompanying notes to consolidated financial statements are an integral part of these statements. F-7

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (Dollars in thousands) <TABLE> <CAPTION> Retained Common Stock Additional Earnings ------------- Paid-in (Accumulated Shares Amount Capital Deficit) Total ------ ------ ---------- ------------ ------- <S> <C> <C> <C> <C> <C> BALANCE, September 18, 1996..... -- $-- $ -- $ -- $ -- Issuance of common stock for cash......................... 400 -- 15,000 -- 15,000 Net income.................... -- -- -- 1,961 1,961 --- ---- ------- -------- ------- BALANCE, December 28, 1996...... 400 -- 15,000 1,961 16,961 Parent contribution of investment in Pretzel Time... -- -- 4,200 -- 4,200 Parent contribution of note receivable due from Pretzel Time's minority stockholder and founder.................. -- -- 500 -- 500 Parent contribution of investment in Mrs. Fields' Brand........................ -- -- 6,500 -- 6,500 Conversion to equity of note payable to parent............ -- -- 4,643 -- 4,643 Dividend paid to parent....... -- -- -- (1,065) (1,065) Net loss...................... -- -- -- (974) (974) --- ---- ------- -------- ------- BALANCE, January 3, 1998........ 400 -- 30,843 (78) 30,765 Parent equity infusion........ -- -- 29,056 -- 29,056 Net loss...................... -- -- -- (19,143) (19,143) --- ---- ------- -------- ------- BALANCE, January 2, 1999........ 400 $-- $59,899 $(19,221) $40,678 === ==== ======= ======== ======= </TABLE> The accompanying notes to consolidated financial statements are an integral part of these statements. F-8

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) <TABLE> <CAPTION> Inception (September 18, 53 Weeks 52 Weeks 1996) to Ended Ended December 28, January 3, January 2, 1996 1998 1999 -------------- ---------- ---------- <S> <C> <C> <C> INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)........................ $ 1,961 $ (974) $(19,143) Adjustments to reconcile net income (loss) to net cash provided by operating activities, net of effects from acquisitions: Depreciation and amortization............ 2,344 10,403 19,820 Amortization of discount on notes........ -- -- 32 Amortization of deferred loan costs...... -- -- 1,250 Loss on disposition of assets............ -- 368 409 Deferred income taxes.................... 1,511 210 -- In-kind interest expense on note payable to stockholder.......................... 97 338 -- Preferred stock accretion and dividends of subsidiaries......................... 97 644 444 Minority interest........................ -- 234 11 Changes in assets and liabilities, net of effects from acquisitions: Accounts receivable..................... (294) (353) (1,673) Amounts due from franchisees and licensees.............................. (339) (514) (866) Inventories............................. (159) 136 (822) Prepaid rent and other.................. (31) (895) 932 Other assets............................ 39 427 1,437 Accounts payable and accrued liabilities............................ 239 (6,651) 2,769 Store closure reserve................... (305) (1,666) 5,196 Accrued salaries, wages and benefits.... 212 80 1,264 Accrued interest payable................ 1,668 (586) (713) Sales taxes payable..................... 542 261 (80) Deferred credits........................ 27 (543) (838) -------- -------- -------- Net cash provided by operating activities............................ 7,609 919 9,429 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Net cash paid for acquisitions and related costs........................... (19,508) (10,949) (32,835) Purchase of property and equipment, net of effects from acquisitions............ (1,638) (4,678) (8,235) Proceeds from the sale of assets......... 15 122 176 -------- -------- -------- Net cash used in investing activities.. (21,131) (15,505) (40,894) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt.................................... -- 108,250 39,400 Principal payments on long-term debt..... (1,769) (77,009) (41,257) Payment of debt financing costs.......... -- (5,976) (7,062) Cash advance from Mrs. Fields' Holding... -- 1,500 -- Repayment of cash advance to Mrs. Fields' Holding................................. -- (1,500) -- Payment of cash dividend to Mrs. Fields' Holding................................. -- (1,065) -- Equity infusion from Mrs. Fields' Holding................................. -- -- 29,056 Principal payments on capital lease obligations............................. -- (36) (123) Proceeds from the issuance of common stock................................... 15,000 -- -- Proceeds from the issuance of mandatorily redeemable cumulative preferred stock of subsidiary.............................. 3,500 -- -- Reduction in preferred stock of Pretzel Time.................................... -- -- (85) Proceeds from the issuance of note payable to related party................ 3,500 -- -- -------- -------- -------- Net cash provided by financing activities............................ 20,231 24,164 19,929 -------- -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.............................. 6,709 9,578 (11,536) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD............................... -- 6,709 16,287 -------- -------- -------- CASH AND CASH EQUIVALENTS AT END OF THE PERIOD................................... $ 6,709 $ 16,287 $ 4,751 ======== ======== ======== </TABLE> The accompanying notes to consolidated financial statements are an integral part of these statements. F-9

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued) (Dollars in thousands) Supplemental Disclosure of Cash Flow Information: Cash paid for interest was approximately $28, $8,416, and $12,440 for the period ended December 28, 1996, and for the years ended January 3, 1998 and January 2, 1999, respectively. Cash paid for income taxes was approximately $0, $217, and $209 for the period ended December 28, 1996, and for the years ended January 3, 1998 and January 2, 1999, respectively. Supplemental Disclosure of Noncash Investing and Financing Activities: On September 18, 1996, the Company acquired certain assets and assumed certain liabilities of Mrs. Fields Inc., Mrs. Fields Development Corporation, Mrs. Fields Cookies, The Original Cookie Company, Incorporated and Hot Sam Company, Inc. In conjunction with the acquisitions, the following net liabilities were assumed. Additionally, in connection with the purchase accounting, certain other accruals were recorded (see Note 1). <TABLE> <S> <C> Fair value of assets acquired.................................... $ 93,494 Net cash paid.................................................... (19,508) Notes payable issued............................................. (65,735) -------- Liabilities assumed............................................ $ 8,251 ======== On November 26, 1997, Mrs. Fields' Holding Company, Inc. ("Mrs. Fields' Holding") converted to common equity of the Company $4,643 total principal amount of convertible subordinated notes and contributed to the Company all of the common equity of Mrs. Fields' Brands after converting its preferred stock interests totaling $3,935 to common equity. On July 25, 1997, certain assets were acquired and certain liabilities were assumed of H & M Concepts Ltd. Co. by Mrs. Fields' Pretzel Concepts, Inc. ("Pretzel Concepts") as follows. Additionally, in connection with the purchase accounting, certain other accruals were recorded (see Note 1). Fair value of assets acquired.................................... $ 15,780 Net cash paid.................................................... (5,750) Notes payable issued............................................. (8,000) -------- Liabilities assumed............................................ $ 2,030 ======== On September 2, 1997, 56 percent of the shares of common stock of Pretzel Time, Inc. ("Pretzel Time") were acquired by Mrs. Fields' Holding as follows. Additionally, in connection with the purchase accounting, certain other accruals were recorded (see Note 1). Fair value of assets acquired.................................... $ 8,311 Net cash paid.................................................... (4,200) -------- Liabilities assumed............................................ $ 4,111 ======== </TABLE> On November 26, 1997, Mrs. Fields' Holding contributed all of the assets and liabilities of Pretzel Concepts, Mrs. Fields' Holding's 56 percent of the shares of common stock of Pretzel Time and a $500 note receivable from Pretzel Time's founder and minority stockholder to the Company. Mrs. Fields' Holding also contributed all of the common stock of Mrs. Fields' Brands to Mrs. Fields. F-10

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued) (Dollars in thousands) During the period from the acquisition of the majority ownership of Pretzel Time (September 2, 1997) to January 2, 1999, Pretzel Time increased its mandatorily redeemable cumulative preferred stock liquidation preference by approximately $212, in lieu of paying cash dividends. In addition, for the same period, Pretzel Time's mandatorily redeemable cumulative preferred stock was increased by approximately $538 for the accretion required over time to amortize the original issue discount. In August 1998, the Company acquired all of the outstanding capital stock and subordinated indebtedness of Cookies USA, Inc. ("Cookies USA") for a total purchase price of approximately $18,400. During August and September 1998, the Company also entered into agreements with three franchisees of Cookies USA (the "Great American Franchisees") under which the Company purchased a total of 37 Great American Cookies franchises for a total purchase price of $16,328. The total purchase price for all of these acquisitions of $34,728 was allocated, on a preliminary basis, as follows. Additionally, in connection with the purchase accounting, certain other accruals were recorded (see Note 1). <TABLE> <S> <C> Fair value of assets acquired.................................... $ 77,410 Net cash paid.................................................... (27,771) -------- Liabilities assumed............................................ $ 49,639 ======== In October 1998, the Company acquired the assets of the Cookie Conglomerate, Inc. ("Cookie Conglomerate") for a total purchase price of $2,800. The total purchase price was allocated as follows: Fair value of assets acquired.................................... $ 2,800 Net cash paid.................................................... -- -------- Liabilities assumed............................................ $ 2,800 ======== In November 1998, the Company acquired all of the outstanding stock of Pretzelmaker Holdings, Inc. ("Pretzelmaker") for $5,419. The total purchase price was allocated as follows: Fair value of assets acquired.................................... $ 8,519 Net cash paid.................................................... (1,100) -------- Liabilities assumed............................................ $ 7,419 ======== </TABLE> F-11

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS Mrs. Fields' Original Cookies, Inc. (the "Company"), a Delaware corporation, is a wholly owned subsidiary of Mrs. Fields' Holding Company, Inc. Mrs. Fields' Holding is a majority owned subsidiary of Capricorn Investors II, L.P. ("Capricorn"). The Company has eight wholly owned operating subsidiaries; namely, Great American Cookie Company, Inc., The Mrs. Fields' Brand, Inc., Pretzel Time, Inc., Pretzelmaker Holdings, Inc., Mrs. Fields' Cookies Australia, Mrs. Fields' Cookies (Canada) Ltd., H & M Canada and Pretzelmaker of Canada; and three partially owned subsidiaries. The Company primarily operates retail stores which sell freshly baked cookies, brownies, pretzels and other food products through six specialty retail chains. As of January 2, 1999, the Company owned and operated 147 Mrs. Fields Cookies stores, 120 Original Cookie Company stores, 119 Great American Cookies stores, 77 Hot Sam Pretzels stores, 93 Pretzel Time stores, 9 Pretzelmaker stores in the United States and one Pretzel Time store in Canada. Additionally, the Company has franchised or licensed 859 stores in the United States and 113 stores in several other countries. As of January 2, 1999, the Company owned and operated 437 core stores and 129 stores which are in the process of being closed or franchised. All of the stores in the process of being closed or franchised are expected to be closed or franchised by the end of fiscal year 2000. The Company holds legal title to certain trademarks for the "Mrs. Fields" name and logo and licenses the uses of these trademarks to third parties for the establishment and operation of Mrs. Fields' cookie and bakery operations and other merchandising activities. In connection with these licensing activities, the Company authorizes third-party licensees to use certain business formats, systems, methods, procedures, designs, layouts, specifications, trade names and trademarks in the United States and other countries. Additionally, the Company markets and distributes its products through catalogs, other print media and mail order. The Company's business follows seasonal trends and is also affected by climate and weather conditions. The Company experiences its highest revenues in the fourth quarter. Because the Company's stores are heavily concentrated in shopping malls, the Company's sales performance is significantly dependent on the performance of those malls. Business Combinations Mrs. Fields, Inc. and Affiliates and Original Cookie Company and Affiliates The Company began operations on September 18, 1996, following the completion of two simultaneous but separate asset purchase transactions wherein the Company (i) acquired certain assets and assumed certain liabilities of Mrs. Fields Inc., Mrs. Fields Development Corporation and Mrs. Fields Cookies in accordance with two Asset Purchase Agreements dated August 7, 1996, among these parties and Capricorn, and (ii) acquired certain assets and assumed certain liabilities of The Original Cookie Company, Incorporated and Hot Sam Company, Inc. in accordance with an Asset Purchase Agreement dated August 7, 1996, as amended by the First Amendment dated as of September 17, 1996, among these parties and Capricorn. The combined purchase price for the acquired net assets was approximately $85,243,000. The Company paid net cash of $19,508,000 and issued approximately $65,735,000 in senior and subordinated notes to the selling shareholders. The acquisitions were accounted for as purchases. The total purchase price was allocated to the net assets acquired, based on their estimated fair values. The organization of the Company and the acquisitions resulted in the recording of intangible assets of approximately $49,942,000 principally made up of goodwill, trademarks and organization costs. An additional $17,680,000 of goodwill and $4,520,000 of deferred income tax assets (net of valuation allowances) were recorded in connection with the Company recording certain other accruals totaling $11,300,000 and providing reserves totaling $10,921,000 for impaired property F-12

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) and equipment (see Note 5) at Company-owned stores the Company intends to exit through closing or franchising. Goodwill and trademarks are amortized using the straight-line method over 15 years. The $11,300,000 of accruals established at the date of the acquisitions consisted of $5,060,000 for obligations incident to store closures (see Note 5), $2,450,000 for contingent legal and lease obligations that were firmed up before December 28, 1996, $3,135,000 for transaction and finders' fees and $655,000 for severance and related costs. The Company terminated all of the Original Cookie Company and Affiliates corporate employees as planned. As of January 2, 1999, approximately $2,068,000 of the $2,450,000 accrual for legal and lease obligations has been utilized. The remaining amount as of January 2, 1999 of approximately $382,000 is expected to be utilized by the end of 1999. All of the $3,135,000 accrual established for transaction and finders' fees and the $655,000 accrual for severance and related costs associated with the acquisitions were fully utilized for the purposes intended during fiscal 1997. H & M Concepts Ltd. Co. On July 25, 1997, Mrs. Fields' Pretzel Concepts, Inc., a wholly owned subsidiary of Mrs. Fields' Holding, acquired substantially all of the assets and assumed certain liabilities of H & M Concepts Ltd. Co. and subsidiaries ("H & M"). H & M owned and operated stores which engage in retail sales of pretzels, toppings and beverages under a franchise agreement with Pretzel Time, Inc. The total consideration of $13,750,000 consisted of (i) $5,750,000 of cash, financed through an advance from Mrs. Fields' Holding of $1,500,000 and a $4,250,000 bank loan to Pretzel Concepts, (ii) a $4,000,000 principal amount bridge note of Pretzel Concepts and (iii) a $4,000,000 principal amount subordinated note of Mrs. Fields' Holding retained by the sellers (all such debt collectively referred to as the "H & M Debt"). The acquisition was accounted for using the purchase method of accounting (based on the estimated fair values of the net assets acquired) and resulted in recording approximately $9,618,000 of goodwill that is being amortized using the straight-line method over 15 years. Effective November 26, 1997, Mrs. Fields' Holding contributed all of the assets and liabilities of Pretzel Concepts to the Company and, in consideration thereof, the Company assumed the H & M Debt, including all accrued but unpaid interest. Pretzel Concepts and the Company merged on the same date with the Company being the surviving entity. The contribution was accounted for in a manner similar to that of pooling-of-interests accounting. There was no step-up in the historical basis of Pretzel Concepts' assets or liabilities. Beginning with July 25, 1997, the Company has included Pretzel Concepts' results of operations in the Company's consolidated results of operations. Pretzel Time, Inc. On September 2, 1997, Mrs. Fields' Holding acquired 56 percent of the shares of common stock of Pretzel Time for a total cash purchase price of $4,200,000, $750,000 of which was paid to Pretzel Time for working capital purposes, and the balance of which was paid to the selling shareholders. In connection with the acquisition, Mrs. Fields' Holding extended a $500,000 loan to the founder of Pretzel Time who continued to own 44 percent of the shares of common stock of Pretzel Time. The note bears interest at an annual rate of ten percent (see Note 8). Pretzel Time is a franchisor of hand rolled soft pretzel outlets located in North America. The outlets are primarily located in shopping malls. The acquisition was accounted for using the purchase method of accounting (based on the estimated fair values of the net assets acquired) and resulted in recording approximately $5,882,000 of goodwill that is being amortized using the straight-line method over 15 years. The goodwill recorded was $1,682,000 more than the purchase price as the Company assumed more liabilities than it acquired in assets at their fair values. Additionally, severance and legal accruals were established in accordance with EITF 95-3. F-13

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Effective November 26, 1997, Mrs. Fields' Holding contributed its 56 percent of the shares of common stock of Pretzel Time to the Company. Mrs. Fields' Holding also contributed to the Company the $500,000 note due from Pretzel Time's founder and minority stockholder. The contribution was accounted for in a manner similar to that of pooling-of-interests accounting. There was no step- up in the book basis of Pretzel Time's assets or liabilities. On January 2, 1998, the Company purchased an additional four percent of the shares of common stock of Pretzel Time from the founder for $300,000 in cash. The purchase was accounted for using the purchase method of accounting (based on the estimated fair values of the net assets acquired) and resulted in recording approximately $311,000 of goodwill. In June 1998, the Company acquired an additional ten percent of the shares of common stock of Pretzel Time from the founder for $875,000 in cash. On December 9, 1998, Mrs. Fields purchased three shares of Pretzel Time common stock for $500,000 in cash. On December 30, 1998, Mrs. Fields completed the acquisition of the remaining outstanding common stock of Pretzel Time under a stock purchase agreement dated December 30, 1998, for a purchase price of approximately $4,700,000, $2,500,000 of which was paid in cash on January 5, 1999 and $2,000,000 of which is payable on or before December 30, 1999. The Company has included the appropriate percentage of Pretzel Time's results of operations for each respective period in its consolidated results of operations. The Mrs. Fields' Brand, Inc. Prior to November 26, 1997, Mrs. Fields' Holding owned 50.1 percent of the shares of the common stock of Mrs. Fields' Brand. Mrs. Fields' Brand holds legal title to certain trademarks for the "Mrs. Fields" name and logo and licenses the use of these trademarks to third parties for the establishment and operation of Mrs. Fields' cookie and bakery operations and other merchandising activities. In connection with these licensing activities, Mrs. Fields' Brand authorizes third-party licensees to use certain business formats, systems, methods, procedures, designs, layouts, specifications, trade names and trademarks in the United States and other countries. On November 26, 1997, Mrs. Fields' Holding acquired the remaining 49.9 percent of the shares of the common stock of Mrs. Fields' Brand from Harvard Private Capital Holdings, Inc. for approximately $2,565,000. The consideration consisted of $1,065,000 in cash and $1,500,000 in rights to common equity of Mrs. Fields' Holding. Mrs. Fields' Holding's Board of Directors determined the value of Harvard's rights to the common equity based on a fair value analysis. This analysis appropriately considered a discount for lack of controlling interest and marketability as Mrs. Fields' Holding's common equity is not publicly traded. The acquisition was accounted for using the purchase method of accounting (based on the estimated fair values of the net assets acquired) and resulted in recording approximately $2,565,000 of intangible assets (primarily goodwill) that are being amortized using the straight-line method over 15 years. Effective November 26, 1997, Mrs. Fields' Holding contributed all of the common stock of Mrs. Fields' Brand to the Company. As a result of this capital contribution, Mrs. Fields' Brand became a wholly owned subsidiary of the Company. The contribution was accounted for in a manner similar to that of pooling-of-interests accounting. There was no step-up in the book basis of Mrs. Fields' Brand's assets or liabilities. Although the Company owned 50.1 percent of Mrs. Fields' Brand until November 25, 1997, the Company has included 100 percent of Mrs. Fields' Brand's results of operations with the Company's consolidated results of operations for all periods presented as a result of Mrs. Fields' Brand incurring net losses for these periods. Great American Cookie Company, Inc. On August 24, 1998, the Company acquired all of the outstanding capital stock and subordinated indebtedness of Cookies USA, Inc., the sole stockholder of Great American Cookie Company, Inc., for a total F-14

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) purchase price of $18,400,000. Great American is an operator and franchisor of mall-based specialty retail cookie outlets and a manufacturer of cookie batter which is distributed to Great American operated retail stores and sold to franchised retail stores. Concurrently with the acquisition of Cookies USA, the Company entered into agreements with two Great American franchisees under which the Company purchased a total of 29 Great American franchises for a total purchase price of $14,430,000. The Company acquired the franchises through the acquisition of 100 percent of the capital stock of the two corporations through which the franchises operated. On September 9, 1998, the Company acquired eight additional Great American franchised retail stores from a Great American franchisee, under an asset purchase agreement, for a total purchase price of $1,898,000. These acquisitions will be collectively referred to as the "Great American Acquisitions." The Great American Acquisitions have been accounted for using the purchase method of accounting (based on preliminary estimates of fair values of the net assets acquired) and resulted in recording approximately $69,390,000 of goodwill that is being amortized using the straight-line method over 15 years. Additionally, the Company caused Cookies USA to be merged with and into the Company and caused the acquired franchisees corporations and/or net assets to be merged with and into Great American. Great American became a wholly owned subsidiary of the Company. The acquired entities' results of operations have been included with those of the Company since the applicable dates of acquisition. The Great American Acquisitions were financed by (i) the net proceeds from the Company issuing $40,000,000 Series C Senior Notes; (ii) the contribution of the net proceeds totaling $29,056,000 from a Mrs. Fields' Holding offering to the Company; and (iii) existing cash of the Company. On October 5, 1998, Mrs. Fields purchased all of the retail cookie and related business and operations of eleven Great American stores for a total purchase price of $2,800,000 under an asset purchase agreement among The Cookie Conglomerate, Inc., The Cookie Conglomerate, LLP and two individuals who were the partners of Cookie Conglomerate, LLP and the shareholders of Cookie Conglomerate, Inc. The sellers were franchisees of Great American. The sellers' rights under franchise agreements and subleases with Great American were terminated upon closing of the transaction. The acquisition was funded through borrowings. Pretzelmaker Holdings, Inc. On November 19, 1998, Mrs. Fields purchased all of the outstanding capital stock of Pretzelmaker Holdings, Inc. under an agreement among Mrs. Fields, Pretzelmaker, and the holders of its capital stock. Pretzelmaker is the holding company for a pretzel retail company. The purchase price was approximately $5,400,000 and Mrs. Fields assumed indebtedness, including severance payments, totaling approximately $1,600,000. 1-800-Cookies On October 10, 1997, the Company acquired substantially all of the net assets of R&R Bourbon Street, Inc. dba 1-800-Cookies for $653,000 in cash. The acquisition was accounted for using the purchase method of accounting (based on the estimated fair values of the net assets acquired) and resulted in recording $600,000 of goodwill and $53,000 of other assets. The goodwill is being amortized using the straight-line method over 15 years. Pro Forma Acquisition Information (Unaudited) The following unaudited pro forma information for the period from inception (September 18, 1996) to December 28, 1996, and for the years ended January 3, 1998 and January 2, 1999, presents the results of operations of the Company assuming the H & M, Pretzel Time and Mrs. Fields' Brand acquisitions and the F-15

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Refinancing, as defined in Note 3, had occurred at the date of inception (September 18, 1996) and that the Great American Acquisitions, Cookie Conglomerate acquisition, Pretzelmaker acquisition and related financing had occurred at December 29, 1996. The results of operations give effect to certain adjustments, including amortization of intangible assets and interest expense on acquisition debt. The pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted or the results which may occur in the future. <TABLE> <CAPTION> Inception (September 18, 1996) to December 28, 53 Weeks Ended 52 Weeks Ended (Unaudited) 1996 January 3, 1998 January 2, 1999 ----------- -------------------- --------------- --------------- <S> <C> <C> <C> Total revenues........... $48,090,000 $200,574,000 $191,246,000 Store closure provision.. -- (538,000) (7,303,000) Depreciation and amortization............ (2,344,000) (19,405,000) (25,582,000) Income (loss) from operations.............. 6,718,000 12,738,000 (4,909,000) Net income (loss)........ 1,029,000 (3,638,000) (22,471,000) </TABLE> 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting Periods The Company operates using a 52/53-week year ending near December 31. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned and majority owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Sources of Supply The Company currently buys a significant amount of its food products from four suppliers. Management believes that other suppliers could provide similar products with comparable terms. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of January 2, 1999, the Company had demand deposits at various banks in excess of the $100,000 limit for insurance by the Federal Deposit Insurance Corporation. As of January 2, 1999, the Company had restricted cash of $225,000. Inventories Inventories consist of food, beverages and supplies and are stated at the lower of cost (first-in, first-out method) or market value. F-16

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Pre-Opening Costs Pre-opening costs associated with new Company-owned stores are charged to expense as incurred. These amounts were not significant for the periods presented in the accompanying consolidated financial statements. Pre-opening costs associated with new franchised stores are the responsibility of the franchisee. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Equipment, fixtures and leasehold improvements are depreciated or amortized over three to seven years using the straight-line method. Expenditures that materially increase values or capacities or extend useful lives of property and equipment are capitalized. Routine maintenance, repairs and renewal costs are expensed as incurred. Gains or losses from the sale or retirement of property and equipment are recorded in current operations. Intangible Assets Intangible assets consist primarily of goodwill and trademarks and are amortized using the straight-line method over 15 years. Other intangible assets such as covenants not to compete are not significant and are being amortized using the straight-line method over two to five years. Deferred Loan Costs Deferred loan costs totaling $13,038,000 resulted from the sale of $100,000,000 total principal amount of 10 1/8 percent Series A Senior Notes (the "Series A Senior Notes") on November 26, 1997 and the sale of $40,000,000 total principal amount of 10 1/8 percent Series C Senior Notes (the "Series C Senior Notes") on August 24, 1998. These costs are being amortized to interest expense over the approximate seven-year life of the Series A Notes and the approximate six-year life of the Series C Senior Notes (see Note 3). Discount on Series C Senior Notes The Series C Senior Notes were issued at a discount which is being amortized to interest expense over the approximate six-year life of the related notes. Long-Lived Assets The Company reviews for impairment of long-lived assets when events or changes in circumstances indicate that the book value of an asset may not be recoverable. The Company evaluates, at each balance sheet date, whether events and circumstances have occurred that indicate possible impairment. The Company uses an estimate of future undiscounted net cash flows of the related asset or group of assets over the remaining life in measuring whether the assets are recoverable. The Company assesses impairment of long-lived assets at the lowest level for which there are identifiable cash flows that are independent of other groups of assets. During the year ended January 2, 1999, the Company wrote down approximately $4,131,000 of impaired long-lived assets. The write-down included approximately $3,098,000 of equipment and leasehold improvements at company-owned stores that the Company intends to close or franchise (see Note 5) and approximately $1,033,000 of goodwill that had been allocated to the impaired assets. These assets have been written-down to their estimated net realizable value. The impairment provision was included in depreciation and amortization in the accompanying fiscal year 1998 statement of operations. F-17

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Store Closure Reserve The Company accrues an estimate for the costs associated with closing a nonperforming store in the period the determination is made to close the store. The accruals are for estimated store lease termination costs (see Note 5). Revenue Recognition Revenues generated from company-owned stores are recognized at the point of sale. Initial franchising and licensing fee revenues are recognized when all material services or conditions relating to the sale have been substantially performed or satisfied. Franchise and license royalties, which are based on a percentage of gross store sales, are recognized as earned. Revenues from the sale of batter that the Company produces and sales to franchisees are recognized at the time of shipment and are classified in franchising revenue. The Company receives rebates or other payments from suppliers based (directly or indirectly) on sales to franchisees and company-owned stores. Rebates related to franchisees are recorded as franchising revenue when earned. Rebates related to company-owned stores are recorded as a reduction to cost of sales when earned. Leases The Company has various operating lease commitments on both company-owned and franchised store locations and equipment. Expenses of operating leases with escalating payment terms, including leases underlying subleases with franchisees, are recognized on a straight-line basis over the lives of the related leases. The Company accrues contingent rental expense on a monthly basis for those retail stores where contingent rental expense is probable. Income Taxes The Company recognizes deferred income tax assets or liabilities for expected future tax consequences of events that have been recognized in the financial statements or tax returns. Under this method, deferred income tax assets or liabilities are determined based upon the difference between the financial and income tax bases of assets and liabilities using enacted tax rates expected to apply when differences are expected to be settled or realized. Foreign Currency Translation The balance sheet accounts of the Company's foreign subsidiaries are translated into U.S. dollars using the applicable balance sheet date exchange rates, while revenues and expenses are translated using the average exchange rates for the periods presented. Translation gains or losses are insignificant for the periods presented. Fair Value of Financial Instruments The Company estimates that the total fair market value of its Series A/B Senior Notes and Series C Senior Notes (see Note 3) was approximately $101,250,000 and $135,100,000 as of January 3, 1998 and January 2, 1999, respectively. These estimates are based on quoted market prices. The book values of the Company's other financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and other long-term debt obligations, approximate fair values at the respective balance sheet dates. Recent Accounting Pronouncement In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement established accounting and reporting standards requiring that every derivative F-18

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) instrument be recorded in the balance sheet as either an asset or liability measured at its fair value. The statement also requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. This statement is effective for fiscal years beginning after June 15, 1999 and is not expected to have a material impact on the Company's consolidated financial statements. Reclassifications Certain reclassifications have been made to the prior periods' consolidated financial statements to conform with the current period presentation. 3. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS Long-Term Debt Long-term debt consists of the following: <TABLE> <CAPTION> January 3, January 2, 1998 1999 ------------ ------------ <S> <C> <C> Series A/B senior unsecured notes, interest at 10 1/8 percent payable semi-annually in arrears on June 1 and December 1, commencing June 1, 1998, due December 1, 2004............................. $100,000,000 $100,000,000 Series C senior unsecured notes, interest at 10 1/8 percent payable semi-Annually in arrears on June 1 and December 1, commencing December 1, 1998, due December 1, 2004....................... -- 40,000,000 Discount related to the issuance of $40,000,000 Series C senior unsecured notes, net of accumulated amortization of $0 and $33,000, respectively..................................... -- (566,000) Notes payable to individuals or corporations with interest terms ranging from non-interest bearing to 15 percent, due at various dates from 1999 through 2001, requiring monthly payments......... 756,000 10,259,000 ------------ ------------ 100,756,000 149,693,000 Less current portion.............................. (472,000) (8,046,000) ------------ ------------ $100,284,000 $141,647,000 ============ ============ </TABLE> On November 26, 1997, the Company issued $100,000,000 total principal amount of Series A Senior Notes due December 1, 2004 pursuant to an indenture between the Company and the Bank of New York (the "Indenture"). The Series A Senior Notes were issued pursuant to a private transaction that was not subject to the registration requirements of the Securities Act of 1933. On June 12, 1998, a majority of the Series A Senior Notes were exchanged for 10 1/8% Series B Senior Notes due December 1, 2004 (collectively, the "Series A/B Senior Notes"), which were registered under the Securities Act. On August 24, 1998, the Company issued $40,000,000 total principal amount of Series C Senior Notes due December 1, 2004 in connection with the Great American Acquisitions. The Series C Senior Notes were issued under the Indenture which also governs the terms of the Series A/B Senior Notes in a private transaction that was not subject to the registration requirements of the Securities Act. The Series A/B Senior Notes and the Series C Senior Notes will be collectively referred to as the "Senior Notes." In connection with the issuance of the Series C Senior Notes, the Company recorded a discount of approximately $600,000. This discount is being amortized to interest expense over the approximate six-year life of the Series C Senior Notes. F-19

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Senior Notes are general unsecured obligations of the Company, rank senior in right of payment to all subordinated indebtedness of the Company and rank pari passu in right of payment with all existing and future senior indebtedness of the Company. The Senior Notes are redeemable at the option of the Company, in whole or in part, at any time on or after December 1, 2001 in cash at redemption prices defined in the Indenture, plus accrued and unpaid interest. In addition, at any time prior to December 1, 2001, the Company may redeem up to a total of 35 percent of the principal amount at a redemption price equal to 110.125 percent of the principal, plus accrued and unpaid interest. The Senior Notes contain certain covenants that limit, among other things, the ability of the Company and its subsidiaries to: (i) declare or pay dividends or make any other payment or distribution on account of the Company's or any of its subsidiaries' equity interest (including without limitation, any payment in connection with any merger or consolidation involving the Company); (ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any equity interest of the Company or any direct or indirect parent of the Company or other affiliate of the Company; (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any indebtedness that is subordinated to the Senior Notes, except as payment of interest or principal at stated maturity; or (iv) make any restricted investments except under conditions provided for in the Indenture. The total amount of principal maturities of debt at January 2, 1999 are as follows: <TABLE> <CAPTION> Fiscal Year ----------- <S> <C> 1999............................................................ $ 8,046,000 2000............................................................ 648,000 2001............................................................ 539,000 2002............................................................ 583,000 2003............................................................ 443,000 Thereafter...................................................... 140,000,000 ------------ $150,259,000 ============ </TABLE> Line of Credit On February 28, 1998, the Company entered into an amended and restated line of credit agreement with a commercial bank which provides for a maximum commitment of up to $15,000,000 secured by essentially all of the assets of the Company. The availability under the line of credit was limited by the Company's Indenture to $4,777,000 as of January 2, 1999. Borrowings under the agreement bear interest, at the Company's option, at either the bank's prime rate or the applicable LIBOR rate plus two percent, with interest payable monthly in arrears. The Company is also obligated to pay the bank a commitment fee in the amount of one quarter of one percent of the unused portion of the revolving loan commitment. As of January 2, 1999, the Company had no outstanding borrowings under the agreement, which expires March 31, 2001. The agreement requires the Company to maintain certain financial ratios including a minimum debt service coverage ratio. At January 2, 1999, the Company was in compliance with the terms of the agreement. F-20

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Capital Lease Obligations Future minimum lease payments for equipment held under capital lease arrangements as of January 2, 1999 are as follows: <TABLE> <CAPTION> Fiscal Year ----------- <S> <C> 1999............................................................. $ 415,000 2000............................................................. 357,000 2001............................................................. 358,000 2002............................................................. 287,000 2003............................................................. 182,000 ---------- Total future minimum lease payments............................ 1,599,000 Less amount representing interest................................ (303,000) ---------- 1,296,000 Less current portion........................................... (299,000) ---------- $ 997,000 ========== </TABLE> As of January 3, 1998 and January 2, 1999, total assets held under capital lease arrangements were approximately $376,000 and $1,024,000 with accumulated amortization of approximately $59,000 and $108,000, respectively. 4. INCOME TAXES The components of the provision for income taxes for the years ended January 3, 1998 and January 2, 1999 are as follows: <TABLE> <CAPTION> December 28, January 3, January 2, 1996 1998 1999 ------------ ---------- ----------- <S> <C> <C> <C> Current: Federal................... $ 207,000 $ 70,000 $ -- State..................... 75,000 228,000 245,000 Foreign................... 5,000 57,000 71,000 Deferred: Federal................... 1,112,000 367,000 (3,021,000) State..................... 277,000 55,000 (469,000) Change in valuation allowance................ 122,000 (122,000) 3,490,000 ---------- --------- ----------- Total provision for income taxes........... $1,798,000 $ 655,000 $ 316,000 ========== ========= =========== </TABLE> F-21

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The differences between income taxes at the statutory federal income tax rate and income taxes reported in the consolidated statements of operations are as follows for the period ended December 28, 1996 and for the year ended January 3, 1998: <TABLE> <CAPTION> December 28, January 3, 1996 1998 ------------ ---------- <S> <C> <C> Federal statutory income tax rate.................... 34.0% 34.0% Dividends paid by subsidiary....................... -- 34.5 Amortization of non-deductible goodwill............ -- 12.3 Net operating losses utilized...................... -- (3.9) State income taxes, net of federal benefit......... 5.3 5.3 State franchise minimum taxes...................... -- 44.0 Foreign taxes...................................... -- 12.3 Change in valuation allowance...................... 3.2 (26.3) Other.............................................. 4.1 29.3 ---- ----- Effective income tax rate............................ 46.6% 141.5% ==== ===== </TABLE> No rate reconciliation is provided for the year ending January 2, 1999 due to the fact that the Company incurred a net loss before income taxes but incurred a tax provision due to state franchise minimum taxes and foreign taxes. The significant components of the Company's deferred income tax assets and liabilities at January 3, 1998 and January 2, 1999 are as follows: <TABLE> <CAPTION> December 28, January 3, January 2, 1996 1998 1999 ------------ ----------- ------------ <S> <C> <C> <C> Deferred income tax assets: Property and equipment reserve....... $ 3,501,000 $ 2,014,000 $ 3,311,000 Store closure reserve................ 1,868,000 2,202,000 5,845,000 Transaction cost accrual............. 789,000 565,000 514,000 Net operating loss carryforward...... 782,000 4,875,000 12,268,000 Legal reserve........................ 470,000 302,000 150,000 Lease accrual........................ 403,000 92,000 -- Other reserves....................... -- 81,000 388,000 Accrued expenses..................... 334,000 230,000 529,000 Alternative minimum tax credit carryforward........................ 207,000 207,000 215,000 ----------- ----------- ------------ Total deferred income tax assets... 8,354,000 10,568,000 23,220,000 Valuation allowance.................. (4,482,000) (5,160,000) (15,560,000) ----------- ----------- ------------ Deferred income tax assets net of valuation allowance............... 3,872,000 5,408,000 7,660,000 ----------- ----------- ------------ Deferred income tax liabilities: Accumulated depreciation and amortization........................ (850,000) (1,548,000) (3,464,000) Other................................ (13,000) (361,000) (697,000) ----------- ----------- ------------ Total deferred income tax liabilities....................... (863,000) (1,909,000) (4,161,000) ----------- ----------- ------------ Net deferred income tax assets..... $ 3,009,000 $ 3,499,000 $ 3,499,000 =========== =========== ============ </TABLE> Management has provided valuation allowances on portions of the deferred income tax assets arising from the Company's business combinations. The valuation allowances established in connection with purchase F-22

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) accounting are not recorded through the provision for income taxes, but rather, as an increase to goodwill. During the years ended January 3, 1998 and January 2, 1999, valuation allowances of $800,000 and $6,910,000, respectively, were recorded in connection with accounting for business combinations. As of January 2, 1999, the Company had net operating losses of $31,232,000 that can be carried forward to reduce federal income taxes. If not utilized, the tax net operating loss carryforwards begin to expire in 2009. As defined in Section 382 of the Internal Revenue Code, the Company has acquired companies which have had a greater than 50 percent ownership change. Consequently, a certain amount of these companies' tax net operating loss carryforwards available to offset future taxable income in any one year may be limited. The maximum amount of carryforwards available in a given year is limited to the product of these companies' value on the date of ownership change and the federal long-term tax- exempt rate, plus any limited carryforwards not utilized in prior years. Although realization of the net deferred income tax assets of $3,499,000 is not assured, management believes that it is more likely than not that these assets will be realized. The amount of net deferred tax assets considered realizable, however, could be reduced in the near term based on changing conditions. 5. STORE CLOSURE AND PROPERTY AND EQUIPMENT IMPAIRMENT RESERVES The Company's management reviews the historical and projected operating performance of its stores on a periodic basis to identify underperforming stores for impairment of net property investment or for targeted closing. The Company's policy is to recognize a loss for that portion of the net property investment determined to be impaired. Additionally, when a store is identified for targeted closing, the Company's policy provides for the costs of closing the store, which are predominantly estimated lease termination costs. Lease termination costs include both one-time settlement payments and continued contractual payments over time under the original lease agreements where no settlement can be resolved with the landlord. No operating losses are accrued for. If and when a reserve that was established as part of purchase accounting is not fully utilized, the Company reduces the reserve to zero and goodwill is adjusted for the corresponding amount. Mrs. Fields Inc. and Affiliates and Original Cookie Company and Affiliates In connection with the Mrs. Fields Inc. and Original Cookie Company acquisitions (see Note 1), the Company formulated a plan to exit certain stores that did not meet certain financial and geographical criteria. In general the plan entailed closing stores that were not profitable and franchising stores that were profitable but contributed less than $50,000 in store annual cash contribution for cookie stores and less than $35,000 in annual store cash contribution for pretzel stores. Management identified 138 stores to be closed (13 of these stores were closed prior to the acquisition but had continuing lease obligations) and 64 stores to be franchised. As of January 2, 1999, there were 23 stores remaining to be exited. The timing to implement the plan was developed based on discussions and relationships with major shopping mall developers. At the date of the acquisitions, in accordance with Emerging Issues Task Force Issue 95-3 ("EITF 95-3"), the Company established a store closure reserve of $5,060,000 for the 138 stores the Company intended to close. The reserve was established to provide for estimated early lease termination costs and penalties. There was no reserve established related to the 64 stores to be franchised. Management continued to refine the plan for closing the stores after the date of the acquisitions which entailed further analysis of lease agreements and meeting with developers to assess timing and estimated lease termination costs. Management finalized the store closure plan in early September 1997, within one year of the date of the acquisitions. At that time, the Company recorded an additional $1,357,000 to the store closure reserve to reflect the finalized plan estimates of lease termination costs and adjusted goodwill by a comparable amount under the F-23

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) provisions of purchase accounting. The increase in the reserve related solely to the 138 stores originally identified to be closed. During the year ended January 2, 1999, the Company reassessed the adequacy of the store closure reserve related to the remaining stores left to be closed and recorded an additional $1,693,000 to the reserve. This portion of the store closure reserve was expensed in the Company's statement of operations for the fiscal year ended January 2, 1999 as the decision to increase the reserve was made subsequent to finalization of the original plan. No other significant changes have been made to the plan. Pursuant to the exit plan, at the date of the acquisitions, the Company established an impairment reserve of $10,921,000 against the property and equipment of the stores the Company planned to exit, in order to record those assets at net realizable value. The property and equipment of 117 of the total stores to be closed were recorded at net values of zero. The property and equipment of 54 of the total stores to be franchised were recorded at the estimated net realizable amount recoverable through a franchise sale. The property and equipment of the remainder of the stores to be closed or franchised had already been reduced to net realizable value prior to the acquisitions. H&M In connection with the H&M acquisition (see Note 1), the Company formulated a plan to exit certain pretzel stores that did not meet certain financial and geographical criteria. Management identified 11 stores to be closed. All of the stores identified for closure are planned to be closed by the end of fiscal year 1999. The timing to implement the plan was developed based on discussions and relationships with major shopping mall developers. At the date of the acquisition, in accordance with EITF 95-3, the Company established a store closure reserve of $1,000,000 for the 11 stores the Company intended to close. The reserve was established to provide for estimated early lease termination costs and penalties. Additionally, the Company established an impairment reserve of $2,500,000 against the property and equipment of the stores the Company planned to exit, in order to record those assets at net realizable value. Pretzel Time In connection with the Pretzel Time acquisition (see Note 1), the Company formulated a plan to exit certain pretzel stores that did not meet certain financial and geographical criteria. Management identified four stores to be closed. All of the stores identified for closure are planned to be closed by the end of fiscal year 1999. The timing to implement the plan was developed based on discussions and relationships with major shopping mall developers. At the date of the acquisition, in accordance with EITF 95-3, the Company established a store closure reserve of $500,000 for the four stores the Company intended to close. The reserve was established to provide for estimated early lease termination costs and penalties. Great American In connection with the Great American Acquisitions (see Note 1), the Company formulated a plan to exit certain cookie stores that did not meet certain financial and geographical criteria. Management identified 54 stores to be closed and 11 stores to be franchised. All of the stores identified for closure are planned to be closed by the end of fiscal year 2000. The timing to implement the plan was developed based on discussions and relationships with major shopping mall developers. F-24

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) At the date of the acquisitions, in accordance with EITF 95-3, the Company established a store closure reserve of $3,548,000 for the 54 stores the Company intended to close. The reserve was established to provide for estimated early lease termination costs and penalties. There was no reserve established related to the 11 stores to be franchised. The Company established an impairment reserve of $2,150,000 against the property and equipment of the stores the Company planned to exit, in order to record those assets at net realizable value. Pretzelmaker In connection with the Pretzelmaker acquisition (see Note 1), the Company formulated a plan to exit certain pretzel stores that did not meet certain financial and geographical criteria. Management identified seven stores to be closed. All of the stores identified for closure are planned to be closed by the end of fiscal year 2000. The timing of implementation of the plan was developed based on discussion and relationships with major shopping mall developers. At the date of the acquisition, in accordance with EITF 95-3, the Company established a store closure reserve of $500,000 for the seven stores the Company intended to close. The reserve was established to provide for estimated early lease termination costs and penalties. Additionally, the Company established an impairment reserve of $327,000 against the property and equipment of the stores the Company planned to exit in order to record those assets at net realizable value. Store Closure Reserves Established for Continuing Company-Owned and Franchised Stores During the fiscal year ended January 3, 1998, the Company increased its store closure reserve by $538,000 for seven continuing company-owned stores that were closed during fiscal year 1997 and for three continuing company-owned stores targeted for closure. This portion of the store closure reserve was expensed in the Company's consolidated statement of operations for the year ended January 3, 1998, as these stores were not identified for closure as part of any of the Company's store closure plans associated with the business combinations. During the fourth quarter of fiscal year 1998, the Company's management approved and committed the Company to a plan to exit 41 stores across all concepts that are not meeting certain financial and geographical criteria. The plan also committed the Company to exit 13 underperforming franchised stores that the Company determined to disenfranchise as of January 2, 1999. The identified stores to be exited under this plan are not part of the stores in the process of being closed in connection with the various business combination exit plans discussed above. These stores were originally identified as continuing company-owned stores at the date of acquisition, however, the stores have not performed as expected. The Company intends to exit the stores primarily through closing and franchising. In connection with this plan, the Company increased the store closure reserve by $5,610,000. The charge was included in the store closure provision in the accompanying consolidated statement of operations for the year ended January 2, 1999. F-25

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Consolidated Analysis The following table presents a summary of the activity in the store closure reserve for the periods indicated for stores to be closed and franchised: <TABLE> <CAPTION> Mrs. Fields Inc. and Original Pretzel Great Cookie Co. H&M Time American Pretzelmaker Consolidated ----------- ---------- -------- ---------- ------------ ------------ <S> <C> <C> <C> <C> <C> <C> Inception, September 18, 1996................... $ 5,060,000 $ -- $ -- $ -- $ -- $ 5,060,000 Utilization from inception (September 18, 1996) to December 28, 1996............... (305,000) -- -- -- -- (305,000) ----------- ---------- -------- ---------- -------- ----------- Balance, December 28, 1996................... 4,755,000 -- -- -- -- 4,755,000 To record obligations related to stores identified for closure upon acquisition, July 25, 1997............... -- 1,000,000 -- -- -- 1,000,000 To record obligations related to stores identified for closure upon acquisition, September 2, 1997...... -- -- 500,000 -- -- 500,000 Finalization of store closure plan for obligations related to stores originally identified............. 1,357,000 -- -- -- -- 1,357,000 Provision for continuing company-owned operating stores targeted for closure................ 538,000 -- -- -- -- 538,000 Utilization from December 28, 1996 to January 3, 1998........ (2,683,000) -- (1,000) -- -- (2,684,000) ----------- ---------- -------- ---------- -------- ----------- Balance, January 3, 1998................... 3,967,000 1,000,000 499,000 -- -- 5,466,000 To record obligations related to stores identified for closure upon acquisition, August 24, 1998........ -- -- -- 3,548,000 -- 3,548,000 To record obligations related to stores identified for closure upon acquisition, November 19, 1999...... -- -- -- -- 500,000 500,000 Additional reserves for stores originally identified for closure, January 2, 1999........ 1,693,000 -- -- -- -- 1,693,000 Additional reserves for continuing company- owned and franchised stores targeted for closure, January 2, 1999................... 4,674,000 367,000 264,000 305,000 -- 5,610,000 Utilization for the 52 weeks ended January 2, 1999................... (1,932,000) (19,000) (6,000) (149,000) -- (2,106,000) ----------- ---------- -------- ---------- -------- ----------- Balance, January 2, 1999................... $ 8,402,000 $1,348,000 $757,000 $3,704,000 $500,000 $14,711,000 =========== ========== ======== ========== ======== =========== </TABLE> F-26

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The following table presents a summary of activity for stores originally identified to be closed or franchised in connection with the applicable business combination for the periods indicated: <TABLE> <CAPTION> Mrs. Fields Inc. and Original Cookie H&M Pretzel Time Great American Pretzelmaker Consolidated ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- To Be To Be To Be To Be To Be To Be To Be To Be To Be To Be To Be To Be Closed Franchised Closed Franchised Closed Franchised Closed Franchised Closed Franchised Closed Franchised ------ ---------- ------ ---------- ------ ---------- ------ ---------- ------ ---------- ------ ---------- <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> Stores identified for closure or franchise at inception, September 18, 1996........... 138 64 -- -- -- -- -- -- -- -- 138 64 Stores closed prior to Inception...... (13) -- -- -- -- -- -- -- -- -- (13) -- Stores closed or franchised from Inception (September 18, 1996) to December 28, 1996........... (17) (3) -- -- -- -- -- -- -- -- (17) (3) --- --- --- --- --- --- --- --- --- --- --- --- Balance, December 28, 1996........... 108 61 -- -- -- -- -- -- -- -- 108 61 Stores identified for Closure or franchise Upon acquisition, July 25, 1997.. -- -- 11 -- -- -- -- -- -- -- 11 -- Stores identified for Closure or franchise upon acquisition, September 2, 1997........... -- -- -- -- 4 -- -- -- -- -- 4 -- Stores closed or franchised from December 28, 1996 to January 3, 1998........ (70) (9) (3) -- -- -- -- -- -- -- (73) (9) --- --- --- --- --- --- --- --- --- --- --- --- Balance, January 3, 1998........ 38 52 8 -- 4 -- -- -- -- -- 50 52 Stores identified for closure or franchise upon acquisition, August 24, 1998........... -- -- -- -- -- -- 54 11 -- -- 54 11 Stores identified for closure or franchise upon acquisition, November 19, 1998........... -- -- -- -- -- -- -- -- 7 -- 7 -- Stores closed or franchised for the 52 weeks ended January 2, 1999........ (15) (16) (2) -- (1) -- (11) -- -- -- (29) (16) --- --- --- --- --- --- --- --- --- --- --- --- Balance, January 2, 1999........ 23 36 6 -- 3 -- 43 11 7 -- 82 47 === === === === === === === === === === === === </TABLE> F-27

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The following table presents a summary of changes in the property and equipment impairment reserves that were established in connection with the applicable business combination for the periods indicated for stores to be closed and franchised: <TABLE> <CAPTION> Mrs. Fields, Inc. and Original Great Cookie Co. H&M American Pretzelmaker Consolidated ------------ ---------- ---------- ------------ ------------ <S> <C> <C> <C> <C> <C> Inception, September 18, 1996................... $10,921,000 $ -- $ -- $ -- $10,921,000 Utilization from inception (September 18, 1996) to December 28, 1996 related to stores to be closed.... (854,000) -- -- -- (854,000) Utilization from inception (September 18, 1996) to December 28, 1996 related to stores to be franchised............. (215,000) -- -- -- (215,000) ----------- ---------- ---------- -------- ----------- Balance, December 28, 1996................... 9,852,000 -- -- -- 9,852,000 To record property and equipment impairment upon acquisition, July 25, 1997............... -- 2,500,000 -- -- 2,500,000 Utilization from December 28, 1996 to January 3, 1998 related to stores to be closed................. (3,299,000) (208,000) -- -- (3,507,000) Utilization from December 28, 1996 to January 3, 1998 related to stores to be franchised............. (492,000) -- -- -- (492,000) ----------- ---------- ---------- -------- ----------- Balance, January 3, 1998................... 6,061,000 2,292,000 -- -- 8,353,000 To record property and equipment impairment upon acquisition, August 24, 1998........ -- -- 2,150,000 -- 2,150,000 To record property and equipment impairment upon acquisition, September 9, 1998...... -- -- 973,000 -- 973,000 To record property and equipment impairment upon acquisition, November 19, 1998...... -- -- -- 327,000 327,000 Utilization for the 52 weeks ended January 2, 1999 related to stores to be closed........... (1,782,000) (93,000) (246,000) -- (2,121,000) Utilization for the 52 weeks ended January 2, 1999 related to stores to be franchised....... (435,000) (819,000) -- -- (1,254,000) ----------- ---------- ---------- -------- ----------- Balance, January 2, 1999................... $ 3,844,000 $1,380,000 $2,877,000 $327,000 $ 8,428,000 =========== ========== ========== ======== =========== </TABLE> 6. MANDATORILY REDEEMABLE CUMULATIVE PREFERRED STOCK OF PRETZEL TIME, INC. The mandatorily redeemable cumulative preferred stock of Pretzel Time (the "Pretzel Time Preferred Stock") is nonvoting and the preferred stockholders are entitled to cumulative preferred dividends of ten percent for three years, accrued and payable upon redemption. The Pretzel Time Preferred Stock must be redeemed at $10,000 per share, plus unpaid and accumulated dividends, on September 1, 1999. The excess of the redemption price over the carrying value is being accreted over the period from issuance to September 1, 1999, using the effective interest method and is being charged to the accumulated deficit of Pretzel Time. In the event of a liquidation or sale of Pretzel Time, the preferred stockholders are entitled to receive payment of $10,000 per share, plus accumulated dividends. During the period from the acquisition of a majority ownership in Pretzel Time (September 2, 1997) to January 2, 1999, Pretzel Time increased the liquidation preference of the Pretzel Time Preferred Stock by $212,000, in lieu of paying cash dividends. In addition, the Pretzel Time Preferred Stock was increased by $538,000, for the accretion required over time to amortize the original issue discount incurred at the time of issuance. As of January 2, 1999, accrued dividends of $339,000, were unpaid. During the period from September 2, 1997 to January 2, 1999, Pretzel Time repurchased 17.5 shares of the Pretzel Time Preferred Stock for an total of $175,000 in cash, or $10,000 per share, plus accrued dividends totaling approximately $20,200. As of January 2, 1999, there are 127 shares of Pretzel Time Preferred Stock issued and outstanding with a total liquidation preference of approximately $1,495,000. F-28

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 7. COMMITMENTS AND CONTINGENCIES Stock Pledged as Collateral Mrs. Fields' Holding has pledged all of the Company's capital stock as collateral for Mrs. Fields' Holding's 14 percent Senior Secured Discount Notes due December 1, 2005 (the " Mrs. Fields' Holding Discount Notes"). Mrs. Fields' Holding issued the Mrs. Fields' Holding Discount Notes on August 24, 1998, in connection with the Great American Acquisitions and the Mrs. Fields' Holding Equity Infusion (see Note 1). In connection with the issuance of the $55,000,000 principal amount at maturity of Mrs. Fields' Holding Discount Notes, Mrs. Fields' Holding recorded an total original issue discount of approximately $24,136,000. The principal amount of the Mrs. Fields' Holding Discount Notes will accrete at a rate of 14 percent compounded semi-annually to a total principal amount of $55,000,000 at December 1, 2002. Thereafter, the Mrs. Fields' Holding Discount Notes will accrue interest at the annual rate of 14 percent, payable semi-annually on June 1 and December 1 of each year, commencing June 1, 2003. Mrs. Fields' Holding is a holding company and does not have separate operations from which it can generate cash flows. Under the circumstances, Mrs. Fields' Holding would likely be dependent on its owners' and the Company's cash flows to make principal and interest payments when due. Interest payments totaling $7,700,000 per year will commence in 2003. The Company has not guaranteed, nor is it obligated to make principal or interest payments related to the Mrs. Fields' Holding Discount Notes. However, in accordance with the Company's Indenture, the Company may pay dividends to Mrs. Fields' Holding, in order for Mrs. Fields' Holding to service the debt, if no default or event of default occurs under the Indenture and certain fixed charge coverage ratios and consolidated net income tests are met. The Mrs. Fields' Holding Discount Notes are effectively subordinated to the Company's Senior Notes. Legal Matters The Company is the subject of certain legal actions, which it considers routine to its business activities. Management, after consultation with legal counsel, believes that the potential liability to the Company under any such actions is adequately accrued for or will not materially affect the Company's consolidated financial position or results of operations. Operating Leases The Company leases retail store facilities, office space and equipment under long-term noncancelable operating lease agreements with remaining terms of one to ten years. Certain of the retail store leases provide for contingent rentals based on gross revenues. Additionally, as part of the Company's franchising program, certain locations have been subleased to franchisees. Rent expense was as follows for the periods presented: <TABLE> <CAPTION> Inception (September 18, 53 Weeks 52 Weeks 1996) to Ended Ended December 28, January 3, January 2, 1996 1998 1999 -------------- ----------- ------------ <S> <C> <C> <C> Minimum rentals....................... $ 8,216,000 $30,654,000 $ 36,834,000 Contingent rentals.................... 105,000 432,000 553,000 Sub-lease rentals..................... (2,220,000) (8,756,000) (12,550,000) ----------- ----------- ------------ $ 6,101,000 $22,330,000 $ 24,837,000 =========== =========== ============ </TABLE> F-29

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) As of January 2, 1999, the future minimum lease payments due under operating leases (including future minimum lease payments for stores in the process of being closed or franchised), which include required lease payments for those stores that have been subleased, are as follows: <TABLE> <CAPTION> Fiscal Year ----------- <S> <C> 1999............................................................ $ 37,686,000 2000............................................................ 32,337,000 2001............................................................ 27,066,000 2002............................................................ 23,033,000 2003............................................................ 18,246,000 Thereafter...................................................... 33,504,000 ------------ $171,872,000 ============ As of January 2, 1999, the future minimum sublease payments due to the Company under these leases are as follows: <CAPTION> Fiscal Year ----------- <S> <C> 1999............................................................ $ 12,550,000 2000............................................................ 10,676,000 2001............................................................ 8,741,000 2002............................................................ 7,277,000 2003............................................................ 5,716,000 Thereafter...................................................... 8,717,000 ------------ $ 53,677,000 ============ </TABLE> Contractual Arrangements The Company entered into a supply agreement to buy frozen dough products through 2000. The agreement stipulates minimum annual purchase commitments of not less than 23,000,000 pounds of the products each year through the end of the contract. The Company also entered into two supply agreements to buy chocolate products through August 1999 and January 2000. The agreements stipulate minimum purchase commitments of which 1.9 million and 1.5 million pounds, respectively, had not been purchased as of January 2, 1999. The terms the frozen dough and chocolate purchase agreements include certain volume incentives and penalties. Under each, the Company and the supplier may terminate the supply agreement if the other party defaults on any of the performance covenants. The Company also entered into several other immaterial purchase agreements to buy products. The Company has assumed an agreement with a third-party lender to provide financing to franchisees for the purchase of existing Company stores. Under the terms of the agreement, a maximum of $5,000,000 may be borrowed from the lender by franchisees of which the Company has agreed to guarantee a maximum of $2,000,000. Outstanding franchisee borrowings guaranteed by the Company under this agreement at January 3, 1998 and January 2, 1999 were approximately $550,000 and $295,000, respectively. Under the terms of the agreement, the Company is required to assume any franchisee obligations which are in default as defined. As of January 2, 1999, the Company has assumed obligations totaling approximately $54,000, respectively, which are included in capital lease obligations. The Company recorded deferred credits of approximately $1,204,000 as of September 18, 1996. The deferred credits represent volume rebates associated with the assumption of a long-term marketing and supply F-30

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) agreement with a supplier in connection with the Mrs. Fields Inc. and affiliates and Original Cookie Company and affiliates business combinations discussed in Note 1. Under terms of the agreement, the Company is obligated to purchase a minimum amount of product from the supplier. The supplier periodically prepays rebates to the Company for anticipated purchases. The Company records the prepayments as deferred credits and amortizes them ratably as purchases are made from the supplier. This agreement was amended in January 1997 and an additional $600,000 in deferred credits were recorded. The amended agreement expires on the later of December 31, 2003 or when the Company has met its revised purchase commitment. In conjunction with this amendment, certain minimum commitments from the previous agreement were carried forward and others were forgiven. Additionally, in November 1997, Pretzel Time entered into a long-term marketing and supply agreement with a supplier. Under terms of the agreement, the Company is obligated to purchase a minimum amount of product from the supplier. An additional $437,000 in deferred credits were recorded under this agreement. The termination date of this agreement will be the later of December 31, 2003 or when Pretzel Time has met its purchase commitment. Under these agreements, the Company recognized approximately $1,393,000, and $812,000 primarily as a reduction to food cost of sales during the years ended January 3, 1998 and January 2, 1999. In November 1996, the Company entered into a consulting agreement (the "Consulting Agreement") with Debbi Fields, a director of the Company, under which Debbi Fields travels and performs public relations and advertising activities on behalf of the Company for at least 50 days a year for a fee of $250,000 per year, with an option to perform these services for 20 additional days a year for additional pay of $5,000 per day. The compensation increases by 10 percent a year beginning on January 1, 1999. The Consulting Agreement expires on December 31, 1999. Under the Consulting Agreement, Debbi Fields may not disclose any confidential information of the Company, such as recipes and trade secrets, and may not, without the prior written consent of the Company, compete with the Company. The Company has entered into employment agreements with five key officers with terms of two to three years. The agreements are for a total annual base salary of $1,095,000. If the Company terminates employment without cause, or the employee terminates employment with good reason, the employee can receive in severance pay the amount equal to the product of his or her then current semi-monthly base salary by the greater of the number of semi-monthly periods from the notice of termination or 36 to 48 semi-monthly periods, plus a portion of any discretionary bonus that would otherwise have been payable. The agreements have customary provisions for other benefits and also include noncompetition clauses. 8. RELATED-PARTY TRANSACTIONS As of January 3, 1998 and January 2, 1999, the Company had receivables due from franchisees and licensees, primarily related to prepaid rent which the Company had paid on behalf of franchisees, totaling approximately $2,176,000 and $6,003,000, respectively. These amounts are included in amounts due from franchisees and affiliates and are net of allowance for doubtful accounts totaling $582,000 and $1,078,000, respectively. As of January 3, 1998 and January 2, 1999, the Company had net payables of approximately $105,000 and $150,000, respectively, due to Mrs. Fields' Holding. The amounts due to or from Mrs. Fields' Holding are recorded in prepaid rent and other in the accompanying consolidated balance sheets. During the years ended January 3, 1998 and January 2, 1999, the Company accrued approximately $441,000 and $0, respectively, of interest expense due to Mrs. Fields' Holding related to the convertible subordinated notes Mrs. Fields' Holding purchased. As part of the Refinancing, Mrs. Fields' Holding converted all of the $4,643,000 convertible subordinated notes to equity and the notes were cancelled (see Note 3). F-31

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Company paid fees to Korn/Ferry International ("Korn/Ferry") totaling approximately $157,000 and $70,600, during the years ended January 3, 1998 and January 2, 1999, respectively. Korn/Ferry is an executive search firm of which one of the Company's directors is the Chairman. A director of the Company is a consultant and an advisor to Dillon Read & Co., Inc. ("Dillon Read"). In 1997, the Company paid to Dillon Read a fee of approximately $707,000 in connection with the restructuring of the Company in September 1996. The director's company did not receive a fee from the Company during the fiscal year ended January 2, 1999. The Company believes that the arrangements were on terms that could have been obtained from an unaffiliated third party. As of January 2, 1999, the Company has a loan due from the founder and minority stockholder of Pretzel Time totaling $567,000. The note bears interest at an annual rate of ten percent and is payable in monthly installments of principal and interest beginning January 1998 by setoff of, and to the extent of, the founder's bonus payments and dividends received by the founder in his Pretzel Time stock; provided that in any calendar year no more than $100,000 may be so offset. In addition, as of January 2, 1999, the Company is due approximately $451,000 from the founder in connection with certain lease payments related to the purchase of Pretzel Time for which the Company is indemnified. These amounts are recorded in accounts receivable and other assets in the accompanying consolidated balance sheets. The Company and Mrs. Fields' Holding expect to enter into a tax-sharing arrangement but as of the date of these financial statements no such agreement has been finalized. 9. EMPLOYEE BENEFIT PLAN The Company sponsors the Mrs. Fields' Original Cookies, Inc. 401(k) Retirement Savings Plan (the "Plan") for all eligible employees. Under the terms of the Plan, employees may make contributions to the Plan, a portion of which is matched by contributions from the Company. The total Company contributions to the Plan for the years ended January 3, 1998 and January 2, 1999 were approximately $97,900 and $171,000, respectively. 10. REPORTABLE SEGMENTS Operating segments are components of the Company for which separate financial information is available that is evaluated regularly by the Chief Operating decision maker in deciding how to allocate resources and in assessing performance. This information is reported on the basis that it is used internally for evaluating segment performance. Mrs. Fields has two reportable operating segments; namely, company-owned stores and related activity and franchising and licensing activity. The segments are determined by revenue source; direct sales or royalties and license fees. The company-owned stores segment consists of both cookie and pretzel stores owned and operated by Mrs. Fields. The franchising and licensing segment consists of cookie and pretzel stores, which are owned and operated by third parties who pay Mrs. Fields an initial franchise or license fee and monthly royalties based on a percentage of gross sales and other licensing activity not related to cookie or pretzel stores. The accounting policies for the segments are discussed in the summary of significant accounting policies (see Note 2). Sales and transfers between segments are eliminated in consolidation. F-32

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Mrs. Fields evaluates performance of each segment based on contribution margin. Mrs. Fields does not allocate any interest income, interest expense, depreciation and amortization or assets to its reportable operating segments. Segment revenue and contribution margin are presented in the following table. <TABLE> <CAPTION> Company-owned Franchising and Stores Licensing Total ------------- --------------- ----------- <S> <C> <C> <C> Period ended December 28, 1996 Revenue.............................. $40,849,000 $1,267,000 $42,116,000 Contribution Margin.................. 10,761,000 1,267,000 12,028,000 Year ended January 3, 1998 Revenue.............................. 127,845,000 6,563,000 134,408,000 Contribution Margin.................. 28,985,000 6,563,000 35,548,000 Year ended January 2, 1999 Revenue.............................. 140,235,000 14,001,000 154,236,000 Contribution Margin.................. 30,337,000 10,414,000 40,751,000 </TABLE> The reconciliation of contribution margin to net income (loss) is as follows: <TABLE> <CAPTION> Period Ended December 28, 1996 Fiscal 1997 Fiscal 1998 ----------------- ------------ ------------ <S> <C> <C> <C> Contribution margin............. $12,028,000 $ 35,548,000 $ 40,751,000 General and administrative expense........................ (4,035,000) (16,192,000) (19,017,000) Store closure provision......... -- (538,000) (7,303,000) Depreciation and amortization... (2,344,000) (10,403,000) (19,820,000) Interest expense................ (1,793,000) (7,584,000) (12,574,000) Other expense, net.............. (1,895,000) (1,805,000) (1,180,000) ----------- ------------ ------------ Net income (loss)............... $ 1,961,000 $ (974,000) $(19,143,000) =========== ============ ============ </TABLE> Geographic segment information is as follows: <TABLE> <CAPTION> Domestic International Domestic International Company-owned Company-owned Franchising Franchising Stores Stores and Licensing and Licensing ------------- ------------- ------------- ------------- <S> <C> <C> <C> <C> Revenue Period ended December 28, 1996............... $ 40,849,000 $ -- $ 1,158,000 $109,000 Fiscal 1997............. 127,736,000 109,000 6,150,000 413,000 Fiscal 1998............. 140,018,000 217,000 13,738,000 263,000 </TABLE> Revenues from international franchising and licensing are secured from Canada and Australia with no other countries having material representation. Revenues from international company-owned stores are immaterial. There were no customers who accounted for more than 10% of Mrs. Fields' total revenue or either segment's revenue. F-33

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 11. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION The Company's obligation related to its $140,000,000 total principal amount of Senior Notes due 2004 (see Note 3) is guaranteed on a joint and several basis and on a senior basis by four of the Company's wholly owned subsidiaries (the "Guarantors"). These guarantees are general unsecured obligations of the Guarantors, rank senior in right of payment to all subordinated indebtedness of the Guarantors and rank pari passu in right of payment with all existing and future senior indebtedness of the Guarantors. There are no restrictions on the Company's ability to obtain cash dividends or other distributions of funds from the Guarantors, except those imposed by applicable law. The following supplemental financial information sets forth, on a condensed consolidating basis, balance sheets, statements of operations and statements of cash flows for Mrs. Fields' Original Cookies, Inc. (the "Parent Company"), Great American Cookie Company, Inc., The Mrs. Fields' Brand, Inc., Pretzelmaker Holdings, Inc., which are Guarantors, and Pretzel Time, Inc., which will become a Guarantor (collectively, the "Guarantor Subsidiaries") and Mrs. Fields' Cookies Australia, Mrs. Fields' Cookies (Canada) Ltd., H & M Canada and Pretzelmaker of Canada, and three partially owned subsidiaries, (collectively, the "Non- guarantor Subsidiaries"). The Company has not presented separate financial statements and other disclosures concerning the Guarantor Subsidiaries because management has determined that such information is not material to investors. F-34

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE PERIOD FROM INCEPTION (SEPTEMBER 18, 1996) TO DECEMBER 28, 1996 (Dollars in thousands) <TABLE> <CAPTION> Non- Parent Guarantor Guarantor Company Subsidiary Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> NET REVENUES............ $41,557 $ 559 $-- $-- $42,116 ------- ----- ---- ---- ------- OPERATING COSTS AND EXPENSES: Selling and store occupancy costs...... 19,492 -- -- -- 19,492 Cost of sales......... 10,596 -- -- -- 10,596 General and administrative....... 3,871 146 18 -- 4,035 Depreciation and amortization......... 2,027 317 -- -- 2,344 ------- ----- ---- ---- ------- Total operating costs and expenses........... 35,986 463 18 -- 36,467 ------- ----- ---- ---- ------- Income (loss) from operations......... 5,571 96 (18) -- 5,649 INTEREST EXPENSE AND OTHER, net............. (1,410) (383) -- -- (1,793) ------- ----- ---- ---- ------- Income (loss) before provision for income taxes, preferred stock accretion and dividends of subsidiaries and equity in net loss of consolidated subsidiaries......... 4,161 (287) (18) -- 3,856 PROVISION FOR INCOME TAXES.................. (1,798) -- -- -- (1,798) ------- ----- ---- ---- ------- Income (loss) before preferred stock accretion and dividends of subsidiaries and equity in net loss of consolidated subsidiaries......... 2,363 (287) (18) -- 2,058 PREFERRED STOCK ACCRETION AND DIVIDENDS OF SUBSIDIARIES........ -- (97) -- -- (97) EQUITY IN NET LOSS OF CONSOLIDATED SUBSIDIARIES........... (402) -- -- 402 -- ------- ----- ---- ---- ------- NET INCOME (LOSS)....... $ 1,961 $(384) $(18) $402 $ 1,961 ======= ===== ==== ==== ======= </TABLE> F-35

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE PERIOD FROM INCEPTION (SEPTEMBER 18, 1996) TO DECEMBER 28, 1996 (Dollars in thousands) <TABLE> <CAPTION> Non- Parent Guarantor Guarantor Company Subsidiary Subsidiaries Eliminations Consolidated -------- ---------- ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> NET CASH PROVIDED BY OPERATING ACTIVITIES.. $ 6,990 $ 589 $ 30 $-- $ 7,609 -------- ------- ---- ---- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Net cash paid for acquisitions and related expenses.... (12,508) (7,000) -- -- (19,508) Purchase of property and equipment, net.. (1,622) (1) -- -- (1,623) -------- ------- ---- ---- -------- Net cash used in investing activities........ (14,130) (7,001) -- -- (21,131) -------- ------- ---- ---- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the issuance of common stock............... 15,000 -- -- -- 15,000 Proceeds from the issuance of mandatorily redeemable cumulative preferred stock of subsidiary.......... -- 3,500 -- -- 3,500 Proceeds from the issuance of note payable............. -- 3,500 -- -- 3,500 Principal payments on long-term debt...... (1,769) -- -- -- (1,769) -------- ------- ---- ---- -------- Net cash provided by financing activities.......... 13,231 7,000 -- -- 20,231 -------- ------- ---- ---- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS.. 6,091 588 30 -- 6,709 CASH AND CASH EQUIVALENTS, beginning of period............. -- -- -- -- -- -------- ------- ---- ---- -------- CASH AND CASH EQUIVALENTS, end of period................ $ 6,091 $ 588 $ 30 $-- $ 6,709 ======== ======= ==== ==== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid........ $ 28 $ -- $-- $-- $ 28 </TABLE> F-36

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET AS OF JANUARY 3, 1998 (Dollars in Thousands) ASSETS <TABLE> <CAPTION> Non- Parent Guarantor Guarantor Company Subsidiary Subsidiaries Eliminations Consolidated -------- ---------- ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> CURRENT ASSETS: Cash and cash equivalents.......... $ 14,270 $ 725 $1,292 $ -- $ 16,287 Accounts receivable, net.................. 1,388 -- 147 -- 1,535 Amounts due from (to) franchisees and licensees, net....... 1,517 659 -- -- 2,176 Inventories........... 3,094 -- 6 -- 3,100 Other current assets.. 6,593 (615) (253) -- 5,725 -------- ------- ------ -------- -------- Total current assets............. 26,862 769 1,192 -- 28,823 PROPERTY AND EQUIPMENT, net.................... 28,907 1 294 -- 29,202 INTANGIBLES, net........ 59,928 17,725 6,041 -- 83,694 INVESTMENT IN SUBSIDIARIES........... 23,089 -- -- (23,089) -- OTHER ASSETS............ 7,902 -- 63 -- 7,965 -------- ------- ------ -------- -------- $146,688 $18,495 $7,590 $(23,089) $149,684 -------- ------- ------ -------- -------- LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Current portion of long-term debt and capital lease obligations.......... $ -- $ -- $ 614 $ -- $ 614 Accounts payable...... 3,621 36 148 -- 3,805 Accrued liabilities... 10,499 25 747 -- 11,271 -------- ------- ------ -------- -------- Total current liabilities........ 14,120 61 1,509 -- 15,690 LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, net of current portion..... 100,000 -- 467 -- 100,467 OTHER ACCRUED LIABILITIES............ 1,802 -- -- -- 1,802 MANDATORILY REDEEMABLE CUMULATIVE PREFERRED STOCK.................. -- -- 902 -- 902 MINORITY INTEREST....... -- -- -- 58 58 STOCKHOLDER'S EQUITY.... 30,766 18,434 4,712 (23,147) 30,765 -------- ------- ------ -------- -------- $146,688 $18,495 $7,590 $(23,089) $149,684 ======== ======= ====== ======== ======== </TABLE> F-37

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED JANUARY 3, 1998 (Dollars in thousands) <TABLE> <CAPTION> Non- Parent Guarantor Guarantor Company Subsidiary Subsidiaries Eliminations Consolidated -------- ---------- ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> NET REVENUES............ $125,991 $ 2,004 $7,077 $ (664) $134,408 -------- ------- ------ ------ -------- OPERATING COSTS AND EXPENSES: Selling and store occupancy costs...... 63,765 -- 3,731 (664) 66,832 Cost of sales......... 31,173 -- 855 -- 32,028 General and administrative....... 14,215 1,066 911 -- 16,192 Store closure provision............ 538 -- -- -- 538 Depreciation and amortization......... 8,745 1,125 533 -- 10,403 -------- ------- ------ ------ -------- Total operating costs and expenses........... 118,436 2,191 6,030 (664) 125,993 -------- ------- ------ ------ -------- Income (loss) from operations......... 7,555 (187) 1,047 -- 8,415 INTEREST EXPENSE AND OTHER, net............. (6,329) (1,230) (393) -- (7,952) -------- ------- ------ ------ -------- Income (loss) before provision for income taxes, preferred stock accretion and dividends of subsidiaries and equity in net loss of consolidated subsidiaries......... 1,226 (1,417) 654 -- 463 PROVISION FOR INCOME TAXES.................. (535) (25) (95) -- (655) -------- ------- ------ ------ -------- Income (loss) before preferred stock accretion and dividends of subsidiaries and equity in net loss of consolidated subsidiaries......... 691 (1,442) 559 -- (192) PREFERRED STOCK ACCRETION AND DIVIDENDS OF SUBSIDIARIES........ -- (338) (306) -- (644) EQUITY IN NET LOSS OF CONSOLIDATED SUBSIDIARIES........... (1,665) -- -- 1,527 (138) -------- ------- ------ ------ -------- NET INCOME (LOSS)....... $ (974) $(1,780) $ 253 $1,527 $ (974) ======== ======= ====== ====== ======== </TABLE> F-38

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JANUARY 3, 1998 (Dollars in thousands) <TABLE> <CAPTION> Non- Parent Guarantor Guarantor Company Subsidiary Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES............. $ (766) $387 $1,298 $-- $ 919 ------- ---- ------ ---- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Net cash paid for acquisitions and related expenses..... (10,949) -- -- -- (10,949) Purchase of property and equipment, net... (4,556) -- -- -- (4,556) ------- ---- ------ ---- ------- Net cash used in investing activities......... (15,505) -- -- -- (15,505) ------- ---- ------ ---- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt.... 108,250 -- -- -- 108,250 Principal payments on long-term debt and capital lease obligations.......... (76,759) (250) (36) -- (77,045) Payment of debt financing costs...... (5,976) -- -- -- (5,976) Payment of cash dividend to Mrs. Fields' Holding...... (1,065) -- -- -- (1,065) ------- ---- ------ ---- ------- Net cash provided by (used in) financing activities......... 24,450 (250) (36) -- 24,164 ------- ---- ------ ---- ------- NET INCREASE IN CASH AND CASH EQUIVALENTS....... 8,179 137 1,262 -- 9,578 CASH AND CASH EQUIVALENTS, beginning of year................ 6,091 588 30 -- 6,709 ------- ---- ------ ---- ------- CASH AND CASH EQUIVALENTS, end of year................... $14,270 $725 $1,292 $-- $16,287 ======= ==== ====== ==== ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid....... $ 7,607 $789 $ 20 $-- $ 8,416 Taxes paid.......... 181 25 11 -- 217 </TABLE> F-39

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET AS OF JANUARY 2, 1999 (Dollars in Thousands) ASSETS <TABLE> <CAPTION> Non- Parent Guarantor Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated -------- ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> CURRENT ASSETS: Cash and cash equivalents.......... $ 3,539 $ 1,134 $ 78 $ -- $ 4,751 Accounts receivable, net.................. 2,860 304 44 -- 3,208 Amounts due from franchisees and licensees, net....... 1,297 4,706 -- -- 6,003 Inventories........... 4,631 863 9 -- 5,503 Other current assets and amounts due from (to) affiliates, net.................. 39,368 (33,898) (592) -- 4,878 -------- ------- ---- -------- -------- Total current assets............. 51,695 (26,891) (461) -- 24,343 PROPERTY AND EQUIPMENT, net.................... 29,900 1,654 243 -- 31,797 INTANGIBLES, net........ 75,875 95,601 320 -- 171,796 INVESTMENT IN SUBSIDIARIES........... 66,484 -- -- (66,484) -- OTHER ASSETS............ 3,688 252 30 -- 3,970 -------- ------- ---- -------- -------- $227,642 $70,616 $132 $(66,484) $231,906 ======== ======= ==== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt and capital lease obligations.......... $ 7,141 $ 1,204 $-- $ -- $ 8,345 Accounts payable...... 14,223 564 69 -- 14,856 Accrued liabilities... 10,956 2,895 18 -- 13,869 -------- ------- ---- -------- -------- Total current liabilities........ 32,320 4,663 87 -- 37,070 LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, net of current portion........ 142,367 216 61 -- 142,644 OTHER ACCRUED LIABILITIES............ 10,134 -- -- -- 10,134 MANDATORILY REDEEMABLE CUMULATIVE PREFERRED STOCK.................. -- 1,261 -- -- 1,261 MINORITY INTEREST....... -- -- -- 119 119 STOCKHOLDERS' EQUITY.... 42,821 64,476 (16) (66,603) 40,678 -------- ------- ---- -------- -------- $227,642 $70,616 $132 $(66,484) $231,906 ======== ======= ==== ======== ======== </TABLE> F-40

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE 52 WEEKS ENDED JANUARY 2, 1999 (Dollars in thousands) <TABLE> <CAPTION> Non- Parent Guarantor Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated -------- ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> NET REVENUES........... $144,057 $13,939 $377 $(4,137) $154,236 -------- ------- ---- ------- -------- OPERATING COSTS AND EXPENSES: Selling and store occupancy costs..... 76,437 -- 334 (1,768) 75,003 Cost of sales........ 37,165 3,587 99 (2,369) 38,482 General and administrative...... 21,213 5,107 -- -- 26,320 Depreciation and amortization........ 16,624 3,196 -- -- 19,820 -------- ------- ---- ------- -------- Total operating costs and expenses.......... 151,439 11,890 433 (4,137) 159,625 -------- ------- ---- ------- -------- (Loss) income from operations.......... (7,382) 2,049 (56) -- (5,389) INTEREST EXPENSE AND OTHER, net............ (13,064) 81 -- -- (12,983) -------- ------- ---- ------- -------- (Loss) income before provision for income taxes, preferred stock accretion and dividends of subsidiaries and equity in net loss of consolidated subsidiaries........ (20,446) 2,130 (56) -- (18,372) PROVISION FOR INCOME TAXES................. (197) (119) -- -- (316) -------- ------- ---- ------- -------- (Loss) income before preferred stock accretion and dividends of subsidiaries and equity in net loss of consolidated subsidiaries........ (20,643) 2,011 (56) -- (18,688) PREFERRED STOCK ACCRETION AND DIVIDENDS OF SUBSIDIARIES.......... -- (444) -- -- (444) EQUITY IN NET LOSS OF CONSOLIDATED SUBSIDIARIES.......... 1,500 -- -- (1,511) (11) -------- ------- ---- ------- -------- NET (LOSS) INCOME...... $(19,143) $ 1,567 $(56) $(1,511) $(19,143) ======== ======= ==== ======= ======== </TABLE> F-41

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE 52 WEEKS ENDED JANUARY 2, 1999 (Dollars In thousands) <TABLE> <CAPTION> Non- Parent Guarantor Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated -------- ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES............. $(23,820) $ 33,382 $(133) $-- $ 9,429 -------- -------- ----- ---- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Net cash paid for acquisitions and related expenses..... $(39,873) 7,038 -- -- $(32,835) Purchase of property and equipment, net... (8,228) (7) -- -- (8,235) Proceeds for asset sales................ 176 -- -- -- 176 -------- -------- ----- ---- -------- Net cash (used in) provided by investing activities......... (47,925) 7,031 -- -- (40,894) -------- -------- ----- ---- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long- term debt............ 39,400 -- -- -- 39,400 Payment of debt financing costs...... (7,062) -- -- -- (7,062) Equity infusion from Mrs. Fields' Holding.............. 29,056 -- -- -- 29,056 Principal payments on long-term debt and capital lease obligations.......... (257) (41,000) -- -- (41,257) Capital lease repayments........... (123) -- -- -- (123) Reduction in preferred stock of Pretzel Time................. -- (85) -- -- (85) -------- -------- ----- ---- -------- Net cash provided by (used in) financing activities......... 61,014 (41,085) -- -- 19,929 -------- -------- ----- ---- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS....... (10,731) (672) (133) -- (11,536) CASH AND CASH EQUIVA- LENTS, beginning of pe- riod................... 14,270 1,806 211 -- 16,287 -------- -------- ----- ---- -------- CASH AND CASH EQUIVA- LENTS, end of Period... $ 3,539 $ 1,134 $ 78 $-- $ 4,751 ======== ======== ===== ==== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMA- TION: Interest paid......... $ 12,405 $ 35 $ -- $-- $ 12,440 Taxes paid............ 141 68 -- -- 209 </TABLE> F-42

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands) ASSETS <TABLE> <CAPTION> January 2, July 3, 1999 1999 ---------- ------- (Unaudited) <S> <C> <C> CURRENT ASSETS: Cash and cash equivalents............................... $ 4,751 $ 4,645 Accounts receivable, net of allowance for doubtful accounts of $74 and $69, respectively.................. 3,208 1,570 Amounts due from franchisees and licensees, net of allowance for doubtful accounts of $1,078 and $897 respectively........................................... 6,003 4,808 Inventories............................................. 5,503 4,913 Prepaid rent and other.................................. 4,017 3,868 Deferred income tax assets, current portion............. 861 861 -------- -------- Total current assets.................................. 24,343 20,665 -------- -------- PROPERTY AND EQUIPMENT, at cost: Leasehold improvements.................................. 29,914 32,889 Equipment and fixtures.................................. 17,108 11,913 Land.................................................... 240 240 -------- -------- 47,262 45,042 Less accumulated depreciation and amortization.......... (15,465) (15,487) -------- -------- Net property and equipment............................ 31,797 29,555 -------- -------- DEFERRED INCOME TAX ASSETS, net of current portion........ 2,638 2,638 -------- -------- GOODWILL, net of accumulated amortization of $11,231 and $16,446, respectively.................................... 145,782 140,417 -------- -------- TRADEMARKS AND OTHER INTANGIBLES, net of accumulated amortization of $2,615 and $3,239, respectively.......... 14,296 13,772 -------- -------- DEFERRED LOAN COSTS, net of accumulated amortization of $1,320 and $2,341, respectively.......................... 11,718 11,852 -------- -------- OTHER ASSETS.............................................. 1,332 414 -------- -------- $231,906 $219,313 ======== ======== </TABLE> The accompanying notes to condensed consolidated financial statements are an integral part of these balance sheets. F-43

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Continued) (dollars in thousands, except share data) LIABILITIES AND STOCKHOLDER'S EQUITY <TABLE> <CAPTION> January 2, July 3, 1999 1999 --------- -------- (Unaudited) <S> <C> <C> CURRENT LIABILITIES: Bank overdraft........................................... $ 4,133 $ 2,902 Current portion of long-term debt........................ 8,046 929 Current portion of capital lease obligations............. 299 444 Line of credit........................................... -- 7,000 Accounts payable......................................... 10,723 10,436 Accrued liabilities...................................... 3,597 2,878 Current portion of store closure reserve................. 4,577 4,577 Accrued salaries, wages and benefits..................... 3,155 3,065 Accrued interest payable................................. 1,260 1,298 Sales taxes payable...................................... 962 378 Deferred income.......................................... 318 192 -------- -------- Total current liabilities.............................. 37,070 34,099 LONG-TERM DEBT, net of current portion..................... 141,647 141,424 STORE CLOSURE RESERVE, net of current portion.............. 10,134 8,419 CAPITAL LEASE OBLIGATIONS, net of current portion.......... 997 1,229 -------- -------- Total liabilities...................................... 189,848 185,171 -------- -------- MANDATORILY REDEEMABLE CUMULATIVE PREFERRED STOCK of PTI (a wholly owned subsidiary), aggregate liquidation preference of $1,495 and $1,525, respectively........................ 1,261 1,440 -------- -------- MINORITY INTEREST.......................................... 119 123 -------- -------- STOCKHOLDER'S EQUITY: Common stock, $.01 par value; 1,000 shares authorized and 400 shares outstanding.................................. -- -- Additional paid-in capital............................... 59,899 61,899 Accumulated deficit...................................... (19,221) (29,320) -------- -------- Total stockholder's equity............................. 40,678 32,579 -------- -------- $231,906 $219,313 ======== ======== </TABLE> The accompanying notes to condensed consolidated financial statements are an integral part of these balance sheets. F-44

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands) <TABLE> <CAPTION> 26 Weeks Ended 26 Weeks Ended July 4, 1998 July 3, 1999 -------------- -------------- (Unaudited) <S> <C> <C> REVENUES: Net store and food sales....................... $58,687 $ 71,915 Franchising, net............................... 2,971 11,562 Licensing, net................................. 683 688 ------- -------- Total revenues............................... 62,341 84,165 ------- -------- OPERATING COSTS AND EXPENSES: Selling and store occupancy costs.............. 33,908 41,118 Cost of sales.................................. 15,185 21,856 General and administrative..................... 8,587 10,873 Depreciation and amortization.................. 6,197 11,263 ------- -------- Total operating costs and expenses........... 63,877 85,110 ------- -------- Loss from operations........................... (1,536) (945) ------- -------- OTHER INCOME (EXPENSE), net: Interest expense............................... (5,626) (8,686) Interest income................................ 417 78 Other expense.................................. (144) (110) ------- -------- Total other expense, net..................... (5,353) (8,718) ------- -------- Loss before provision for income taxes, preferred stock accretion and dividends of subsidiaries and minority interest............ (6,889) (9,663) PROVISION FOR INCOME TAXES....................... (14) (210) ------- -------- Loss before preferred stock accretion and dividends of subsidiaries and minority interest...................................... (6,903) (9,873) PREFERRED STOCK ACCRETION AND DIVIDENDS OF SUBSIDIARIES.................................... (222) (222) MINORITY INTEREST................................ (176) (4) ------- -------- Net loss....................................... $(7,301) $(10,099) ======= ======== </TABLE> The accompanying notes to condensed consolidated financial statements are an integral part of these statements. F-45

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) <TABLE> <CAPTION> 26 Weeks Ended 26 Weeks Ended July 4, 1998 July 3, 1999 -------------- -------------- (Unaudited) <S> <C> <C> INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH FLOWS FROM OPERATING ACTIVITIES: Net loss........................................ $(7,301) $(10,099) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization.................. 6,197 11,263 Amortization of deferred loan costs............ 427 1,021 Loss on sale of assets......................... 144 117 Preferred stock accretion and dividends of subsidiaries.................................. 222 222 Minority interest.............................. 176 4 Changes in assets and liabilities: Accounts receivable, net...................... 387 1,638 Amounts due from franchisees and licensees, net.......................................... 181 1,195 Inventories................................... 240 590 Prepaid rent and other........................ 523 149 Other assets.................................. 261 918 Accounts payable and accrued liabilities...... (2,518) (1,006) Bank overdraft................................ -- (1,231) Store closure reserve......................... (946) (1,311) Accrued salaries, wages and benefits.......... 32 (90) Accrued interest payable...................... (171) 38 Sales taxes payable........................... (562) (584) Deferred income............................... (598) (126) ------- -------- Net cash provided by (used in) operating activities.................................. (3,306) 2,708 ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Net cash paid for acquisition expenses.......... (928) (100) Purchase of property and equipment.............. (3,342) (2,604) ------- -------- Net cash used in investing activities........ (4,270) (2,704) ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Reduction of long-term debt..................... -- (5,340) Payment of debt financing costs................. -- (1,155) Borrowings under line of credit................. -- 7,000 Collection of common stock subscriptions receivable..................................... (265) -- Principal payments on capital lease obligations.................................... (138) (572) Reduction in preferred stock.................... (42) (43) ------- -------- Net cash used in financing activities........ (445) (110) ------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..................................... (8,021) (106) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD.......................................... 16,287 4,751 ------- -------- CASH AND CASH EQUIVALENTS AT END OF THE PERIOD... $ 8,266 $ 4,645 ======= ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest......................... $ 5,370 $ 7,588 ======= ======== Cash paid for income taxes..................... $ 36 $ 164 ======= ======== </TABLE> The accompanying notes to condensed consolidated financial statements are an integral part of these statements. F-46

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared by Mrs. Fields' Original Cookies, Inc. and subsidiaries ("Mrs. Fields") in accordance with the rules and regulations of the Securities and Exchange Commission for Form 10-Q, and accordingly, do not include all of the information and footnotes required by generally accepted accounting principles. In the opinion of management, these condensed consolidated financial statements reflect all adjustments, which consist only of normal recurring adjustments necessary to present fairly the financial position of Mrs. Fields as of July 3, 1999 and January 2, 1999, and the results of its operations and its cash flows as of and for the periods presented herein. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended January 2, 1999 contained in Mrs. Fields' Annual Report on Form 10-K. The results of operations for the 26 weeks ended July 3, 1999 are not necessarily indicative of the results that may be expected for the remainder of the fiscal year ending January 1, 2000. Loss per share is not presented as Mrs. Fields is wholly owned by Mrs. Fields' Holding Company, Inc. ("Mrs. Fields' Holding") and therefore, its shares are not publicly traded. (2) RECLASSIFICATIONS Certain reclassifications have been made to the prior period's condensed consolidated financial statements to conform with the current period's presentation. (3) PRO FORMA RESULTS OF OPERATIONS The following unaudited pro forma information presents a summary of the consolidated results of operations of Mrs. Fields assuming the Great American, Deblan, Chocolate Chip, Karp, Cookie Conglomerate and Pretzelmaker acquisitions and related financings had occurred at the beginning of the 26 weeks ended July 4, 1998. Pro forma adjustments have been made to give effect to amortization of goodwill, interest expense on acquisition debt and certain other adjustments. The pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had the acquisitions been consummated at the beginning of the 26 weeks ended July 4, 1998. <TABLE> <CAPTION> 26 Weeks Ended July 4, 1998 -------------- (Unaudited) <S> <C> Total revenues........................................... $92,640 Income from operations................................... 630 Net loss................................................. (8,064) </TABLE> (4) REPORTABLE SEGMENTS Management evaluates performance at Mrs. Fields using two reportable operating segments, namely, (1) company-owned stores and related activity and (2) franchising and licensing activity. The segments are determined by revenue source; direct sales or royalties and license fees. The company-owned stores segment consists of both cookie and pretzel stores owned and operated by Mrs. Fields. The franchising and licensing segment consists of cookie and pretzel stores, which are owned and operated by third parties who pay Mrs. Fields an initial franchise fee and monthly royalties based on a percentage of gross sales and other licensing activity not related to cookie or pretzel stores. Sales and transfers between segments are eliminated in consolidation. F-47

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(continued) (Unaudited) Mrs. Fields evaluates performance of each segment based on contribution margin. Mrs. Fields does not allocate any interest income, interest expense, depreciation and amortization or assets to its reportable operating segments. Segment revenue and contribution margin are presented in the following table. <TABLE> <CAPTION> Company- Franchising owned and Stores Licensing Total -------- ----------- ------- <S> <C> <C> <C> 26 weeks ended July 4, 1998 Total revenues................................. $58,687 $ 3,654 $62,341 Contribution margin............................ 9,594 3,654 13,248 26 weeks ended July 3, 1999 Total revenues................................. $71,915 $12,250 $84,165 Contribution margin............................ 13,404 7,787 21,191 </TABLE> The reconciliation of contribution margin to net loss is as follows: <TABLE> <CAPTION> 26 Weeks Ended 26 Weeks Ended July 4, 1998 July 3, 1999 -------------- -------------- <S> <C> <C> Contribution margin............................ $13,248 $ 21,191 General and administrative expense............. (8,587) (10,873) Depreciation and amortization.................. (6,197) (11,263) Interest expense............................... (5,626) (8,686) Other income (expense), net.................... (139) (468) ------- -------- Net loss....................................... $(7,301) $(10,099) ======= ======== </TABLE> Geographic segment information is as follows: <TABLE> <CAPTION> Domestic Domestic Company- International Franchising International owned Company-owned and Franchising Total revenues Stores Stores Licensing and Licensing -------------- -------- ------------- ----------- ------------- <S> <C> <C> <C> <C> 26 weeks ended July 4, 1998..................... $58,609 $78 $ 3,467 $187 26 weeks ended July 3, 1999..................... 71,894 21 12,050 200 </TABLE> Revenues from international franchising and licensing are generated from Canada and Australia with no other countries having material representation. Revenues from international company-owned stores are immaterial. As of July 3, 1999, there are no remaining international company-owned stores. There were no customers who accounted for more than 10% of Mrs. Fields' total revenues or either segment's revenues. (5) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION Mrs. Fields' obligation related to its $140,000,000 aggregate principal amount of 10 1/8 percent Series A, B and C Senior Notes due 2004 is fully and unconditionally guaranteed (the "Guarantee") on a senior basis by four of Mrs. Fields' wholly owned subsidiaries. The Guarantee is a general unsecured obligation of The Mrs. Fields' Brand, Inc., Great American Cookies, Inc., Pretzel Time, Inc. and Pretzelmaker Holdings, Inc. (the "Guarantors"), rank senior in right of payment to all subordinated indebtedness of the Guarantors and rank equal in right of payment with all existing and future senior indebtedness of the Guarantors. There are no restrictions on Mrs. Fields' ability to obtain cash dividends or other distributions of funds from the Guarantors, F-48

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(continued) (Unaudited) except those imposed by applicable law. The following supplemental financial information sets forth, on a condensed consolidating basis, balance sheets, statements of operations and statements of cash flows for Mrs. Fields' Original Cookies, Inc. (the "Parent Company"), the Guarantor Subsidiaries and the Non- guarantor Subsidiaries (which include Mrs. Fields' Cookies Australia, Mrs. Fields' Cookies (Canada) Ltd., Pretzelmaker Canada, H & M Canada, and Fairfield Foods, Inc. and three partially owned subsidiaries). Mrs. Fields has not presented separate financial statements and other disclosures concerning the Guarantors because management has determined that such information is not material. (6) SUBSEQUENT EVENT On September 1, 1999, the Preferred Shareholders of Pretzel Time, Inc. agreed to extend the payment to retire the preferred stock to January 2000. F-49

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET AS OF JULY 3, 1999 (Unaudited) (dollars in thousands) <TABLE> <CAPTION> Non- Parent Guarantor Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated -------- ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> ASSETS CURRENT ASSETS: Cash and cash equivalents.......... $ 2,636 $ 1,892 $ 117 $ -- $ 4,645 Accounts receivable, net.................. 1,558 -- 12 -- 1,570 Amounts due from franchisees and licensees, net....... 996 3,812 -- -- 4,808 Inventories........... 3,957 950 6 -- 4,913 Other current assets and amounts due from (to) affiliates, net.................. 24,017 (18,561) (727) -- 4,729 -------- -------- ----- -------- -------- Total current assets............. 33,164 (11,907) (592) -- 20,665 PROPERTY AND EQUIPMENT, net.................... 27,923 1,462 170 -- 29,555 INTANGIBLES, net........ 80,878 84,865 298 -- 166,041 INVESTMENT IN SUBSIDIARIES........... 64,984 -- -- (64,984) -- OTHER ASSETS............ 2,895 125 32 -- 3,052 -------- -------- ----- -------- -------- $209,844 $ 74,545 $ (92) $(64,984) $219,313 ======== ======== ===== ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT) CURRENT LIABILITIES: Current portion of long-term debt and capital lease obligations.......... $ 8,105 $ 268 $ -- $ -- $ 8,373 Accounts payable...... 11,724 1,636 (22) -- 13,338 Accrued liabilities... 10,458 1,930 -- -- 12,388 -------- -------- ----- -------- -------- Total current liabilities........ 30,287 3,834 (22) -- 34,099 LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, net of current portion........ 142,539 114 -- -- 142,653 OTHER ACCRUED LIABILITIES............ 8,419 -- -- -- 8,419 MANDATORILY REDEEMABLE CUMULATIVE PREFERRED STOCK.................. -- 1,440 -- -- 1,440 MINORITY INTEREST....... -- -- 4 119 123 STOCKHOLDER'S EQUITY (DEFICIT).............. 28,599 69,157 (74) (65,103) 32,579 -------- -------- ----- -------- -------- $209,844 $ 74,545 $ (92) $(64,984) $219,313 ======== ======== ===== ======== ======== </TABLE> F-50

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE 26 WEEKS ENDED JULY 3, 1999 (Unaudited) (dollars in thousands) <TABLE> <CAPTION> Non- Parent Guarantor Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated -------- ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> TOTAL REVENUES.......... $ 74,365 $12,764 $104 $(3,068) $ 84,165 -------- ------- ---- ------- -------- OPERATING COSTS AND EXPENSES: Selling and store occupancy costs...... 41,634 -- 120 (636) 41,118 Cost of sales......... 19,787 4,463 38 (2,432) 21,856 General and administrative....... 10,819 54 -- -- 10,873 Depreciation and amortization......... 7,967 3,296 -- -- 11,263 -------- ------- ---- ------- -------- Total operating costs and expenses........... 80,207 7,813 158 (3,068) 85,110 -------- ------- ---- ------- -------- (Loss) income from operations......... (5,842) 4,951 (54) -- (945) INTEREST EXPENSE AND OTHER, net............. (8,638) (80) -- -- (8,718) -------- ------- ---- ------- -------- (Loss) income before provision for income taxes and equity in net loss of consolidated subsidiaries......... (14,480) 4,871 (54) -- (9,663) PROVISION FOR INCOME TAXES.................. (210) -- -- -- (210) -------- ------- ---- ------- -------- (Loss) income before preferred stock accretion and dividends of subsidiaries and equity in net loss of consolidated subsidiaries......... (14,690) 4,871 (54) -- (9,873) PREFERRED STOCK ACCRETION AND DIVIDENDS OF SUBSIDIARIES........ -- (222) -- -- (222) EQUITY IN NET LOSS OF CONSOLIDATED SUBSIDIARIES........... 4,595 -- -- (4,599) (4) -------- ------- ---- ------- -------- NET (LOSS) INCOME....... $(10,095) $ 4,649 $(54) $(4,599) $(10,099) ======== ======= ==== ======= ======== </TABLE> F-51

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE 26 WEEKS ENDED JULY 3, 1999 (Unaudited) (dollars in thousands) <TABLE> <CAPTION> Non- Parent Guarantor Guarantor Company Subsidiary Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES............ $ 1,138 $1,531 $ 39 $-- $ 2,708 ------- ------ ---- ---- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition Expenses............ (100) -- -- -- (100) Purchase of property and equipment, net.. (2,520) (84) -- -- (2,604) ------- ------ ---- ---- ------- Net cash used in investing activities........ (2,620) (84) -- -- (2,704) ------- ------ ---- ---- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Reduction of long- term debt and capital lease obligations......... (5,291) (621) -- -- (5,912) Payment of debt financing fees...... (1,130) (25) -- -- (1,155) Reduction in preferred stock..... -- (43) -- -- (43) Proceeds from line of credit.............. 7,000 -- -- -- 7,000 ------- ------ ---- ---- ------- Net cash used in financing activities........ 579 (689) -- -- (110) ------- ------ ---- ---- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........... (903) 758 39 -- (106) CASH AND CASH EQUIVALENTS, beginning of the period......... 3,539 1,134 78 -- 4,751 ------- ------ ---- ---- ------- CASH AND CASH EQUIVALENTS, end of the period............ $ 2,636 $1,892 $117 $-- $ 4,645 ======= ====== ==== ==== ======= </TABLE> F-52

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET AS OF JANUARY 2, 1999 (Unaudited) (dollars in thousands) <TABLE> <CAPTION> Non- Parent Guarantor Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated --------- ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> ASSETS CURRENT ASSETS: Cash and cash equivalents.......... $ 3,539 $ 1,134 $ 78 $ -- $ 4,751 Accounts receivable, net.................. 2,860 304 44 -- 3,208 Amounts due from franchisees and licensees, net....... 1,297 4,706 -- -- 6,003 Inventories........... 4,631 863 9 -- 5,503 Other current assets and amounts due from (to) affiliates, net.................. 39,368 (33,898) (592) -- 4,878 --------- -------- ----- -------- -------- Total current assets............. 51,695 (26,891) (461) -- 24,343 PROPERTY AND EQUIPMENT, net.................... 29,900 1,654 243 -- 31,797 INTANGIBLES, net........ 75,875 95,601 320 -- 171,796 INVESTMENT IN SUBSIDIARIES........... 66,484 -- -- (66,484) -- OTHER ASSETS............ 3,688 252 30 -- 3,970 --------- -------- ----- -------- -------- $ 227,642 $ 70,616 $ 132 $(66,484) $231,906 ========= ======== ===== ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT) CURRENT LIABILITIES: Current portion of long-term debt and capital lease obligations.......... $ 7,141 $ 1,204 $ -- $ -- $ 8,345 Accounts payable...... 14,223 564 69 -- 14,856 Accrued liabilities... 10,956 2,895 18 -- 13,869 --------- -------- ----- -------- -------- Total current liabilities........ 32,320 4,663 87 -- 37,070 LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, net of current portion........ 142,367 216 61 -- 142,644 OTHER ACCRUED LIABILITIES............ 10,134 -- -- -- 10,134 MANDATORILY REDEEMABLE CUMULATIVE PREFERRED STOCK.................. -- 1,261 -- -- 1,261 MINORITY INTEREST....... -- -- -- 119 119 STOCKHOLDER'S EQUITY (DEFICIT).............. 42,821 64,476 (16) (66,603) 40,678 --------- -------- ----- -------- -------- $227,642 $ 70,616 $ 132 $(66,484) $231,906 ========= ======== ===== ======== ======== </TABLE> F-53

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE 26 WEEKS ENDED JULY 4, 1998 (Unaudited) (dollars in thousands) <TABLE> <CAPTION> Non- Parent Guarantor Guarantor Company Subsidiary Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> NET REVENUES............ $60,370 $ 683 $1,867 $(579) $62,341 ------- ------ ------ ----- ------- OPERATING COSTS AND EXPENSES: Selling and store occupancy costs...... 34,309 -- 178 (579) 33,908 Food cost of sales.... 15,142 -- 43 -- 15,185 General and administrative....... 7,261 554 772 -- 8,587 Depreciation and amortization......... 5,331 640 226 -- 6,197 ------- ------ ------ ----- ------- Total operating costs and expenses........... 62,043 1,194 1,219 (579) 63,877 ------- ------ ------ ----- ------- (Loss) income from operations......... (1,673) (511) 648 -- (1,536) INTEREST EXPENSE AND OTHER, net............. (5,372) 14 5 -- (5,353) ------- ------ ------ ----- ------- (Loss) income before provision for income taxes and equity in net loss of consolidated subsidiaries......... (7,045) (497) 653 -- (6,889) PROVISION FOR INCOME TAXES.................. (14) -- -- -- (14) ------- ------ ------ ----- ------- (Loss) income before preferred stock accretion and dividends of subsidiaries and equity in net loss of consolidated subsidiaries......... (7,059) (497) 653 -- (6,903) PREFERRED STOCK ACCRETION AND DIVIDENDS OF SUBSIDIARIES........ -- -- (222) -- (222) EQUITY IN NET (LOSS) INCOME OF CONSOLIDATED SUBSIDIARIES........... (242) -- (176) 242 (176) ------- ------ ------ ----- ------- NET (LOSS) INCOME....... $(7,301) $ (497) $ 255 $ 242 $(7,301) ======= ====== ====== ===== ======= </TABLE> F-54

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE 26 WEEKS ENDED JULY 4, 1998 (dollars in thousands) (Unaudited) <TABLE> <CAPTION> Non- Parent Guarantor Guarantor Company Subsidiary Subsidiaries Eliminations Consolidated ------- ---------- ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> NET CASH USED IN OPERATING ACTIVITIES.. $(2,824) $(379) $ (103) $-- $(3,306) ------- ----- ------ ---- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Net cash paid for acquisitions........ (928) -- -- -- (928) Purchase of property and equipment, net.. (3,335) -- (7) -- (3,342) ------- ----- ------ ---- ------- Net cash used in investing activities........ (4,263) -- (7) -- (4,270) ------- ----- ------ ---- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Reduction of long- term debt and capital lease obligations......... (138) -- (265) -- (403) Reduction in preferred stock..... -- -- (42) -- (42) ------- ----- ------ ---- ------- Net cash used in financing activities........ (138) -- (307) -- (445) ------- ----- ------ ---- ------- NET DECREASE IN CASH AND CASH EQUIVALENTS.. (7,225) (379) (417) -- (8,021) CASH AND CASH EQUIVALENTS, beginning of period............. 14,270 725 1,292 -- 16,287 ------- ----- ------ ---- ------- CASH AND CASH EQUIVALENTS, end of period................ $ 7,045 $ 346 $ 875 $-- $ 8,266 ======= ===== ====== ==== ======= </TABLE> F-55

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Mrs. Fields Inc.: We have audited the accompanying consolidated balance sheet of Mrs. Fields Inc. (a Delaware corporation) and subsidiaries as of September 17, 1996, and the related consolidated statements of operations, stockholders' deficit and cash flows for the period from December 31, 1995 to September 17, 1996. These consolidated 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 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mrs. Fields Inc. and subsidiaries as of September 17, 1996, and the results of their operations and their cash flows for the period from December 31, 1995 to September 17, 1996 in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Salt Lake City, Utah June 27, 1997 F-56

INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Mrs. Fields Inc. We have audited the accompanying consolidated statements of operations, stockholders' deficit, and cash flows of Mrs. Fields Inc. and subsidiaries for the year ended December 30, 1995. 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, such consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of Mrs. Fields Inc. and subsidiaries for the year ended December 30, 1995 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Salt Lake City, Utah February 9, 1996 F-57

MRS. FIELDS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Dollars in thousands, except per share data) ASSETS <TABLE> <CAPTION> September 17, 1996 ------------- <S> <C> CURRENT ASSETS: Cash and cash equivalents...................................... $ 1,883 Accounts receivable, net of allowance for doubtful accounts of $269.......................................................... 1,611 Inventories.................................................... 1,296 Prepaid rent................................................... 420 Other prepaid expenses......................................... 1,042 -------- Total current assets......................................... 6,252 -------- PROPERTY AND EQUIPMENT, at cost: Leasehold improvements......................................... 23,223 Equipment and fixtures......................................... 18,422 -------- 41,645 Less accumulated depreciation and amortization................. (29,409) -------- Net property and equipment................................... 12,236 -------- DEPOSITS......................................................... 656 -------- Total assets..................................................... $ 19,144 ======== </TABLE> The accompanying notes to consolidated financial statements are an integral part of this balance sheet. F-58

MRS. FIELDS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (CONTINUED) (Dollars in thousands, except per share data) LIABILITIES AND STOCKHOLDERS' DEFICIT <TABLE> <CAPTION> September 17, 1996 ------------- <S> <C> CURRENT LIABILITIES: Notes payable.................................................. $ 18,352 Premium on restructured debt................................... 2,872 Accounts payable............................................... 3,708 Accrued liabilities............................................ 1,329 Current portion of store closure reserve....................... 1,270 Current portion of deferred credits............................ 425 --------- Total current liabilities.................................... 27,956 STORE CLOSURE RESERVE, net of current portion.................... 294 DEFERRED CREDITS, net of current portion......................... 1,212 --------- Total liabilities............................................ 29,462 --------- COMMITMENTS AND CONTINGENCIES (Notes 5, 6, 7 and 8) MINORITY INTEREST IN MAJORITY OWNED SUBSIDIARY: 20,000,000 cumulative preferred stock; involuntary liquidation preference of $24,834, including $4,834 of unrecorded dividends in arrears.......................................... 20,000 --------- STOCKHOLDERS' DEFICIT: Cumulative preferred stock, $.001 par value; 21,885,000 shares authorized and issued, involuntary liquidation preference of $32,085, including $10,200 of unrecorded dividends in arrears....................................................... 22 Common stock, $.001 par value; 200,000,000 shares authorized and outstanding............................................... 200 Additional paid-in capital..................................... 83,863 Accumulated deficit............................................ (114,371) Cumulative translation adjustment.............................. (32) --------- Total stockholders' deficit.................................. (30,318) --------- Total liabilities and stockholders' deficit.................. $ 19,144 ========= </TABLE> The accompanying notes to consolidated financial statements are an integral part of this balance sheet F-59

MRS. FIELDS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands) <TABLE> <CAPTION> Year Ended Period Ended December 30, September 17, 1995 1996 ------------ ------------- <S> <C> <C> REVENUES: Net store sales.................................... $59,956 $29,674 Net franchising.................................... 1,870 1,793 Net licensing...................................... 2,031 892 Net other.......................................... 2,092 1,101 ------- ------- Total revenues................................... 65,949 33,460 ------- ------- OPERATING COSTS AND EXPENSES: Selling and store occupancy costs.................. 36,965 17,782 Food cost of sales................................. 13,373 6,525 General and administrative......................... 12,612 7,984 Depreciation and amortization...................... 3,525 1,911 Provision for store closure costs.................. 3,000 1,000 ------- ------- Total operating costs and expenses............... 69,475 35,202 ------- ------- Loss from operations............................. (3,526) (1,742) INTEREST EXPENSE..................................... (51) (80) (LOSS) GAIN ON SALE OF ASSETS........................ 1,450 (277) ------- ------- Loss before provision for income taxes........... (2,127) (2,099) PROVISION FOR INCOME TAXES........................... (241) (205) ------- ------- Net loss......................................... $(2,368) $(2,304) ======= ======= </TABLE> The accompany notes to consolidated financial statements are an integral part of these statements. F-60

MRS. FIELDS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (Dollars in Thousands) <TABLE> <CAPTION> Cumulative Preferred Stock Common Stock Additional Cumulative ----------------- ------------------ Paid-in Accumulated Translation Shares Amount Shares Amount Capital Deficit Adjustment Total ---------- ------ ----------- ------ ---------- ----------- ----------- -------- <S> <C> <C> <C> <C> <C> <C> <C> <C> BALANCE, January 1, 1995................... 21,885,000 $22 200,000,000 $200 $83,863 $(109,699) $195 $(25,419) Foreign currency translation adjustment............ -- -- -- -- -- -- (230) (230) Net loss............... -- -- -- -- -- (2,368) -- (2,368) ---------- --- ----------- ---- ------- --------- ---- -------- BALANCE, December 30, 1995................... 21,885,000 22 200,000,000 200 83,863 (112,067) (35) (28,017) Foreign currency translation adjustment............ -- -- -- -- -- -- 3 3 Net loss............... -- -- -- -- -- (2,304) -- (2,304) ---------- --- ----------- ---- ------- --------- ---- -------- BALANCE, September 17, 1996................... 21,885,000 $22 200,000,000 $200 $83,863 $(114,371) $(32) $(30,318) ========== === =========== ==== ======= ========= ==== ======== </TABLE> The accompanying notes to consolidated financial statements are an integral part of these statements. F-61

MRS. FIELDS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS <TABLE> <CAPTION> Year Ended Period Ended December 30, September 17, 1995 1996 ------------ ------------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net loss.......................................... $(2,368) $(2,304) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization................... 3,525 1,911 Amortization of premium on restructured debt.... -- (1,541) In-kind expense on note payable................. (1,610) 1,598 Provision for store closure costs............... 3,000 1,000 Net loss (gain) on asset sales, disposals and store closures................................. (1,450) 277 Changes in assets and liabilities: (Increase) Decrease in accounts receivable.... (163) 2,039 Decrease in inventories....................... 853 267 Increase in prepaid rent...................... -- (420) Increase in other prepaid expenses............ (337) (673) Increase in deposits.......................... -- (15) Decrease in accounts payable and accrued liabilities.................................. (5,821) (194) Decrease in store closure reserve............. -- (1,696) Decrease in deferred credits.................. (107) (696) ------- ------- Net cash used in operating activities....... (4,478) (447) ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment................ (4,146) (1,054) Proceeds from the sale of assets.................. 6,672 669 ------- ------- Net cash provided by (used in) investing activities................................. 2,526 (385) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on notes payable............... (145) (58) Payments for debt restructuring................... (40) -- ------- ------- Net cash used in financing activities....... (185) (58) ------- ------- EFFECT OF FOREIGN EXCHANGE RATES.................... -- 3 ------- ------- NET DECREASE IN CASH AND CASH EQUIVALENTS........... (2,137) (887) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD............................................. 4,907 2,770 ------- ------- CASH AND CASH EQUIVALENTS AT END OF THE PERIOD...... $ 2,770 $ 1,883 ======= ======= </TABLE> The accompanying notes to consolidated financial statements are an integral part of these statements. F-62

MRS. FIELDS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued) (Dollars in Thousands) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Supplemental Disclosure of Cash Flow Information: Cash paid for interest was approximately $1,661 and $24 for the year ended December 30, 1995 and for the period ended September 17, 1996, respectively. Cash paid for income taxes was approximately $128 and $39 for the year ended December 30, 1995 and for the period ended September 17, 1996, respectively. Supplemental Disclosure of Noncash Investing and Financing Activities: During the year ended December 30, 1995 and the period ended September 17, 1996, the Company, in accordance with the Amended and Restated Restructuring Agreement, entered into the following noncash financing activities: . The Company converted accrued interest payable incurred from January 1, 1995 through March 31, 1995 and from July 1, 1994 through December 31, 1994 into approximately $520 and $1,000 of Series A interest deferral notes, respectively. In addition, the Company amortized approximately $2,100 of its premium on restructured debt as a reduction to interest expense during the year ended December 30, 1995. . The Company converted accrued interest payable from December 31, 1995 through September 17, 1996 into $1,598 of 15 percent interest bearing Series A interest deferral notes. During the year ended December 30, 1995 and for the period ended September 17, 1996, the Company entered into the following noncash investing and financing activities: . In accordance with the Company's franchise financing arrangement, the Company assumed long-term debt of franchisees which was in default totaling approximately $132 and $0 during the year ended December 30, 1995 and the period ended September 17, 1996, respectively. . In connection with its sale of several cookie stores, the Company accepted notes receivable in the approximate amount of $305 during the year ended December 30, 1995. In addition, during the year ended December 30, 1995 and the period ended September 17, 1996, the Company charged off approximately $1,960 and $651 of assets against accrued expenses. The accompanying notes to consolidated financial statements are an integral part of these statements. F-63

MRS. FIELDS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS Mrs. Fields Inc. ("MFI"), a Delaware corporation, was incorporated on May 2, 1986 and is a holding company for its wholly owned subsidiaries Mrs. Fields Cookies Australia, Mrs. Fields Cookies, Ltd. (Canada) plus other inactive subsidiaries (collectively termed "Mrs. Fields International") and its majority owned subsidiary, Mrs. Fields Development Corporation ("MFD") and MFD's wholly owned subsidiary, Mrs. Fields Cookies ("MFC"). Collectively, these entities are referred to in this prospectus as the "Company". Nature of Operations The most significant part of the Company's operations are its retail stores which sell freshly baked cookies, brownies and other food products. As of September 17, 1996, the Company operates 147 "Mrs. Fields Cookies" stores all of which are located in the United States. Additionally, the Company has franchised approximately 163 stores in the United States and approximately 55 stores in nine other countries. Additionally, the Company holds legal title to certain trademarks for the "Mrs. Fields" name and logo, and licenses the use of these trademarks to third parties for the establishment and operation of Mrs. Fields cookie and bakery operations and other merchandising activities. In connection with these licensing activities, the Company authorizes third-party licensees to use certain business formats, systems, methods, procedures, designs, layouts, specifications, trade names and trademarks in the United States and other countries. The Company's business follows seasonal trends and is also affected by climate and weather conditions. The Company usually experiences its highest revenues in the fourth calendar quarter. Because the Company's stores are heavily concentrated in shopping malls, the Company's sales performance is somewhat dependent on the performance of those malls. The results for the period ended September 17, 1996 presented in the accompanying consolidated financial statements may not be indicative of results that would have been achieved for an entire calendar year. Effective September 18, 1996, the Company sold substantially all of its net assets to Mrs. Fields' Original Cookies, Inc. and The Mrs. Fields' Brand, Inc. (see Note 11). Subsequently, the Company has been solely involved in liquidating remaining assets and collecting certain outstanding notes. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Fiscal Year The Company operates using a 52/53-week year ending near December 31. Principles of Consolidation The consolidated financial statements include the accounts of MFI, Mrs. Fields International, MFD and MFC. All significant intercompany balances and transactions have been eliminated in consolidation. Sources of Supply The Company currently buys a significant amount of its food products from three suppliers. Management believes that other suppliers could provide similar products with comparable terms. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and F-64

MRS. FIELDS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of September 17, 1996 and at various times during the period then ended, the Company had demand deposits at various banks in excess of the $100,000 limit for insurance by the Federal Deposit Insurance Corporation. Inventories Inventories are stated at the lower of cost (first-in, first-out method) or market value. Inventory consisted of the following at September 17, 1996: <TABLE> <CAPTION> 1996 ---------- <S> <C> Food and beverages............................................. $ 792,000 Smallwares..................................................... 504,000 ---------- $1,296,000 ========== </TABLE> Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Equipment, fixtures and leasehold improvements are depreciated or amortized over three to seven years using the straight-line method. Expenditures that materially increase values or capacities or extend useful lives of property and equipment are capitalized. Routine maintenance, repairs and renewal costs are expensed as incurred. Gains or losses from the sale or retirement of property and equipment are included in the determination of net income or loss. Accounting for the Impairment of Long-Lived Assets The Company accounts for impairment of long-lived assets in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121"). SFAS No. 121 requires that long-lived assets be reviewed for impairment when events or changes in circumstances indicate that the book value of an asset may not be recoverable. The Company evaluates, at each balance sheet date, whether events and circumstances have occurred that indicate possible impairment. In accordance with SFAS No. 121, the Company uses an estimate of future undiscounted net cash flows of the related asset over the remaining life in measuring whether the assets are recoverable. As of September 17, 1996, the Company has reserved for any of its long-lived assets that are considered to be impaired. Revenue Recognition The Company recognizes franchising and licensing revenues on an accrual basis as those revenues are earned. Product sales are recognized as the product is delivered or shipped to the customer. F-65

MRS. FIELDS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Leases The Company has various operating lease commitments on both Company-owned and franchised store locations and equipment. Operating leases with escalating payment terms, including leases underlying subleases with franchisees, are expensed on a straight-line basis over the life of the related lease. Income Taxes The Company recognizes deferred income tax assets or liabilities for expected future tax consequences of events that have been recognized in the financial statements or tax returns. Under this method, deferred income tax assets or liabilities are determined based upon the difference between the financial and income tax bases of assets and liabilities using enacted tax rates expected to apply when differences are expected to be settled or realized. Fair Value of Financial Instruments The notes payable and cumulative preferred stock (see Note 6) are presented in the accompanying consolidated balance sheet at a total of $60,237,000 as of September 17, 1996. All such obligations were subsequently settled in two sales transactions (see Note 11) for $41,800,000. Cumulative Foreign Currency Translation Adjustment The assets and liabilities of foreign operations are translated into United States dollars using exchange rates in effect at the end of the accounting period. Revenues and expenses are translated using the average exchange rate during the period. Differences in exchange rates arising from foreign currency translation are recorded as a separate component of stockholders' deficit. In connection with a sale or liquidation of an investment in a foreign subsidiary, the accumulated translation adjustment attributable to that subsidiary is transferred from stockholders' deficit and is reported as a gain or loss. 3. NOTES PAYABLE On June 30, 1994, the Company entered into the Amended and Restated Restructuring Agreement (the "Restructuring Agreement") with its lenders of long-term debt (the "Lenders"). In connection with the Restructuring Agreement, the Lenders exchanged approximately $56,900,000 of existing long-term notes payable for $15,000,000 of new Series A secured notes, 51,292,000 shares of the Company's common stock, 21,885,000 shares of cumulative preferred stock of MFI and 20,000,000 shares of cumulative preferred stock of MFD. After the issuances of common stock, the Lenders' total ownership interest in the Company's common stock was approximately 85 percent. Because the total estimated future cash payments (including interest and principal) required as of June 30, 1994 under the terms of the new Series A secured notes was less than the principal amount plus the previous carrying amount of the unamortized premium on restructured debt by approximately $25,200,000, the Company reduced the premium on restructured debt by that amount. The remaining unamortized premium on restructured debt is being amortized over the life of the Series A secured notes to produce an effective interest rate of zero percent. F-66

MRS. FIELDS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Notes payable consist of the following as of September 17, 1996: <TABLE> <CAPTION> 1996 ------------ <S> <C> Series A secured notes, interest at 13 percent, payable quarterly, secured by all common stock and essentially all assets of the Company, principal due in varying installments through March 31, 1998...................................... $ 15,000,000 Series A interest deferral notes, interest at 13 percent, payable quarterly, secured by all common stock and essentially all assets of the Company, principal due March 31, 1998.................................................... 1,511,000 Series A interest deferral notes, interest at 15 percent, secured by all common stock and essentially all assets of the Company, principal and interest originally due August 15, 1996, subsequently extended through September 20, 1996.. 1,598,000 Other........................................................ 243,000 Premium on restructured debt................................. 2,872,000 21,224,000 Less current portion......................................... (21,224,000) ------------ $ -- ============ </TABLE> The Series A secured notes and the Series A interest deferral notes were paid by the Company on September 20, 1996 in connection with the receipt of proceeds from two simultaneous but separate asset sale transactions (see Note 11). As a result, all of the Series A notes referred to above are reflected as current liabilities in the accompanying September 17, 1996 consolidated balance sheet. 4. INCOME TAXES The components of the provision (benefit) for income taxes for the year ended December 30, 1995 and for the period ended September 17, 1996 are as follows: <TABLE> <CAPTION> 1995 1996 -------- ----------- <S> <C> <C> Current: Federal.............................................. $ -- $ -- State................................................ 241,000 205,000 Deferred: Federal.............................................. -- (1,125,000) State................................................ -- (109,000) Change in valuation allowance........................ -- 1,234,000 -------- ----------- Total provision for income taxes................... $241,000 $ 205,000 ======== =========== </TABLE> The Company incurred financial reporting losses for the year ended December 30, 1995 and for the period ended September 17, 1996 for which no benefits have been recorded in the accompanying consolidated statements of operations due to appropriate valuation allowances being provided. The provisions for income taxes are solely related to minimum state income tax requirements. Current deferred income tax assets relate to temporary differences between financial statement and income tax recognition of bad debts, unearned revenues, and the store closure reserve. Long-term deferred income tax assets relate to temporary differences between financial statement and income tax recognition of depreciation and write-downs of certain property and equipment, net operating losses and other income tax credit carryforwards. F-67

MRS. FIELDS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Management has provided a valuation allowance equal to the amount of the deferred income tax assets arising from the Company's net operating loss carryforwards. As of September 17, 1996, the Company had net operating loss carryforwards for tax reporting purposes totaling approximately $90,900,000. These net operating loss carryforwards expire as follows: <TABLE> <CAPTION> Fiscal Year ----------- <S> <C> 2001......................................................... $ 214,000 2002......................................................... 4,600,000 2003......................................................... 19,993,000 2004......................................................... 7,693,000 2005......................................................... 9,143,000 Thereafter (through 2011).................................... 49,257,000 ----------- $90,900,000 =========== </TABLE> Subsequent to the sale of substantially all of its assets (see Note 1), the Company utilized certain of its net operating loss carryforwards to offset the related gain. The remainder of the net operating loss carryforwards may not be used. 5. STORE CLOSURE RESERVE As of December 30, 1995, the Company had a store closure reserve of approximately $2,510,000 for the anticipated costs to franchise or close 26 stores during 1996. During the period from December 31, 1995 to September 17, 1996, the Company closed 12 stores and provided for additional store closure expenses totaling $1,000,000. As of September 17, 1996, the remaining store closure reserve totaled approximately $1,564,000, of which approximately $1,270,000 is current and approximately $294,000 is long-term. In management's opinion, the store closure reserve is adequate for stores identified to be closed. The Company's management reviews the historic and projected operating performance of its stores on an annual basis to identify underperforming stores for impairment of property investment or targeted closing. The Company's policy is to write-off any net property investment for underperforming stores identified to have permanent impairment of investment. When a store is identified for targeted closing, the Company's policy is to provide for the costs of closing the store, which are predominantly estimated lease settlement costs. 6. CUMULATIVE PREFERRED STOCK In connection with the Restructuring Agreement, the Company issued 21,885,000 and 20,000,000 shares of cumulative preferred stock of MFI and MFD, respectively. The MFD preferred stock is reflected as "minority interest in majority owned subsidiary" in the accompanying consolidated balance sheet. The MFI and MFD cumulative preferred stocks have dividend rates of 18 percent and 10 percent, respectively, which accumulate on a semi-annual basis. The dividends are computed based upon the liquidation preference rates which are defined in the Restructuring Agreement as $1.00 per share plus any unrecorded dividends in arrears for each issue and are payable only as declared by the Board of Directors. As of September 17, 1996, the Board of Directors had not declared dividends for either series of preferred stock. Accordingly, dividends in arrears on the MFI and MFD preferred stocks which have not been recorded in the accompanying consolidated financial statements as of September 17, 1996 totaled $10,200,000 and $4,834,000, respectively. In the event of liquidation or dissolution of the Company, the holders of the cumulative preferred stocks of MFI and MFD will be entitled to receive from the assets of the Company available for distribution prior to any distribution to common stockholders an amount per share equal to the sum of (i) $1.00 for each outstanding F-68

MRS. FIELDS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) preferred share and (ii) an amount equal to all unpaid dividends on such preferred shares through the distribution date. As of September 17, 1996, the distribution preference for the MFI and MFD preferred stockholders totaled $32,085,000 and $24,834,000, respectively. Also, if a change in control of the Company occurs, preferred stockholders shall have the right to convert all (but not less than all) of their preferred shares into notes payable in an amount equal to the liquidation preference value of their preferred shares. The Company also has the right at any time to redeem shares of the MFI and MFD preferred stocks at a price of $1.00 per share plus all accrued but unpaid dividends through the date of redemption. Subsequent to period end, the Company completed two sales transactions (see Note 11) wherein all of the cumulative preferred stock was redeemed at a discount. 7. OPTION AGREEMENT As part of the Restructuring Agreement, the Lenders granted two directors an option to acquire common stock from the Lenders which, if the option was exercised as of September 17, 1996, would constitute approximately 51 percent of the Company's issued common stock. The option is exercisable through September 30, 1999 in whole, but not in part, at a price approximating the amount of debt forgiven by the Lenders plus interest at nine percent from the date of the grant of the option. In the event the option is exercised, the directors are also required to offer other minority stockholders the same price per share for their common stock. In connection with the two sales transactions described in Note 11, the two directors waived their options to acquire common stock from the Lenders. 8. COMMITMENTS AND CONTINGENCIES Legal Matters The Company is the subject of certain legal actions, which it considers routine to its business activities. As of September 17, 1996, management, after consultation with legal counsel, believes that the potential liability to the Company under such actions is adequately accrued or insured for, or will not materially affect the Company's consolidated financial position or results of operations. Operating Leases The Company leases retail store facilities, office space and equipment under long-term noncancelable operating lease agreements with remaining terms of one to 10 years. The future minimum lease payments due under these operating leases, which include required lease payments for those stores that have been subleased, as of September 17, 1996 are as follows: <TABLE> <CAPTION> Fiscal Year ----------- <S> <C> 1997.......................................................... $12,395,000 1998.......................................................... 10,684,000 1999.......................................................... 8,376,000 2000.......................................................... 5,737,000 2001.......................................................... 3,757,000 Thereafter.................................................... 4,855,000 ----------- $45,804,000 =========== </TABLE> Certain of the leases provide for contingent rentals based on gross revenues. Total rental expense including contingent rentals and net of sublease rentals received, under the above operating leases for the year ended F-69

MRS. FIELDS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) December 30, 1995 and for the period ended September 17, 1996 was approximately $13,697,000 and $7,405,000, respectively. As part of the Company's franchising program, certain leases have been subleased to franchisees. The future minimum sublease payments due to the Company under these leases as of September 17, 1996 are as follows: <TABLE> <CAPTION> Fiscal Year ----------- <S> <C> 1997.......................................................... $ 3,741,000 1998.......................................................... 3,119,000 1999.......................................................... 2,512,000 2000.......................................................... 1,776,000 2001.......................................................... 1,038,000 Thereafter.................................................... 374,000 ----------- $12,560,000 =========== </TABLE> Contractual Arrangements The Company has entered into a supply agreement to buy frozen dough products through 1998. The agreement stipulates minimum annual purchase commitments for 1997 and 1998. The Company and the supplier may terminate the supply agreement if the other party defaults on any of the performance covenants. The Company has assumed an agreement with a third-party lender to provide financing to franchisees for the purchase of existing Company stores. Under the terms of the agreement, a maximum of $5,000,000 may be borrowed from the lender by franchisees of which the Company has agreed to guarantee a maximum of $2,000,000. Outstanding franchisee borrowings guaranteed by the Company under this agreement at September 17, 1996 were approximately $707,400. Under the terms of the agreement, the Company is required to assume any franchisee borrowings which are in default as defined. As of September 17, 1996, the Company has assumed loans totaling approximately $240,000, which are included in notes payable. As of December 30, 1995, the Company had recorded deferred credits, representing vendor rebates, of approximately $1,486,000 under a long-term marketing and supply agreement with a supplier. Under the terms of the agreement, the Company was obligated to purchase a minimum amount of product from the supplier. The supplier periodically prepays rebates to the Company for anticipated purchases. The Company records the prepayments as deferred credits and amortizes them ratably as purchases are made from the supplier. In April 1996, the Company and the supplier renegotiated the agreement whereby the supplier would reduce the unearned portion of the deferred credits to $504,000 and advance the Company a rebate of $800,000 in exchange for an extension of the termination date and a modification of the purchase commitment. The termination date of the renegotiated agreement will be the later of March 31, 2001 or when the Company has met its purchase commitment. The Company reduced food costs by approximately $1,082,000 during the period ended September 17, 1996 related to this arrangement and its renegotiation. The remaining balance of approximately $1,204,000 is included in deferred credits as of September 17, 1996. 9. RELATED-PARTY TRANSACTIONS Under the terms of a licensing agreement with an entity which is owned in part by a former director of the Company, the Company is required to pay an annual software maintenance fee. During the year ended December 30, 1995 and for the period ended September 17, 1996, the Company paid maintenance fees of approximately $100,000 and $17,000, respectively, which are included in general and administrative expenses. F-70

MRS. FIELDS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Company leases certain office space to an entity which is owned in part by a former director of the Company. Billings to the entity during the year ended December 30, 1995 and the period ended September 17, 1996 totaled approximately $152,000 and $136,000, respectively, of which approximately $9,000 is included in accounts receivable as of September 17, 1996. 10. EMPLOYEE BENEFIT PLAN The Company sponsors the Mrs. Fields 401(k) Plan (the "Plan") for all eligible employees. Under the terms of the Plan, employees can make contributions to the Plan, a portion of which is matched by contributions from the Company. The total Company contributions to the Plan for the year ended December 30, 1995 and for the period ended September 17, 1996 were approximately $42,000 and $23,000, respectively. 11. SUBSEQUENT EVENT On September 17, 1996, the Company completed two simultaneous but separate asset sale transactions wherein the Company (i) sold certain assets and relinquished certain liabilities of the Company in accordance with an Asset Purchase Agreement dated August 7, 1996, among the Company, Mrs. Fields' Original Cookies, Inc. and Capricorn Investors II, L.P., and (ii) sold certain assets of the Company in accordance with an Asset Purchase Agreement dated August 7, 1996, as amended by the First Amendment dated as of September 17, 1996, among the Company, The Mrs. Fields' Brand, Inc. and Capricorn Investors II, L.P. The combined sales price for the net assets sold was approximately $41,800,000. The Company received approximately $12,157,000 in cash and approximately $29,643,000 in senior and subordinated notes. The proceeds from these net asset sales were used in part to repay the Series A notes and the Series A interest deferral notes on September 20, 1996 (see Note 3). F-71

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To The Original Cookie Company, Incorporated and Hot Sam Company, Inc.: We have audited the accompanying combined balance sheet of The Original Cookie Company, Incorporated and the carved-out portion of Hot Sam Company, Inc., both Delaware corporations (subsidiaries of Chocamerican, Inc.), as of September 17, 1996, and the related combined statements of operations, stockholders' equity and cash flows for the year ended December 30, 1995, and for the period December 31, 1995 to September 17, 1996. These combined financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of The Original Cookie Company, Incorporated and the carved-out portion of Hot Sam Company, Inc. as of September 17, 1996, and the results of their operations and their cash flows for the year ended December 30, 1995, and for the period December 31, 1995 to September 17, 1996 in conformity with generally accepted accounting principles. Arthur Andersen LLP Cleveland, Ohio July 11, 1997 F-72

THE ORIGINAL COOKIE COMPANY, INCORPORATED AND THE CARVED-OUT PORTION OF HOT SAM COMPANY, INC. COMBINED BALANCE SHEET (Dollars in Thousands) <TABLE> <CAPTION> September 17, 1996 ------------- <S> <C> ASSETS CURRENT ASSETS: Cash and cash equivalents..................................... $ 655 Accounts receivable........................................... 340 Inventories................................................... 1,728 Prepaids and other............................................ 984 -------- Total current assets........................................ 3,707 -------- PROPERTY AND EQUIPMENT, at cost: Leasehold improvements........................................ 31,329 Furniture and fixtures........................................ 7,719 Buildings and improvements.................................... 639 Land.......................................................... 69 -------- 39,756 Accumulated depreciation and amortization..................... (22,687) -------- Net property and equipment.................................. 17,069 -------- OTHER ASSETS, net............................................... 256 -------- COST IN EXCESS OF FAIR VALUE OF NET ASSETS OF PURCHASED BUSINESS, net of accumulated amortization of $9,092............ 37,992 -------- $ 59,024 ======== </TABLE> The accompanying notes to combined financial statements are an integral part of this combined balance sheet. F-73

THE ORIGINAL COOKIE COMPANY, INCORPORATED AND THE CARVED-OUT PORTION OF HOT SAM COMPANY, INC. COMBINED BALANCE SHEET (CONTINUED) (Dollars in Thousands) <TABLE> <CAPTION> September 17, 1996 ------------- <S> <C> LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable................................................ $ 1,696 Accrued payroll and related expenses............................ 2,208 Accrued liabilities............................................. 3,443 ------- Total current liabilities..................................... 7,347 ------- LONG-TERM LIABILITIES: Deferred lease credit........................................... 1,653 Store closure reserve........................................... 1,002 Related-party notes payable..................................... 30,977 Other........................................................... 1,102 ------- Total long-term liabilities................................... 34,734 ------- COMMITMENTS (NOTE 9) STOCKHOLDERS' EQUITY: Common stock.................................................... 10,000 Additional paid-in capital...................................... 15,873 Accumulated deficit............................................. (8,930) ------- Total stockholders' equity.................................... 16,943 ------- Total liabilities and stockholders' equity.................... $59,024 ======= </TABLE> The accompanying notes to combined financial statements are an integral part of this combined balance sheet. F-74

THE ORIGINAL COOKIE COMPANY, INCORPORATED AND THE CARVED-OUT PORTION OF HOT SAM COMPANY, INC. COMBINED STATEMENTS OF OPERATIONS (Dollars in Thousands) <TABLE> <CAPTION> December 31, Year Ended 1995 to December 30, September 17, 1995 1996 ------------ ------------- <S> <C> <C> NET SALES............................................ $85,581 $54,366 ------- ------- OPERATING COSTS AND EXPENSES: Food cost of sales................................. 19,996 12,728 Selling and occupancy expenses..................... 47,032 31,935 General and administrative expenses................ 8,425 5,538 Severance and related expenses..................... -- 2,000 Depreciation and amortization...................... 6,902 4,937 Provision for store closure costs.................. 791 -- ------- ------- Total operating costs and expenses............... 83,146 57,138 ------- ------- INCOME (LOSS) FROM OPERATIONS........................ 2,435 (2,772) INTEREST EXPENSE, net................................ (4,268) (2,828) OTHER EXPENSE........................................ -- (45) ------- ------- LOSS BEFORE INCOME TAXES............................. (1,833) (5,645) PROVISION FOR INCOME TAXES........................... 263 -- ------- ------- NET LOSS............................................. $(2,096) $(5,645) ======= ======= </TABLE> The accompanying notes to combined financial statements are an integral part of these combined statements. F-75

THE ORIGINAL COOKIE COMPANY, INCORPORATED AND THE CARVED-OUT PORTION OF HOT SAM COMPANY, INC. COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (Dollars in thousands) <TABLE> <CAPTION> Additional Retained Total Common Paid-in Earnings Stockholders' Stock Capital (Deficit) Equity ------- ---------- --------- ------------- <S> <C> <C> <C> <C> BALANCE, JANUARY 1, 1995............ $10,000 $15,873 $(1,189) $24,684 Net loss.......................... -- -- (2,096) (2,096) ------- ------- ------- ------- BALANCE, DECEMBER 30, 1995.......... 10,000 15,873 (3,285) 22,588 Net loss.......................... -- -- (5,645) (5,645) ------- ------- ------- ------- BALANCE, SEPTEMBER 17, 1996......... $10,000 $15,873 $(8,930) $16,943 ======= ======= ======= ======= </TABLE> The accompanying notes to combined financial statements are an integral part of these combined statements. F-76

THE ORIGINAL COOKIE COMPANY, INCORPORATED AND THE CARVED-OUT PORTION OF HOT SAM COMPANY, INC. COMBINED STATEMENTS OF CASH FLOWS (Dollars in Thousands) <TABLE> <CAPTION> December 31, Year Ended 1995 to December 30, September 17, 1995 1996 ------------ ------------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net loss........................................... $(2,096) $(5,645) Adjustments to reconcile net loss to net cash provided by (used in) operating activities-- Depreciation and amortization...................... 6,902 4,937 Changes in assets and liabilities-- Increase in accounts receivable.................. (61) (279) Decrease (increase) in related-party receivables/payables............................ 18 (169) Decrease (increase) in inventories............... 461 (65) Decrease in prepaids and other................... 695 967 Decrease (increase) in other assets.............. 64 (60) (Decrease) increase in accounts payable.......... (476) 410 Decrease in accrued payroll and related expenses........................................ (331) (384) Increase (decrease) in accrued liabilities....... (1,196) 330 Increase in other long-term liabilities.......... 231 73 Increase (decrease) in deferred lease credit..... 38 (111) Increase (decrease) in store closure reserve..... 202 (382) ------- ------- Net cash provided by (used in) operating activities.................................... 4,451 (378) ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment, net........... (568) (1,200) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments to related party........................ (4,599) (1,380) ------- ------- CASH AND CASH EQUIVALENTS: Net decrease during the period..................... (716) (2,958) Balance, beginning of the period................... 4,329 3,613 ------- ------- Balance, end of the period......................... $ 3,613 $ 655 ======= ======= SUPPLEMENTAL CASH FLOW INFORMATION: State and local income taxes paid.................. $ 234 $ 82 ======= ======= </TABLE> The accompanying notes to combined financial statements are an integral part of these combined statements. F-77

THE ORIGINAL COOKIE COMPANY, INCORPORATED AND THE CARVED-OUT PORTION OF HOT SAM COMPANY, INC. NOTES TO COMBINED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS The Original Cookie Company, Incorporated ("OCCI") and Hot Sam Company, Inc. ("HSCI") (collectively, the "Companies") are wholly owned subsidiaries of Chocamerican, Inc., which is a wholly owned subsidiary of Midial S.A., a French company (collectively, the "Parent"). The Companies operated specialty retailing outlets providing prepared goods. OCCI operated approximately 240 stores in over 35 states, offering a variety of fresh baked cookies and brownies and beverages. HSCI operated approximately 190 stores in over 30 states providing a variety of fresh baked pretzels and pretzel sticks, toppings and beverages. On September 17, 1996, all of the operations of the Companies including certain assets and liabilities were sold to a nonrelated party (the "Buyer") who assumed responsibility for all retail locations as of that date. Except for approximately $2,000,000 of payments to employees for severance and related costs which is included in the operating results for the period December 31, 1995 to September 17, 1996, these combined financial statements do not reflect any effect of such sale. The Companies traditionally experienced their highest revenues in the fourth calendar quarter. Because the Companies' stores were heavily concentrated in shopping malls, the Companies' sales performance was somewhat dependent on the performance of those malls. Because of such seasonality and the extra payroll costs noted above, the results for the period December 31, 1995 to September 17, 1996 are not necessarily indicative of results that would have been achieved for an entire calendar year. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Fiscal Year The Companies' fiscal year ends on the Saturday closest to December 31, which results in a 52 or 53-week year. Basis of Presentation The combined financial statements include the accounts of OCCI and HSCI except that these statements do not reflect the results of the operations and the related assets and liabilities of a group of retail food locations owned and operated by HSCI primarily under the name of Corn Dog. The Corn Dog operations were sold to a nonrelated entity in April 1996 and the accompanying combined financial statements exclude these operations and net assets, as well as the results of the sale. All significant intercompany balances and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-78

THE ORIGINAL COOKIE COMPANY, INCORPORATED AND THE CARVED-OUT PORTION OF HOT SAM COMPANY, INC. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) Inventories The Companies' inventories were stated at the lower of cost (first-in, first- out method) or market value. Inventories consisted of the following at September 17, 1996: <TABLE> <CAPTION> 1996 ---------- <S> <C> Food and beverages................................................ $1,215,000 Small wares....................................................... 513,000 ---------- $1,728,000 ========== </TABLE> Property and Equipment The Companies' policy is to provide depreciation using the straight-line method over a period which is sufficient to amortize the cost of the asset during its useful life. The estimated useful lives for depreciation purposes are: <TABLE> <S> <C> Leasehold improvements........................................ 5 to 10 years Furniture and fixtures........................................ 3 to 10 years Buildings and improvements.................................... 10 to 50 years </TABLE> Intangible Assets Cost in excess of fair value of net assets of purchased business which was recorded as part of the acquisition of the Companies by the Parent was amortized on a straight-line basis over 40 years. Management evaluated the expected cash flows of such assets periodically and determined no adjustments were appropriate. Subsequent to September 17, 1996, the Companies expensed all such intangibles in connection with recording the effects of the sales of the operations. Cash and Cash Equivalents For purposes of the statements of cash flows, the Companies consider all temporary cash investments purchased with an original maturity of three months or less to be cash equivalents. Leases The Companies have various operating lease commitments on their retail store locations. Operating leases with escalating payment terms are expensed on a straight-line basis over the life of the related lease. Asset Impairment The Companies adopted Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" for the period December 31, 1995 to September 17, 1996. SFAS No. 121 requires the Companies to evaluate the recoverability of long-lived assets based on expected future cash flows. Prior to the adoption of SFAS No. 121, the Companies accounted for long-lived operating assets as discussed both above and in Note 6. The adoption of this standard did not have a material impact on the Companies' financial position or results of operations. Revenue Recognition Revenues from product sales are recognized at the point of sale to the customer. F-79

THE ORIGINAL COOKIE COMPANY, INCORPORATED AND THE CARVED-OUT PORTION OF HOT SAM COMPANY, INC. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) Income Taxes The Companies recognize deferred income tax assets or liabilities for expected future income tax consequences of events that have been recognized in the financial statements or income tax returns. Under this method, deferred income tax assets or liabilities are determined based upon the difference between the financial and income tax bases of assets and liabilities using enacted tax rates expected to apply when differences are expected to be settled or realized. 3. STOCKHOLDERS' EQUITY The Companies' common stock at December 30, 1995 and September 17, 1996 is comprised of the following: OCCI has common stock with a par value $1 per share, 10,000,000 shares authorized, issued and outstanding. HSCI has common stock with a par value $1 per share, 10 shares authorized, issued and outstanding. 4. RELATED-PARTY NOTES PAYABLE In addition to debt incurred as part of the purchase by the Parent, the Companies' cash requirements were provided for by the Parent. These amounts were evidenced by notes, bearing interest rates ranging from 8% to 12%, and consisted of $30,977,000 as of September 17, 1996. The notes were paid in part by the Companies subsequent to September 17, 1996 in connection with the receipt of proceeds from the sale of certain assets and liabilities to the Buyer. 5. INCOME TAXES The Companies have been included in the consolidated income tax returns of a subsidiary of the Parent which was in a cumulative loss carryforward position during all of the periods presented in the accompanying combined financial statements. The Companies incurred financial reporting losses for the year ended December 30, 1995 and the period December 31, 1995 to September 17, 1996 for which no benefits have been recorded in the accompanying combined statements of operations due to appropriate valuation allowances being provided. The provisions for income taxes are solely related to minimum state income tax requirements. Deferred income tax assets relate to temporary differences between financial statement and income tax recognition of depreciation, store closure reserve and other accrued liabilities. Management has provided a valuation allowance equal to the amount of the deferred income tax assets. 6. STORE CLOSURE RESERVE The Companies annually reviewed the historic and projected operating performance of their stores and identified underperforming stores for impairment of property investment and/or targeted closing. The Companies' policy was to write-off any net property investment for underperforming stores identified to have permanent impairment of investment. Additionally, when a store was identified for targeted closing, the Companies' policy was to provide for the costs of closing the store, which are predominantly estimated lease settlement costs and/or estimated lease payments after the date of the store closing. F-80

THE ORIGINAL COOKIE COMPANY, INCORPORATED AND THE CARVED-OUT PORTION OF HOT SAM COMPANY, INC. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) An analysis of the activity in the store closure reserve is as follows for the year ended December 30, 1995 and for the period December 31, 1995 to September 17, 1996: <TABLE> <CAPTION> 1995 1996 ---------- ---------- <S> <C> <C> Beginning Balance.................................... $1,182,000 $1,384,000 Provision............................................ 791,000 -- Payments and Other Deductions........................ (589,000) (382,000) ---------- ---------- Ending Balance....................................... $1,384,000 $1,002,000 ========== ========== </TABLE> 7. EMPLOYEE BENEFIT PLANS The Companies' employees participate in a defined contribution saving plan which was funded by voluntary employee contributions and by contributions from the Companies. The Companies' expense for the year ended December 30, 1995, and for the period December 31, 1995 to September 17, 1996 was $143,000 and $106,000, respectively. The Companies do not provide for any other post-retirement benefits. 8. RELATED-PARTY TRANSACTIONS The Parent provides certain services to the Companies, such as human resources, accounting and legal, among others. Charges to the Companies for such administrative services totaled $520,000 for the year ended December 30, 1995 and $175,000 for the period December 31, 1995 to September 17, 1996. In management's opinion, these charges approximate the fair market value of such services. 9. COMMITMENTS Operating Leases The Companies leased all of their retail store locations. These leases typically had initial terms of up to 10 years. Certain leases provided for contingent rentals based on store sales. Generally, the Companies were required to pay taxes and normal expenses of operating the premises under retail store leases. Total rental expense was approximately $15,038,000 for the year ended December 30, 1995. Total rental expense for the period ended September 17, 1996 was approximately $11,165,000. The minimum rentals under operating leases subsequent to September 17, 1996 are as follows: <TABLE> <CAPTION> Fiscal Year ----------- <S> <C> Remaining 1996................................................... $ 5,346,000 1997............................................................. 15,886,000 1998............................................................. 13,763,000 1999............................................................. 11,691,000 2000............................................................. 9,712,000 Thereafter....................................................... 20,190,000 ----------- $76,588,000 =========== </TABLE> Effective September 17, 1996, the Buyer assumed responsibility for all open store leases but the Companies remain contingently liable under certain of these leases. However, management is not aware of any actual or threatened claims under these leases. F-81

REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Cookies USA, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of changes in stockholders' deficit, and of cash flows present fairly, in all material respects, the financial position of Cookies USA, Inc. and its subsidiary at June 29, 1997 and June 28, 1998, and the results of their operations and their cash flows for each of the three fifty-two week periods in the period ended June 28, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audits 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICEWATERHOUSECOOPERS LLP Atlanta, Georgia August 24, 1998 F-82

COOKIES USA, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share data) <TABLE> <CAPTION> June 29, June 28, 1997 1998 -------- -------- <S> <C> <C> ASSETS Current assets: Cash and cash equivalents.................................. $ 4,885 $ 8,382 Accounts receivable--trade................................. 1,702 2,042 Inventory (Notes 1 and 2).................................. 1,292 1,212 Prepaid expenses (Note 3).................................. 1,227 1,245 Current deferred income tax benefit (Notes 1 and 10)....... 392 872 Current portion of notes receivable (Note 4)............... 867 88 Other receivables.......................................... 8 8 ------- ------- Total current assets..................................... 10,373 13,849 ------- ------- Property and equipment, net of accumulated depreciation (Note 5).......................................................... 6,304 4,916 Construction in progress, net of construction deposits received from franchisees................................... 92 163 ------- ------- 6,396 5,079 ------- ------- Other assets: Deferred loan costs, net of accumulated amortization of $2,050 and $2,626, respectively (Note 1).................. 2,050 1,474 Notes receivable, net of current portion (Note 4).......... 302 352 Deferred income tax benefit (Notes 1 and 10)............... 2,372 1,438 Deposits................................................... 50 49 Accrued straight-line minimum rent receivable for subleases to franchisees (Note 1)................................... 1,267 1,388 ------- ------- 6,041 4,701 ------- ------- Cost in excess of fair value of net assets acquired (goodwill), net of accumulated amortization of $3,104 and $3,975, respectively (Note 1)............................... 31,848 30,977 ------- ------- $54,658 $54,606 ======= ======= </TABLE> The accompanying notes to consolidated financial statements are an integral part of these balance sheets. F-83

COOKIES USA, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (CONTINUED) (Dollars in thousands, except per share data) <TABLE> <CAPTION> June 29, June 28, 1997 1998 -------- -------- <S> <C> <C> LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable......................................... $ 376 $ 913 Sales taxes payable...................................... 105 102 Accrued interest payable................................. 2,202 2,202 Accrued expenses (Note 6)................................ 1,568 1,075 Deposits................................................. 673 727 -------- -------- Total current liabilities.............................. 4,924 5,019 -------- -------- Capital lease obligations (Note 9)......................... 62 36 -------- -------- Accrued straight-line minimum rent payable (Note 1)........ 2,113 2,164 -------- -------- Long-term debt (Note 7): Senior secured notes..................................... 40,000 40,000 Original issue discount, net of accumulated amortization of $102 and $131, respectively.......................... (98) (69) Subordinated unsecured notes payable..................... 10,000 10,000 -------- -------- Total long-term debt................................... 49,902 49,931 -------- -------- Commitments and contingencies (Note 9) Mandatorily redeemable preferred stock (Note 11): Senior cumulative (6.00%) convertible; $1.00 par value; 10,500 shares authorized, issued and outstanding........ 12,739 13,369 Junior Class A cumulative ($50 per annum); $1.00 par value; 2,500 shares authorized, issued and outstanding.. 2,944 3,069 Junior Class B cumulative ($50 per annum); $1.00 par value; 750 shares authorized, issued and outstanding.... 883 921 -------- -------- Total mandatorily redeemable preferred stock........... 16,566 17,359 -------- -------- Common stock and other stockholders' deficit: Common stock, $.01 par value; 115,000 shares authorized; 82,800 shares issued and outstanding.................... 1 1 Additional paid-in capital............................... 449 449 Excess of purchase price over predecessor basis.......... (10,164) (10,164) Accumulated deficit...................................... (9,195) (10,189) -------- -------- Total stockholders' deficit............................ (18,909) (19,903) -------- -------- $ 54,658 $ 54,606 ======== ======== </TABLE> The accompanying notes to consolidated financial statements are an integral part of these balance sheets. F-84

COOKIES USA, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands) <TABLE> <CAPTION> For the Fifty-Two For the Fifty-Two For the Fifty-Two Week Period Week Period Week Period Ended Ended Ended June 30, 1996 June 29, 1997 June 28, 1998 ----------------- ----------------- ----------------- <S> <C> <C> <C> Revenues: Cookie and beverage sales................ $24,719 $22,375 $18,854 Batter sales to franchisees.......... 10,104 11,270 12,214 Franchise royalties... 4,289 4,729 5,267 Franchise license fees--existing and new stores........... 521 675 503 Other, net............ 115 66 139 ------- ------- ------- Total revenue....... 39,748 39,115 36,977 ------- ------- ------- Operating expenses: Cost of sales......... 19,523 18,615 17,056 Retail store occupancy............ 7,379 7,055 5,737 Other retail store expenses............. 1,316 1,019 870 Selling, general and administrative expenses............. 7,309 7,619 7,220 Management fee expense (Note 14)............ 250 250 250 ------- ------- ------- Total operating expenses........... 35,777 34,558 31,133 ------- ------- ------- Income from operations.. 3,971 4,557 5,844 ------- ------- ------- Other (income) expenses, net: Interest income....... (56) (251) (346) Interest expense...... 5,646 5,634 5,635 Amortization of deferred loan costs.. 572 586 576 Gain on sale of existing stores...... (636) (927) (370) ------- ------- ------- Total other expenses, net...... 5,526 5,042 5,495 ------- ------- ------- Income (loss) before income taxes............ (1,555) (485) 349 State and federal income tax expense (benefit) (Note 10).............. (194) 261 551 ------- ------- ------- Net loss.......... $(1,361) $ (746) $ (202) ======= ======= ======= </TABLE> The accompanying notes to consolidated financial statement are an integral part to these statements. F-85

COOKIES USA, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (Dollars in Thousands) <TABLE> <CAPTION> Excess of Purchase Common Stock Additional Price Over Total ------------- Paid-in Predecessor Accumulated Stockholders' Shares Amount Capital Basis Deficit Deficit ------ ------ ---------- ----------- ----------- ------------- <S> <C> <C> <C> <C> <C> <C> Balance at June 29, 1995................... 82,800 $ 1 $449 $(10,164) $ (5,503) $(15,217) Net loss for the fifty-two week period ended June 30, 1996.. -- -- -- -- (1,361) (1,361) Redeemable preferred stock accretion...... -- -- -- -- (792) (792) ------ ---- ---- -------- -------- -------- Balance at June 30, 1996................... 82,800 1 449 (10,164) (7,656) (17,370) Net loss for the fifty-two week period ended June 29, 1997.. -- -- -- -- (746) (746) Redeemable preferred stock accretion...... -- -- -- -- (793) (793) ------ ---- ---- -------- -------- -------- Balance at June 29, 1997................... 82,800 1 449 (10,164) (9,195) (18,909) Net loss for the fifty-two week period ended June 28, 1998.. -- -- -- -- (202) (202) Redeemable preferred stock accretion...... -- -- -- -- (792) (792) ------ ---- ---- -------- -------- -------- Balance at June 28, 1998................... 82,800 $ 1 $449 $(10,164) $(10,189) $(19,903) ====== ==== ==== ======== ======== ======== </TABLE> The accompanying notes to consolidated financial statements are an integral part of these statements. F-86

COOKIES USA, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) <TABLE> <CAPTION> For the Fifty- For the Fifty- For the Fifty- Two Week Two Week Two Week Period Ended Period Ended Period Ended June 30, 1996 June 29, 1997 June 28, 1998 -------------- -------------- -------------- <S> <C> <C> <C> Cash flows from operating activities: Net loss......................... $(1,361) $ (746) $ (202) Adjustments to reconcile net loss to net cash provided by (used for) operating activities: Depreciation..................... 1,854 1,940 1,604 Amortization of cost in excess of fair value of net assets acquired (goodwill)............. 870 871 871 Amortization of deferred loan costs........................... 572 586 576 Amortization of original issue discount........................ 29 29 29 Net gain on sales and disposals of property, equipment and inventory....................... (402) (550) (247) Net (decrease) increase in accrued straight-line minimum rent receivable and payable..... 86 (29) (70) Changes in assets and liabilities: Decrease (increase) in accounts receivable.................... (550) (195) (340) Decrease (increase) in inventory..................... (140) 95 80 Decrease (increase) in prepaid expenses...................... (100) (52) (18) Decrease (increase) in current deferred tax benefit.......... (50) (195) (480) Decrease (increase) in other receivables................... 165 56 -- Decrease (increase) in deferred tax benefit................... (186) 348 934 Decrease (increase) in other assets........................ (7) 11 1 Increase (decrease) in accounts payable....................... (462) (456) 538 Increase (decrease) in sales taxes payable................. 2 (25) (3) Increase (decrease) in accrued interest payable.............. -- (3) -- Increase (decrease) in accrued expenses...................... (913) 172 (493) Increase (decrease) in deposits...................... (22) (66) 54 ------- ------- ------- Net cash provided by (used for) operating activities.... (615) 1,791 2,834 ------- ------- ------- Cash flows from investing activities: Acquisitions of property and equipment, including net increase in construction in progress, net of construction deposits received from franchisees..................... (1,913) (1,084) (1,263) Proceeds from sales and disposals of property and equipment....... 1,146 453 1,005 Proceeds from collection of notes receivable...................... 448 474 947 ------- ------- ------- Net cash provided by (used for) investing activities.... (319) (157) 689 ------- ------- ------- Cash flows from financing activities: Payments of deferred loan costs.. -- (27) -- Principal repayments under capital lease obligations....... (15) (25) (26) ------- ------- ------- Net cash used for financing activities................... (15) (52) (26) ------- ------- ------- Net increase (decrease) in cash and cash equivalents during period........................... (949) 1,582 3,497 Cash and cash equivalents, beginning of period.............. 4,252 3,303 4,885 ------- ------- ------- Cash and cash equivalents, end of period........................... $ 3,303 $ 4,885 $ 8,382 ======= ======= ======= </TABLE> The accompanying notes to consolidated financial statements are an integral part of these statements. F-87

COOKIES USA, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: <TABLE> <CAPTION> For the Fifty- For the Fifty- For the Fifty- Two Week Two Week Two Week Period Ended Period Ended Period Ended June 30, 1996 June 29, 1997 June 28, 1998 -------------- -------------- -------------- (Dollars in Thousands) <S> <C> <C> <C> Cash paid for: Interest......................... $5,617 $5,609 $5,606 State and federal income taxes... $ 119 $ 91 $ 286 </TABLE> Cash paid for state and federal income taxes represents payments made to government authorities during the periods presented. SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING AND INVESTING ACTIVITIES: During the fifty-two weeks ended June 30, 1996, June 29,1997 and June 28, 1998, the Company recorded accretion on mandatorily redeemable preferred stock totaling $792,000, $793,000 and $793,000, respectively. During the fifty-two weeks ended June 30, 1996, the Company exchanged accounts receivable from unrelated franchisees totaling $156,000 for fixtures and equipment and leasehold improvements representing retail cookie stores previously licensed by franchisees. During the fifty-two weeks ended June 30, 1996, notes receivable with face amounts totaling $296,000 were received from unrelated franchisees in connection with the sale of two Company-operated stores. During the fifty-two weeks ended June 29, 1997, notes receivable with face amounts totaling $1,353,000 were received from unrelated franchisees in connection with the sale of eight Company-operated stores. During the fifty-two weeks ended June 29, 1997, the Company exchanged accounts receivable from unrelated franchisees totaling $91,000 for fixtures and equipment and leasehold improvements representing retail cookie stores previously licensed by the franchisees. During the fifty-two weeks ended June 28, 1998, notes receivable with face amounts totaling $217,000 were received from unrelated franchisees in connection with the sale of five Company-operated stores. The accompanying notes to consolidated financial statements are an integral part of these statements. F-88

COOKIES USA, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS Cookies USA, Inc. ("Cookies USA") was incorporated in December 1993 and was formed by the Jordan Company to acquire 100% of the common stock of The Original Great American Chocolate Chip Cookie Company, Inc. ("Great American Cookies"). Great American Cookies is in the business of franchising cookie stores and manufacturing cookie batter which is sold to Company-operated and franchised retail stores. The financial statements include the consolidated accounts of Cookies USA and Great American Cookies (the "Company"). On December 10, 1993, Cookies USA acquired Great American Cookies in several transactions. Immediately following the acquisition, Great American Cookies changed its name from The Original Great American Chocolate Chip Cookie Company, Inc. to Great American Cookie Company, Inc. Due to the 22% interest retained by the selling stockholders of Great American Cookies via their common and convertible preferred stock interest in Cookies USA, the excess of purchase price over predecessor basis as reflected in the stockholders' deficit section of the accompanying consolidated balance sheets represents the limitation on the write-up of the assets acquired. The Company's business follows seasonal trends and experiences its highest revenues in the fourth calendar quarter. Because the Company's stores are heavily concentrated in shopping malls, the Company's sales performance is significantly dependent on the performance of those malls. Consolidation The consolidated financial statements include the accounts of Cookies USA and its subsidiary, Great American Cookies. All significant intercompany transactions and accounts have been eliminated in consolidation. Accounting Periods During the fiscal year ended June 30, 1996, the Company changed its year end from the last Thursday in the month of June to the last Sunday in the month of June. As a result, three days were added to the fifty-two week period ended Thursday, June 27, 1996 to effectively change the Company's fiscal year end to Sunday, June 30, 1996. This change does not materially impact the comparability of the years presented in these financial statements. Use of Estimates in Financial Statements 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 the 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. Fair Value of Financial Instruments The carrying amounts of financial instruments including cash, accounts receivable, accounts payable and accrued expenses approximate fair value at the respective balance sheet dates due to the relatively short period to maturity of these instruments. The long-term notes payable with fixed interest rates are recorded at face values of $50.0 million at June 29, 1997 and June 28, 1998; however, the fair values of such long-term notes, based on quoted market values, are approximately $50.5 million and $51.4 million at June 29, 1997 and June 28, 1998, respectively. F-89

COOKIES USA, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Revenue Recognition Revenues from the Company-operated stores are recognized in the period the related cookies and beverages are sold. Revenues from the sale of batter are recognized at the time of shipment. Franchise royalties, which are based on a percentage of franchised store sales, are recognized in the same period related franchise store revenues are generated. Franchise license fee revenues are recognized at the time that all Company obligations regarding the franchise sale have been met. Fees received under development agreements which grant the right to develop franchised units in future periods in specific geographic areas are deferred and recognized as income on a pro rata basis as the Company's obligations regarding the franchised units subject to the development agreements are met. Cash Equivalents The Company considers all highly liquid, short-term investments with original maturities of three months or less to be cash equivalents. Cash equivalents at June 29, 1997 and June 28, 1998 consist of short-term commercial paper. These investments are stated at cost, which approximates market. Inventories Inventories of cookie and brownie products, beverage products, paper and supplies and smallwares are stated at the lower of cost or market with cost determined based on the first-in, first-out (FIFO) method. Property and Equipment Property and equipment are stated at cost. Expenditures for repairs and maintenance are expensed in the year incurred, while renewals and betterments that materially extend the life of an asset are capitalized. The cost of assets sold, retired, or otherwise disposed, and the related accumulated depreciation, are eliminated from the accounts, and any resulting gain or loss is recognized in the statement of operations. Depreciation is provided using straight-line and accelerated methods over the estimated lives of the assets which are as follows: <TABLE> <S> <C> Building................ 20 years Furniture, fixtures and equipment.............. 3-7 years Building and leasehold improvements........... Lesser of 8 years or the life of the related lease </TABLE> During fiscal year 1996, the Company revised its estimate of the useful life of certain leasehold improvements. The Company began amortizing leasehold improvements using accelerated methods over an average of eight years instead of using the straight-line method over an average of ten years. The effect of this change in estimate was to increase fiscal year 1996 pre-tax loss by $214,000. During fiscal year 1998, the Company revised its estimate of the useful life of certain computer equipment from five to three years. The effect of this change in estimate was to decrease fiscal 1998 pre-tax income by $111,000. Store Opening and Closing Costs Non-capital expenditures incurred in opening new stores or remodeling existing stores are expensed in the year incurred. When a store is closed, the store's unamortized investment in leasehold improvements and fixtures and equipment is recorded as a loss on store closing. F-90

COOKIES USA, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Deferred Loan Costs Debt issue costs of approximately $4.0 million were incurred in connection with the issuance of the 10.875% senior secured notes payable due 2001 (see Note 7). Deferred loan costs are being amortized over the life of the related notes (85 months), with annual charges to income of approximately $576,000. Cost in Excess of Fair Value of Net Assets Acquired (Goodwill) Cost in excess of fair value of net assets acquired (goodwill) is being amortized over a forty-year period, with annual charges to income of approximately $870,000. The carrying value of goodwill is periodically evaluated for indications of possible impairment. The review is based on comparing the carrying amount to the undiscounted estimated cash flows from continuing operations over the remaining amortization period. Operating Leases The Company has various operating lease commitments on both Company-operated and franchised store locations and equipment. Operating leases with escalating payment terms, including those subleased to franchisees, are recorded on a straight-line basis over the life of the related lease. Original Issue Discount The Company has issued warrants to the holders of the senior secured notes. The value of the warrants has been accounted for as an original issue discount and is being amortized over the life of the related notes (85 months), with annual charges to income of approximately $29,000. Advertising Costs Advertising costs are expensed as incurred. Income Taxes Concurrent with the acquisition and its termination of the S Corporation status (see Note 10), the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). In accordance with the provisions of SFAS 109, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of the enacted tax laws. Earnings Per Share Earnings per share is not presented, as the Company is a non-public entity that is closely held. Reclassifications Certain reclassifications have been made in the prior period consolidated financial statements to conform with the current period presentation. F-91

COOKIES USA, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 2. INVENTORY The major components of inventory are as follows: <TABLE> <CAPTION> June 29, June 28, 1997 1998 ---------- ---------- <S> <C> <C> Raw ingredients...................................... $ 237,000 $ 279,000 Batter, including retail stores...................... 368,000 254,000 Beverage syrup....................................... 56,000 43,000 Paper goods and packaging supplies................... 168,000 149,000 Purchased icing and decorative toppings held for resale.............................................. 52,000 57,000 Equipment held for resale............................ 75,000 43,000 Marketing and miscellaneous supplies held for resale.............................................. 336,000 387,000 ---------- ---------- $1,292,000 $1,212,000 ========== ========== </TABLE> 3. PREPAID EXPENSES Prepaid expenses consist of the following: <TABLE> <CAPTION> June 29, June 28, 1997 1998 ---------- ---------- <S> <C> <C> Rent................................................... $1,158,000 $1,178,000 Other.................................................. 69,000 67,000 ---------- ---------- $1,227,000 $1,245,000 ========== ========== </TABLE> 4. NOTES RECEIVABLE Notes receivable consist of the following: <TABLE> <CAPTION> June 29, June 28, 1997 1998 ---------- -------- <S> <C> <C> Notes receivable....................................... $1,169,000 $440,000 Less current portion................................... (867,000) (88,000) ---------- -------- Notes receivable, net of current portion............... $ 302,000 $352,000 ========== ======== </TABLE> Notes receivable are due from various franchisees and principally result from the sale of existing Company-operated stores to franchisees. Each note is guaranteed by the purchaser and collateralized by the assets sold. Short-term notes generally carry an interest rate of 15% per annum and are intended to serve as interim financing until the franchisee can secure long-term financing from a third-party lender. Notes classified as non-current are generally due in monthly installments of principal and interest, with the interest rates ranging from between 9% and 12.5% per annum. The total maturities of the notes receivable are as follows: <TABLE> <S> <C> Fiscal Year Ending June 1999................................................................. $ 88,000 2000................................................................. 140,000 2001................................................................. 94,000 2002................................................................. 41,000 2003................................................................. 8,000 Thereafter........................................................... 69,000 -------- $440,000 ======== </TABLE> F-92

COOKIES USA, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 5. PROPERTY AND EQUIPMENT Property and equipment consists of the following: <TABLE> <CAPTION> June 29, June 28, 1997 1998 ----------- ----------- <S> <C> <C> Land................................................ $ 240,000 $ 240,000 Building............................................ 761,000 761,000 Building and leasehold improvements................. 6,829,000 6,189,000 Furniture, fixtures and equipment................... 3,228,000 3,067,000 ----------- ----------- 11,058,000 10,257,000 Less accumulated depreciation....................... (4,754,000) (5,341,000) ----------- ----------- Property and equipment, net......................... $ 6,304,000 $ 4,916,000 =========== =========== 6. ACCRUED EXPENSES Accrued expenses consist of the following: <CAPTION> June 29, June 28, 1997 1998 ----------- ----------- <S> <C> <C> Employee compensation including payroll taxes....... $ 379,000 $ 388,000 Bonuses payable..................................... 480,000 475,000 Construction expenses............................... 15,000 -- Professional fees................................... 293,000 88,000 Management fees..................................... 188,000 62,000 Other............................................... 213,000 62,000 ----------- ----------- $ 1,568,000 $ 1,075,000 =========== =========== 7. LONG-TERM DEBT Notes payable at June 29, 1997 and June 28, 1998 are described as follows: <CAPTION> June 29, June 28, 1997 1998 ----------- ----------- <S> <C> <C> 10.875% senior secured notes payable due January 15, 2001, Series B. Interest accrues daily and is payable semi-annually on January 15 and July 15. (The notes are secured by certain tangible and intangible assets, including, but not limited to, the equipment constituting Great American Cookies' batter production facility, the capital stock of all current and future subsidiaries of Great American Cookies, intellectual property rights and other intangible assets of Great American Cookies)................................ $40,000,000 $40,000,000 Original issue discount related to the issuance of 7,200 detachable warrants with the 10.875% senior secured notes.................................... (98,000) (69,000) 12.5% subordinated unsecured note payable due October 31, 2003 with initial annual prepayment thereof due October 31, 2001. Interest accrues daily and is payable semi-annually on April 30 and October 31................................... 10,000,000 10,000,000 ----------- ----------- $49,902,000 $49,931,000 =========== =========== </TABLE> F-93

COOKIES USA, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The $10 million of subordinated notes issued by Cookies USA have principal payments due as follows: $2.5 million due October 31, 2001; $2.5 million due October 31, 2002; and $5.0 million due October 31, 2003. As Great American Cookies is the sole operating unit of the consolidated entity, Great American Cookies is the sole source of any cash to be paid by Cookies USA as interest and principal payment on such debt. Such payments will be made primarily via dividends to Cookies USA. Such dividends are subject to certain covenants provided for under the senior secured notes (see Note 11). Great American Cookies is subject to certain covenants provided for under the indenture including limitations on restricted payments, incurrence of indebtedness and issuances of preferred stock, asset sales, granting of liens, restrictions on subsidiary dividends, mergers, consolidations, sale of assets, and on transactions with affiliates, various reporting requirements to the holders of the senior secured notes and the Securities and Exchange Commission and maintenance of a fixed charge coverage ratio. If a violation of a covenant occurs, the holders of at least 25% in principal amount of the then outstanding senior secured notes may declare all outstanding senior secured notes to be due and payable immediately (see Note 11). Upon the occurrence of a change of control as defined in the note agreements, the Company will be required to (i) offer to repurchase all of the 10.875% senior secured notes then outstanding at a purchase price equal to 101% of the total principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase and (ii) repurchase the 12.5% subordinated notes at par plus accrued and unpaid interest, if any, to the date of repurchase. 8. 401(K) PROFIT-SHARING PLAN The Company provides a defined contribution profit-sharing plan (the "Plan") for all employees meeting certain requirements. On February 14, 1997, the Company amended the Plan to include a pre-tax savings provision in accordance with Section 401(k) of the Internal Revenue Code. Under the Plan, eligible employees may contribute as much as 15% of compensation up to the federal statutory limit, with the Company matching 25% of the first 6% of compensation contributed by the employee. The Company's matching portion of the Plan contributions resulted in expense of $9,000 and $39,000 in fiscal years 1997 and 1998, respectively. During fiscal year 1996, no amounts were expensed for profit-sharing plan contributions. 9. COMMITMENTS AND CONTINGENCIES Operating Leases The Company has various operating lease commitments on both Company-operated and franchised store locations. These leases generally contain escalating rental payments and various provisions for contingent rental payments based on sales volume. Future minimum lease payments, including scheduled escalating rental payments, as of June 28, 1998 are as follows: <TABLE> <CAPTION> Subleases to Leases Franchises Net ----------- ------------ ----------- <S> <C> <C> <C> Fiscal Year Ending June 1999.................................. $ 9,796,000 $ 7,071,000 $ 2,725,000 2000.................................. 8,797,000 6,369,000 2,428,000 2001.................................. 7,586,000 5,589,000 1,997,000 2002.................................. 6,540,000 4,747,000 1,793,000 2003.................................. 5,368,000 3,909,000 1,459,000 Thereafter............................ 9,737,000 7,331,000 2,406,000 ----------- ----------- ----------- $47,824,000 $35,016,000 $12,808,000 =========== =========== =========== </TABLE> F-94

COOKIES USA, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Operating leases with escalating payment terms, including those subleased to franchisees, are expensed on a straight-line basis over the life of the related lease. For the fifty-two week periods ended June 30, 1996, June 29, 1997 and June 28, 1998, gross rent expense (including mall pass-through charges) was approximately $13,332,000, $14,135,000 and $13,593,000, respectively, while sublease income (including mall pass-through charges) was approximately $9,628,000, $10,533,000 and $10,571,000, respectively. Capital Leases The Company leases various office equipment under capital lease agreements expiring on various dates through 2000. The Company's total future obligation under these agreements, net of interest expense, is $62,000 as of June 29, 1997 and $36,000 as of June 28, 1998. Lease Guarantees In connection with the sale of existing Company-operated stores to franchisees, the Company has guaranteed certain lease renewals to the prospective franchisee. If such leases are not obtained, then predetermined payments shall be made to the franchisees as follows: <TABLE> <CAPTION> Number of Lease Amount of Renewals Guarantee -------- --------- <S> <C> <C> Fiscal Year of Lease Expiration 1999.................................................... 1 $ 75,000 2000.................................................... 1 24,000 2001.................................................... -- -- 2002.................................................... 1 60,000 -- -------- $159,000 ======== </TABLE> As of June 28, 1998, the Company has not recorded any liability with respect to these guarantees as these amounts represent loss contingencies which management believes are not probable. Purchase Commitments The Company is committed to purchase certain raw materials from various suppliers over the next year at fixed prices. As of June 28, 1998, such purchase commitments totaled approximately $1,750,000. Employment Agreements On December 10, 1993, the Company entered into annual renewable employment agreements with the founders of Great American Cookies ("Founders"), who are also directors of the Company. Under these employment agreements, each Founder receives a salary of $150,000 and a payment in connection with an agreement not to compete of $100,000 per year. Additionally, whether employed or not, each Founder is also entitled to receive an annual $100,000 bonus if Great American Cookies advances funds to Cookies USA to permit Cookies USA to pay interest on its subordinated notes. The Company's employment of the two Founders ended on December 7, 1995 and December 9, 1996. Under the above agreements, the Company made total payments to the Founders of $564,000, $285,000 and $200,000, during the fifty-two week periods ended June 30, 1996, June 29, 1997 and June 28, 1998, respectively. As of June 30, 1996, June 29, 1997 and June 28, 1998, $200,000 was due to the Founders and included in accrued liabilities in the accompanying consolidated balance sheets. F-95

COOKIES USA, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Company has entered into employment agreements with its Executive Vice President of Development, Vice President of Operations and Director of Production with terms of one to two years. The agreements are for an total annual base salary of $355,000. The agreements have customary provisions for benefits and noncompetition. Incentive and Severance Agreements In connection with the Company's negotiations (see Note 15) with Mrs. Fields' Original Cookies, Inc. ("Mrs. Fields"), the Company has entered into agreements with a number of employees incenting them to assist with the sale process and to stay until the closing of such sale. In addition, the Company has informed its home office employees of the severance payments to be paid to them in the event their employment is terminated without cause subsequent to the closing of the proposed sale. The total amount of these incentives and severance payments, as well as any severance payments to employees with employment agreements, is $1,623,000. These amounts are conditional upon the closing of the sale and no amounts will be due or paid if a sale to Mrs. Fields does not occur. Legal On September 22, 1997, nine Great American Cookies franchisees filed a lawsuit against Great American Cookies and certain other parties alleging certain anticipatory breaches of contract and violations of certain state, franchise and unfair trade practice laws. These allegations resulted from discussions held be Cookies USA and Mrs. Fields regarding the possibility of Mrs Fields acquiring all of the outstanding shares of Common Stock of Cookies USA, Inc. As of August 14, 1998, a settlement has been reached whereby the franchisees have been granted certain rights upon the sale of the Company to Mrs. Fields for a period of three years. In exchange, Cookies USA has been released from further legal action. 10. INCOME TAXES Cookies USA and Great American Cookies file consolidated federal income tax returns. The following information has been determined based upon the provisions of SFAS 109 for the fifty-two week periods ended June 30, 1996, June 29, 1997 and June 28, 1998. <TABLE> <CAPTION> Fifty-two Fifty-two Fifty-two Week Period Week Period Week Period Ended Ended Ended June 30, 1996 June 29, 1997 June 28, 1998 ------------- ------------- ------------- <S> <C> <C> <C> Income tax (benefit) provision: Current: Federal......................... -- -- -- State........................... $ 48,000 $107,000 $ 97,000 --------- -------- -------- 48,000 107,000 97,000 Deferred: Federal......................... (217,000) 131,000 386,000 State........................... (25,000) 23,000 68,000 --------- -------- -------- (242,000) 154,000 454,000 --------- -------- -------- Total (benefit) provision for income taxes................. $(194,000) $261,000 $551,000 ========= ======== ======== </TABLE> F-96

COOKIES USA, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The differences between income taxes at the statutory federal and state income tax rates and the income tax expense reported in the statements of operations for the fifty-two week periods ended June 30, 1996, June 29, 1997 and June 28, 1998 are as follows: <TABLE> <CAPTION> Fifty-Two Fifty-Two Fifty-Two Week Period Week Period Week Period Ended Ended Ended June 30, 1996 June 29, 1997 June 28, 1998 ------------- ------------- ------------- <S> <C> <C> <C> Federal statutory tax rate....... (34.0)% 34.0% 34.0% State income taxes, net of federal benefit................. (4.0)% 4.0% 4.0% Goodwill amortization and other.. 25.5 % 15.8% 119.9% ----- ---- ----- (12.5)% 53.8% 157.9% ===== ==== ===== </TABLE> Deferred income tax assets are comprised of the following: <TABLE> <CAPTION> June 29, June 28, 1997 1998 ---------- ---------- <S> <C> <C> Current: NOL carryforward..................................... $ 350,000 $ 872,000 Other................................................ 42,000 -- ---------- ---------- $ 392,000 $ 872,000 ========== ========== Non-current: NOL carryforward..................................... $1,079,000 $ -- Depreciation......................................... 841,000 1,191,000 Other................................................ 452,000 247,000 ---------- ---------- $2,372,000 $1,438,000 ========== ========== </TABLE> As of June 28, 1998, the Company had net operating loss carryforwards for income tax reporting purposes of approximately $2.2 million, which are scheduled to expire in varying amounts in the years 2009 to 2011. The Company's net operating loss carryforwards are limited under Section 382 of the Internal Revenue Code regarding changes in ownership. 11. PREFERRED STOCK In connection with Cookies USA's acquisition of Great American Cookies on December 10, 1993, Cookies USA issued $2.5 million of Junior Class A Preferred Stock and $750,000 of Junior Class B Preferred Stock. Additionally, Cookies USA issued $10.5 million of Senior Preferred Stock to the Founders of Great American Cookies in exchange for a portion of the stock of Great American Cookies ($3.5 million) and the assets of other entities owned by the Founders ($7.0 million). As Great American Cookies is a wholly owned subsidiary of Cookies USA and is the sole operating unit of the consolidated entity, Great American Cookies is the sole source of any cash to be paid by Cookies USA as dividends on such securities. The 10,500 shares of $1.00 par Senior Preferred Stock issued by Cookies USA on December 10, 1993 are 6% cumulative convertible shares. A share of the Senior Preferred Stock is convertible at any time at the option of the holder into 1.1308 shares of Cookies USA Common Stock. The holders of Senior Preferred Stock are entitled to certain antidilution protections to maintain their percentage of ownership in Cookies USA. Accumulated dividends on the Senior Preferred Stock have priority over any dividends of "Junior Securities" (Junior Class A and Class B Preferred and Common Stock), but are subordinate to any debt payments of F-97

COOKIES USA, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Cookies USA or the Company. Such preferred shares may be redeemed at any time for $1,000 per share plus accrued but unpaid dividends at the option of Cookies USA; however, all such shares not previously converted or redeemed shall be redeemed by payment in cash of $1,000 per share plus accrued but unpaid dividends on November 30, 2003. As of June 28, 1998, Cookies USA has accrued $2,869,000 for unpaid dividends due to the holders of the Senior Preferred Stock. The 2,500 shares of $1.00 par Junior Class A Preferred Stock and the 750 shares of $1.00 par Junior Class B Preferred Stock issued by Cookies USA are entitled to receive, when legally available and when declared, dividends at the rate of $50 per share per annum. Such shares may be redeemed by Cookies USA at any time for $1,000 per share plus all dividends accrued and unpaid; however, all such shares not previously redeemed shall be redeemed by payment of cash of $1,000 per share plus all accrued and unpaid dividends on the first business day of January 2004. The Junior Class A and B Preferred Stock have no conversion, preemptive, voting or subscription rights. As of June 28, 1998, Cookies USA has accrued $740,000 for unpaid dividends due to the holders of the Junior Class A and B Preferred Stock. Great American Cookies' debt covenants related to the senior secured notes limit the ability of Great American Cookies to pay dividends. Under the debt covenants, as outlined in the Indenture under which the Senior Secured Notes were issued, Great American Cookies may pay dividends if: (a) no Default or Event of Default has occurred and is continuing or would occur as a consequence thereof, (b) immediately after the dividend and after giving effect to it on a pro forma basis, the Company could incur at least $1.00 of additional indebtedness under the provisions of the debt covenants, and (c) such dividend, together with the total of all other "Restricted Payments" (as defined in the Indenture) made by Great American Cookies and its subsidiaries after the date of the Indenture, is less than the sum of (x) 50% of the Adjusted Consolidated Net Income of Great American Cookies for the period (taken as one accounting period) from the beginning of the first quarter commencing immediately after the date of the Indenture to the end of Great American Cookies' most recently ended first quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Adjusted Consolidated Net Income for such period is a deficit, 100% of such deficit), plus (y) 100% of the total net cash proceeds received by Great American Cookies from the issue or sale of Equity Interest of Great American Cookies (other than Equity Interests sold to a subsidiary of Great American Cookies and other than Disqualified Stock) after the date of the Indenture and on or prior to the time of such Restricted Payment, plus (z) 100% of the net cash proceeds received by Great American Cookies from the issuance or sale, other than to a subsidiary of Great American Cookies, of any convertible or exchangeable debt security of Great American Cookies that has been converted or exchanged into equity interests of Great American Cookies under the terms thereof (other than Disqualified Stock) after the date of the Indenture and on or prior to the time of such dividend. The foregoing limitations on Restricted Payments do not prohibit, among other items, payments to Cookies USA under the Tax Sharing Agreement, payments to Cookies USA to permit payments of current interest then due on the Subordinated Debt or for any other purpose provided that certain fixed coverage ratio tests have been achieved, or making other Restricted Payments in the total amount not to exceed $1.5 million. 12. STOCK OPTION AGREEMENTS, WARRANTS AND OTHER STOCKHOLDERS' AGREEMENT As part of its acquisition of Great American Cookies, Cookies USA entered into Non-Qualified Stock Option Agreements (the "Stock Option Agreements") with the Founders. Under the Stock Option Agreements, each of the Founders is granted an option to purchase 5,600 shares of common stock of Cookies USA at an F-98

COOKIES USA, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) exercise price of $2.23 per share, which expires on December 10, 2003. The options will not be vested initially. The options will become vested at the rate of 20% per year for each fiscal year in which certain operating cash flow targets are achieved. Notwithstanding the foregoing, if Cookies USA's operating cash flow targets are achieved on a cumulative basis in subsequent years, then the options will be vested. As of June 28, 1998, none of the outstanding stock options were vested. If the employment with the Company of either of the Founders is terminated, each Founder will have the right to require Cookies USA to repurchase all of his shares of Common Stock, and all other securities of Cookies USA convertible into, exchangeable for or entitling the holder to acquire its Common Stock, at the appraised fair market value thereof. The purchase price will be paid with a subordinated note that will bear interest at 8% per annum until the fifth anniversary of the Stockholders' Agreement dated December 10, 1993 and at the prime rate plus 2% thereafter. The note will be secured by the Common Stock purchased by Cookies USA and will be payable in equal installments on each of the sixth through the tenth anniversaries of the Stockholders' Agreement. As of June 28, 1998, the employment of both of the Founders has been terminated and such Founders have not requested Cookies USA to repurchase their shares. At June 29, 1997 and June 28, 1998, the fair value of these options was de minimis. In connection with the issuance of the 10.875% senior secured notes payable (see Note 7), the Company issued 7,200 warrants to purchase common stock at a purchase price of $27.78 per warrant. The warrants expire on January 15, 2001 and have an exercise price of $0.01 per share subject to anti-dilution protection. Additionally, the warrants have certain rights related to the purchase of shares of common stock to a third party whereby the warrant holder may require the purchaser to purchase a determined number of warrants at the common stock purchase price less the exercise price per warrant. If the holders of at least 75% of the common stock agree to sell their shares to a third party, the warrants have certain obligations whereby the warrant holders may be required to sell their warrants for a price equal to the purchase price of the common stock less the exercise price per warrant. 13. COMPANY AND FRANCHISED STORES As of June 30, 1996, June 29, 1997 and June 28, 1998 there were 115, 100 and 81 Company-operated outlets and 253, 263 and 279 franchised outlets in operation, respectively. During the fifty-two week period ended June 30, 1996, the Company earned initial license fees of $275,000 from the sale of 11 new in-line stores to franchisees. Additionally, the Company earned $21,000 from license transfer, upgrade and other fees. During the fifty-two week period ended June 29, 1997, the Company earned initial license fees of $300,000 from the sale of 12 new in-line stores to franchisees. Additionally, the Company earned $75,000 from license transfer, upgrade and other fees. During the fifty-two week period ended June 28, 1998, the Company earned initial license fees of $125,000 from the sale of five new in-line stores to franchisees. Additionally, the Company earned $13,000 from license transfer, upgrade and other fees. 14. RELATED-PARTY TRANSACTIONS The majority shareholders of the Common Stock of Cookies, USA, Inc. are affiliated with the holders of the $10 million of Subordinated Notes issued by Cookies USA. The holders of the Senior Preferred Stock of Cookies USA are also holders of some of the Common Stock of Cookies USA. The holders of the Junior Class A and B Preferred Stock of Cookies USA are also affiliated with the majority of the holders of the Common Stock of Cookies USA (see Note 11). F-99

COOKIES USA, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) A franchisee who owns eight franchise outlets is related to one of the Company's directors. During the fifty-two week periods ended June 30, 1996, June 29, 1997 and June 28, 1998, the Company had sales of batter and supplies of approximately $497,000, $476,000 and $419,000, respectively, to this related party. The Company also received royalty revenues of approximately $202,000, $199,000 and $186,000 for the fifty-two week periods ended June 30, 1996, June 29, 1997 and June 28, 1998, respectively, from this franchisee. As of June 30, 1996, June 29, 1997 and June 28, 1998, this franchisee owed the Company approximately $91,000, $34,000 and $47,000, respectively. During the fifty-two week periods ended June 30, 1996, June 29, 1997 and June 28, 1998, the Company expensed $250,000 for management services provided by TJC Management Corp. ("TJC"), an affiliate of the majority shareholder of Cookies USA. Under the agreement with TJC, these fees are not to exceed $300,000 per year. Amounts due to TJC as of June 30, 1996, June 29, 1997 and June 28, 1998 were $375,000, $188,000 and $63,000, respectively, and are included in accrued liabilities in the accompanying consolidated balance sheets. 15. SUBSEQUENT EVENTS On August 24, 1998, Mrs. Fields, acquired 100% of the common stock, redeemable preferred stock and subordinated indebtedness of Cookies USA, Inc., for an total purchase price of approximately $18.4 million, under a Securities Purchase Agreement (the "Purchase Agreement"), dated as of August 13, 1998 among Mrs. Fields, Cookies USA, and the individuals and entities identified as sellers therein. In addition, Mrs Fields assumed all principal and accrued interest on the senior secured notes totaling approximately $42.4 million. Per the terms of the Purchase Agreement, the Stock Option Agreements and all other options and warrants, as discussed in Note 12, were cancelled. Mrs Fields also purchased eight stored from a related party franchise, as disclosed in Note 14, for a total purchase price of $1.75 million on September 9, 1998. The franchise was also a holder of Cookies USA securities and a party to the Purchase Agreement. The foregoing summary should be read in conjunction with and is qualified by reference to the Purchase Agreement, the stock purchase agreements between Mrs. Fields and the holders of the capital stock of Deblan and Chocolate Chip, the merger agreements between each of Deblan and Chocolate Chip, the Indenture, the First Supplemental Indenture, dated as of August 24, 1998, among Mrs. Fields, The Mrs. Fields Brand, Inc., and The Bank of New York, as trustee, the Second Supplemental Indenture, dated as of August 24, 1998, among Mrs. Fields, The Mrs. Fields Brand, Inc., and The Bank of New York, as trustee, and the Credit Agreement, which are described as exhibits hereto. The foregoing summary should be read in conjunction with and is qualified by reference to the Purchase Agreement, to the stock purchase agreements between Mrs. Fields and the holders of the capital stock of Deblan and Chocolate Chip, and to the merger agreements between each of Deblan and Chocolate Chip and the Company, which are described as exhibits to this report. In connection with the contemplated acquisition of Cookies USA, the Company commenced a tender offer on August 17, 1998 for all of the outstanding $40.0 million in total principal amount of Great American's 10 7/8% Senior Secured Notes due 2001 (the "Notes"). On August 24, 1998, the Company purchased approximately $33.5 million of the Notes that had been tendered through August 20, 1998 and an additional $5.4 million of the Notes that had been tendered through August 21, 1998. All remaining Notes outstanding were tendered as of the expiration of the tender offer at Midnight on September 14, 1998, and Mrs. Fields accepted and paid for the approximately $1.1 million of remaining Notes on September 16, 1998. F-100

INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Deblan Corporation Houston, Texas We have audited the accompanying Balance Sheets of Deblan Corporation as of December 31, 1996 and 1997 and the related Statements of Earnings, Shareholders' Equity and Cash Flows for the years ended December 31, 1995, 1996 and 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Deblan Corporation as of December 31, 1996 and 1997, and the results of its operations and its cash flows for the years ended December 31, 1995, 1996 and 1997, in conformity with generally accepted accounting principles. Weinstein Spira & Company, P.C. Houston, Texas August 17, 1998 F-101

DEBLAN CORPORATION BALANCE SHEETS (Dollars in Thousands, Except Per Share Data) <TABLE> <CAPTION> December 31, ------------- June 30, 1996 1997 1998 ------ ------ ----------- (Unaudited) <S> <C> <C> <C> ASSETS Current Assets: Cash and cash equivalents......................... $ 399 $ 689 $ 702 Temporary investment.............................. 50 50 50 Accounts receivable: Employees....................................... 12 10 12 Other........................................... 12 18 11 Inventory......................................... 161 145 180 Prepaid expenses.................................. 4 2 17 ------ ------ ------ Total Current Assets.......................... 638 914 972 ------ ------ ------ Property and Equipment: Machinery and equipment........................... 1,173 1,269 1,339 Furniture and fixtures............................ 62 75 81 Leasehold improvements............................ 1,531 1,721 1,721 Transportation equipment.......................... 21 80 55 ------ ------ ------ 2,787 3,145 3,196 Less: Accumulated depreciation and amortization... 1,319 1,417 1,520 ------ ------ ------ Net Property and Equipment...................... 1,468 1,728 1,676 ------ ------ ------ Deferred Federal Income Tax Asset................... 3 2 14 ------ ------ ------ Goodwill, net of accumulated amortization of $7, $8 and $8, respectively............................... 13 12 12 ------ ------ ------ Intangibles, net of accumulated amortization of $317, $325 and $347, respectively.................. 275 285 263 ------ ------ ------ Other Assets........................................ 185 181 181 ------ ------ ------ $2,582 $3,122 $3,118 ====== ====== ====== </TABLE> See notes to financial statements. F-102

DEBLAN CORPORATION BALANCE SHEETS--(Continued) (Dollars in Thousands, Except Per Share Data) <TABLE> <CAPTION> December 31, ------------- June 30, 1996 1997 1998 ------ ------ ----------- (Unaudited) <S> <C> <C> <C> LIABILITIES Current Liabilities: Current portion of long-term debt................. $ 278 $ 291 $ 244 Accounts payable.................................. 212 232 335 Accrued expenses.................................. 191 230 108 Accrued payroll................................... 143 190 137 Federal income tax payable........................ 95 44 44 ------ ------ ------ Total Current Liabilities..................... 919 987 868 Long-Term Debt, net of current portion.............. 299 479 362 ------ ------ ------ 1,218 1,466 1,230 ------ ------ ------ Commitments and Contingencies SHAREHOLDERS' EQUITY Common Stock--$.10 par, 110,000 shares authorized, 97,800 shares issued and outstanding............... 10 10 10 Additional Paid-In Capital.......................... 104 104 104 Retained Earnings................................... 1,250 1,542 1,774 ------ ------ ------ Total Shareholders' Equity.......................... 1,364 1,656 1,888 ------ ------ ------ $2,582 $3,122 $3,118 ====== ====== ====== </TABLE> See notes to financial statements F-103

DEBLAN CORPORATION STATEMENTS OF EARNINGS (Dollars in Thousands) <TABLE> <CAPTION> For the Six For the Year Ended Months Ended December 31, June 30, ---------------------- -------------- 1995 1996 1997 1997 1998 ------ ------ ------ ------ ------ (Unaudited) <S> <C> <C> <C> <C> <C> Revenues Store Sales.......................... $8,512 $8,572 $9,503 $4,342 $4,768 ------ ------ ------ ------ ------ Operating Costs and Expenses Selling and store occupancy costs.... 5,465 5,400 5,744 2,570 2,666 Food cost of sales................... 1,518 1,519 1,675 773 831 General and administrative........... 971 1,061 1,169 672 779 Depreciation and amortization........ 266 237 255 138 142 ------ ------ ------ ------ ------ Total operating costs and expenses.......................... 8,220 8,217 8,843 4,153 4,418 ------ ------ ------ ------ ------ Earnings From Operations............... 292 355 660 189 350 ------ ------ ------ ------ ------ Other Income (Expense) Interest income...................... 14 19 26 10 17 Gain (loss) on disposition of property and equipment.............. (124) 32 (147) -- (4) Interest expense..................... (109) (79) (73) (32) (34) Other................................ 21 13 21 22 18 ------ ------ ------ ------ ------ (198) (15) (173) -- (3) ------ ------ ------ ------ ------ Earnings Before Income Tax............. 94 340 487 189 347 ------ ------ ------ ------ ------ Federal and State Income Tax (Recovery) Current.............................. 52 145 194 82 127 Deferred............................. (9) (9) 1 (10) (12) ------ ------ ------ ------ ------ 43 136 195 72 115 ------ ------ ------ ------ ------ Net Earnings........................... $ 51 $ 204 $ 292 $ 117 $ 232 ====== ====== ====== ====== ====== </TABLE> See notes to financial statements. F-104

DEBLAN CORPORATION STATEMENTS OF SHAREHOLDERS' EQUITY For the Years Ended December 31, 1995, 1996, 1997 and For the Six Months Ended June 30, 1998 (Unaudited) (Dollars in Thousands) <TABLE> <CAPTION> Common Stock Additional ------------- Paid-In Retained Shares Amount Capital Earnings Total ------ ------ ---------- -------- ------ <S> <C> <C> <C> <C> <C> Balance--December 31, 1994............ 97,800 $10 $104 $ 995 $1,109 Net Earnings........................ -- -- -- 51 51 ------ --- ---- ------ ------ Balance--December 31, 1995............ 97,800 10 104 1,046 1,160 Net Earnings........................ -- -- -- 204 204 ------ --- ---- ------ ------ Balance--December 31, 1996............ 97,800 10 104 1,250 1,364 Net Earnings........................ -- -- -- 292 292 ------ --- ---- ------ ------ Balance--December 31, 1997............ 97,800 10 104 1,542 1,656 Net Earnings (unaudited)............ -- -- -- 232 232 ------ --- ---- ------ ------ Balance--June 30, 1998 (unaudited).... 97,800 $10 $104 $1,774 $1,888 ====== === ==== ====== ====== </TABLE> See notes to financial statements. F-105

DEBLAN CORPORATION STATEMENTS OF CASH FLOWS (Dollars in Thousands) <TABLE> <CAPTION> For the Six For the Year Ended Months Ended December 31, June 30, ------------------------- ---------------- 1995 1996 1997 1997 1998 ------- ------- ------- ------- ------- (Unaudited) <S> <C> <C> <C> <C> <C> Cash Flows From Operating Activities: Cash received from customers and employees...................... $ 8,506 $ 8,563 $ 9,500 $ 4,348 $ 4,773 Cash paid to vendors and employees...................... (7,777) (8,146) (8,442) (4,082) (4,389) Interest paid................... (109) (79) (73) (32) (34) Income tax paid................. (100) (9) (245) (165) (127) Interest received............... 14 19 26 10 17 Other income received........... 21 13 21 22 18 ------- ------- ------- ------- ------- Net Cash Provided by Operating Activities................... 555 361 787 101 258 ------- ------- ------- ------- ------- Cash Flows From Investing Activities: Purchase of property and equipment...................... (282) (203) (685) (348) (78) Purchase of license agreement... -- (59) (75) (50) -- Payment of store start-up costs.......................... (5) (13) (36) (21) -- Purchase of additional cash value of life insurance........ (18) (13) (19) (9) (9) Proceeds from sale of property and equipment.................. -- 226 125 -- 6 ------- ------- ------- ------- ------- Net Cash Used in Investing Activities................... (305) (62) (690) (428) (81) ------- ------- ------- ------- ------- Cash Flows From Financing Activities: Proceeds from long-term financing...................... 228 -- 482 284 -- Payment of debt................. (323) (306) (289) (147) (164) ------- ------- ------- ------- ------- Net Cash Provided by (Used in) Financing Activities......... (95) (306) 193 137 (164) ------- ------- ------- ------- ------- Net Increase (Decrease) in Cash and Cash Equivalents............. 155 (7) 290 (190) 13 Cash and Cash Equivalents-- Beginning of Period.............. 251 406 399 399 689 ------- ------- ------- ------- ------- Cash and Cash Equivalents--End of Period........................... $ 406 $ 399 $ 689 $ 209 $ 702 ======= ======= ======= ======= ======= </TABLE> See notes to financial statements. F-106

DEBLAN CORPORATION STATEMENTS OF CASH FLOWS--(Continued) (Dollars in Thousands) <TABLE> <CAPTION> For the Six For the Year Ended Months Ended December 31, June 30, ----------------- ------------- 1995 1996 1997 1997 1998 ---- ----- ---- ------ ------ (Unaudited) <S> <C> <C> <C> <C> <C> Reconciliation of Net Earnings to Net Cash Provided by Operating Activities: Net earnings............................... $ 51 $ 204 $292 $ 117 $ 232 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization............ 266 237 255 138 142 (Gain) Loss on disposition of property and equipment........................... 124 (32) 147 -- 4 Deferred taxes (recovery)................ (9) (9) 1 (10) (12) (Increase) Decrease in: Accounts receivable.................... (5) (9) (4) 6 5 Inventory.............................. 25 (16) 16 (16) (35) Prepaid expenses....................... (2) 5 2 (11) (15) Prepaid federal income tax............. (41) 41 -- -- -- Deposits............................... 4 9 23 7 9 Accounts payable....................... 66 (109) 20 37 103 Accrued expenses....................... 84 (55) 86 (82) (175) Federal income tax payable............. (8) 95 (51) (85) -- ---- ----- ---- ----- ------ Net Cash Provided by Operating Activities.......................... $555 $ 361 $787 $ 101 $ 258 ==== ===== ==== ===== ====== </TABLE> See notes to financial statements. F-107

DEBLAN CORPORATION NOTES TO FINANCIAL STATEMENTS (Information at June 30, 1998 and for the Six Months Ended June 30, 1997 and June 30, 1998 is Unaudited) 1. ACCOUNTING POLICIES Doing business as The Great American Chocolate Chip Cookie Company, the Company operated twenty-three franchise locations at December 31, 1995, 1996 and 1997 and June 30, 1998, in various Texas, Louisiana, Colorado and Florida shopping malls. The Company maintains its accounts on the accrual method of accounting in accordance with generally accepted accounting principles. Accounting principles followed by the Company and the methods of applying those principles which materially affect the determination of financial position, results of operations and cash flows are summarized below: Revenue Recognition Revenue is recognized at the time sales are made. Cash and Cash Equivalents The Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. At all balance sheet dates, the Company had deposits in excess of federally insured limits. Inventory Inventory consists of packaging materials, beverages and baking ingredients for use in the ordinary course of business. All inventory is valued at the lower of cost (first-in, first-out method) or market. Property and Equipment Property and equipment are recorded at cost. Depreciation is computed using the straight-line and accelerated methods over the following estimated useful lives: <TABLE> <S> <C> Machinery and equipment.......... 5-7 years Furniture and fixtures........... 5-7 years Leasehold improvements........... 10-20 years Transportation equipment......... 5 years </TABLE> Temporary Investment Temporary investment includes certificates of deposit with an original maturity of greater than three months. Federal and State Income Tax Federal and state income tax is provided at current prevailing rates. The Company records deferred tax liabilities and assets for the anticipated future tax effects of temporary differences that arise as a result of differences in the carrying amounts and tax bases of assets and liabilities. Licenses Fees paid in connection with obtaining operating licenses are amortized over the life of the license, ranging from 60 months to 360 months. F-108

DEBLAN CORPORATION NOTES TO FINANCIAL STATEMENTS--(Continued) (Information at June 30, 1998 and for the Six Months Ended June 30, 1997 and June 30, 1998 is Unaudited) Intangibles Intangibles consist of organization and store start-up costs which are amortized over a 60-month period, and store license fees which are amortized over periods ranging from 60 months to 360 months. In April 1998, the American Institute of Certified Public Accountants issued Statement of Position (SOP) 98-5 which requires store start-up expenses to be expensed as incurred. This SOP is effective for financial statements for fiscal years beginning after December 15, 1998. Goodwill Goodwill represents the excess of cost over book value of assets acquired. The Company amortizes goodwill using the straight-line method over twenty years. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Unaudited Interim Financial Statements In the opinion of management, the unaudited interim financial statements for the six months ended June 30, 1997 and 1998, presented in this prospectus, include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the Company's financial position, results of operations, shareholders' equity and cash flows for the interim period. The results of operations and cash flows for the six months ended June 30, 1997 and 1998 are not necessarily indicative of the results which would be expected for a full year. Long-Lived Assets The Company assesses and measures for impairment of all long-lived assets, including intangibles, in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121"). SFAS No. 121 requires that long-lived assets be reviewed for impairment when events or changes in circumstances indicate that the book value of an asset may not be recoverable. The Company evaluates, at each balance sheet date, whether events and circumstances have occurred that indicate possible impairment. In accordance with SFAS No. 121, the Company uses an estimate of future undiscounted net cash flows of the related asset or group of assets over the remaining life in measuring whether the assets are recoverable. The Company assesses impairment of long-lived assets at the store level which the Company believes is the lowest level for which there are identifiable cash flows that are independent of other groups of assets. As of December 31, 1996, December 31, 1997 and June 30, 1998, the Company does not consider any of its long-lived assets to be impaired. Fair Value of Financial Instruments The book value of the Company's financial instruments approximates fair value. The estimated fair values have been determined using appropriate market information and valuation methodologies. F-109

DEBLAN CORPORATION NOTES TO FINANCIAL STATEMENTS--(Continued) (Information at June 30, 1998 and for the Six Months Ended June 30, 1997 and June 30, 1998 is Unaudited) Recent Accounting Pronouncements The Company has not yet adopted Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income." The Statement will be effective for the fiscal year 1998. It establishes standards for reporting and displaying of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general-purpose financial statements. Reclassification of financial statements for earlier periods provided for comparative purposes is required. The Company has not yet adopted Statement of Financial Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and Related Information." The Statement will be effective for the fiscal year 1998. It establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. In the initial year of application, comparative information for earlier years is to be restated. The Company believes that adoption of these Statements will not have a material impact on its financial condition, results of operations or cash flows. Reclassifications Certain reclassifications have been made in the prior years' financial statements to conform with the presentation as of June 30, 1998. 2. INTANGIBLES Intangibles consist of the following (in thousands): <TABLE> <CAPTION> December 31, ------------ June 30, 1996 1997 1998 ---- ---- ----------- (Unaudited) <S> <C> <C> <C> License fees (net of accumulated amortization of $263, $270 and $285, respectively).................. $243 $237 $222 Organization and store start-up costs (net of accumulated amortization of $54, $55 and $62, respectively)....................................... 32 48 41 ---- ---- ---- $275 $285 $263 ==== ==== ==== 3. OTHER ASSETS Other assets consist of the following (in thousands): <CAPTION> December 31, ------------ June 30, 1996 1997 1998 ------ ----- ----------- (Unaudited) <S> <C> <C> <C> Cash value of officer's life insurance............... $ 82 $101 $110 Deposits............................................. 103 80 71 ---- ---- ---- $185 $181 $181 ==== ==== ==== </TABLE> F-110

DEBLAN CORPORATION NOTES TO FINANCIAL STATEMENTS--(Continued) (Information at June 30, 1998 and for the Six Months Ended June 30, 1997 and June 30, 1998 is Unaudited) 4. FEDERAL INCOME TAXES Differences between the effective tax rate and the statutory federal tax rate are as follows (in thousands): <TABLE> <CAPTION> For the Six For the Year Months Ended Ended December 31, June 30, ---------------- -------------- 1995 1996 1997 1997 1998 ---- ---- ---- ----- ------ (Unaudited) <S> <C> <C> <C> <C> <C> Federal income tax expense at the statutory rate........................... $32 $116 $166 $ 64 $ 118 Increase (Decrease) in: State income taxes, net of income tax benefit.................................. 6 4 5 2 1 Officer's life insurance and other nondeductible expenses................... 17 20 23 7 4 Surtax exemption.......................... (12) Other..................................... -- (4) 1 (1) (8) --- ---- ---- ----- ------ $43 $136 $195 $ 72 $ 115 === ==== ==== ===== ====== </TABLE> The net deferred federal income tax asset results from differences in depreciation between tax reporting and financial statement reporting, as follows (in thousands): <TABLE> <CAPTION> December 31, ------------ June 30, 1996 1997 1998 ---- ---- ----------- (Unaudited) <S> <C> <C> <C> Accumulated depreciation.............................. $ 3 $ 2 $ 14 ==== ==== ==== </TABLE> 5. NOTES PAYABLE Notes payable are as follows (in thousands): <TABLE> <CAPTION> December 31, ------------ June 30, 1996 1997 1998 ---- ---- ----------- (Unaudited) <S> <C> <C> <C> Notes payable--bank, bearing interest at bank prime plus 1%, secured by certificate of deposit, equipment, leasehold improvements, assignment of life insurance, common stock and guaranty of majority shareholder, due in total monthly installments of $6.6, including interest, maturing in 1998........... $ 98 $ 27 $-- Notes payable--bank, bearing interest at bank prime plus .5%, secured by certificate of deposit, equipment, leasehold improvements, assignment of life insurance, common stock and guaranty of majority shareholder, due in total monthly installments of $26.5, including interest, maturing in various years through 2002......................................... 465 686 561 Notes payable--bearing interest at 8.5% to 8.6%, secured by transportation equipment, due in total monthly installments of $1.8, including interest, maturing in various years through 2002............... 14 57 45 ---- ---- ---- 577 770 606 Less: Current maturities.............................. 278 291 244 ---- ---- ---- $299 $479 $362 ==== ==== ==== </TABLE> F-111

DEBLAN CORPORATION NOTES TO FINANCIAL STATEMENTS--(Continued) (Information at June 30, 1998 and for the Six Months Ended June 30, 1997 and June 30, 1998 is Unaudited) The following is a schedule of future minimum principal payments on debt (in thousands): <TABLE> <CAPTION> For the Year Ending December 31, Amount -------------------------------- ------ <S> <C> 1998.................................................................. $291 1999.................................................................. 210 2000.................................................................. 113 2001.................................................................. 124 2002.................................................................. 32 ---- $770 ==== </TABLE> In connection with the notes payable-bank, the Company has entered into a loan agreement which contains certain restrictive covenants, including maintenance of certain financial ratios, and limitations on borrowings, capital expenditures, loans, sale of assets, dividend payments and executive compensation. At December 31, 1996, December 31, 1997 and June 30, 1998, the Company was in compliance with the covenants or had obtained waivers for those covenants for the succeeding 12 months for which it was not in compliance. 6. OPERATING LEASES The Company leases facilities at various locations from unrelated third parties. The facility leases expire in years ranging from 1998 through 2005. Rent expense is composed of the following items (in thousands): <TABLE> <CAPTION> For the Six For the Year Ended Months Ended December 31, June 30, -------------------- ------------ 1995 1996 1997 1997 1998 ------ ------ ------ ----- ----- (Unaudited) <S> <C> <C> <C> <C> <C> Facilities.................................. $ 997 $ 908 $ 953 $ 478 $ 478 Equipment................................... 20 18 8 5 2 Contingent rents............................ 78 101 162 54 54 ------ ------ ------ ----- ----- $1,095 $1,027 $1,123 $ 537 $ 534 ====== ====== ====== ===== ===== </TABLE> The following is a schedule of future minimum rental payments (in thousands): <TABLE> <CAPTION> For the Year Ending December 31, Facilities Equipment Total -------------------------------- ---------- --------- ------ <S> <C> <C> <C> 1998............................................ $ 805 $ 2 $ 807 1999............................................ 726 -- 726 2000............................................ 624 -- 624 2001............................................ 529 -- 529 2002............................................ 477 -- 477 Thereafter...................................... 1,305 -- 1,305 ------ --- ------ $4,466 $ 2 $4,468 ====== === ====== </TABLE> F-112

DEBLAN CORPORATION NOTES TO FINANCIAL STATEMENTS--(Continued) (Information at June 30, 1998 and for the Six Months Ended June 30, 1997 and June 30, 1998 is Unaudited) 7. PROFIT SHARING PLAN The Company has a profit sharing plan under Section 401(k) of the Internal Revenue Code for all eligible employees. All eligible employees are permitted to defer compensation up to the maximum percentage of annual compensation allowed by the Internal Revenue Code. The plan provides for a matching 50% contribution and a discretionary contribution by the Company. The Company provided contributions of $40,560, $49,974 and $77,877 for the years ended December 31, 1995, 1996 and 1997, and $14,470 and $25,211 for the six months ended June 30, 1997 and 1998, respectively. 8. COMMITMENTS The Company is required to pay its franchisor seven percent of revenues as a franchise fee. 9. CORPORATE REGISTRATION In a corporate reorganization in February, 1997, the par value of the common stock was changed from $1.00 to $.10, followed by a 150-to-1 stock split which increased the number of issued shares to 97,800. Additionally, the number of shares authorized was increased to 110,000. The financial statements presented have been restated to reflect the stock split. Common stock was increased $3,000, and retained earnings were reduced $3,000. 10. REDEMPTION AGREEMENT The shareholders of the Company entered into a stock redemption agreement with the Company in March, 1997. The following is a brief overview of the general terms: Upon the death of the majority shareholder, the Company is obligated to purchase his stock (87,300 shares at December 31, 1997). The price per share shall be the greater of the proceeds from the redemption of life insurance or the value of the stock as stipulated by the shareholders, annually. The initial value stipulated in March, 1997 was $22.75 per share. The Company owns and is beneficiary of life insurance in the amount of $1,500,000 on the life of the majority shareholder, the proceeds of which may be used toward this redemption. Upon the death of the other shareholders, the Company is obligated to purchase the stock at the above described stipulated value. 11. SUBSEQUENT EVENT Subsequent to year end, the shareholders of the Company agreed to sell their shares to Mrs. Fields' Original Cookies, Inc. ("Mrs. Fields") subject to certain events, including Mrs. Fields obtaining financing through a private placement of debt securities. F-113

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Chocolate Chip Cookies of Texas, Inc.: We have audited the accompanying balance sheets of Chocolate Chip Cookies of Texas, Inc. (a Texas corporation) as of September 30, 1996 and 1997, and the related statements of operations, stockholders' equity and cash flows for the years ended September 30, 1995, 1996 and 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Chocolate Chip Cookies of Texas, Inc. as of September 30, 1996 and 1997, and the results of its operations and its cash flows for the years ended September 30, 1995, 1996 and 1997 in conformity with generally accepted accounting principles. Arthur Andersen LLP Salt Lake City, Utah July 22, 1998 F-114

CHOCOLATE CHIP COOKIES OF TEXAS, INC. BALANCE SHEETS (In Thousands) ASSETS <TABLE> <CAPTION> September 30, September 30, June 30, 1996 1997 1998 ------------- ------------- ----------- (Unaudited) <S> <C> <C> <C> CURRENT ASSETS: Cash................................. $ 161 $ 66 $ 173 Accounts receivable.................. -- -- 2 Inventories.......................... 21 22 34 Prepaid assets....................... 4 1 20 ----- ----- ----- Total current assets............... 186 89 229 ----- ----- ----- PROPERTY AND EQUIPMENT, at cost: Leasehold improvements............... 353 494 496 Equipment and fixtures............... 150 168 168 Vehicles............................. 26 26 26 ----- ----- ----- 529 688 690 Less accumulated depreciation and amortization........................ (377) (408) (435) ----- ----- ----- Net property and equipment......... 152 280 255 ----- ----- ----- OTHER ASSETS: Deposits............................. -- -- 13 Intangibles, net of accumulated amortization of $216, $245 and $257, respectively........................ 47 43 31 ----- ----- ----- Total other assets................. 47 43 44 ----- ----- ----- DEFERRED TAX ASSET..................... 2 3 1 ----- ----- ----- Total assets....................... $ 387 $ 415 $ 529 ===== ===== ===== </TABLE> The accompanying notes to financial statements are an integral part of these balance sheets. F-115

CHOCOLATE CHIP COOKIES OF TEXAS, INC. BALANCE SHEETS--(Continued) (In Thousands, Except Share and Per Share Data) LIABILITIES AND STOCKHOLDERS' EQUITY <TABLE> <CAPTION> September 30, September 30, June 30, 1996 1997 1998 ------------- ------------- ----------- (Unaudited) <S> <C> <C> <C> CURRENT LIABILITIES: Current portion of long-term debt.... $ 31 $ 33 $ -- Accounts payable..................... 73 73 50 Accrued salaries..................... 33 43 94 Accrued liabilities.................. 18 45 50 Deferred rent expense................ 22 31 34 Income taxes payable................. 12 15 57 ----- ----- ----- Total current liabilities.......... 189 240 285 LONG-TERM DEBT, net of current portion............................... 81 47 -- ----- ----- ----- Total liabilities.................. 270 287 285 ----- ----- ----- COMMITMENTS (Note 6) STOCKHOLDERS' EQUITY: Common stock, $1 par value; 1,000,000 shares authorized and 250 shares outstanding......................... -- -- -- Treasury stock, 750 shares at cost... (216) (216) (216) Retained earnings.................... 333 344 460 ----- ----- ----- Total stockholder's equity........... 117 128 244 ----- ----- ----- Total liabilities and stockholders' equity............................ $ 387 $ 415 $ 529 ===== ===== ===== </TABLE> The accompanying notes to financial statements are an integral part of these balance sheets. F-116

CHOCOLATE CHIP COOKIES OF TEXAS, INC. STATEMENTS OF OPERATIONS (In Thousands) <TABLE> <CAPTION> Nine Months Nine Months Year Ended Year Ended Year Ended Ended Ended September 30, September 30, September 30, June 30, June 30, 1995 1996 1997 1997 1998 ------------- ------------- ------------- ----------- ----------- (Unaudited) (Unaudited) <S> <C> <C> <C> <C> <C> NET STORE SALES......... $2,168 $2,321 $2,650 $1,962 $2,266 ------ ------ ------ ------ ------ OPERATING COSTS: Selling and store occupancy costs...... 1,197 1,234 1,373 1,005 1,101 Food cost of sales.... 504 603 634 472 531 General and administrative....... 352 363 565 424 429 Depreciation and amortization......... 48 49 60 41 39 ------ ------ ------ ------ ------ Total operating costs and expenses........... 2,101 2,249 2,632 1,942 2,100 ------ ------ ------ ------ ------ Income from operations......... 67 72 18 20 166 ------ ------ ------ ------ ------ OTHER INCOME/(EXPENSE): Interest expense...... (21) (11) (8) (6) (4) Interest income....... 4 3 6 4 4 ------ ------ ------ ------ ------ Income before provision for income taxes....... 50 64 16 18 166 PROVISION FOR INCOME TAXES.................. 12 12 5 6 50 ------ ------ ------ ------ ------ NET INCOME.............. $ 38 $ 52 $ 11 $ 12 $ 116 ====== ====== ====== ====== ====== </TABLE> The accompanying notes to financial statements are an integral part of these statements. F-117

CHOCOLATE CHIP COOKIES OF TEXAS, INC. STATEMENTS OF STOCKHOLDERS' EQUITY (In Thousands) <TABLE> <CAPTION> Treasury Common Stock Stock ------------- ------------- Retained Shares Amount Shares Amount Earnings Total ------ ------ ------ ------ -------- ----- <S> <C> <C> <C> <C> <C> <C> BALANCE, SEPTEMBER 30, 1994....... 250 $-- 750 $(216) $243 $ 27 Net income...................... -- -- -- -- 38 38 --- ---- --- ----- ---- ---- BALANCE, SEPTEMBER 30, 1995....... 250 -- 750 (216) 281 65 Net income...................... -- -- -- -- 52 52 --- ---- --- ----- ---- ---- BALANCE, SEPTEMBER 30, 1996....... 250 -- 750 (216) 333 117 Net income...................... -- -- -- -- 11 11 --- ---- --- ----- ---- ---- BALANCE, SEPTEMBER 30, 1997....... 250 -- 750 (216) 344 128 Net income (unaudited).......... -- -- -- -- 116 116 --- ---- --- ----- ---- ---- BALANCE, JUNE 30, 1998 (unau- dited)........................... 250 $-- 750 $(216) $460 $244 === ==== === ===== ==== ==== </TABLE> The accompanying notes to financial statements are an integral part of these statements. F-118

CHOCOLATE CHIP COOKIES OF TEXAS, INC. STATEMENTS OF CASH FLOWS (In Thousands) INCREASE (DECREASE) IN CASH <TABLE> <CAPTION> Nine Months Nine Months Year Ended Year Ended Year Ended Ended Ended September 30, September 30, September 30, June 30, June 30, 1995 1996 1997 1997 1998 ------------- ------------- ------------- ----------- ----------- (Unaudited) (Unaudited) <S> <C> <C> <C> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net income............. $ 38 $ 52 $ 11 $ 12 $116 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization......... 48 49 60 41 39 Changes in assets and liabilities: Accounts receivable.. -- -- -- -- (2) Inventories.......... (11) 9 (1) (13) (12) Prepaid assets....... (7) 3 3 4 (19) Deposits............. -- -- -- -- (13) Deferred tax asset... (1) 1 (1) (2) 2 Accounts payable..... -- (10) -- 4 (23) Income taxes payable............. (20) 7 3 4 42 Accrued liabilities, salaries and deferred rent expense............. 28 4 46 121 59 ----- ---- ----- ---- ---- Net cash provided by operating Activities......... 75 115 121 171 189 ----- ---- ----- ---- ---- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment......... (143) (10) (159) (69) (2) Amounts paid for non- compete agreements.... (63) -- -- -- -- Amounts paid for franchise agreements.. (25) -- (25) (26) -- ----- ---- ----- ---- ---- Net cash used in investing activities......... (231) (10) (184) (95) (2) ----- ---- ----- ---- ---- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of debt............... 160 -- -- -- -- Principal payments on debt.................. (21) (27) (32) (24) (80) ----- ---- ----- ---- ---- Net cash provided by (used in) financing activities......... 139 (27) (32) (24) (80) ----- ---- ----- ---- ---- NET (DECREASE) INCREASE IN CASH................ (17) 78 (95) 52 107 CASH, beginning of period................. 100 83 161 161 66 ----- ---- ----- ---- ---- CASH, end of period..... $ 83 $161 $ 66 $213 $173 ===== ==== ===== ==== ==== </TABLE> The accompanying notes to financial statements are an integral part of these statements. F-119

CHOCOLATE CHIP COOKIES OF TEXAS, INC. STATEMENTS OF CASH FLOWS--(Continued) (In Thousands) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest was approximately $21, $11, $8, $6 (unaudited) and $4 (unaudited) for the years ended September 30, 1995, 1996 and 1997 and for the nine months ended June 30, 1997 and 1998, respectively. Cash paid for income taxes was approximately $17, $2, $1, $1 (unaudited) and $1 (unaudited) for the years ended September 30, 1995, 1996 and 1997 and for the nine months ended June 30, 1997 and 1998, respectively. The accompanying notes to financial statements are an integral part of these statements. F-120

CHOCOLATE CHIP COOKIES OF TEXAS, INC. NOTES TO FINANCIAL STATEMENTS (Including Notes to Unaudited Periods) 1. DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS Chocolate Chip Cookies of Texas, Inc. (the "Company"), a Texas corporation, was incorporated in 1981. The Company operates retail stores which sell freshly baked cookies and other food products. The Company's stores are franchised from Great American Cookie Company, Inc. ("GACC"). As of June 30, 1998, the Company owned and operated six stores, of which five are located in Texas and one in Louisiana. The Company's business follows seasonal trends and is also affected by climate and weather conditions. The Company experiences its highest revenues in the first fiscal quarter. Because the Company's stores are all located in shopping malls, the Company's sales performance is significantly dependent on the performance of those malls. As a franchisee of GACC, substantially all of the Company's sales are derived from products purchased from GACC. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures 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 may differ from those estimates. Fair Value of Financial Instruments The Company's financial instruments consist primarily of cash, accounts payable and debt instruments. The carrying value of those instruments reported in the balance sheets are considered to estimate their respective fair values due to the short-term nature of such instruments and the current interest rate environment. Inventories Inventories are stated at the lower of cost or market value. Cost is determined using the FIFO (first-in, first-out) method (see Note 3). Property and Equipment Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the lesser of the useful life of the improvement or the remaining term of the applicable lease. The depreciable lives of equipment, fixtures and vehicles range from five to ten years. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments that extend the useful lives of existing equipment are capitalized and depreciated. On retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the statement of operations. Intangibles Intangibles primarily consist of franchise fees paid to GACC and amounts paid for non-compete agreements between the Company and various other parties. Intangibles are being amortized on a straight-line F-121

CHOCOLATE CHIP COOKIES OF TEXAS, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) (Including Notes to Unaudited Periods) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) basis over the lives of the agreements, which are generally ten years for franchise agreements and three years for non-compete agreements. Income Taxes The Company recognizes deferred income tax assets or liabilities for expected future tax consequences of events that have been recognized in the financial statements or tax returns. Under this method, deferred income tax assets or liabilities are determined based upon the difference between the financial and income tax bases of assets and liabilities using enacted tax rates expected to apply when differences are expected to be settled or realized. Revenue Recognition Revenues generated from the Company's stores are recognized at the point of sale. Sources of Supply The Company currently buys a significant amount of its food products and supplies from GACC and an unrelated supplier. In accordance with the franchise agreement, the Company must buy its food products from GACC (see Note 6). Management believes that the Company could obtain its supplies from numerous other suppliers at comparable prices and terms. Long-Lived Assets The Company assesses and measures for impairment of long-lived assets, including intangibles, in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121"). SFAS No. 121 requires that long-lived assets be reviewed for impairment when events or changes in circumstances indicate that the book value of an asset may not be recoverable. The Company evaluates, at each balance sheet date, whether events and circumstances have occurred that indicate possible impairment. In accordance with SFAS No. 121, the Company uses an estimate of future undiscounted net cash flows of the related asset or group of assets over the remaining life in measuring whether assets are recoverable. The Company assesses impairment of long-lived assets at the store level, which the Company believes is the lowest level for which there are identifiable cash flows that are independent of other groups of assets. As of June 30, 1998, the Company does not consider any of its long-lived assets to be impaired. Recent Accounting Pronouncements During the nine months ended June 30, 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 130, "Comprehensive Income", SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information", and SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". The Company does not expect that these statements will have a significant impact on its financial statements. Interim Financial Statements The financial statements as of and for the nine months ended June 30, 1998, and for the nine months ended June 30, 1997, are unaudited. In the opinion of management, these financial statements have been presented on the same basis as the audited financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial position and results of operations for these periods. These interim financial statements are not necessarily indicative of the results that may be achieved for the full fiscal year. F-122

CHOCOLATE CHIP COOKIES OF TEXAS, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) (Including Notes to Unaudited Periods) 3. INVENTORIES The Company's inventories consist of the following as of September 30, 1996 and 1997 and June 30, 1998: <TABLE> <CAPTION> September 30, September 30, June 30, 1996 1997 1998 ------------- ------------- ----------- (Unaudited) <S> <C> <C> <C> Food................................. $12,000 $13,000 $23,000 Beverages............................ 3,000 3,000 4,000 Supplies............................. 6,000 6,000 7,000 ------- ------- ------- $21,000 $22,000 $34,000 ======= ======= ======= </TABLE> 4. LONG-TERM DEBT As of September 30, 1996 and September 30, 1997, long-term debt consisted of a promissory note payable to Wells Fargo Bank secured by the property and equipment of the Company. The note was originally issued by the Company on October 17, 1994 with a variable interest rate equal to the prime rate. As of September 30, 1997 the interest rate on the note was 8.50%. During April 1998, the note was paid in full. 5. INCOME TAXES The components of the provision for income taxes for the years ended September 30, 1995, 1996 and 1997 and the nine months ended June 30, 1997 and 1998 are as follows: <TABLE> <CAPTION> September 30, September 30, September 30, June 30, June 30, 1995 1996 1997 1997 1998 ------------- ------------- ------------- ----------- ----------- (Unaudited) (Unaudited) <S> <C> <C> <C> <C> <C> Federal: Current............... $11,000 $11,000 $ 5,000 $ 8,000 $44,000 Deferred.............. (1,000) -- (1,000) (2,000) 2,000 State: Current............... 2,000 1,000 1,000 -- 4,000 ------- ------- ------- ------- ------- Total................... $12,000 $12,000 $ 5,000 $ 6,000 $50,000 ======= ======= ======= ======= ======= </TABLE> The differences between income taxes at the statutory income tax rate and income taxes reported in the statements of operations are as follows for the years ended September 30, 1995, 1996 and 1997 and the nine months ended June 30, 1997 and 1998: <TABLE> <CAPTION> Nine Months Nine Months Ended Ended September 30, September 30, September 30, June 30, June 30, 1995 1996 1997 1997 1998 ------------- ------------- ------------- ----------- ----------- (Unaudited) (Unaudited) <S> <C> <C> <C> <C> <C> Federal statutory rate.. 15% 15% 15% 15% 30% State franchise taxes... 4 2 6 -- 2 Other................... 5 2 10 18 (2) --- --- --- --- --- 24% 19% 31% 33% 30% === === === === === </TABLE> F-123

CHOCOLATE CHIP COOKIES OF TEXAS, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) (Including Notes to Unaudited Periods) The significant components of the Company's deferred income tax assets and liabilities at September 30, 1996 and 1997 and June 30, 1998 are as follows: <TABLE> <CAPTION> September 30, September 30, June 30, 1996 1997 1998 ------------- ------------- ----------- (Unaudited) <S> <C> <C> <C> Deferred income tax assets: Deferred rent expense............ $ 3,000 $ 5,000 $ 10,000 Amortization of non-compete agreements and franchise agreements...................... 6,000 9,000 20,000 ------- -------- -------- Total deferred income tax assets........................ 9,000 14,000 30,000 Deferred income tax liabilities: Accumulated depreciation......... (7,000) (11,000) (29,000) ------- -------- -------- Net deferred income tax assets..... $ 2,000 $ 3,000 $ 1,000 ======= ======== ======== </TABLE> 6. RELATED-PARTY TRANSACTIONS Related-Party Operating Leases The Company leases retail store facilities under long-term noncancelable operating lease agreements with remaining terms of one to nine years from GACC. The future minimum lease payments due under these operating leases as of September 30, 1997 are as follows: <TABLE> <CAPTION> Year Ending September 30, ------------------------- <S> <C> 1998........................................................... $ 185,000 1999........................................................... 185,000 2000........................................................... 192,000 2001........................................................... 193,000 2002........................................................... 166,000 Thereafter..................................................... 326,000 ---------- $1,247,000 ========== </TABLE> Each of these leases provides for contingent rentals based on gross revenues. Total rental expense, which has been accounted for on a straight-line basis for escalating leases included above, for the years ended September 30, 1995, 1996 and 1997 and for the nine months ended June 30, 1997 and 1998 was approximately $280,000, $299,000, $335,000, $239,000 (unaudited) and $219,000 (unaudited), respectively. Franchise Royalties The Company pays GACC franchise royalties in connection with its franchise agreements with GACC. Franchise royalties are calculated as 7% of gross revenues (as defined in the individual agreements). During the years ended September 30, 1995, 1996 and 1997 and the nine months ended June 30, 1997 and 1998, the Company incurred approximately $152,000, $163,000, $185,000, $132,000 (unaudited) and $158,000 (unaudited), respectively, for franchise royalties, which are included as part of selling and store occupancy costs in the accompanying statements of operations. As of September 30, 1996 and 1997 and June 30, 1998, approximately $13,000, $15,000 and $17,000 (unaudited), respectively, in franchise royalties were payable to GACC. F-124

CHOCOLATE CHIP COOKIES OF TEXAS, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) (Including Notes to Unaudited Periods) 6. RELATED PARTY TRANSACTIONS (Continued) Inventory The Company, in connection with its franchise agreements with GACC, purchases the majority of its inventories from GACC. During the years ended September 30, 1995, 1996 and 1997 and the nine months ended June 30, 1997 and 1998, the Company purchased approximately $311,000, $348,000, $387,000, $298,000 (unaudited) and $327,000 (unaudited), respectively, in inventories from GACC. As of September 30, 1996 and 1997 and June 30, 1998, approximately $12,000, $14,000 and $15,000 (unaudited), respectively, were payable to GACC related to inventory purchases. 7. SUBSEQUENT EVENT On August 24, 1998, the Company sold 100 percent of its common stock to Mrs. Fields' Original Cookies, Inc. F-125

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Combined Karp Entities: We have audited the accompanying combined balance sheets of the Combined Karp Entities (the "Company") identified in Note 1 as of December 31, 1996 and 1997, and the related statements of operations, stockholders' equity and cash flows for the years ended December 31, 1995, 1996 and 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of the Combined Karp Entities as of December 31, 1996 and 1997, and the results of their operations and their cash flows for the years ended December 31, 1995, 1996 and 1997 in conformity with generally accepted accounting principles. Arthur Andersen LLP Salt Lake City, Utah October 6, 1998 F-126

THE COMBINED KARP ENTITIES COMBINED BALANCE SHEETS (In Thousands) ASSETS <TABLE> <CAPTION> December 31, December 31, June 30, 1996 1996 1998 ------------ ------------ ----------- (Unaudited) <S> <C> <C> <C> CURRENT ASSETS: Cash................................... $ 179 $ 176 $ 98 Inventories............................ 57 54 62 Prepaid assets......................... 42 34 31 ------ ------ ------ Total current assets................. 278 264 191 ------ ------ ------ PROPERTY AND EQUIPMENT, at cost: Leasehold improvements................. 803 803 803 Equipment and fixtures................. 460 460 462 ------ ------ ------ 1,263 1,263 1,265 Less accumulated depreciation.......... (617) (718) (768) ------ ------ ------ Net property and equipment........... 646 545 497 ------ ------ ------ OTHER ASSETS: Deposits............................... 42 37 35 Intangibles, net of accumulated amortization of $159, $179 and $191, respectively.......................... 136 121 111 ------ ------ ------ Total other assets................... 178 158 146 ------ ------ ------ NON-CURRENT DEFERRED TAX ASSET........... 8 20 23 ------ ------ ------ Total assets......................... $1,110 $ 987 $ 857 ====== ====== ====== </TABLE> The accompanying notes to combined financial statements are an integral part of these balance sheets. F-127

THE COMBINED KARP ENTITIES COMBINED BALANCE SHEETS--(Continued) (In Thousands) LIABILITIES AND STOCKHOLDERS' EQUITY <TABLE> <CAPTION> December 30, December 30, June 30, 1996 1997 1998 ------------ ------------ ----------- (Unaudited) <S> <C> <C> <C> CURRENT LIABILITIES: Accounts payable....................... $ 39 $ 95 $ 63 Accrued salaries....................... 55 52 42 Accrued liabilities.................... 123 121 107 Income taxes payable................... 128 142 147 ------ ------ ------- Total current liabilities............ 345 410 359 ------ ------ ------- RELATED-PARTY PAYABLES................... 23 23 23 ------ ------ ------- COMMITMENTS AND CONTINGENCIES (Note 6) STOCKHOLDERS' EQUITY: Common stock (Note 5).................. 90 90 90 Additional paid-in capital............. 1,324 1,452 1,536 Accumulated deficit.................... (672) (988) (1,151) ------ ------ ------- Total stockholders' equity........... 742 554 475 ------ ------ ------- Total liabilities and stockholders' equity.............................. $1,110 $ 987 $ 857 ====== ====== ======= </TABLE> The accompanying notes to combined financial statements are an integral part of these balance sheets. F-128

THE COMBINED KARP ENTITIES COMBINED STATEMENTS OF OPERATIONS (In Thousands) <TABLE> <CAPTION> Six Months Six Months Year Ended Year Ended Year Ended Ended Ended December 31, December 31, December 31, June 30, June 30, 1995 1996 1997 1997 1998 ------------ ------------ ------------ ----------- ----------- (Unaudited) (Unaudited) <S> <C> <C> <C> <C> <C> NET STORE SALES......... $2,342 $2,445 $2,500 $1,144 $1,181 ------ ------ ------ ------ ------ OPERATING COSTS: Food cost of sales.... 614 668 683 336 339 Selling and store occupancy costs...... 1,421 1,488 1,635 788 744 General and administrative....... 192 199 238 101 114 Depreciation and amortization......... 104 127 121 59 62 ------ ------ ------ ------ ------ Total operating costs.............. 2,331 2,482 2,677 1,284 1,259 ------ ------ ------ ------ ------ Income (loss) from operations......... 11 (37) (177) (140) (78) INTEREST EXPENSE........ (54) (30) (18) (9) (7) ------ ------ ------ ------ ------ Loss before provision for income taxes....... (43) (67) (195) (149) (85) PROVISION FOR INCOME TAXES.................. (26) (19) (15) (4) (6) ------ ------ ------ ------ ------ NET LOSS................ $ (69) $ (86) $ (210) $ (153) $ (91) ====== ====== ====== ====== ====== </TABLE> The accompanying notes to combined financial statements are an integral part of these statements. F-129

THE COMBINED KARP ENTITIES COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (In Thousands) <TABLE> <CAPTION> Additional Accumulated Common Stock Paid-In Capital Deficit Total ------------ --------------- ----------- ----- <S> <C> <C> <C> <C> BALANCE, DECEMBER 31, 1994..... $90 $ 398 $ (13) $ 475 Distributions................ -- -- (137) (137) Net loss..................... -- -- (69) (69) --- ------ ------- ----- BALANCE, DECEMBER 31, 1995..... 90 398 (219) 269 Distributions................ -- -- (367) (367) Capital contributions........ -- 926 -- 926 Net loss..................... -- -- (86) (86) --- ------ ------- ----- BALANCE, DECEMBER 31, 1996..... 90 1,324 (672) 742 Distributions................ -- -- (106) (106) Capital contributions........ -- 128 -- 128 Net loss..................... -- -- (210) (210) --- ------ ------- ----- BALANCE, DECEMBER 31, 1997..... 90 1,452 (988) 554 Distributions (unaudited).... -- -- (72) (72) Capital contributions (unaudited)................. -- 84 -- 84 Net loss (unaudited)......... -- -- (91) (91) --- ------ ------- ----- BALANCE, JUNE 30, 1998 (unaudited)................... $90 $1,536 $(1,151) $ 475 === ====== ======= ===== </TABLE> The accompanying notes to combined financial statements are an integral part of these statements. F-130

THE COMBINED KARP ENTITIES COMBINED STATEMENTS OF CASH FLOWS (In Thousands) INCREASE (DECREASE) IN CASH <TABLE> <CAPTION> Six Months Six Months Year Ended Year Ended Year Ended Ended Ended December 31, December 31, December 31, June 30, June 30, 1995 1996 1997 1997 1998 ------------ ------------ ------------ ----------- ----------- (Unaudited) (Unaudited) <S> <C> <C> <C> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net loss............... $ (69) $ (86) $(210) $(153) $(91) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization......... 104 127 121 59 62 Changes in assets and liabilities: Related-party receivables......... (79) 143 -- -- -- Inventories.......... -- -- 3 -- (8) Prepaid assets....... (5) 5 8 11 3 Deposits............. 1 (11) 5 5 2 Deferred taxes....... (2) (9) (12) (7) (3) Accounts payable..... 38 (52) 56 25 (32) Accrued salaries..... -- 17 (3) (15) (10) Accrued liabilities.. 15 13 (2) (21) (14) Income taxes payable............. 13 14 14 3 5 Related-party payables............ 69 (567) -- -- -- ----- ----- ----- ----- ---- Net cash provided by (used in) operating activities......... 85 (406) (20) (93) (86) ----- ----- ----- ----- ---- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment......... (13) (111) -- -- (2) Acquisition of intangibles........... 4 (20) (5) (5) (2) Distributions.......... (137) (367) (106) (66) (72) Additional investment.. -- 926 128 62 84 ----- ----- ----- ----- ---- Net cash provided by (used in) investing activities......... (146) 428 17 (9) 8 ----- ----- ----- ----- ---- NET INCREASE (DECREASE) IN CASH................ (61) 22 (3) (102) (78) CASH, beginning of period................. 218 157 179 179 176 ----- ----- ----- ----- ---- CASH, end of period..... $ 157 $ 179 $ 176 $ 77 $ 98 ===== ===== ===== ===== ==== </TABLE> The accompanying notes to combined financial statements are an integral part of these statements. F-131

THE COMBINED KARP ENTITIES COMBINED STATEMENTS OF CASH FLOWS--(Continued) SUPPLEMENTAL DISCLOSURE OF COMBINED CASH FLOW INFORMATION: Cash paid for interest was approximately $40,000, $18,000, $18,000, $9,000 (unaudited) and $7,000 (unaudited) for the years ended December 31, 1995, 1996 and 1997 and for the six months ended June 30, 1997 and 1998, respectively. Cash paid for income taxes was approximately $18,000, $10,000, $10,000, $2,000 (unaudited) and $1,000 (unaudited) for the years ended December 31, 1995, 1996 and 1997 and for the six months ended June 30, 1997 and 1998, respectively. During the year ended December 31, 1996, related-party payables of Hot White Plains Cookies, Inc, Hot Roosevelt Cookies, Inc. and Hot Rockaway Cookies of approximately $364,000, $264,000 and $198,000, respectively, were forgiven and accounted for as capital contributions to these entities. During the year ended December 31, 1996 and December 31,1997, related party receivables of Hot Barton and Northpark Cookies, Inc. and Northpark Cookies, Inc. of approximately $71,000 and $0 and $120,000 and $4,000, respectively, were distributed to stockholders. The accompanying notes to combined financial statements are an integral part of these statements. F-132

THE COMBINED KARP ENTITIES NOTES TO COMBINED FINANCIAL STATEMENTS (Including Notes to Unaudited Periods) 1. DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS The Combined Karp Entities (the "Company") established operations on the following dates under the laws of the respective states: <TABLE> <CAPTION> Structure of State of State of Company Inception date Entity Incorporation Operation ------- ------------------ ------------- ------------- ---------- <S> <C> <C> <C> <C> Hot Barton and Northpark Cookies, Inc........... August 6, 1981 C-corporation Georgia New Jersey Northpark Cookies, Inc.................... October 5, 1981 C-corporation Iowa Iowa Crossroads Cookies, Inc.................... December 9, 1981 C-corporation Georgia Oklahoma Quail Springs Cookies, Inc.................... April 20, 1982 C-corporation Georgia Oklahoma Westgate Cookies, Inc... August 30, 1982 S-corporation Texas Texas Hot White Plains Cookies, Inc........... September 23, 1992 S-corporation Georgia New York Hot Roosevelt Cookies, Inc.................... April 7, 1993 S-corporation Georgia New York Hot Rockaway Cookies.... April 11, 1996 -- Florida New Jersey </TABLE> Northpark Cookies, Inc.'s status of incorporation became inactive as of November 25, 1987. The successor in interest is Hot Barton and Northpark Cookies, Inc. The ASK & MSK Family Limited Partnership-II(B), Inc. (the "Partnership") was incorporated in Florida on April 11, 1996. On this date, the Partnership acquired Hot Roosevelt Cookies, Inc. and Hot White Plains Cookies, Inc. As these entities share common control, these acquisitions were accounted for in a manner similar to a pooling of interests. In addition, on April 11, 1996, the Partnership invested in the Hot Rockaway Cookies store. The Company operates retail stores that sell freshly baked cookies and other food products. The retail stores are franchised from Great American Cookie Company, Inc. ("GACC"). The entities that make up the Company have various fiscal year ends which have been recast to December 31 for purposes of these combined financial statements. These fiscal year ends are as follows: <TABLE> <CAPTION> Company Fiscal Year End ------- --------------- <S> <C> Hot Barton and Northpark Cookies, Inc....................... July 31 Northpark Cookies, Inc...................................... July 31 Crossroads Cookies, Inc..................................... November 30 Quail Springs Cookies, Inc.................................. November 30 Westgate Cookies, Inc....................................... December 31 Hot White Plains Cookies, Inc............................... December 31 Hot Roosevelt Cookies, Inc.................................. December 31 Hot Rockaway Cookies........................................ December 31 </TABLE> F-133

THE COMBINED KARP ENTITIES NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) (Including Notes to Unaudited Periods) The Company's business follows seasonal trends and is affected by climate and weather conditions. The Company experiences its highest revenues in the fourth quarter. Because the stores are located in shopping malls, sales performance is significantly dependent on the performance of those malls. As a franchisee of GACC, substantially all of the Entities' sales are derived from products purchased from GACC. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The individuals entities included within the combined financial statements operate under similar ownership and common control. All significant intercompany balances and transactions have been eliminated in the combination. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures 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 may differ from those estimates. Fair Value of Financial Instruments The Company's financial instruments consist primarily of cash, accounts payable and related-party payables. The carrying value of cash and accounts payable reported in the combined balance sheets are considered to approximate their respective fair values due to the short-term nature of such instruments and the current interest rate environment. The fair value of related-party payables at prevailing market rates is estimated to be $25,000 as of December 31, 1996, 1997 and June 30, 1998. Inventories Inventories are stated at the lower of cost or market value. Cost is determined using the FIFO (first-in, first-out) method (see Note 3). Property and Equipment Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the lesser of the useful life of the improvement or the remaining term of the applicable lease. The depreciable lives of equipment and fixtures are ten years. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments that extend the useful lives of existing equipment are capitalized and depreciated. On retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in the statement of operations. Intangibles Intangibles consist primarily of franchise fees and store operating lease costs paid to GACC. Intangibles are being amortized on a straight-line basis over the lives of the franchise or lease agreements, which are generally ten years. F-134

THE COMBINED KARP ENTITIES NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) (Including Notes to Unaudited Periods) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Taxes The Company recognizes deferred income tax assets or liabilities for expected future tax consequences of events that have been recognized in the combined financial statements or tax returns. Under this method, deferred income tax assets or liabilities are determined based upon the difference between the financial and income tax bases of assets and liabilities using enacted tax rates expected to apply when differences are expected to be settled or realized. Revenue Recognition Revenues generated from the combined stores are recognized at the point of sale. Sources of Supply The Company currently buys a significant portion of their food products and supplies from GACC and an unrelated supplier. In accordance with the franchise agreements, the Company must buy its food products from GACC (see Note 6). Management believes that the Company could obtain its supplies from numerous other suppliers at comparable prices and terms. Long-Lived Assets The Company assesses and measures for impairment of long-lived assets, including intangibles, in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed Of" ("SFAS No. 121"). SFAS No. 121 requires that long-lived assets be reviewed for impairment when events or changes in circumstances indicate that the book value of an asset may not be recoverable. The Company evaluates, at each balance sheet date, whether events and circumstances have occurred that indicate possible impairment. In accordance with SFAS No. 121, the Company uses an estimate of future undiscounted net cash flows of the related asset or group of assets over the remaining life in measuring whether assets are recoverable. The Company assesses impairment of long-lived assets at the store level, which management believes is the lowest level for which there are identifiable cash flows that are independent of other groups of assets. As of June 30, 1998, the Company does not consider any of its long-lived assets to be impaired. Recent Accounting Pronouncements During the six months ended June 30, 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 130, "Comprehensive Income", SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information" and SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". The Company does not expect the implementation of these pronouncements will have a significant impact on its financial statements. Interim Combined Financial Statements The combined financial statements as of and for the six months ended June 30, 1998 and for the six months ended June 30, 1997 are unaudited. In the opinion of management, these combined financial statements have been presented on the same basis as the audited financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the combined financial position and results of operations for these periods. These combined interim financial statements are not necessarily indicative of the results that may be achieved for the full fiscal year. F-135

THE COMBINED KARP ENTITIES NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) (Including Notes to Unaudited Periods) 3. INVENTORIES The Company's inventories consist of the following as of December 31, 1996 and 1997 and June 30, 1998: <TABLE> <CAPTION> December 31, December 31, June 30, 1996 1997 1998 ------------ ------------ ----------- (Unaudited) <S> <C> <C> <C> Food................................... $38,000 $33,000 $40,000 Beverages.............................. 5,000 6,000 7,000 Supplies............................... 14,000 15,000 15,000 ------- ------- ------- $57,000 $54,000 $62,000 ======= ======= ======= </TABLE> 4. INCOME TAXES The following four entities are not included in income tax calculations due to their status as S-corporations or as a business operated within a partnership: Westgate Cookies, Inc., Hot White Plains Cookies, Inc., Hot Roosevelt Cookies, Inc. and Hot Rockaway Cookies. Had these entities been taxable entities, on a pro forma basis, an income tax provision (benefit) of approximately $22,000, $(27,000), $16,000, $(14,000) and $15,000 would have been provided for the years ended December 31, 1995, 1996, 1997 and the six months ended June 30, 1997 and 1998, respectively. Income taxes were provided for all entities with C-corporation status. The components of the provision for income taxes for the years ended December 31, 1995, 1996 and 1997 and the six months ended June 30, 1997 and 1998 are as follows: <TABLE> <CAPTION> December 31, December 31, December 31, June 30, June 30, 1995 1996 1997 1997 1998 ------------ ------------ ------------ ----------- ----------- (Unaudited) (Unaudited) <S> <C> <C> <C> <C> <C> Federal: Current.... $10,000 $13,000 $ 9,000 $ 4,000 $ 3,000 Deferred... (2,000) (8,000) (12,000) (7,000) (3,000) State: Current.... 18,000 14,000 18,000 7,000 6,000 ------- ------- -------- ------- ------- Total........ $26,000 $19,000 $ 15,000 $ 4,000 $ 6,000 ======= ======= ======== ======= ======= </TABLE> The differences between income taxes at the statutory income tax rate and income taxes reported in the statements of operations are the result of permanent differences. The significant components of the Entities' deferred income tax assets and liabilities at December 31, 1996 and 1997 and June 30, 1998 are as follows: <TABLE> <CAPTION> December 31, December 31, June 30, 1996 1997 1998 ------------ ------------ ----------- (Unaudited) <S> <C> <C> <C> Deferred income tax assets: Accumulated depreciation........... $5,000 $ 9,000 $11,000 Net operating loss carryforwards... 3,000 8,000 9,000 Capital losses in excess of capital gains............................. -- 3,000 3,000 ------ ------- ------- Net deferred income tax assets... $8,000 $20,000 $23,000 ====== ======= ======= </TABLE> F-136

THE COMBINED KARP ENTITIES NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) (Including Notes to Unaudited Periods) 5. STOCKHOLDERS' EQUITY Share Data The individual entities had the following assigned par value, authorized and outstanding shares at December 31, 1996 and 1997, and June 30, 1998: <TABLE> <CAPTION> Shares Shares Entity Par Value Authorized Outstanding ------ --------- ---------- ----------- <S> <C> <C> <C> Hot Barton and Northpark Cookies, Inc. ... $0.10 1,000 200 Northpark Cookies, Inc. .................. 0.50 1,000,000 180,000 Crossroads Cookies, Inc. ................. 0.10 2,000 1,000 Quail Springs Cookies, Inc. .............. 0.10 1,000 500 Westgate Cookies, Inc. ................... 0.10 1,000 1,000 Hot White Plains Cookies, Inc. ........... 0.01 10,000 500 Hot Roosevelt Cookies, Inc. .............. 0.01 10,000 500 </TABLE> Capital Contributions The individual entities received the following capital contributions: <TABLE> <CAPTION> Year Ended Year Ended Six Months December 31, December 31, Ended Entity 1996 1997 June 30, 1998 ------ ------------ ------------ ------------- <S> <C> <C> <C> Hot Barton and Northpark Cookies, Inc. ............................ $ -- $ 7,000 $ -- Northpark Cookies, Inc. .......... -- -- 7,000 Crossroads Cookies, Inc. ......... -- -- -- Quail Springs Cookies, Inc. ...... -- -- -- Westgate Cookies, Inc. ........... -- -- -- Hot White Plains Cookies, Inc. ... 428,000 46,000 15,000 Hot Roosevelt Cookies, Inc. ...... 300,000 27,000 12,000 Hot Rockaway Cookies.............. 198,000 48,000 50,000 -------- -------- ------- $926,000 $128,000 $84,000 ======== ======== ======= </TABLE> Distributions The individual entities made the following distributions to stockholders: <TABLE> <CAPTION> Year Ended Year Ended Six Months December 31, December 31, Ended Entity 1996 1997 June 30, 1998 ------ ------------ ------------ ------------- <S> <C> <C> <C> Hot Barton and Northpark Cookies, Inc. ............................ $ (71,000) $ -- $ -- Northpark Cookies, Inc. .......... (120,000) (4,000) -- Crossroads Cookies, Inc. ......... (24,000) (3,000) -- Quail Springs Cookies, Inc. ...... (45,000) (45,000) (30,000) Westgate Cookies, Inc. ........... (107,000) (54,000) (42,000) Hot White Plains Cookies, Inc. ... -- -- -- Hot Roosevelt Cookies, Inc. ...... -- -- -- Hot Rockaway Cookies.............. -- -- -- --------- --------- -------- $(367,000) $(106,000) $(72,000) ========= ========= ======== </TABLE> F-137

THE COMBINED KARP ENTITIES NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) (Including Notes to Unaudited Periods) 6. RELATED-PARTY TRANSACTIONS Related-party Operating Leases The Company leases retail store facilities under long-term noncancelable operating lease agreements with remaining terms of one to nine years from GACC. The future minimum lease payments due under these operating leases as of December 31, 1997 are as follows: <TABLE> <CAPTION> Year Ending December 31, ------------------------ <S> <C> 1998............................................................ $ 370,000 1999............................................................ 347,000 2000............................................................ 240,000 2001............................................................ 222,000 2002............................................................ 110,000 Thereafter...................................................... 152,000 ---------- $1,441,000 ========== </TABLE> Each of these leases provides for contingent rentals based upon gross revenues. Total rental expense, which has been accounted for on a straight-line basis for escalating leases included above, for the years ended December 31, 1995, 1996 and 1997 and for the six months ended June 30, 1997 and 1998 was approximately $457,000, $486,000, $553,000, $276,000 (unaudited) and $225,000 (unaudited), respectively. Franchise Royalties The Company pays GACC franchise royalties in connection with its franchise agreements with GACC. Franchise royalties are calculated as 7% of gross revenues (as defined in the individual agreements). During the years ended December 31, 1995, 1996 and 1997 and the six months ended June 30, 1997 and 1998, the Company incurred approximately $164,000, $165,000, $175,000, $80,000 (unaudited) and $83,000 (unaudited), respectively, for franchise royalties, which are included as part of selling and store occupancy costs in the accompanying combined statements of operations. As of December 31, 1996 and 1997 and June 30, 1998, approximately $21,000, $21,000 and $14,000 (unaudited), respectively, in franchise royalties were payable to GACC. Inventory The Company, in connection with its franchise agreements with GACC, purchases the majority of its inventory from GACC. During the years ended December 31, 1995, 1996 and 1997 and the six months ended June 30, 1997 and 1998, the Company purchased approximately $372,000, $406,000, $425,000, $190,000 (unaudited) and $178,000 (unaudited), respectively, in inventory from GACC. As of December 31, 1996 and 1997 and June 30, 1998, approximately $14,000, $24,000 and $8,000 (unaudited), respectively, were payable to GACC related to inventory purchases. Related-party Payables The related-party payables of $23,000, $23,000 and $23,000 (unaudited) as of December 31, 1996, December 31, 1997 and June 30, 1998 represent loans from stockholders to Hot Barton and Northpark Cookies, Inc. These loans are non- interest bearing and have no specific payment terms or maturity dates. F-138

THE COMBINED KARP ENTITIES NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) (Including Notes to Unaudited Periods) Management Fees Each entity was responsible for paying management fees to a company owned by a related party. For the years ended December 31, 1995, 1996 and 1997 and for the six months ended June 30, 1997 and 1998, the Entities paid approximately $24,000, $60,000, $80,000, $40,000 (unaudited) and $40,000 (unaudited), respectively, in management fees. As of December 31, 1996 and 1997 and June 30, 1998 approximately $5,000, $7,000 and $7,000 (unaudited), respectively, were payable to a related party for management fees. 7. SUBSEQUENT EVENT On July 29, 1998, the Entities entered into individual Asset Purchase Agreements with Mrs. Fields' Original Cookies, Inc. In accordance with these agreements, Mrs. Fields' Original Cookies, Inc. purchased the following assets of the entities: leasehold rights and interests, tangible personal property, such as inventories and property and equipment, certain agreements between the sellers and GACC, customer and vendor lists, recipes and production techniques, store petty cash, deposits and prepaid expenses. On September 9, 1998, the agreements were completed. F-139

INDEPENDENT AUDITORS' REPORT To the Board of Directors and Partners The Cookie Conglomerate, Inc., Cookie Conglomerate, L.L.P., and The Cookie Conglomerate of Carolina Place, Inc. We have audited the accompanying combined balance sheets of THE COOKIE CONGLOMERATE, INC. AND AFFILIATES (The Cookie Conglomerate, L.L.P. and The Cookie Conglomerate of Carolina Place, Inc.) as of December 31, 1997 and 1996 and the related combined statements of operations, changes in equity [deficit] and cash flows for the years then ended. These financial statements are the responsibility of the Companies' and Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of THE COOKIE CONGLOMERATE, INC. AND AFFILIATES as of December 31, 1997 and 1996 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Habif, Arogeti & Wynne, P.C. Atlanta, Georgia November 12, 1998 F-140

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES COMBINED BALANCE SHEETS DECEMBER 31, ASSETS <TABLE> <CAPTION> 1997 1996 ----------- ---------- <S> <C> <C> Current assets -------------- Cash................................................. $ 227,385 $ 184,963 Advances............................................. 0 0 Inventories.......................................... 52,029 61,909 Prepaid expenses..................................... 26,993 33,064 ----------- ---------- Total current assets................................. 306,407 279,936 ----------- ---------- Property and equipment, at cost ------------------------------- Equipment............................................ 720,050 688,156 Fixtures............................................. 174,103 174,103 Leasehold improvements............................... 679,892 679,892 ----------- ---------- 1,574,045 1,542,151 Accumulated depreciation............................. (1,099,171) ( 938,942) ----------- ---------- 474,874 603,209 ----------- ---------- Other assets ------------ Deposits............................................. 34,450 34,450 Franchise costs, net of accumulated amortization of $61,456 for 1997 and $49,122 for 1996............... 73,544 85,936 Organizational costs, net of accumulated amortization of $4,004 for 1997 and $6,832 for 1996.............. 1,854 3,026 Intangible assets, net of accumulated amortization of $13,394 for 1997 and $9,474 for 1996................ 45,406 49,326 Loan costs, net of accumulated amortization of $6,999 for 1997 and $1,729 for 1996........................ 4,708 9,978 ----------- ---------- 159,962 182,716 ----------- ---------- $ 941,243 $1,065,861 =========== ========== </TABLE> See auditors' report and accompanying notes F-141

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES COMBINED BALANCE SHEETS DECEMBER 31, LIABILITIES AND EQUITY <TABLE> <CAPTION> 1997 1996 --------- ---------- <S> <C> <C> Current liabilities ------------------- Accounts payable....................................... $ 156,264 $ 191,219 Accrued expenses....................................... 160,482 139,164 Line-of-credit......................................... 40,000 80,000 Current portion of long-term debt...................... 155,107 176,098 --------- ---------- Total current liabilities............................. 511,853 586,481 --------- ---------- Other liabilities ----------------- Long-term debt, net of current portion................. 108,671 268,664 Deferred rent payable.................................. 81,998 84,182 --------- ---------- 190,669 352,846 --------- ---------- Equity (deficit) ---------------- Common stock, $1 par value, 20,000 shares of Class A (voting) authorized and 10,000 shares of Class B (nonvoting) authorized; 2,357 shares of Class A issued and outstanding....................................... 2,357 2,357 Additional paid-in capital............................. 473,643 473,643 Accumulated deficit.................................... (239,117) (330,174) Partner capital (deficit).............................. 1,838 (19,292) --------- ---------- 238,721 126,534 --------- ---------- $ 941,243 $1,065,861 ========= ========== </TABLE> See auditors' report and accompanying notes F-142

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES COMBINED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, <TABLE> <CAPTION> 1997 1996 ---------- ---------- <S> <C> <C> Sales.................................................... $4,202,799 $3,651,231 Food cost of sales....................................... 1,097,277 1,042,314 ---------- ---------- Gross profit.......................................... 3,105,522 2,608,917 ---------- ---------- Selling, general, and administrative expenses............ 2,787,260 2,519,005 ---------- ---------- Interest expense......................................... 40,075 56,762 ---------- ---------- Net income............................................ $ 278,187 $ 33,150 ========== ========== </TABLE> See auditors' report and accompanying notes F-143

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES COMBINED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 <TABLE> <CAPTION> Additional Partners' Common Paid-In Accumulated Capital Stock Capital Deficit (Deficit) Total ------ ---------- ----------- --------- --------- <S> <C> <C> <C> <C> <C> Balances, December 31, 1995.......... $2,357 $473,643 $(255,382) $ (60,217) $ 160,401 Net income (loss)........... (71,792) 104,942 33,150 Dividends paid.............. (3,000) (64,017) (67,017) ------ -------- --------- --------- --------- Balances, December 31, 1996.......... 2,357 473,643 (330,174) (19,292) 126,534 Net income.................. 91,057 187,130 278,187 Dividends paid.............. 0 (166,000) (166,000) ------ -------- --------- --------- --------- Balances, December 31, 1997.......... $2,357 $473,643 $(239,117) $ 1,838 $ 238,721 ====== ======== ========= ========= ========= </TABLE> See auditors' report and accompanying notes F-144

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES COMBINED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, Increase (Decrease) In Cash <TABLE> <CAPTION> 1997 1996 --------- --------- <S> <C> <C> Cash flows from operating activities Net income............................................... $ 278,187 $ 33,150 --------- --------- Adjustments to reconcile net income to net cash provided by operating activities Depreciation........................................... 160,229 198,535 Amortization........................................... 22,754 25,882 Changes in assets and liabilities Decrease in advances.................................. 0 1,600 Decrease in inventories............................... 9,880 10,915 Decrease (Increase) in prepaid expenses............... 6,071 (6,793) Decrease in deposits.................................. 0 8,767 Decrease in accounts payable.......................... (34,955) (56,024) Increase in accrued expenses.......................... 21,318 34,500 Increase (Decrease) in deferred rent payable.......... (2,184) 16,830 --------- --------- Total adjustments................................... 183,113 234,212 --------- --------- Net cash provided by operating activities............... 461,300 267,362 --------- --------- Cash flows from investing activities Acquisition of property and equipment.................... (31,894) (87,109) Franchise costs reimbursed............................... 0 8,000 Loan costs incurred...................................... 0 (9,462) --------- --------- Net cash used by investing activities................... (31,894) (88,571) --------- --------- Cash flows from financing activities Net proceeds from (payments on) line-of-credit........... (40,000) 55,000 Payments on long-term debt............................... (180,984) (161,252) Dividends paid........................................... (166,000) (67,017) --------- --------- Net cash used by financing activities................... (386,984) (173,269) --------- --------- Net increase in cash.............................. 42,422 5,522 Cash, beginning of year................................... 184,963 179,441 --------- --------- Cash, end of year................................. $ 227,385 $ 184,963 --------- --------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the years for Interest................................................. $ 36,616 $ 55,347 </TABLE> See auditors' report and accompanying notes F-145

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Combination Policy The accompanying combined financial statements include the accounts of The Cookie Conglomerate Inc., The Cookie Conglomerate, L.L.P., and The Cookie Conglomerate of Carolina Place, Inc., all of which are under common control. Intercompany transactions and balances have been eliminated in the combination. Nature of Operations The Companies and Partnership operate retail cookie stores in North Carolina, South Carolina, and Ohio. The stores are franchised from Great American Cookie Company, Inc., now a subsidiary of Mrs. Fields' Original Cookies, Inc. Inventories Inventories are valued at the lower of cost or market with cost determined on the first-in, first-out method. Property and Equipment Property and equipment is carried at cost. Expenditures for maintenance and repairs are expensed currently, while renewals and betterments that materially extend the life of an asset are capitalized. The cost of assets sold, retired, or otherwise disposed of, and the related allowance for depreciation, are eliminated from the accounts, and any resulting gain or loss is recognized. Depreciation is provided using both the straight-line and accelerated methods over the estimated useful lives of the assets which are as follows: <TABLE> <CAPTION> <S> <C> Equipment.......................................... 5 years Fixtures........................................... 7 years Leasehold improvements............................. Life of related lease </TABLE> Franchise Costs Franchise costs represent amounts paid to open the stores and for operating under the name of Great American Cookie Company, Inc., now a subsidiary of Mrs. Fields' Original Cookies, Inc. These costs are being amortized over eight to fifteen years using the straight-line method of amortization. Organizational Costs Organizational costs are carried at cost. Amortization is provided using the straight-line method over a period of sixty months. Intangible Assets: Intangible assets include goodwill and restrictive convenant fees. Goodwill represents the excess of the cost of the Carolina Place franchise over the fair value of its net assets at the date of acquisition. Restrictive convenant fees represent the costs of a non-compete agreement with the previous owners of the Carolina Place franchise. These assets are being amortized on the straight-line method over fifteen years. Loan Costs Loan costs represent bank loan and closing fees incurred in connection with the procurement of long-term debt. These costs are being amortized over the terms of the related loan agreements, which are two to five years. F-146

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES NOTES TO FINANCIAL STATEMENT--(Continued) DECEMBER 31, 1997 AND 1996 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Taxes The Cookie Conglomerate, Inc. and The Cookie Conglomerate of Carolina Place, Inc. elected by unanimous consent of its stockholders to be taxed under the provisions of subchapter S of the Internal Revenue Code. Under those provisions, the Companies do not pay corporate income taxes on their taxable income. Instead, the stockholders are liable for individual income taxes on their respective shares of the Company's taxable income. The Cookie Conglomerate, L.L.P. is also not subject to income tax. Income is taxed directly to its partners. On December 30, 1997, the partners elected to become a limited liability partnership under the Georgia Uniform Partnership Act. Compensated Absences Employees of the Companies and Partnership are entitled to paid vacation, paid sick days and personal days off, depending on job classification, length of service, and other factors. It is impractical to estimate the amount of compensation for future absences, and accordingly, no liability has been recorded in the accompanying financial statements. The Companies' and Partnership's policy is to recognize the costs of compensated absences when actually paid to employees. Estimates The process of preparing financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts. B. LINES-OF-CREDIT A summary of the lines-of-credit is as follows: <TABLE> <CAPTION> Collateral 1997 1996 ---------- ------- ------- <S> <C> <C> <C> Riverside Bank -- $100,000 Guarantee of Ronald Eichel, note payable dated Alan Kuehn, and Cookie September 30, 1996 with Conglomerate, Inc. interest payable monthly at prime plus 1%. Principal payable at maturity on September 30, 1997. $ 0 $80,000 Riverside Bank -- $100,000 Inventory, accounts note payable dated November receivable, 4, 1997 with interest equipment, general payable monthly at prime intangibles, plus 1%. Principal payable corporate guarantee of Cookie at maturity on November 4, Conglomerate Partnership, 1998. personal guarantees of Ronald Eichel, Nancy Eichel, and Alan Kuehn. 40,000 0 ------- ------- $40,000 $80,000 ======= ======= </TABLE> F-147

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES NOTES TO FINANCIAL STATEMENTS--(Continued) DECEMBER 31, 1997 AND 1996 C. LONG-TERM DEBT Long-term debt consists of the following at December 31: <TABLE> <CAPTION> Collateral 1997 1996 ---------- -------- -------- <S> <C> <C> <C> Tony Hege - $160,000 note Notes and accounts payable dated July 18, receivable, 1994. Principal payments inventory, fixtures and of $1,905 plus interest equipment. at 9% per annum payable monthly beginning August 10, 1994 until July 10, 1998 when remaining principal due. $ 77,778 $104,762 Alan Kuehn (stockholder)-- Notes and accounts $20,000 note payable at receivable, 9%. Interest only payable inventory, fixtures and through December of 1995. equipment. Principal payments of $417 plus interest due monthly through July 10, 1998 when remaining principal due. Interest expense incurred for each year totals $3,600. 20,000 20,000 Ron Eichel (stockholder)-- Notes and accounts $20,000 note payable at receivable, 9%. Interest only payable inventory, fixtures and through December of 1995. equipment. Principal payments of $417 plus interest due monthly through July 10, 1998 when remaining principal due. Interest expense incurred for each year totals $3,600. 20,000 20,000 Riverside Bank--$106,222 Inventory, equipment, note payable dated accounts September 30, 1996 with receivable, general 50 monthly installment intangibles. payments of principal and Personal guarantees of Ronald interest of $2,574 Eichel, Nanci Eichel, Alan beginning on October 30, Kuehn 1996. Interest at 9.25%. and corporate guarantee of Matures November 30, Cookie 2000. Conglomerate Partnership. 76,000 100,000 Riverside Bank--$196,747 Inventory, equipment, note payable dated accounts September 30, 1996 with receivable, general 25 monthly installment intangibles. payments beginning Personal guarantees of Ronald October 30, 1996 of Eichel and Alan Kuehn principal of $7,870 plus and corporate guarantee of interest at prime plus Cookie 1%. Matures October 30, Conglomerate Partnership. 1998. 70,000 173,000 Riverside Bank--$30,837 Inventory, accounts note payable dated receiveable, September 30, 1996 with general intangibles. 25 monthly installment Corporate payments beginning guarantee of Cookie October 30, 1996 of Conglomerate principal of $1,233 plus partnership, personal interest at 9.25%. guarantees Matures October 30, 1998. of Ronald Eichel, Nanci Eichel and Alan Kuehn. 0 27,000 -------- -------- 263,778 444,762 Less: Current maturities 155,107 176,098 -------- -------- $108,671 $268,664 ======== ======== </TABLE> F-148

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES NOTES TO FINANCIAL STATEMENTS--(Continued) DECEMBER 31, 1997 AND 1996 C. LONG-TERM DEBT (Continued) Following are maturities of long-term debt for each of the next five years: <TABLE> <CAPTION> December 31, ------------ <S> <C> 1998............................................................... $155,107 1999............................................................... 49,907 2000............................................................... 49,557 2001............................................................... 9,207 2002............................................................... 0 -------- $263,778 ======== </TABLE> D. COMMITMENTS The Cookie Conglomerate, Inc. and Affiliates are the lessee of store space in various malls under sublease arrangements with Great American Cookie Company, Inc., now a subsidiary of Mrs. Fields' Original Cookies, Inc. Minimum future lease payments under non-cancelable operating leases having remaining terms in excess of one year as of December 31, 1997 for each of the next five years and in total are: <TABLE> <CAPTION> December 31, ------------ <S> <C> 1998............................................................ $ 481,036 1999............................................................ 454,143 2000............................................................ 297,246 2001............................................................ 237,789 2002............................................................ 195,536 Thereafter...................................................... 353,804 ---------- $2,019,554 ========== </TABLE> Additional rental payments are contingent on sales exceeding certain breakpoint levels specified in each lease. Rent expense totaled $640,870 for 1997 and $620,355 for 1996. Franchise agreements provide for the Companies and Partnership to pay annual service fees equal to 7% of gross sales. The service fees due the franchiser in connection with these agreements are due on a monthly basis. The franchise agreements end simultaneously with the termination of the lease of the premises in which the cookie facilities are located. E. SUBSEQUENT EVENT The Cookie Conglomerate of Carolina Place, Inc. effectively merged with The Cookie Conglomerate, Inc. on January 1, 1998. The Cookie Conglomerate, Inc. and The Cookie Conglomerate, L.L.P. entered into an asset purchase agreement on October 5, 1998 with Mrs. Fields' Original Cookies, Inc. to sell substantially all the assets of the Company and Partnership. F-149

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES COMBINED BALANCE SHEET SEPTEMBER 30, 1998 (Unaudited) ASSETS <TABLE> <CAPTION> September 30, 1998 ------------- <S> <C> Current assets -------------- Cash............................................................ $135,749 Inventories..................................................... 71,635 Other current assets............................................ 2,011 -------- Total current assets........................................... 209,395 Property and equipment, net...................................... 435,604 Intangibles, net................................................. 111,490 Other assets..................................................... 34,451 -------- $790,940 ======== LIABILITIES AND STOCKHOLDERS' EQUITY <CAPTION> Current liabilities ------------------- <S> <C> Accounts payable................................................ $101,243 Accrued expenses................................................ 91,213 Current portion of long-term debt............................... 121,621 -------- Total current liabilities...................................... 314,077 <CAPTION> Other liabilities ----------------- <S> <C> Long-term debt, net of current portion.......................... 29,366 -------- Total liabilities.............................................. 343,443 -------- <CAPTION> Stockholders' equity -------------------- <S> <C> Common stock, $1 par value, 20,000 shares of Class A [voting] authorized and 10,000 Shares of Class B [nonvoting] authorized; 2,357 shares of Class A issued and outstanding................. 2,357 Additional paid-in capital...................................... 473,643 Partner capital................................................. 23,629 Accumulated Deficit............................................. (52,132) -------- 447,497 -------- $790,940 ======== </TABLE> See footnote F-150

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES COMBINED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, (Unaudited) <TABLE> <CAPTION> 1998 1997 ---------- ---------- <S> <C> <C> Sales...................................................... $2,906,499 $2,926,659 Cost of sales.............................................. 2,313,079 2,388,393 ---------- ---------- Gross profit............................................. 593,420 538,266 Selling, general, and administrative expenses.............. 389,462 380,901 Interest expense........................................... 16,972 27,649 ---------- ---------- Net income............................................... $ 186,986 $ 129,716 ========== ========== </TABLE> See footnote F-151

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES COMBINED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, (Unaudited) Increase (Decrease) In Cash <TABLE> <CAPTION> 1998 1997 --------- --------- <S> <C> <C> Cash flows from operating activities ------------------------------------ Net income.............................................. $ 186,985 $ 129,716 --------- --------- Adjustments to reconcile net income to net cash provided by operating activities Depreciation & amortization............................ 117,584 125,688 Changes in assets and liabilities Increase (decrease) in inventories.................... (19,606) 7,908 Decrease in prepaid expenses.......................... 24,981 28,124 Decrease in accounts payable & accrued expenses....... (246,288) (212,000) --------- --------- Total adjustments.................................... (123,329) (50,280) --------- --------- Net cash provided by operating activities........... 63,656 79,436 --------- --------- Cash flows from investing activities ------------------------------------ Acquisition of equipment................................ (64,292) (25,003) --------- --------- Net cash used by investing activities.................. (64,292) (25,003) --------- --------- Cash flows from financing activities ------------------------------------ Dividends paid.......................................... (43,906) (43,365) Payments on long-term debt and line-of-credit........... (47,095) (76,854) --------- --------- Net cash used by financing activities.................. (91,001) (120,219) --------- --------- Net decrease in cash.................................. (91,637) (65,786) Cash, beginning of period............................... 227,385 184,963 --------- --------- Cash, end of period................................... $ 135,748 $ 119,177 ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION ------------------------------------------------- <CAPTION> 1998 1997 --------- --------- <S> <C> <C> Cash paid during the years for interest................. $ 16,972 $ 27,649 </TABLE> See footnote F-152

THE COOKIE CONGLOMERATE, INC. AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS (Unaudited) (1)BASIS OF PRESENTATION The accompanying interim unaudited combined financial statements have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission, and accordingly, do not include all of the information and footnotes required by generally accepted accounting principles. In the opinion of management, these combined financial statements reflect all adjustments, which consist only of normal recurring adjustments, which are necessary to present fairly the Company's financial position as of September 30, 1998 and results of operations and cash flows for the nine months ended September 30, 1998 and September 30, 1997. These interim unaudited combined financial statements should be read in conjunction with the audited combined financial statements and notes to it included in this filing. F-153

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors Pretzelmaker Holdings, Inc. and Subsidiaries Denver, Colorado We have audited the accompanying consolidated balance sheet of Pretzelmaker Holdings, Inc. and Subsidiaries as of December 31, 1997, 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Pretzelmaker Holdings, Inc. and Subsidiaries at December 31, 1997, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. As discussed in Note 2 to the consolidated financial statements, during 1997 the Company's subsidiary became non-compliant with the covenants under its bank debt agreements and the lender has not agreed to provide waivers. Accordingly, such debt has been reclassified as a current liability since, due to the covenant default, the lender has the right to accelerate the repayment of the loans. AJ. ROBBINS, PC CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS Denver, Colorado December 11, 1998 F-154

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors Pretzelmaker Holdings, Inc. and Subsidiaries Denver, Colorado We have audited the accompanying consolidated balance sheet of Pretzelmaker Holdings, Inc. and Subsidiaries as of December 31, 1996, and the related consolidated statements of operations, stockholders' equity and cash flows for the period from inception (February 24, 1995) to December 31, 1995 and for the year ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Pretzelmaker Holdings, Inc. and Subsidiaries at December 31, 1996, and the results of its operations and its cash flows for the period from inception (February 24, 1995) to December 31, 1995 and for the year ended December 31, 1996 in conformity with generally accepted accounting principles. BDO SEIDMAN, LLP Denver, Colorado February 7, 1997 F-155

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS (Substantially all pledged) <TABLE> <CAPTION> December 31, --------------------- September 30, 1996 1997 1998 ---------- ---------- ------------- (Unaudited) <S> <C> <C> <C> CURRENT ASSETS: Cash...................................... $ 95,914 $ 115,805 $ 216,261 Accounts receivable, net of allowance for doubtful accounts of $10,000, $10,000 and $45,000.................................. 485,002 642,821 510,904 Due from affiliates....................... 77,904 46,129 24,809 Refundable income taxes................... -- 56,524 -- Inventories............................... 31,583 74,226 47,400 Prepaid expenses and supplies............. 14,126 237 22,677 ---------- ---------- ---------- Total Current Assets.................... 704,529 935,742 822,051 ---------- ---------- ---------- PROPERTY AND EQUIPMENT: Store fixtures and equipment.............. 719,509 872,864 646,598 Leasehold improvements.................... 336,301 416,631 267,233 Computer equipment........................ 54,346 71,761 70,811 Furniture and fixtures.................... 54,264 54,134 34,959 ---------- ---------- ---------- 1,164,420 1,415,390 1,019,601 Less accumulated depreciation and amortization............................. 150,336 341,523 453,193 ---------- ---------- ---------- Net Property and Equipment................ 1,014,084 1,073,867 566,408 ---------- ---------- ---------- OTHER ASSETS: Intangible assets, net of accumulated amortization............................. 1,414,628 1,258,470 1,141,351 Deferred tax asset........................ 62,000 62,000 62,000 Other assets.............................. 122,762 46,880 62,533 Restricted cash........................... -- 64,575 59,112 ---------- ---------- ---------- Total Other Assets...................... 1,599,390 1,431,925 1,324,996 ---------- ---------- ---------- $3,318,003 $3,441,534 $2,713,455 ========== ========== ========== </TABLE> See accompanying notes to consolidated financial statements F-156

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY <TABLE> <CAPTION> December 31, ---------------------- September 30, 1996 1997 1998 ---------- ---------- ------------- (Unaudited) <S> <C> <C> <C> CURRENT LIABILITIES: Bank debt............................... $ -- $ 732,916 $ 443,742 9% Notes payable in 1998................ -- 215,587 38,500 Accounts payable........................ 367,904 461,124 330,541 Accruals and other payables............. 47,810 138,065 185,213 Income taxes payable.................... 70,000 23,449 -- Deferred initial franchise fees......... 357,760 151,500 214,950 Current maturities of long-term debt.... 151,797 45,647 49,141 Current portion of non-compete agreements............................. 130,416 151,418 168,082 ---------- ---------- ---------- Total Current Liabilities............. 1,125,687 1,919,706 1,430,169 ---------- ---------- ---------- LONG-TERM OBLIGATIONS: Long-term debt, less current maturities............................. 288,639 237,130 180,555 Unsecured promissory notes.............. 534,000 540,000 540,000 Non-compete agreements payable.......... 327,221 175,803 -- Deferred revenues....................... -- -- 180,906 ---------- ---------- ---------- Total Liabilities..................... 2,275,547 2,872,639 2,331,630 ---------- ---------- ---------- COMMITMENTS AND CONTINGENCIES (Note 7) STOCKHOLDERS' EQUITY: Common stock, $0.001 par value; shares authorized 1,000,000; shares issued and outstanding 135,155.. 135 135 135 Additional paid-in capital.............. 1,070,814 1,070,814 1,070,814 Accumulated deficit..................... (28,493) (502,054) (689,124) ---------- ---------- ---------- Total Stockholders' Equity............ 1,042,456 568,895 381,825 ---------- ---------- ---------- $3,318,003 $3,441,534 $2,713,455 ========== ========== ========== </TABLE> See accompanying notes to consolidated financial statements. F-157

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS <TABLE> <CAPTION> February 24 Nine Months Ended (Inception) to Years Ended December 31, September 30, December 31, ------------------------- ------------------------ 1995 1996 1997 1997 1998 -------------- ----------- ------------ ------------------------ (Unaudited) (Unaudited) <S> <C> <C> <C> <C> <C> REVENUES : Franchising............ $ 706,410 $1,663,846 $2,026,385 $1,415,632 $1,538,486 Net company-owned store sales................. 254,124 1,061,889 1,818,919 1,222,149 1,038,775 Initial franchise fees.................. 435,988 893,099 778,294 593,285 186,202 Product and equipment revenue 329,523 1,795,262 1,441,815 1,322,613 598,068 ---------- ---------- ---------- ---------- ---------- Total Revenues........ 1,726,045 5,414,096 6,065,413 4,553,679 3,361,531 ---------- ---------- ---------- ---------- ---------- COSTS AND EXPENSES: General and administrative expenses.............. 1,088,763 2,588,832 2,685,646 2,007,944 1,546,513 Company-owned stores expenses.............. 275,163 1,104,908 1,815,775 1,370,404 992,336 Product and equipment costs................. 209,910 1,173,866 921,131 895,829 121,254 Losses on store closings and asset dispositions.......... -- -- 340,491 153,611 108,858 Litigation settlement.. -- -- 148,702 148,702 -- Depreciation and amortization.......... 156,382 291,862 402,693 288,566 627,337 Interest expense....... 89,247 157,242 224,536 171,316 152,303 ---------- ---------- ---------- ---------- ---------- Total Costs and Expenses............. 1,819,465 5,316,710 6,538,974 5,036,372 3,548,601 ---------- ---------- ---------- ---------- ---------- INCOME (LOSS) BEFORE TAXES ON INCOME (93,420) 97,386 (473,561) (482,693) (187,070) TAXES ON INCOME -- 32,459 -- -- -- ---------- ---------- ---------- ---------- ---------- NET INCOME (LOSS) $ (93,420) $ 64,927 $ (473,561) $ (482,693) $ (187,070) ========== ========== ========== ========== ========== </TABLE> See accompanying notes to consolidated financial statements F-158

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY <TABLE> <CAPTION> Common Stock Additional -------------- Paid-in Accumulated Shares Amount Capital Deficit Total ------- ------ ---------- ----------- ---------- <S> <C> <C> <C> <C> <C> Balances at February 24, 1995 (Inception)........... -- $-- $ -- $ -- $ -- Issuance of Capital Stock.. 135,155 135 1,070,814 -- 1,070,949 Net loss for the period.... -- -- -- (93,420) (93,420) ------- ---- ---------- --------- ---------- Balances at December 31, 1995....................... 135,155 135 1,070,814 (93,420) 977,529 Net income for the year.... -- -- -- 64,927 64,927 ------- ---- ---------- --------- ---------- Balances at December 31, 1996....................... 135,155 135 1,070,814 (28,493) 1,042,456 Net loss for the year...... -- -- -- (473,561) (473,561) ------- ---- ---------- --------- ---------- Balances at December 31, 1997....................... 135,155 135 1,070,814 (502,054) 568,895 Net loss for the period (unaudited)............... -- -- -- (187,070) (187,070) ------- ---- ---------- --------- ---------- Balances at September 30, 1998 (unaudited)........... 135,155 $135 $1,070,814 $(689,124) $ 381,825 ======= ==== ========== ========= ========== </TABLE> See accompanying notes to consolidated financial statements F-159

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS <TABLE> <CAPTION> February 24, Years Ended Nine Months Ended (Inception) to December 31, September 30, December 31, -------------------- ---------------------- 1995 1996 1997 1997 1998 -------------- --------- --------- ----------- ---------- (Unaudited) (Unaudited) <S> <C> <C> <C> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)...... $ (93,420) $ 64,927 $(473,561) $(482,693) $(187,070) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amor- tization............. 156,382 291,862 402,693 288,566 627,337 Loss on disposal of equipment............ -- -- 108,890 6,795 (76,601) Interest accretion.... 73,637 69,974 51,884 38,904 23,161 Deferred revenues..... -- -- -- -- 180,906 Deferred income tax- es................... (22,000) (40,000) -- -- -- Accounts receivable allowance............ 5,000 5,000 -- -- 35,000 Changes in operating assets and liabilities: Accounts receivable.. (172,836) (211,469) (81,319) (52,693) 71,917 Refundable income taxes............... (23,000) 23,000 (56,524) -- 56,524 Inventories.......... (11,254) (18,779) (42,643) (60,727) 26,826 Due from affiliates.. -- (77,904) 31,775 51,565 21,320 Prepaid expenses and supplies............ (14,126) -- 13,889 (24,722) (22,440) Accounts payable..... 147,000 184,788 72,520 255,828 (130,583) Accruals and other payables............ 62,995 (86,315) 110,955 52,476 23,699 Income taxes pay- able................ -- 70,000 (46,551) (70,000) -- Deferred initial franchise fees...... 90,679 16,561 (206,261) (147,910) 63,450 --------- --------- --------- --------- --------- Net Cash Provided by (Used in) Operating Activities............ 199,057 291,645 (114,253) (144,611) 713,446 --------- --------- --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment......... (445,612) (665,948) (278,529) (161,209) (75,296) Proceeds from sale of property and equipment............. -- -- 199,564 191,064 166,361 Purchase of business, net of cash acquired.. (333,784) -- -- -- -- Other assets........... (63,003) (70,451) 80,335 49,972 (7,876) Restricted cash........ -- -- (64,575) (69,560) 5,463 --------- --------- --------- --------- --------- Net Cash Provided by (Used in) Investing Activities............ (842,399) (736,399) (63,205) 10,267 88,652 --------- --------- --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of capital stock...... 795,000 -- -- -- -- Proceeds from notes payable............... 399,000 593,878 518,426 406,728 -- Principal payments on notes payable......... -- (49,727) (128,928) (84,804) (466,261) Principal payments on non-compete agreements............ (360,000) (182,300) (182,300) (182,300) (182,300) Principal payments on capital lease obligations........... (3,165) (8,676) (9,849) (3,830) (53,081) --------- --------- --------- --------- --------- Net Cash Provided by (Used in) Financing Activities............ 830,835 353,175 197,349 135,794 (701,642) --------- --------- --------- --------- --------- NET INCREASE (DECREASE) IN CASH................ 187,493 (91,579) 19,891 1,450 100,456 CASH BALANCE, beginning of period.............. -- 187,493 95,914 95,914 115,805 --------- --------- --------- --------- --------- CASH BALANCE, end of pe- riod................... $ 187,493 $ 95,914 $ 115,805 $ 97,364 $ 216,261 ========= ========= ========= ========= ========= </TABLE> See accompanying notes to consolidated financial statements F-160

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Information as of September 30, 1998 and for the Nine Months Ended September 30, 1997 and 1998 is Unaudited.) NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Business Pretzelmaker Holdings, Inc. and Subsidiaries (the Company), was incorporated on February 24, 1995 and acquired all the issued and outstanding common stock of Pretzelmaker, Inc. (Pretzelmaker) on March 28, 1995. Pretzelmaker holds legal title to certain trademarks and recipes for specialty bakery products. Pretzelmaker licenses use of the trademarks and recipes to qualified third parties for the establishment and operation of Pretzelmaker stores. In connection with these licensing activities, Pretzelmaker will require third- party-licensees to use certain business formats, systems, methods, procedures, designs, layouts, specifications, tradenames and trademarks. There are licensed locations located throughout the United States and Canada, as well as Korea. Pretzelmaker also operates company-owned stores and sports venues for the sale of its bakery products. On September 26, 1996, Pretzelmaker Canada, Inc. (Canada) was incorporated. Pretzelmaker owns all the issued and outstanding stock of Canada. Canada has a master franchise agreement with Pretzelmaker which covers all locations in Canada. Basis of Presentation The Consolidated financial statements include the accounts of the Company, Pretzelmaker and Canada, its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. The acquisition of Pretzelmaker has been accounted for as a purchase and accordingly these consolidated financial statements include the results of Pretzelmaker from the date of acquisition forward. Unaudited Information The accompanying consolidated financial statements as of September 30, 1998 and for the nine months ended September 30, 1997 and 1998 are unaudited and have been prepared on a substantially equivalent basis with that of the annual consolidated financial statements. In the opinion of management, the unaudited information contains all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company's consolidated financial position and results of operations as of September 30, 1998 and for such periods. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Financial Instruments and Credit Risk Concentration Financial instruments which potentially subject the Company to concentrations of credit risk are primarily cash and accounts receivable. The Company places its cash in what it believes to be highly rated financial institutions. The balance in each cash account maintained in the United States is insured by the Federal Deposit Insurance Corporation up to $100,000. From time to time, balances in these accounts may exceed the insured limits. F-161

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Information as of September 30, 1998 and for the Nine Months Ended September 30, 1997 and 1998 is Unaudited.) NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Concentrations of credit risk with respect to accounts receivable are limited due to a broad franchisee base and generally short payment terms. Cash and Equivalents For the purposes of the statement of cash flows, the Company considers cash and all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Inventories Inventories consisting of food products, ovens, belts and promotional materials are stated at the lower of cost or market, cost being determined on a first-in, first-out basis. Property and Equipment Property and equipment is stated at cost, less accumulated depreciation. Depreciation is determined using the straight-line method over the estimated useful lives of the assets as follows: <TABLE> <S> <C> Store fixtures and equipment................................. 5-7 years Leasehold improvements....................................... Term of lease Computers and equipment...................................... 5 years Furniture and fixtures....................................... 7 years </TABLE> Intangible Assets Intangible assets consist primarily of goodwill and non-compete agreements, which arose in connection with the acquisition of Pretzelmaker by the Company in 1995. The goodwill and non-compete agreements are being amortized over periods of fifteen and nine years, respectively. Revenue Recognition Revenues generated from company-owned stores are recognized at the point of sale. Initial franchise fees are recognized after the Company has completed performance of its initial license obligations. A portion of the franchise fee revenue is deferred until commencement of operations of the licensee's location. Franchise and license royalties, which are based upon a percentage of gross store sales, are recognized as earned. Advance payments received from suppliers are recorded as deferred revenues and recognized as income over the life of the related supply agreement. Income Taxes The Company recognizes deferred income tax assets or liabilities for expected future tax consequences of events that have been recognized in the financial statements or tax returns. Under this method, deferred income tax assets or liabilities are determined based upon the difference between the financial and income tax basis of assets and liabilities using enacted tax rates expected to apply when differences are expected to be settled or realized. Valuation allowances will be established when necessary, to reduce deferred tax assets to the amount expected to be realized. F-162

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Information as of September 30, 1998 and for the Nine Months Ended September 30, 1997 and 1998 is Unaudited.) NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Foreign Currency Translation The functional currency for the Company's foreign operations is the applicable local currency. The translation of the applicable foreign currency into U.S. dollars is computed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. The gains and losses resulting from such translation are immaterial. Recent Accounting Pronouncement During the nine months ended September 30, 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130 requires an "all-inclusive" income presentation approach which specifies that all revenues, expenses, gains and losses recognized during the period be reported in income, regardless of whether they are considered to be results of operations of the period. The adoption of SFAS No. 130 had no material impact on the Company's financial statement presentation. Reclassifications Certain reclassifications have been made in the prior period consolidated financial statements to conform with the current period presentation. Year 2000 Issues Management of the Company has assessed the year 2000 issue and has determined that its financial software and related corporate systems and retail sales data collecting systems are not year 2000 compliant. As a result of the acquisition of the Company (Note 12) all of the Company's year 2000 non-compliant systems will be converted to Mrs. Fields' systems by early 1999. NOTE 2--BANK DEBT During April 1997, the Company through Pretzelmaker established a $300,000 line-of-credit with a bank and subsequently finalized a term loan facility to repay then outstanding term debt as well as to provide financing for expansion equipment and fixtures. Advances under the line-of-credit were made based upon 75% of eligible accounts receivable and 30% of allowable inventories. Advances under the term loan facility are repayable in 36 monthly installments, plus interest. Interest on amounts outstanding on the bank debt is computed at the bank's prime rate plus 1% and the debt is collateralized by the Company's accounts receivable, inventories, intangibles and property and equipment. F-163

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Information as of September 30, 1998 and for the Nine Months Ended September 30, 1997 and 1998 is Unaudited.) NOTE 2--BANK DEBT (Continued) The following amounts were outstanding under the bank debt agreements: <TABLE> <CAPTION> December 31, September 30, 1997 1998 ------------ ------------- (Unaudited) <S> <C> <C> Line-of-credit.................................. $300,000 $279,692 Term loans, payable $14,114 monthly, plus interest....................................... 432,916 164,050 -------- -------- Total......................................... $732,916 $443,742 ======== ======== </TABLE> Under the terms of the agreements, the Company is subject to certain debt covenants, which include, among other items, limitations on capital expenditures, minimum tangible net worth and debt coverage ratio amounts and maximum leverage ratio (all as defined under the agreements). As of December 31, 1997 and September 30, 1998 the Company was not in compliance with the covenant requirements and the lender has not agreed to provide waivers of such violations. Accordingly, the term debt which by its original terms would have been classified as a long-term obligation, has been reclassified as a current liability due to the default, as the lender has the right to accelerate the repayment of the loans. Subsequent to the acquisition as discussed in Note 12, Mrs. Fields is in discussions with the lender regarding repayment or refinancing. All required payments under the terms of the debt are current and on March 5, 1998, by mutual agreement with the lender, the Company made a $200,000 prepayment on the term loan portion of the debt. Subsequent to December 31, 1997, advances under the line-of-credit were frozen and an agreement was reached to extend the repayment of the line-of-credit balance to January 31, 1999. As of December 31, 1996 there was approximately $409,000 outstanding in 10.1% to 10.25% term loans, payable to a bank in monthly installments through October 1999. Such amounts, which at that time totaled approximately $360,000 were repaid out of proceeds from the Company's new term loan facility discussed above. NOTE 3--STOCKHOLDERS' EQUITY Preferred Stock The Company's Articles of Incorporation authorize $0.001 par value, non- voting preferred stock in series A (300,000 shares authorized) and series B (800 shares authorized). In connection with the 1995 acquisition of Pretzelmaker by the Company, there were 275,942 share of series A and 800 shares of series B preferred shares issued. The series A and B shares contained dividends and liquidation preferences, cumulative dividend rights and were convertible into common stock of the Company under terms as defined in the agreements. No dividends were paid on the preferred shares. In connection with the acquisition of the Company discussed in Note 12, the 275,942 shares of series A and 800 shares of series B preferred stock were converted into 35,155 shares of common stock. The accompanying financial statements retroactively reflect the conversion (which has no affect on total stockholders' equity amounts) for all periods presented. F-164

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Information as of September 30, 1998 and for the Nine Months Ended September 30, 1997 and 1998 is Unaudited.) NOTE 3--STOCKHOLDERS' EQUITY (Continued) Stock Options The Company has 35,000 shares of common stock reserved for issuance under three stock option plans (Incentive Stock Option Plan, Non-Qualified Stock Option Plan and Stock Bonus Plan) collectively referred to as the "Plan". Through December 31, 1997, options to acquire 13,250 shares had been granted at exercise prices ranging from $13.20 to $25.00 per share. There were no options granted in 1998. The Company applies APB Opinion No. 25, Accounting for Stock Issues to Employees, in accounting for its plans. FASB Statement No. 123, Accounting for Stock-Basis Compensation, requires the Company to provide pro forma information regarding net income as if compensation cost for the Company's stock option plans has been determined in accordance with the fair value based method prescribed in FASB Statement No. 123. Under the accounting provisions of FASB Statements No. 123 the Company's reported net income (loss) would not have been materially impacted for the periods presented under FASB Statement No. 123. As part of the acquisition of the Company discussed in Note 12, all of the stock options were cancelled in connection with the consulting, bonus and service agreements. NOTE 4--NON-COMPETE AGREEMENTS In connection with the 1995 acquisition of Pretzelmaker, the Company entered into non-compete agreements with the two principal former owners of Pretzelmaker. The non-interest bearing obligations have been recorded as a liability on a discounted present value basis using an imputed interest rate of 15%. The agreements require annual payments of $182,300 and as of December 31, 1997, future minimum payments under the obligations are summarized as follows: <TABLE> <CAPTION> Years Ending December 31, Amount ------------------------- --------- <S> <C> 1998.............................................................. $ 182,300 1999.............................................................. 182,300 --------- Total Payments.................................................... 364,600 Less: Amounts Representing Interest............................... (37,379) --------- Present Value of Payments......................................... 327,221 Less: Current Portion............................................. (151,418) --------- $ 175,803 ========= </TABLE> NOTE 5--UNSECURED PROMISSORY NOTES During 1995, the Company issued 15% unsecured promissory notes due September 30, 2000 to various parties, who at the time, were also shareholders of the Company. In addition to the stated interest, which is payable quarterly, the notes also contain a net profits interest, as defined, in all Pretzelmaker company-owned stores and sports venues. Through September 30, 1998, there has been no net profit interest due under the agreements. In connection with the acquisition of the Company during November 1998 (as discussed in Note 12), the acquirer has agreed to repay the outstanding unsecured promissory notes in January, 1999. F-165

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Information as of September 30, 1998 and for the Nine Months Ended September 30, 1997 and 1998 is Unaudited.) NOTE 6--CAPITAL LEASE OBLIGATIONS At December 31, 1997 included with long-term debt are capitalized lease obligations incurred for store equipment, fixtures and improvements. The obligations bear implicit interest rates of 16.9% to 21.6% and require total monthly payments of approximately $6,800, decreasing as the leases are paid off through October 2001. Total future payments required under the lease obligations at December 31, 1997 are approximately $78,600 in 1998, $76,300 in 1999, $66,800 in 2000 and $67,300 in 2001. As of December 31, 1997, property and equipment includes $197,469 acquired through capital leases. Accumulated depreciation related to these assets was $19,183. NOTE 7--COMMITMENTS AND CONTINGENCIES Operating Leases The Company leases retail store facilities and corporate office space under long-term non-cancelable operating lease agreements requiring monthly payments over their remaining terms which expire through 2007. Certain of the retail store leases also provide for contingent rentals based upon gross revenue of the store as well as adjustments for operating costs. Additionally, as a result of master franchise agreements in Canada and former company-owned stores which have been franchised, the Company is contingently liable under lease guarantees or assignment agreements. Total rent expense, including lease termination costs for closed company- owned stores is summarized as follows: <TABLE> <CAPTION> February 24 Nine Months Ended (Inception) to Years Ended December 31, September 30, December 31, ------------------------ ------------------- 1995 1996 1997 1997 1998 --------------- ------------ ------------ --------- --------- <S> <C> <C> <C> <C> <C> Rent expense............ $77,100 $256,900 $446,100 $308,700 $256,200 Lease termination expense................ -- -- 109,200 103,600 186,600 ------- ------------ ------------ --------- --------- $77,100 $256,900 $555,300 $412,300 $442,800 ======= ============ ============ ========= ========= </TABLE> As of December 31, 1997, future minimum lease payments due under operating leases are as follows: <TABLE> <CAPTION> Years Ending December 31, Amount ------------------------- ---------- <S> <C> 1998............................................................. $ 242,000 1999............................................................. 248,000 2000............................................................. 216,000 2001............................................................. 151,000 2002............................................................. 130,000 Thereafter....................................................... 356,000 ---------- $1,343,000 ========== </TABLE> F-166

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Information as of September 30, 1998 and for the Nine Months Ended September 30, 1997 and 1998 is Unaudited.) NOTE 7--COMMITMENTS AND CONTINGENCIES (Continued) During September 1998, the Company entered into a sub-lease agreement for its corporate office space providing for sub-rental income to the Company of approximately $8,000 monthly to July 2000. Such amounts are not reflected in the table above. As of December 31, 1997, future minimum amounts due under operating leases where the Company is contingently liable under lease guarantees or assignment agreements are as follows: <TABLE> <CAPTION> Years Ended December 31, Amount ------------------------ ---------- <S> <C> 1998............................................................ $ 390,000 1999............................................................ 398,000 2000............................................................ 405,000 2001............................................................ 401,000 2002............................................................ 352,000 Thereafter...................................................... 1,262,000 ---------- $3,208,000 ========== </TABLE> Approximately 51% of the above amounts relate to franchised locations which are owned in whole or in part by individuals or entities which were stockholders of the Company prior to the acquisition discussed in Note 12. Legal Matters From time to time the Company is the subject of legal actions or threatened legal actions, which it considers routine to its business activities. Management of the Company believes that the potential liability to the Company under such matters would not have a material affect on the Company's consolidated financial position, results of operations or cash flows. NOTE 8--RELATED PARTY TRANSACTIONS Since 1996, the Company has had business relationships with various entities owned in whole or in part by its Chairman, President, and Chief Executive Officer (the "Officer") summarized as follows: <TABLE> <CAPTION> December 31, September 30, ---------------- ------------- 1996 1997 1998 -------- ------- ------------- <S> <C> <C> <C> Franchise Fee Income from Related Entities.. $200,000 $ -- $ -- Royalty and Advertising Fees from Related Entities in Illinois....................... 25,400 55,000 37,765 Account Receivables Outstanding at Period End from Related Entities.................. 77,904 46,129 24,809 </TABLE> During 1997, Canada received loans totaling approximately $65,000 (U.S.) from the two largest franchisees in Canada who are related to the Company through common ownership. The proceeds are invested in a Canadian certificate of deposit and the debt evidenced by non-interest bearing promissory notes. The certificate of deposit is presented as restricted cash and the notes are included with long-term debt. The advances were made to secure a limited loan guarantee made by Canada on behalf of the franchisees. Subsequent to September 30, 1998, the loan guarantee obligation was transferred to another corporation affiliated with the franchisees and the certificate of deposit used to liquidate the related debt obligations, thereby releasing Canada from any further obligations under the agreements. F-167

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Information as of September 30, 1998 and for the Nine Months Ended September 30, 1997 and 1998 is Unaudited.) NOTE 9--INCOME TAXES Income taxes consisted of the following: <TABLE> <CAPTION> December 31, ------------------------ 1995 1996 1997 -------- -------- ---- <S> <C> <C> <C> CURRENT: Federal........................................... $ 19,000 $ 68,507 $-- State............................................. 3,000 3,952 -- -------- -------- ---- <CAPTION> 22,000 72,459 -- <S> <C> <C> <C> -------- -------- ---- DEFFERED (BENEFIT): Federal........................................... (20,000) (37,000) -- State............................................. (2,000) (3,000) -- -------- -------- ---- (22,000) (40,000) -- -------- -------- ---- Total........................................... $ -- $ 32,459 $-- ======== ======== ==== </TABLE> The components of the net deferred tax assets (liabilities) are summarized as follows: <TABLE> <CAPTION> December 31, ------------------ 1996 1997 ------- --------- <S> <C> <C> Net operating loss carryforward.......................... $ -- $ 55,000 Intangible assets........................................ 65,000 95,000 Accrued expenses......................................... -- 21,000 Accounts receivable allowance............................ 4,000 4,000 Other.................................................... -- 13,000 Accumulated depreciation................................. (7,000) (17,000) ------- --------- 62,000 171,000 Valuation allowance...................................... -- (109,000) ------- --------- $62,000 $ 62,000 ======= ========= </TABLE> As of December 31, 1997, the Company has a net operating loss carryforward for income tax purposes of approximately $149,000, expiring in 2012. A reconciliation of the effective tax rates to the federal statutory rate is summarized as follows: <TABLE> <CAPTION> December 31, --------------------- 1995 1996 1997 ----- ----- ----- <S> <C> <C> <C> Federal Statutory Income Tax Rate (Benefit)..... (34.0)% 34.0 % (34.0)% Amortization Of Non- Deductible Goodwill.... 18.2 21.6 12.0 Non-Deductible Expenses............... -- -- 15.1 Other................... 15.8 (22.3) 6.9 ----- ----- ----- Effective Income Tax Rate................... 0.0 % 33.3 % 0.0 % ===== ===== ===== </TABLE> F-168

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Information as of September 30, 1998 and for the Nine Months Ended September 30, 1997 and 1998 is Unaudited.) NOTE 10--LITIGATION SETTLEMENT During 1997, the Company settled a lawsuit, which arose in 1996 in a case in which the plaintiffs claimed that the Company breached the Franchise Agreement by failing to grant a specific mall location. The plaintiffs sought damages of approximately $600,000, plus punitive damages and attorney fees. The cost of the settlement, including the Company's outside legal fees, was approximately $149,000. NOTE 11--SUPPLEMENTAL CASH FLOW INFORMATION <TABLE> <CAPTION> February 24 Years Ended Nine Months Ended (Inception) to December September 30, December 31, ---------------- ----------------- 1995 1996 1997 1997 1998 --------------- ------- -------- -------- -------- <S> <C> <C> <C> <C> <C> Supplemental Disclosure of Cash Flow Information: Cash Paid for: Interest.................. $ 69,600 $87,900 $157,400 $106,700 $106,800 Income taxes.............. 45,000 4,000 103,800 89,700 8,600 Supplemental Disclosure of Non-Cash Investing and Financing Activities: Preferred Stock Issued in Pretzelmaker Acquisition.............. 279,800 -- -- -- -- Equipment Acquired under Financing Obligations.... 42,100 -- 417,200 297,200 -- Company-owned Stores Sold with Deferred Terms...... -- -- 76,500 76,500 25,000 </TABLE> NOTE 12--SUBSEQUENT EVENT--ACQUISITION OF COMPANY During November 1998 the stockholders of the Company sold their shares to Mrs. Field's Original Cookies, Inc. ("Mrs. Fields"). As a condition to closing, by mutual agreement among the parties, all preferred shares previously outstanding were converted to common shares, outstanding stock option agreements were terminated, and the repayment terms under the non-compete agreements and unsecured promissory notes were modified so that such obligations would be repaid by Mrs. Fields by January 1999. In connection with the acquisition of the Company, Pretzelmaker entered into various consulting, bonus and severance agreements totaling $327,300 to be paid during December 1998 and January 1999. F-169

------------------------------------------------------------------------------- ------------------------------------------------------------------------------- No dealer, sales representative, or other person has been authorized to give any information or to make any representations other than those contained in this prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by Mrs. Fields or the ini- tial purchasers. This prospectus does not constitute an offer to sell or a so- licitation of an offer to buy any securities other than the securities to which it relates, nor does it constitute an offer to sell or the solicitation of an offer to buy such securities in any jurisdiction in which such offer or solicitation is not authorized, or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlaw- ful to make such an offer or solicitation. Neither the delivery of this pro- spectus nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of Mrs. Fields since the date hereof or that information contained in this prospectus is correct as of any time subsequent to its date. --------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- $53,725,000 MRS. FIELDS' ORIGINAL COOKIES, INC. 10 1/8% Series B Senior Notes Due 2004 --------------- PROSPECTUS --------------- , 1999 ------------------------------------------------------------------------------- -------------------------------------------------------------------------------

PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY. As authorized by Section 145 of the General Corporation Law of the State of Delaware, each director and officer of Mrs. Fields' may be indemnified by Mrs. Fields' against expenses (including attorney's fees, judgments, fines and amounts paid in settlement) actually and reasonably incurred in connection with the defense or settlement of any threatened, pending or completed legal proceedings in which he is involved by reason of the fact that he is or was a director or officer of Mrs. Fields' if he acted in good faith and in a manner that he reasonably believed to be in or not opposed to the best interests of Mrs. Fields' and, with respect to any criminal action or proceeding, if he had no reasonable cause to believe that his conduct was unlawful. If the legal proceeding, however, is by or in the right of Mrs. Fields, the director or officer may not be indemnified in respect of any claim, issue or matter as to which he shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to Mrs. Fields' unless a court determines otherwise. Mrs. Fields' by-laws authorize the Company to indemnify its present and former directors and officers and to pay or reimburse expenses for individuals in advance of the final disposition of a proceeding upon receipt of an undertaking by or on behalf of such individuals to repay such amounts if so required. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES EXHIBIT 1.1 + Purchase Agreement, dated as of August 13, 1998, among Mrs. Fields' Original Cookies, Inc., The Mrs. Fields Brand Inc., Great American Cookie Company, Inc., Jefferies & Company, Inc. and BT Alex. Brown Incorporated 2.1 Stock Purchase Agreement among Mrs. Fields' Holding Company, Inc. and Martin E. Lisiewski, shareholder of Pretzel Time, Inc., dated as of January 2, 1998 2.2 Stock Purchase Agreement among Mrs. Fields' Holding Company, Inc. and Martin E. Lisiewski, shareholder of Pretzel Time, Inc., dated as of June 12, 1998. 2.3 + Securities Purchase Agreement by and among Cookies USA, Inc., the Individuals and Entities Identified Therein as The Sellers and Mrs. Fields' Original Cookies, Inc., dated as of August 13, 1998 2.4 + Stock Purchase Agreement among Mrs. Fields' Original Cookies, Inc., as Buyer, and Jake Tortorice of Chocolate Chip Cookies of Texas, Inc. as Seller. Filed as Exhibit 2.3 to the 8-K dated September 3, 1998. 2.5 + Stock Purchase Agreement among Mrs. Fields' Original Cookies, Inc., as Buyer, and Lawrence J. Cohen, Mildred S. Cohen, Jerome E. Mouton, Steven J. Bryan and Jason A. Piltzmaker, holders of all outstanding capital stock of Deblan Corporation, as Sellers Filed as Exhibit 2.2 to the 8-K dated September 3, 1998. 1

EXHIBIT (CONTINUED) 2.6 + Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc. and ASK & MSK Family Limited Partnership-II(B), Ltd. Filed as exhibit 2.4 to the 8-K dated September 3, 1998. 2.7 + Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc. and Crossroads Cookies, Inc. Filed as exhibit 2.5 to the 8-K dated September 3, 1998. 2.8 + Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc. and Hot Barton and Northpark Cookies, Inc. Filed as exhibit 2.6 to the 8-K dated September 3, 1998. 2.9 + Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc. and Northpark Cookies, Inc. Filed as exhibit 2.7 to the 8-K dated September 3, 1998. 2.10 + Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc. and Quail Springs Cookies, Inc. Filed as exhibit 2.8 to the 8-K dated September 3, 1998. 2.11 + Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc. and Westgate Cookies, Inc. Filed as exhibit 2.9 to the 8-K dated September 3, 1998. 2.12 Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc. as buyer, The Cookie Conglomerate, Inc. and The Cookie Conglomerate, LLP., as sellers, and Ronald A. Eichel and Alan M. Kuchn, partners of The Cookie Conglomerate LLP. and shareholders of the Cookie Conglomerate, Inc., dated as of October 5, 1998. 2.13 Stock Purchase Agreement between Mrs. Fields' Original Cookies, Inc., as buyer, and Martin E. Lisiewski, a shareholder of Pretzel Time, Inc., dated as of December 9, 1998. 2.14 Stock Purchase Agreement between Mrs. Fields' Holding Company, Inc., and Mrs. Fields' Original Cookies, Inc. as buyer, and Pretzel Time, Inc. and Martin E. Lisiewski, as seller, dated as of December 30, 1998. 2.15 Stock Purchase Agreement between Mrs. Fields' Original Cookies, Inc., as buyer and Pretzelmaker Holdings, Inc., Mark N. Geman, Donald G. Cox, Jr. and Louis H. Marks as principal sellers, dated as of November 19, 1998. 3.1 + Restated Certificate of Incorporation of Mrs. Fields' Original Cookies, Inc., filed as Exhibit 3.1 to the Company's Registration Statement on Form S-4 (No. 333-45179) and incorporated by reference herein 3.2 + Restated Certificate of Incorporation of The Mrs. Fields' Brand, Inc., filed as Exhibit 3.2 to the Company's Registration Statement on Form S-4 (No. 333-45179) and incorporated by reference herein 3.3 + Certificate of Designations of the Mrs. Fields' Brand, Inc., dated as of September 18, 1996, filed as Exhibit 3.3 to the Company's Registration Statement on Form S-4 (No. 333-45179) and incorporated by reference herein 3.4 + Amended and Restated Certificate of Incorporation of Great American Cookie Company, Inc. 3.5 + Articles of Incorporation of Pretzelmaker Holdings, Inc. 3.6 Articles of Incorporation of Pretzel Time, Inc. 3.7 + By-Laws of Mrs. Fields' Original Cookies, Inc., filed as Exhibit 3.4 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 3.8 + By-Laws of The Mrs. Fields' Brand, Inc., filed as Exhibit 3.5 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 3.9 + By-Laws of Great American Cookie Company, Inc. 3.10 + By-Laws of Pretzelmaker Holdings, Inc. 3.11 By-Laws of Pretzel Time, Inc. 4.1 + Indenture, dated as of November 26, 1997, among Mrs. Fields' Original Cookies, Inc., The Mrs. Fields' Brand, Inc., and The Bank of New York, as Trustee, filed as Exhibit 4.1 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein. 4.2 + Form of Notation of Guarantee (included as Exhibit E to Exhibit 4.1) 4.3 + Form of Certificate of Senior Note (included as Exhibit A to Exhibit 4.1) 4.4 + First Supplemental Indenture, dated as of August 24, 1998, among Mrs. Fields' Original Cookies, Inc., The Mrs. Fields Brand, Inc., and The Bank of New York, as Trustee 4.5 + Second Supplemental Indenture, dated as of August 24, 1998, among Mrs. Fields' Original Cookies, Inc., The Mrs. Fields' Brand, Inc., Great American Cookie Company, Inc., and The Bank of New York, as trustee 4.6 + Third Supplemental Indenture, dated as of November 20, 1998, among Mrs. Fields' Original Cookies, Inc., Great American Cookie Company, Inc., The Mrs. Fields' Brand, Inc., Pretzelmaker Holdings, Inc., and The Bank of New York, as a Trustee 4.7 + Registration Rights Agreement, dated as of August 24, 1998, among Mrs. Fields' Original Cookies, Inc., The Mrs. Fields Brand, Inc., Great American Cookie Company, Inc., Jefferies & Company, Inc. and BT Alex. Brown Incorporated 5.1 * Opinion and consent of Skadden, Arps, Meagher & Flom LLP as to legality of the new senior notes to be issued by Mrs. Fields' Original Cookies, Inc. and the new guarantees to be issued by The Mrs. Fields' Brand, Inc., A Great American Coolie Company, Inc., Pretzelmaker Holdings, Inc. and Pretzel Time, Inc. 10.1 + Asset Purchase Agreement, dated as of August 7, 1996, among Mrs. Fields Development Corporation, The Mrs. Fields' Brand, Inc. and Capricorn II, L.P., filed as Exhibit 10.1 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.2 + Asset Purchase Agreement, dated as of August 7, 1996, among Mrs. Fields, Inc., Mrs. Fields' Original Cookies, Inc., and Capricorn Investors II, L.P., filed as Exhibit 10.11 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein

EXHIBIT (CONTINUED) 10.3 + Amended and Restated Marketing Agreement, dated as of January 9, 1997, between Mrs. Fields' Original Cookies, Inc. and Coca-Cola USA Fountain, filed as Exhibit 10.27 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.4 + Amendment dated December 1, 1997, to Amended and Restated Marketing Agreement between Mrs. Fields' Original Cookies, Inc. and Coca-Cola USA Fountain 10.5 + Corollary agreement, dated September 21, 1998, to existing marketing agreement, dated as of January 9, 1997 and amended on November 13, 1997 and December 1, 1997, between Mrs. Fields' Original Cookies, Inc. and Coca-Cola USA 10.6 + Employment Agreement, dated as of October 1, 1997, between Michael R. Ward and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.28 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.7 + Employment Agreement, dated as of October 1, 1997, between Pat Knotts and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.29 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.8 + Employment Agreement, dated as of October 1, 1997, between L. Tim Pierce and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.30 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.9 + Employment Agreement, dated as of July 1, 1996, between Lawrence Hodges and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.31 the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 3

EXHIBIT (CONTINUED) 10.10 + Employment Agreement, dated as of July 10, 1997, between Garry Remington and Mrs. Fields' Original Cookies, Inc. 10.11 + Lease Agreement, dated as of February 23, 1993, between The Equitable Life Assurance Society of the United States and Mrs. Fields Cookies, filed as Exhibit 10.32 the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.12 + Lease Agreement, dated as of October 10, 1995, between The Equitable Life Assurance Society of the United States and Mrs. Fields Cookies, filed as Exhibit 10.33 the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.13 + Letter of Agreement, dated as of October 1, 1992, between United Airlines, Inc. and Mrs. Fields Development Corporation, filed as Exhibit 10.34 to the Company's Registration Statement on S-4 (No. 333- 45179) and incorporated by reference herein 10.14 + Lease Agreement, dated as of January 18, 1998, between 2855 E. Cottonwood Parkway, L.C. and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.35 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.15 + Amendment to Supply Agreement, dated as of June 19, 1995 between Van Den Bergh Foods Company and Mrs. Fields, Inc., filed as Exhibit 10.37 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.16 + Stock Acquisition Agreement, dated as of September 2, 1997, among Mrs. Fields' Holding Company, Inc., Pretzel Time, Inc. and Martin E. Lisiewski, filed as Exhibit 10.39 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.17 + License Agreement, dated as of March 1, 1992, between Mrs. Fields Development Corporation and Marriott Corporation, filed as Exhibit 10.40 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.18 + License Agreement, dated as of October 28, 1993 between Mrs. Fields Development Corporation and Marriott Management Services, Corp., filed as Exhibit 10.41 to the Company's Registration Statement on S-4 (No. 333-45170) and incorporated by reference herein. 10.19 + Stock Acquisition Agreement, dated as of September 2, 1997, among Mrs. Fields' Holding Company, Inc. Pretzel Time, Inc., and Martin E. Lisiewski, filed as Exhibit 10.43 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.20 + Franchise Agreement Addendum 2 and Area Development Agreement Addendum 2, dated as of September 2, 1997, between Pretzel Time, Inc. and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.44 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.21 + Management Agreement, dated as of September 2, 1997, between Mrs. Fields' Original Cookies, Inc. and Pretzel Time, Inc., filed as Exhibit 10.45 to the Company's Registration Statement on S-4 (No. 333- 45179) and incorporated by reference herein 10.22 + Stock Purchase Agreement, dated as of September 2, 1997, between Mrs. Fields' Holding Company, Inc. and Martin E. Lisiewski, filed as Exhibit 10.46 to the Company's Registration Statement on S-4 (No. 333- 45179) and incorporated by reference herein 10.23 + Shareholder Agreement, dated as of September 2, 1997, among Mrs. Fields' Holding Company, Inc., Martin E. Lisiewski and Pretzel Time, Inc., filed as Exhibit 10.47 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.24 + Employment Agreement, dated as of September 2, 1997, between Pretzel Time, Inc. and Martin E. Lisiewski, filed as Exhibit 10.48 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.25 + Area Development Agreement, dated as of September 2, 1997, between Pretzel Time, Inc. and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.49 to the Company's Registration Statement on S-4 (No. 333- 45179) and incorporated by reference herein 10.26 + $500,000 Promissory Note, dated as of September 2, 1997, between Martin E. Lisiewski and Mrs. Fields' Holding Company, Inc., filed as Exhibit 10.50 to the Company's Registration Statement on S-4 (No. 333- 45179) and incorporated by reference herein 4

EXHIBIT (CONTINUED) 10.27 + Exchange Agreement, dated September 2, 1997, between Mrs. Fields' Holding Company, Inc. and Martin E. Lisiewski, filed as Exhibit 10.51 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.28 + Registration Rights Agreement, dated September 2, 1997, between Mrs. Fields' Holding Company, Inc. and Martin E. Lisiewski, filed as Exhibit 10.52 to the Company's Registration Statement on S-4 (No. 333- 45179) and incorporated by reference herein 10.29 + Franchise Development Agreement, dated September 2, 1997, between Mrs. Fields' Original Cookies, Inc. and Pretzel Time, Inc., filed as Exhibit 10.53 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein. 10.30 + Asset Purchase Agreement, dated July 23, 1997, among Mrs. Fields' Pretzel Concepts, Inc., H&M Concepts, Inc., and The Managing Members of H&M Concepts Ltd., Co., filed as Exhibit 10.53 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.31 + Exhibit A to the Developing Agent Agreement, dated September 2, 1997, between Pretzel Time, Inc. and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.54 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.32 Uniform Franchise Offering Circular of Pretzel Time, Inc., as amended on August 24, 1998 10.33 Uniform Franchise Offering Circular of Great American Cookie Company, Inc., as amended on November 24, 1998 10.34 + Exhibit B to the Developing Agent Agreement, dated September 2, 1997, between Pretzel Time, Inc., and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.57 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein. 10.35 + Assignment of Assets and Assumption of Liabilities Agreement, dated July 25, 1997, between H&M Concepts Ltd., Co., and Mrs. Fields' Pretzel Concepts, Inc., filed as Exhibit 10.62 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.36 + First Amendment to Operating Agreement for UVEST, LLC, dated July 25, 1997, between Mrs. Fields' Pretzel Concepts, Inc. and NVEST Limited, filed as Exhibit 10.64 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.37 + First Amendment to Operating Agreement for LV-H&M, L.L.C., Dated July 25, 1997, between Mrs. Fields' Pretzel Concepts, Inc. and Jean Jensen, filed as Exhibit 10.65 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.38 + Lease Agreement, dated March 2, 1995, between Price Development Company, Limited Partnership and Mrs. Fields Cookies, filed as Exhibit 10.69 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.39 + Consulting Agreement, dated November 26, 1996, between Debra J. Fields and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.70 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.40 + Mrs. Fields' Holding Company, Inc. Director Stock Option Plan 10.41 + Mrs. Fields' Holding Company, Inc. Employee Stock Option Plan 10.42 + Mrs. Fields' Holding Company, Inc. Director Stock Purchase Plan 10.43 + Amended and Restated Loan Agreement, dated as of February 28, 1998, between Mrs. Fields' Original Cookies, Inc. and LaSalle National Bank, filed as Exhibit 10.73 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.44 + Intellectual Property Security Agreement, dated as of February 28, 1998, between Mrs. Fields' Original Cookies, Inc. and LaSalle National Bank 10.45 + Pledge and Security Agreement, dated as of February 28, 1998, between Mrs. Fields' Original Cookies, Inc. and LaSalle National Bank 10.46 + Stockholders' Agreement, dated as of July 17, 1998, between Mrs. Fields' Holding Company, Inc. and its Stockholders 5

EXHIBIT (CONTINUED) 10.47 + Form of Settlement Agreement and Release, by and among Mrs. Fields' Original Cookies, Inc., Capricorn Investors II, L.P., a Delaware limited partnership, Great American Cookie Company, Inc., Cookies USA, Inc., The Jordan Company, and the Franchisees parties thereto 10.48 + Supply Agreement, dated as of March 30, 1998 between Mrs. Fields' Original Cookies, Inc. and LBI Acquisition Corp. d/b/a/ Pennant Foods. 12.1 + Computation of ratio of earnings to fixed charges of Mrs. Fields' Original Cookies, Inc. 21.1 + Subsidiaries of Mrs. Fields' Original Cookies, Inc. 23.1 Consent of Arthur Andersen LLP 23.2 Consent of Deloitte & Touche LLP 23.3 Consent of Weinstein Spira & Company, P.C. 23.4 Consent of PricewaterhouseCoopers LLP 23.5 * Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1) 23.6 Consent of Habif, Arogeti & Wynne, P.C. 23.7 Consent of BDO Siedman, LLP 23.8 Consent of AJ Robbins, P.C. 23.9 Consent of the Prior Management of Great American Cookie Company 24.1 + Power of Attorney of certain officers and directors of the Company, included in Part II of this Registration Statement 24.2 + Power of Attorney of certain officers and directors of The Mrs. Fields' Brand, Inc., included in Part II of this Registration Statement 24.3 + Power of attorney of certain officers and directors of Great American Cookie Company, Inc., included in Part II of this Registration Statement 25.1 + Form T-1 Statement of Eligibility of The Bank of New York to act as trustee under the Indenture 27.1 + Financial Data Schedule (for SEC use only), filed as Exhibit 27 to the Company's Form 10-K for the year ended January 2, 1999 99.1 Form of Letter of Transmittal 99.2 * Form of Notice of Guaranteed Delivery 99.3 Schedule II - Valuation and Qualifying Accounts 99.4 * Guidelines for certification of taxpayer identification number on substitute Form W-9 99.5 * Letter to Brokers 99.6 * Letter to Clients ________ * To be filed by amendment. + Filed previously 6

ITEM 22. UNDERTAKINGS The undersigned registrants hereby undertake: (1) To file, during any period in which offers to sale are being made, a post-effective amendment to this registration statement; (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) to include any material information with respect to the plan of distribution previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liabilities under the Securities Act of 1933, each post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned Registrants hereby undertake to respond to requests for information that is incorporated by reference into the Prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. The undersigned Registrants hereby undertake to supply by means of a post- effective amendment all information concerning a transaction, and the company being acquired or involved therein, that was not the subject of and included in the registration statement when it became effective. 7

Pursuant to the requirements of the Securities Act of 1933, Mrs. Fields' Original Cookies, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Salt Lake City, State of Utah, on the 8th day of September, 1999. MRS. FIELDS' ORIGINAL COOKIES, INC. By /s/Larry A. Hodges ---------------------- Larry A. Hodges President/CEO 8

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on September 8, 1999. <TABLE> <CAPTION> SIGNATURE TITLE --------- ----- <S> <C> * President, Chief Executive Officer ------------------------------------ and Director (Larry A. Hodges) /s/ Mark S. Tanner Senior Vice President, Chief ----------------------------------- Financial Officer (Mark S. Tanner) * Chairman of the Board of Directors ------------------------------------ (Herbert S. Winokur) * Director ------------------------------------ (Richard M. Ferry) * Director ------------------------------------ (Debbi Fields) * Director ------------------------------------ (Nathaniel A. Gregory) * Director ------------------------------------ (Walker Lewis) * Director ------------------------------------ (Peter W. Mullin) * Director ------------------------------------ (Gilbert C. Osnos) * By: /s/ Michael R. Ward ------------------------------------ Michael R. Ward Attorney-in-Fact </TABLE> 9

Pursuant to the requirements of the Securities Act of 1933, The Mrs. Fields' Brand, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Salt Lake City, State of Utah, on the 8th day of September, 1999. THE MRS. FIELDS' BRAND, INC. By /s/Larry A. Hodges --------------------- Larry A. Hodges President/CEO 10

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on September 8, 1999. <TABLE> <CAPTION> SIGNATURE TITLE --------- ----- <S> <C> * President, Chief Executive Officer ----------------------------------- and Director, Secretary & Treasurer (Larry A. Hodges) /s/ Mark S. Tanner Chief Financial Officer ----------------------------------- (Mark S. Tanner) * Chairman of the Board of Directors ----------------------------------- (Herbert S. Winokur) * Director ----------------------------------- (Walker Lewis) * By: /s/ Michael R. Ward ----------------------------------- Michael R. Ward Attorney-in-Fact </TABLE> 11

Pursuant to the requirements of the Securities Act of 1933, Great American Cookie Company, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Salt Lake City, State of Utah, on the 8th day of September, 1999. GREAT AMERICAN COOKIE COMPANY, INC. By /s/Larry A. Hodges --------------------- Larry A. Hodges President/CEO 12

POWER OF ATTORNEY Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on September 8, 1999. <TABLE> <CAPTION> SIGNATURE TITLE --------- ----- <S> <C> * Chairman of the Board of Directors ------------------------------------- and President (Larry A. Hodges) /s/ Mark S. Tanner Chief Financial Officer and ------------------------------------- Vice President (Mark S. Tanner) /s/ Michael R. Ward Director ------------------------------------- (Michael R. Ward ) * By: /s/ Michael R. Ward ------------------------------------- Michael R. Ward Attorney-in-Fact </TABLE> 13

Pursuant to the requirements of the Securities Act of 1933, Pretzelmaker Holdings, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Salt Lake City, State of Utah, on the 8th day of September, 1999. PRETZELMAKER HOLDINGS, INC. By /s/Larry A. Hodges --------------------- Larry A. Hodges President/CEO 14

POWER OF ATTORNEY Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on September 8, 1999. <TABLE> <CAPTION> SIGNATURE TITLE --------- ----- <S> <C> * Chairman of the Board of Directors ------------------------------------- and President (Larry A. Hodges) /s/ Mark S. Tanner Chief Financial Officer and ------------------------------------- Vice President (Mark S. Tanner) /s/ Michael R. Ward Director ------------------------------------- Michael R. Ward * By: /s/ Michael R. Ward ------------------------------------- Michael R. Ward Attorney-in-Fact </TABLE> 15

Pursuant to the requirements of the Securities Act of 1933, Pretzel Time, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Salt Lake City, State of Utah, on the 8th day of September, 1999. PRETZEL TIME, INC. By /s/Larry A. Hodges --------------------- Larry A. Hodges President/CEO 16

POWER OF ATTORNEY We, the undersigned directors and officers of Pretzel Time, Inc. and each of us, do hereby constitute and appoint Michael R. Ward our true and lawful attorney and agent, with power of substitution, to do any and all acts and things in our name and behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated above, which said attorney and agent may deem necessary or advisable to enable said corporation to comply with the Securities Act of 1933, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission (the "Commission"), in connection with this Registration Statement on Form S-4, and any and all amendments to said Registration Statement and all instruments necessary or incidental in connection therewith, including specifically, but without limitation, power and authority to sign for us or any of us in our names, in the capacities indicated below, any and all amendments hereto, and to file the same with the Commission. Said attorney shall have full power and authority to do and perform in the name and on behalf of each of the undersigned, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises as fully and to all intents and purposes as each of the undersigned might or could do in person, hereby ratifying and approving the acts of said attorneys and each of them. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on September 8, 1999. <TABLE> <CAPTION> SIGNATURE TITLE --------- ----- <S> <C> /s/ Larry A. Hodges Chairman of the Board of Directors ------------------------------------- and President (Larry A. Hodges) /s/ Mark S. Tanner Chief Financial Officer and ------------------------------------- Vice President (Mark S. Tanner) /s/ Michael R. Ward Director ------------------------------------- (Michael R. Ward ) </TABLE> 17

EXHIBIT INDEX EXHIBIT 1.1+ Purchase Agreement, dated as of August 13, 1998, among Mrs. Fields' Original Cookies, Inc., The Mrs. Fields Brand Inc., Jefferies & Company, Inc. and BT Alex. Brown Incorporated 2.1 Stock Purchase Agreement among Mrs. Fields' Holding Company, Inc. and Martin E. Lisiewski, shareholder of Pretzel Time,Inc., dated as of January 2, 1998 2.2 Stock Purchase Agreement among Mrs. Fields' Holding Company, Inc. and Martin E. Lisiewski, shareholder of Pretzel Time, Inc., dated as of June 12, 1998. 2.3+ Securities Purchase Agreement by and among Cookies USA, Inc., the Individuals and Entities Identified Therein as The Sellers and Mrs. Fields' Original Cookies, Inc., dated as of August 13, 1998 2.4+ Stock Purchase Agreement among Mrs. Fields' Original Cookies, Inc., as Buyer, and Jake Tortorice of Chocolate Chip Cookies of Texas, Inc. as Seller. Filed as Exhibit 2.3 to the 8-K dated September 3, 1998. 2.5+ Stock Purchase Agreement among Mrs. Fields' Original Cookies, Inc., as Buyer, and Lawrence J. Cohen, Mildred S. Cohen, Jerome E. Mouton, Steven J. Bryan and Jason A. Piltzmaker, holders of all outstanding capital stock of Deblan Corporation, as Sellers Filed as Exhibit 2.2 to the 8-K dated September 3, 1998. 2.6+ Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc. and ASK & MSK Family Limited Partnership-II(B), Ltd. Filed as Exhibit 2.4 to the 8-K dated September 3, 1998. 2.7+ Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc. and Crossroads Cookies, Inc. Filed as Exhibit 2.5 to the 8-K dated September 3, 1998. 2.8+ Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc. and Hot Barton and Northpark Cookies, Inc. Filed as Exhibit 2.6 to the 8-K dated September 3, 1998. 2.9+ Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc. and Northpark Cookies, Inc. Filed as Exhibit 2.7 to the 8-K dated September 3, 1998. 2.10+ Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc. and Quail Springs Cookies, Inc. Filed as Exhibit 2.8 to the 8-K dated September 3, 1998. 2.11+ Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc. and Westgate Cookies, Inc. Filed as Exhibit 2.9 to the 8-K dated September 3, 1998. See changes on Pg 3 (2.10-2.13) 2.12 Asset Purchase Agreement between Mrs. Fields' Original Cookies, Inc. as buyer, The Cookie Conglomerate, Inc. and The Cookie Conglomerate, LLP., the sellers, and Ronald A. Eichel and Alan M. Kuehn, partners of The Cookie Conglomerate LLP. and shareholders of The Cookie Conglomerate, Inc., dated as of October 5, 1998. 2.13 Stock Purchase Agreement between Mrs. Fields' Original Cookies, Inc. as buyer and Martin E. Lisiewski, a shareholder of Pretzel Time, Inc., dated as of December 9, 1998. 2.14 Stock Purchase Agreement among Mrs. Fields' Holding Company, Inc. and Mrs. Fields' Original Cookies, Inc. as buyer, and Pretzel Time, Inc. and Martin E. Lisiewski as seller, dated as of December 30, 1998. 2.15 Stock Purchase Agreement between Mrs. Fields' Original Cookies, Inc. as buyer and Pretzelmaker Holdings, Inc., Mark A. Geman, Donald G. Cox, Jr. and Louis H. Marks as principal sellers, dated as of November 19, 1998. 3.1+ Restated Certificate of Incorporation of Mrs. Fields' Original Cookies, Inc., filed as Exhibit 3.1 to the Company's Registration Statement on Form S-4 (No. 333-45179) and incorporated by reference herein 3.2+ Restated Certificate of Incorporation of The Mrs. Fields' Brand, Inc., filed as Exhibit 3.2 to the Company's Registration Statement on Form S-4 (No. 333-45179) and incorporated by reference herein 3.3+ Certificate of Designations of the Mrs. Fields' Brand, Inc., dated as of September 18, 1996, filed as Exhibit 3.3 to the Company's Registration Statement on Form S-4 (No. 333-45179) and incorporated by reference herein 3.4+ Amended and Restated Certificate of Incorporation of Great American Cookie Company, Inc. 3.5+ Articles of Incorporation of Pretzelmaker Holdings, Inc. 3.6 Articles of Incorporation of Pretzel Time, Inc. 3.7+ By-Laws of Mrs. Fields' Original Cookies, Inc., filed as Exhibit 3.4 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein

EXHIBIT (CONTINUED) 3.8+ By-Laws of The Mrs. Fields' Brand, Inc., filed as Exhibit 3.5 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 3.9+ By-Laws of Great American Cookie Company, Inc. 3.10+ By-Laws of Pretzelmaker Holdings, Inc. 3.11 By-Laws of Pretzel Time, Inc. 4.1+ Indenture, dated as of November 26, 1997, among Mrs. Fields' Original Cookies, Inc., The Mrs. Fields' Brand, Inc., and The Bank of New York, as Trustee, filed as Exhibit 4.1 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein. 4.2+ Form of Notation of Guarantee (included as Exhibit E to Exhibit 4.1) 4.3+ Form of Certificate of Senior Note (included as Exhibit A to Exhibit 4.1) 4.4+ First Supplemental Indenture, dated as of August 24, 1998, among Mrs. Fields' Original Cookies, Inc., The Mrs. Fields Brand, Inc., and The Bank of New York, as Trustee 4.5+ Second Supplemental Indenture, dated as of August 24, 1998, among Mrs. Fields' Original Cookies, Inc., The Mrs. Fields' Brand, Inc., Great American Cookie Company, Inc., and The Bank of New York, as trustee 4.6+ Third Supplemental Indenture, dated as of November 20, 1998, among Mrs. Fields' Original Cookies, Inc., Great American Cookie Company, Inc., The Mrs. Fields' Brand, Inc., Pretzelmaker Holdings, Inc., and The Bank of New York, as a Trustee 4.7+ Registration Rights Agreement, dated as of August 24, 1998, among Mrs. Fields' Original Cookies, Inc., The Mrs. Fields Brand, Inc., Great American Cookie Company, Inc., Jefferies & Company, Inc. and BT Alex. Brown Incorporated 5.1* Opinion and consent of Skadden, Arps, Meagher & Flom LLP as to legality of the new senior notes to be issued by Mrs. Fields' Original Cookies, Inc. and the new guarantees to be issued by The Mrs. Fields' Brand, Inc., A Great American Cookie Company, Inc., Pretzelmaker Holdings, Inc. and Pretzel Time, Inc. 10.1+ Asset Purchase Agreement, dated as of August 7, 1996, among Mrs. Fields Development Corporation, The Mrs. Fields' Brand, Inc. and Capricorn II, L.P., filed as Exhibit 10.1 to the Company's Registration Statement on S- 4 (No. 333-45179) and incorporated by reference herein 10.2+ Asset Purchase Agreement, dated as of August 7, 1996, among Mrs. Fields, Inc., Mrs. Fields' Original Cookies, Inc., and Capricorn Investors II, L.P., filed as Exhibit 10.11 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein

EXHIBIT (CONTINUED) 10.3+ Amended and Restated Marketing Agreement, dated as of January 9, 1997, between Mrs. Fields' Original Cookies, Inc. and Coca-Cola USA Fountain, filed as Exhibit 10.27 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.4+ Amendment, dated December 1, 1997, to Amended and Restated Marketing Agreement between Mrs. Fields' Original Cookies, Inc. and Coca-Cola USA Fountain 10.5+ Corollary agreement, dated September 21, 1998, to existing marketing agreement, dated as of January 9, 1997 and amended on November 13, 1997 and December 1, 1997 between Mrs. Fields' Original Cookies, Inc. and Coco-Cola USA Fountain. 10.6+ Employment Agreement, dated as of October 1, 1997, between Michael R. Ward and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.28 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.7+ Employment Agreement, dated as of October 1, 1997, between Pat Knotts and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.29 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.8+ Employment Agreement, dated as of October 1, 1997, between L. Tim Pierce and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.30 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.9+ Employment Agreement, dated as of July 1, 1996, between Lawrence Hodges and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.31 the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.10+ Employment Agreement, dated as of July 10, 1997, between Garry Remington and Mrs. Fields' Original Cookies, Inc. 10.11+ Lease Agreement, dated as of February 23, 1993, between The Equitable Life Assurance Society of the United States and Mrs. Fields Cookies, filed as Exhibit 10.32 the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.12+ Lease Agreement, dated as of October 10, 1995, between The Equitable Life Assurance Society of the United States and Mrs. Fields Cookies, filed as Exhibit 10.33 the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.13+ Letter of Agreement, dated as of October 1, 1992, between United Airlines, Inc. and Mrs. Fields Development Corporation, filed as Exhibit 10.34 to the Company's Registration Statement on S-4 (No. 333- 45179) and incorporated by reference herein 10.14+ Lease Agreement, dated as of January 18, 1998, between 2855 E. Cottonwood Parkway, L.C. and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.35 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.15+ Amendment to Supply Agreement, dated as of June 19, 1995 between Van Den Bergh Foods Company and Mrs. Fields, Inc., filed as Exhibit 10.37 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.16+ Stock Acquisition Agreement, dated as of September 2, 1997, among Mrs. Fields' Holding Company, Inc., Pretzel Time, Inc. and Martin E. Lisiewski, filed as Exhibit 10.39 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.17+ License Agreement, dated as of March 1, 1992, between Mrs. Fields Development Corporation and Marriott Corporation, filed as Exhibit 10.40 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein

EXHIBIT (CONTINUED) 10.18+ License Agreement, dated as of October 28, 1993 between Mrs. Fields Development Corporation and Marriott Management Services, Corp., filed as Exhibit 10.41 to the Company's Registration Statement on S-4 (No. 333-45170) and incorporated by reference herein. 10.19+ Stock Acquisition Agreement, dated as of September 2, 1997, among Mrs. Fields' Holding Company, Inc. Pretzel Time, Inc., and Martin E. Lisiewski, filed as Exhibit 10.43 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.20+ Franchise Agreement Addendum 2 and Area Development Agreement Addendum 2, dated as of September 2, 1997, between Pretzel Time, Inc. and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.44 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.21+ Management Agreement, dated as of September 2, 1997, between Mrs. Fields' Original Cookies, Inc. and Pretzel Time, Inc., filed as Exhibit 10.45 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.22+ Stock Purchase Agreement, dated as of September 2, 1997, between Mrs. Fields' Holding Company, Inc. and Martin E. Lisiewski, filed as Exhibit 10.46 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.23+ Shareholder Agreement, dated as of September 2, 1997, among Mrs. Fields' Holding Company, Inc., Martin E. Lisiewski and Pretzel Time, Inc., filed as Exhibit 10.47 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.24+ Employment Agreement, dated as of September 2, 1997, between Pretzel Time, Inc. and Martin E. Lisiewski, filed as Exhibit 10.48 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.25+ Area Development Agreement, dated as of September 2, 1997, between Pretzel Time, Inc. and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.49 to the Company's Registration Statement on S-4 (No. 333- 45179) and incorporated by reference herein 10.26+ $500,000 Promissory Note, dated as of September 2, 1997, between Martin E. Lisiewski and Mrs. Fields' Holding Company, Inc., filed as Exhibit 10.50 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.27+ Exchange Agreement, dated September 2, 1997, between Mrs. Fields' Holding Company, Inc. and Martin E. Lisiewski, filed as Exhibit 10.51 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.28+ Registration Rights Agreement, dated September 2, 1997, between Mrs. Fields' Holding Company, Inc. and Martin E. Lisiewski, filed as Exhibit 10.52 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.29+ Franchise Development Agreement, dated September 2, 1997, between Mrs. Fields' Original Cookies, Inc. and Pretzel Time, Inc., filed as Exhibit 10.53 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein. 10.30+ Asset Purchase Agreement, dated July 23, 1997, among Mrs. Fields' Pretzel Concepts, Inc., H&M Concepts, Inc., and The Managing Members of H&M Concepts Ltd., Co., filed as Exhibit 10.53 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.31+ Exhibit A to the Developing Agent Agreement, dated September 2, 1997, between Pretzel Time, Inc. and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.54 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.32 Uniform Franchise Offering Circular of Pretzel Time, Inc., as amended on August 24, 1998 10.33 Uniform Franchise Offering Circular of Great American Cookie Company, Inc., as amended on November 24, 1998 10.34+ Exhibit B to the Developing Agent Agreement, dated September 2, 1997, between Pretzel Time, Inc., and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.57 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein. 10.35+ Assignment of Assets and Assumption of Liabilities Agreement, dated July 25, 1997, between H&M Concepts Ltd., Co., and Mrs. Fields' Pretzel Concepts, Inc., filed as Exhibit 10.62 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.36+ First Amendment to Operating Agreement for UVEST, LLC, dated July 25, 1997, between Mrs. Fields' Pretzel Concepts, Inc. and NVEST Limited, filed as Exhibit 10.64 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein

EXHIBIT (CONTINUED) 10.37+ First Amendment to Operating Agreement for LV-H&M, L.L.C., Dated July 25, 1997, between Mrs. Fields' Pretzel Concepts, Inc. and Jean Jensen, filed as Exhibit 10.65 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.38+ Lease Agreement, dated March 2, 1995, between Price Development Company, Limited Partnership and Mrs. Fields Cookies, filed as Exhibit 10.69 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.39+ Consulting Agreement, dated November 26, 1996, between Debra J. Fields and Mrs. Fields' Original Cookies, Inc., filed as Exhibit 10.70 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.40+ Mrs. Fields' Holding Company, Inc. Director Stock Option Plan 10.41+ Mrs. Fields' Holding Company, Inc. Employee Stock Option Plan 10.42+ Mrs. Fields' Holding Company, Inc. Director Stock Purchase Plan 10.43+ Amended and Restated Loan Agreement, dated as of February 28, 1998, between Mrs. Fields' Original Cookies, Inc. and LaSalle National Bank, filed as Exhibit 10.73 to the Company's Registration Statement on S-4 (No. 333-45179) and incorporated by reference herein 10.44+ Intellectual Property Security Agreement, dated as of February 28, 1998, between Mrs. Fields' Original Cookies, Inc. and LaSalle National Bank 10.45+ Pledge and Security Agreement, dated as of February 28, 1998, between Mrs. Fields' Original Cookies, Inc. and LaSalle National Bank 10.46+ Stockholders' Agreement, dated as of July 17, 1998, between Mrs. Fields' Holding Company, Inc. and its Stockholders 10.47+ Form of Settlement Agreement and Release, by and among Mrs. Fields' Original Cookies, Inc., Capricorn Investors II, L.P., a Delaware limited partnership, Great American Cookie Company, Inc., Cookies USA, Inc., The Jordan Company, and the Franchisees parties thereto 10.48+ Supply Agreement, dated as of March 30, 1998 between Mrs. Fields' Original Cookies, Inc. and LBI Acquisition Corp. d/b/a Pennant Foods. 12.1+ Computation of ratio of earnings to fixed charges of Mrs. Fields' Original Cookies, Inc. 21.1+ Subsidiaries of Mrs. Fields' Original Cookies, Inc. 23.1 Consent of Arthur Andersen LLP 23.2 Consent of Deloitte & Touche LLP 23.3 Consent of Weinstein Spira & Company, P.C. 23.4 Consent of PricewaterhouseCoopers LLP 23.5* Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1) 23.6 Consent of Habif, Arogeti, & Wynne, P.C. 23.7 Consent of BDO Siedman, LLP 23.8 Consent of AJ Robbins, P.C. 23.9 Consent of Prior Management of Great American Cookie Company 24.1+ Power of Attorney of certain officers and directors of the Company, included in Part II of this Registration Statement 24.2+ Power of Attorney of certain officers and directors of The Mrs. Fields' Brand, Inc., included in Part II of this Registration Statement 24.3+ Power of attorney of certain officers and directors of Great American Cookie Company, Inc., included in Part II of this Registration Statement 25.1+ Form T-1 Statement of Eligibility of The Bank of New York to act as trustee under the Indenture 27.1+ Financial Data Schedule (for SEC use only), filed as Exhibit 27 to the Company's Form 10-K for the year ended January 2, 1999 99.1 Form of Letter of Transmittal 99.2* Form of Notice of Guaranteed Delivery 99.3 Schedule II - Valuation and Qualifying Accounts 99.4* Guidelines for certification of taxpayer identification number on substitute Form W-9* 99.5* Letter to Brokers* 99.6* Letter to clients* ________ * To be filed by amendment. + Filed previously

EXHIBIT A STOCK PURCHASE AGREEMENT THIS AGREEMENT ("Agreement") is made and entered into as of January 2, 1998, by and among Mrs. Fields' Holding Company, Inc., a Delaware corporation (the "Buyer"), and Martin E. Lisiewski, shareholder of Pretzel Time, Inc., a Pennsylvania corporation (the "Company"), who becomes the "Seller". The Buyer and the Seller are referred to collectively herein as the "Parties." A. The Seller collectively owns ____________ (_____) shares of the issued and outstanding common stock of the Company; B. This Agreement contemplates a transaction in which the Buyer will purchase from the Seller, and the Seller will sell to the Buyer, four (4) shares of the outstanding common stock (par value $10.00 per share) of the Company owned by the Seller (the "Shares"), as part of a series of transactions in which the Buyer is acquiring common stock in the Company, and is also entering into other related transactions (collectively, the "Related Transactions"); WHEREAS, the Buyer will purchase the Shares of the Company in return for cash as set forth below. NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows. 1. PURCHASE AND SALE OF SHARES. (a) Basic Transaction. On and subject to the terms and conditions of this Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees to sell to the Buyer, each of the Shares for the consideration specified below in Section 1(b). (b) Purchase Price. The Buyer agrees to pay to the Seller at the Closing the sum of Seventy-Five Thousand Dollars ($75,000) per Share (the "Purchase Proceeds") for a total of Three Hundred Thousand Dollars ($300,000) (the "Purchase Price"), by delivery of certified funds for the Purchase Price payable in accordance with this Agreement. (c) The Closing. The closing of the transactions contemplated by this Agreement (the "Closing") will take place at the offices of the Buyer in Salt Lake City, Utah, on a mutually agreeable date between January 2 and January 9, 1998 (the "Closing Date"), unless extended by written agreement of the Parties.

(d) Deliveries at the Closing. At Closing, the Seller will deliver to the Buyer, the various documents referred to in Section 5(a) below, including the stock certificate(s) representing each of the Seller's Shares, endorsed in blank or accompanied by duly executed assignment documents. 2. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION. (a) Representations and Warranties of the Seller. The Seller represents and warrants to the Buyer that the statements contained in this Section 2(a) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 2(a)) with respect to himself except as set forth on the Disclosure Schedule affixed hereto. (i) Organization of Certain Seller. If the Seller is a corporation, the Seller is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. (ii) Authorization of Transaction. The Seller has full power and authority (including, if the Seller is a corporation, full corporate power and authority) to execute and deliver this Agreement and to perform his obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Seller, enforceable in accordance with its terms and conditions. The Seller need not give any notice to, make any filing with, or obtain any authorization, consent or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement. (iii) Noncontravention. To the best of Seller's knowledge, neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (A) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge or other restriction of any government, governmental agency or court to which the Seller is subject or, if the Seller is a corporation, any provision of its charter or bylaws, or (B) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice under any agreement, contract, lease, license, instrument or other arrangement to which the Seller is a party or by which the Seller is bound or to which any of the Seller's assets is subject. (iv) Brokers' Fees. The Seller has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement for which the Buyer could 2

become liable or obligated. (v) Shares. The Seller holds of record and owns beneficially the number of Shares (but no more or other shares of the common stock of the Company than) set forth in paragraph A above. The Seller holds and owns each of the Shares free and clear of any restrictions on transfer, any federal, state or local taxes of any kind, taxes, mortgage, pledge, lien, encumbrance, charge or other security interests, options, warrants, purchase rights, contracts, commitments, equities, claims and demands. Other than this Agreement and other written agreements with the Company and/or the Buyer, the Seller is not a party to (A) any option, warrant, purchase right, shareholders agreement, co-sale agreement, buy-sell agreement or other contract or commitment that could require the Seller to sell, transfer or otherwise dispose of any capital stock of the Company (other than this Agreement), or (B) any voting trust, proxy or other agreement or understanding with respect to the voting of any capital stock of the Company. (vi) Legal Compliance/Litigation. To the best of his knowledge, the Seller and his respective predecessors and affiliates have complied with all applicable laws of federal, state, local and foreign governments (and all agencies thereof), and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand or notice has been filed or commenced against any of them alleging any failure so to comply. To the best of his knowledge, there are no outstanding injunctions, judgments, orders, decrees, rulings or charges affecting their Shares. To the best of his knowledge, there are no actions, suits, proceedings, hearings or investigations, and the Seller does not have reason to believe that any such action, suit, proceeding, hearing or investigation may be brought or threatened, against the Seller. (vii) Investigation. The Seller has investigated or had full opportunity to investigate the terms and conditions of the transactions contemplated by this Agreement, including the Purchase Price, and deems them to be fair and appropriate. 3. PRE-CLOSING COVENANTS. With respect to the period between the execution of this Agreement and the Closing, (A) each of the Parties will use his reasonable best efforts to take all action and to do all things necessary, proper or advisable in order to consummate and make effective the transactions contemplated by this Agreement, (B) the Seller will use his best efforts to obtain any third-party consents that the Buyer may request or to otherwise consummate the transactions contemplated hereby, and (C) the Seller will give prompt written notice to the Buyer of any material adverse development causing a breach of any of the representations and warranties in Section 2 above. 3

4. POST-CLOSING COVENANTS. The Parties agree that if at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request. 5. CONDITIONS TO CLOSING. (a) Conditions to Obligation of the Buyer. The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to the satisfaction of the following conditions: (i) The representations and warranties set forth in Section 2 above shall be true and correct in all material respects at and as of the Closing Date. (ii) The Seller shall have performed and complied with all of their covenants hereunder in all material respects through the Closing. (iii) The Seller shall have procured any third party consents required for the sale of the Shares. (iv) No action, suit or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement, (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, or (C) affect adversely the right of the Buyer to own the Shares. (v) The Buyer shall have obtained on terms and conditions reasonably satisfactory to it all of the financing required to consummate the transactions contemplated hereby and by the Related Transactions. (vi) The Seller shall be prepared to deliver the certificates and documents in the form and executed as required by this Agreement. (vii) All actions to be taken by the Seller in connection with consummation of the transactions contemplated by this Agreement, and all certificates, and other documents required to effect the transactions contemplated hereby, will be satisfactory in form and substance to the Buyer. (viii) The Closing of the Related Transactions shall have occurred. 4

(ix) Neither the Company nor the Principal Shareholder shall be in breach under the terms and conditions of any of the Stock Acquisition Agreement (as defined in Section 6 below) and the documents executed in connection with the Related Transactions. The Buyer may waive any condition specified in this Section 5(a) if it executes a writing so stating at or prior to the Closing. (b) Conditions to Obligation of the Seller. The obligation of the Seller to consummate the transactions to be performed by them in connection with the Closing is subject to satisfaction of the following conditions: (i) No action, suit or proceeding shall be pending threatened before any court or quasi-judicial or administrative agency of any federal, state, local or foreign jurisdiction for before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement, or (B) cause any of the transactions between the Buyer and the Seller contemplated by this Agreement to be rescinded following consummation (and no such injunction, judgment, order, decree, ruling or charge shall be in effect). (ii) The Buyer shall be prepared to deliver the Purchase Proceeds as required by Section 1(b). (iii) The Closing of the Related Transactions shall have occurred. The Seller may waive any condition specified in this Section 5(b) if they execute a writing so stating at or prior to the Closing. 6. REMEDIES FOR BREACHES OF THIS AGREEMENT. (a) Survival of Representations and Warranties. All of the representations and warranties of the Seller contained in this Agreement shall survive the Closing hereunder (even if the damaged Party knew or had reason to know of any misrepresentation or breach of warranty at the time of Closing) and continue in full force and effect forever thereafter (subject to any applicable statutes of limitations). (b) Indemnification Provisions for Benefit of the Buyer. (i) In the event the Seller breaches any of its representations, warranties, and covenants contained herein, and, if the Buyer makes a written claim for indemnification against any 5

of the Seller therefor, then, the Seller agrees to indemnify the Buyer from and against the entirety of any Adverse Consequences that the Buyer may suffer through and after the date of the claim for indemnification (including any Adverse Consequences the Buyer may suffer after the end of any applicable survival period) resulting from, arising out of, relating to, in the nature of, or caused by the breach. (ii) If any third party shall notify Fields with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against the Seller under this ' 6, then Fields shall promptly notify the Seller thereof in writing, provided, however, that no delay on the part of Fields in notifying the Seller shall relieve the Seller from any obligation hereunder unless (and then solely to the extent) the Seller is prejudiced. The indemnification procedure respecting a Third Party Claim hereunder shall be the same as set forth in Section 9(c) of that certain Stock Acquisition Agreement, dated as of September 2, 1997 (the "Acquisition Agreement"), by and between Fields, the Company and the Seller (therein referred to as the Principal Shareholder). (iii) All claims for indemnification made under this Agreement shall be subject to the terms and conditions of Sections 9(d) (Determination of Adverse Consequences), (f) (Rights of Offset) and (g) (Limitation of Rights of Offset) of the Stock Acquisition Agreement, and the indemnity payment for such claims shall be determined as if such claims were made under the Stock Acquisition Agreement. (iv) The foregoing indemnification provisions are in addition to, and not in derogation of, any statutory, equitable, or common law remedy Fields may have for breach of representation, warranty, or covenant. 7. TERMINATION. (a) Termination of Agreement. The Parties may terminate this Agreement as provided below: (i) The Buyer and the Seller may terminate this Agreement by mutual written consent at any time prior to the Closing. (ii) The Buyer or the Seller may terminate this Agreement if the Closing does not occur on or before January 30, 1998. (b) Effect of Termination. If any Party terminates this Agreement pursuant to this Section, all rights and obligations of the Parties hereunder shall terminate without any liability of any Party to any other Party (except for any liability of any Party then in breach). 6

8. MISCELLANEOUS. (a) No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. (b) Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements or representations by or among the Parties, written or oral, to the extent they relate in any way to the subject matter hereof. (c) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of his or its rights, interests or obligations hereunder without the prior written approval of the Buyer and the Seller; provided, however, that the Buyer may (i) assign any or all of its rights and interests hereunder to one or more of its affiliates, and (ii) designate one or more of its affiliates to perform its obligations hereunder (in any or all of which cases the Buyer nonetheless shall remain responsible for the performance of all of its obligations hereunder). (d) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. (e) Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (f) Notices. All notices, requests, demands, claims and other communications hereunder will be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: If to the Seller: Martin E. Lisiewski 4800 Linglestown Road, Suite 202 Harrisburg, PA 17112 With a copy to: Mette, Evans & Woodside Attention: Elyse E. Rogers 3401 North Front Street Harrisburg, PA 17110 7

If to the Buyer: Mrs. Fields' Holding Company, Inc. 462 West Bearcat Drive Salt Lake City, UT 84115 Attention: Larry A. Hodges, President With a Copy to: Jones, Waldo, Holbrook & McDonough 170 South Main Street, Suite 1500 Salt Lake City, UT 84101 Attention: Glen D. Watkins Any Party may send any notice, request, demand, claim or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth. (g) Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Utah without giving effect to any choice or conflict of law provision or rule thereof. (h) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyer and each of the Sellers. No waiver by any Party of any default, misrepresentation or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. (i) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. (j) Expenses. Each of the Parties will bear his or its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. The Seller agrees that none of the Company and its Subsidiaries has borne or will bear any of the Seller's costs and expenses (including any of their legal fees and expenses) in connection with this Agreement or any of the transactions contemplated hereby. 8

(k) Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. (l) Specific Performance. Each of the Parties acknowledges and agrees that the other Parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the Parties agrees that the other Parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter, in addition to any other remedy to which they may be entitled, at law or in equity. IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written. BUYER: MRS. FIELDS' HOLDING COMPANY, INC. By:____________________________________________________ Its:___________________________________________________ SELLER: ____________________________________ Martin E. Lisiewski 9

DISCLOSURE SCHEDULE TO STOCK ACQUISITION AGREEMENT Section 2(a): ------------ None, unless otherwise stated below. _________________ __________________ Buyer's Initials Seller's Initials 10

STOCK PURCHASE AGREEMENT THIS AGREEMENT ("Agreement") is made and entered into as of June 12, 1998, by and among Mrs. Fields' Holding Company, Inc., a Delaware corporation (the "Buyer"), and Martin E. Lisiewski, shareholder of Pretzel Time, Inc., a Pennsylvania corporation (the "Company"), who becomes the "Seller". The Buyer and the Seller are referred to collectively herein as the "Parties." A. The Seller owns forty (40) shares of the issued and outstanding common stock of the Company; B. This Agreement contemplates a transaction in which the Buyer will purchase from the Seller, and the Seller will sell to the Buyer, ten (10) shares of the outstanding common stock (par value $10.00 per share) of the Company owned by the Seller (the "Shares"), as part of a series of transactions in which the Buyer is acquiring common stock in the Company, and is also entering into other related transactions (collectively, the "Related Transactions"); WHEREAS, the Buyer will purchase the Shares of the Company in return for cash as set forth below. NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows. 1. PURCHASE AND SALE OF SHARES. (a) Basic Transaction. On and subject to the terms and conditions of this Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees to sell to the Buyer, each of the Shares for the consideration specified below in Section 1(b). (b) Purchase Price. The Buyer agrees to pay to the Seller at the Closing the sum of Eighty Seven Thousand Five Hundred Dollars ($87,500) per Share (the "Purchase Proceeds") for a total of Eight Hundred Seventy Five Thousands Dollars ($875,000) (the "Purchase Price"), by delivery of certified funds for the Purchase Price payable in accordance with this Agreement. (c) The Closing. The closing of the transactions contemplated by this Agreement (the "Closing") will take place at the offices of the Buyer in Salt Lake City, Utah, on June 12, 1998 (the "Closing Date"), unless extended by written agreement of the Parties. (d) Deliveries at the Closing. At Closing, the Seller will deliver to the Buyer, the various documents referred to in Section 5(a) below, including the stock

certificate(s) representing each of the Seller's Shares, endorsed in blank or accompanied by duly executed assignment documents. 2. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION. (a) Representations and Warranties of the Seller. The Seller represents and warrants to the Buyer that the statements contained in this Section 2(a) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 2(a)) with respect to himself except as set forth on the Disclosure Schedule affixed hereto. (i) Organization of Certain Seller. If the Seller is a corporation, the Seller is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. (ii) Authorization of Transaction. The Seller has full power and authority (including, if the Seller is a corporation, full corporate power and authority) to execute and deliver this Agreement and to perform his obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Seller, enforceable in accordance with its terms and conditions. The Seller need not give any notice to, make any filing with, or obtain any authorization, consent or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement. (iii) Noncontravention. To the best of Seller's knowledge, neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (A) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge or other restriction of any government, governmental agency or court to which the Seller is subject or, if the Seller is a corporation, any provision of its charter or bylaws, or (B) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice under any agreement, contract, lease, license, instrument or other arrangement to which the Seller is a party or by which the Seller is bound or to which any of the Seller's assets is subject. (iv) Brokers' Fees. The Seller has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement for which the Buyer could become liable or obligated. 2

(v) Shares. The Seller holds of record and owns beneficially the number of Shares (but no more or other shares of the common stock of the Company than) set forth in paragraph A above. The Seller holds and owns each of the Shares free and clear of any restrictions on transfer, any federal, state or local taxes of any kind, taxes, mortgage, pledge, lien, encumbrance, charge or other security interests, options, warrants, purchase rights, contracts, commitments, equities, claims and demands. Other than this Agreement and other written agreements with the Company and/or the Buyer, the Seller is not a party to (A) any option, warrant, purchase right, shareholders agreement, co-sale agreement, buy-sell agreement or other contract or commitment that could require the Seller to sell, transfer or otherwise dispose of any capital stock of the Company (other than this Agreement), or (B) any voting trust, proxy or other agreement or understanding with respect to the voting of any capital stock of the Company. (vi) Legal Compliance/Litigation. To the best of his knowledge, the Seller and his respective predecessors and affiliates have complied with all applicable laws of federal, state, local and foreign governments (and all agencies thereof), and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand or notice has been filed or commenced against any of them alleging any failure so to comply. To the best of his knowledge, there are no outstanding injunctions, judgments, orders, decrees, rulings or charges affecting their Shares. To the best of his knowledge, there are no actions, suits, proceedings, hearings or investigations, and the Seller does not have reason to believe that any such action, suit, proceeding, hearing or investigation may be brought or threatened, against the Seller. (vii) Investigation. The Seller has investigated or had full opportunity to investigate the terms and conditions of the transactions contemplated by this Agreement, including the Purchase Price, and deems them to be fair and appropriate. 3. PRE-CLOSING COVENANTS. With respect to the period between the execution of this Agreement and the Closing, (A) each of the Parties will use his reasonable best efforts to take all action and to do all things necessary, proper or advisable in order to consummate and make effective the transactions contemplated by this Agreement, (B) the Seller will use his best efforts to obtain any third-party consents that the Buyer may request or to otherwise consummate the transactions contemplated hereby, and (C) the Seller will give prompt written notice to the Buyer of any material adverse development causing a breach of any of the representations and warranties in Section 2 above. 4. POST-CLOSING COVENANTS. The Parties agree that if at any time after the Closing, any further action is necessary or desirable to carry out the purposes of this Agreement, each of the 3

Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request. 5. CONDITIONS TO CLOSING. (a) Conditions to Obligation of the Buyer. The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to the satisfaction of the following conditions: (i) The representations and warranties set forth in Section 2 above shall be true and correct in all material respects at and as of the Closing Date. (ii) The Seller shall have performed and complied with all of their covenants hereunder in all material respects through the Closing. (iii) The Seller shall have procured any third party consents required for the sale of the Shares. (iv) No action, suit or proceeding shall be pending or threatened before any court of quasi-judicial or administrative agency of any federal, state, local or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement, (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, or (C) affect adversely the right of the Buyer to own the Shares. (v) The Buyer shall have obtained on terms and conditions reasonably satisfactory to it all of the financing required to consummate the transactions contemplated hereby and by the Related Transactions. (vi) The Seller shall be prepared to deliver the certificates and documents in the form and executed as required by this Agreement. (vii) All actions to be taken by the Seller in connection with consummation of the transactions contemplated by this Agreement, and all certificates, and other documents required to effect the transactions contemplated hereby, will be satisfactory in form and substance to the Buyer. (viii) The Closing of the Related Transactions shall have occurred. (ix) Neither the Company nor the Principal Shareholder shall be in breach under the terms and conditions of any of the Stock Acquisition Agreement (as 4

defined in Section 6 below) and the documents executed in connection with the Related Transactions. The Buyer may waive any condition specified in this Section 5(a) if it executes a writing so stating at or prior to the Closing. (b) Conditions to Obligation of the Seller. The obligation of the Seller to consummate the transactions to be performed by them in connection with the Closing is subject to satisfaction of the following conditions: (i) No action, suit or proceeding shall be pending threatened before any court or quasi-judicial or administrative agency of any federal, state, local or foreign jurisdiction for before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement, or (B) cause any of the transactions between the Buyer and the Seller contemplated by this Agreement to be rescinded following consummation (and no such injunction, judgment, order, decree, ruling or charge shall be in effect). (ii) The Buyer shall be prepared to deliver the Purchase Proceeds as required by Section 1(b). (iii) The Closing of the Related Transactions shall have occurred. The Seller may waive any condition specified in this Section 5(b) if they execute a writing so stating at or prior to the Closing. 6. REMEDIES FOR BREACHES OF THIS AGREEMENT. (a) Survival of Representations and Warranties. All of the representations and warranties of the Seller contained in this Agreement shall survive the Closing hereunder (even if the damaged Party knew or had reason to know of any misrepresentation or breach of warranty at the time of Closing) and continue in full force and effect forever thereafter (subject to any applicable statutes of limitations). (b) Indemnification Provisions for Benefit of the Buyer. (i) In the event the Seller breaches any of its representations, warranties, and covenants contained herein, and, if the Buyer makes a written claim for indemnification against any of the Seller therefor, then, the Seller agrees to indemnify the Buyer from and against the entirety of any Adverse Consequences that the Buyer may suffer through and after the date of the claim for indemnification (including any Adverse Consequences the Buyer may suffer after the end of any 5

applicable survival period) resulting from, arising out of, relating to, in the nature of, or caused by the breach. (ii) If any third party shall notify Fields with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against the Seller under this (S) 6, then Fields shall promptly notify the Seller thereof in writing, provided, however, that no delay on the part of Fields in notifying the Seller shall relieve the Seller from any obligation hereunder unless (and then solely to the extent) the Seller is prejudiced. The indemnification procedure respecting a Third Party Claim hereunder shall be the same as set forth in Section 9(c) of that certain Stock Acquisition Agreement, dated as of September 2, 1997 (the "Acquisition Agreement"), by and between Fields, the Company and the Seller (therein referred to as the Principal Shareholder). (iii) All claims for indemnification made under this Agreement shall be subject to the terms and conditions of Sections 9(d) (Determination of Adverse Consequences), (f) (Rights of Offset) and (g) (Limitation of Rights of Offset) of the Stock Acquisition Agreement, and the indemnity payment for such claims shall be determined as if such claims were made under the Stock Acquisition Agreement. (iv) The foregoing indemnification provisions are in addition to, and not in derogation of, any statutory, equitable, or common law remedy Fields may have for breach of representation, warranty or covenant. 7. TERMINATION. (a) Termination of Agreement. The Parties may terminate this Agreement as provided below: (i) The Buyer and the Seller may terminate this Agreement by mutual written consent at any time prior to the Closing. (ii) The Buyer or the Seller may terminate this Agreement if the Closing does not occur on or before June 30, 1998. (b) Effect of Termination. If any Party terminates this Agreement pursuant to this Section, all rights and obligations of the Parties hereunder shall terminate without any liability of any Party to any other Party (except for any liability of any Party then in breach). 8. MISCELLANEOUS. (a) No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. 6

(b) Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements or representations by or among the Parties, written or oral, to the extent they relate in any way to the subject matter hereof. (c) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of his or its rights, interests or obligations hereunder without the prior written approval of the Buyer and the Seller, provided, however, that the Buyer may (i) assign any or all of its rights and interests hereunder to one or more of its affiliates, and (ii) designate one or more of its affiliates to perform its obligations hereunder (in any or all of which cases the Buyer nonetheless shall remain responsible for the performance of all of its obligations hereunder). (d) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. (e) Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (f) Notices. All notices, requests, demands, claims and other communications hereunder will be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: If to the Seller: Martin E. Lisiewski 4800 Linglestown Road, Suite 202 Harrisburg, PA 17112 With a copy to: Mette, Evans & Woodside Attention: Elyse E. Rogers 3401 North Front Street Harrisburg, PA 17110 If to the Buyer: Mrs. Fields' Holding Company, Inc. 462 West Bearcat Drive Salt Lake City, UT 84115 Attention: Larry A. Hodges, President 7

With a Copy to: Jones, Waldo, Holbrook & McDonough 170 South Main Street, Suite 1500 Salt Lake City, UT 84101 Attention: Glen D. Watkins Any Party may send any notice, request, demand, claim or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth. (g) Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Utah without giving effect to any choice or conflict of law provision or rule thereof. (h) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyer and each of the Sellers. No waiver by any Party of any default, misrepresentation or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. (i) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. (j) Expenses. Each of the Parties will bear his or its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. The Seller agrees that none of the Company and its Subsidiaries has borne or will bear any of the Seller's costs and expenses (including any of their legal fees and expenses) in connection with this Agreement or any of the transactions contemplated hereby. (k) Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. 8

(l) Specific Performance. Each of the Parties acknowledges and agrees that the other Parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the Parties agrees that the other Parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter, in addition to any other remedy to which they may be entitled, at law or in equity. IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written. BUYER: MRS. FIELDS' HOLDING COMPANY, INC. By: /s/ [SIGNATURE ILLEGIBLE] ------------------------------------- Its: V.P. -------------------------------- SELLER: /s/ Martin E. Lisiowski ------------------------------------- Martin E. Lisiowski 9

DISCLOSURE SCHEDULE TO STOCK ACQUISITION AGREEMENT Section 2(a): ------------ None, unless otherwise stated below. /s/ [SIGNATURE ILLEGIBLE] M.L. --------------------------- ----------------- Buyer's Initials Seller's Initials

================================================================================ ASSET PURCHASE AGREEMENT Dated as of October 5, 1998 between MRS. FIELDS' ORIGINAL COOKIES, INC. as Buyer, and THE COOKIE CONGLOMERATE, LLP, and THE COOKIE CONGLOMERATE, INC. as Sellers, and RONALD A. EICHEL AND ALAN M. KUEHN, as Seller Related Parties ================================================================================

TABLE OF CONTENTS <TABLE> <CAPTION> Page ---- <C> <S> <C> 1. Purchase, Sale and Assumption.................................................. 1 2. Closing; Transactions to be Effected; Purchase Price Adjustment................ 6 3. Conditions to Closing.......................................................... 7 4. Representations and Warranties of the Sellers and Seller Related Parties....... 9 5. Covenants of the Sellers and Seller Related Parties............................ 16 6. Representations and Warranties of the Buyer.................................... 18 7. Covenants of the Buyer......................................................... 19 8. Mutual Covenants............................................................... 19 9. Employee and Related Matters................................................... 20 10. Further Assurances............................................................. 20 11. Indemnification................................................................ 21 12. Assignment..................................................................... 25 13. No Third-Party Beneficiaries................................................... 26 14. Termination.................................................................... 26 15. Survival of Representations.................................................... 27 16. Expenses....................................................................... 27 17. Amendments; Waiver............................................................. 28 18. Notices........................................................................ 28 19. Interpretation................................................................. 29 20. Counterparts................................................................... 29 21. Entire Agreement............................................................... 29 22. Fees........................................................................... 29 23. Severability................................................................... 29 24. Attorney's Fees................................................................ 29 25. No Third-Party Beneficiaries................................................... 29 26. Governing Law.................................................................. 30 27. Remedies....................................................................... 30 28. Submission to Jurisdiction..................................................... 30 </TABLE> Exhibits: A - List of Stores B - Store Cash C - Bill of Sale D - Centennial Escrow Agreement E - Allocation Schedule F - Closing Escrow Agreement G - Franchise Termination Agreement H - Opinion of Counsel for Sellers and Seller Related Parties i

Disclosure Schedules: (S)1(a) Acquired Assets (S)1(b)(iv) Excluded Assets (S)1(c)(ii) Assumed Liabilities (S)3(a)(vi) Consents (S)4(a) Organization and Standing (S)4(b) Officers, Directors, Shareholders, Managers (S)4(c) Financial Statements (S)4(d) Taxes (S)4(e) Liens (S)4(f) Condition of Assets (S)4(g) Intellectual Property (S)4(h) Contracts (S)4(i) Litigation (S)4(j) Insurance (S)4(l) Absence of Material Changes (S)4(m) Environmental Matters (S)4(n) Employment Matters (S)4(o) Licenses and Permits (S)4(p) Inventory (S)4(r) Product Liability ii

ASSET PURCHASE AGREEMENT MRS. FIELDS' ORIGINAL COOKIES, INC. ASSET PURCHASE AGREEMENT ("Agreement"), dated as of October 5, 1998, among MRS. FIELDS' ORIGINAL COOKIES, INC., a Delaware corporation ("Buyer"); THE COOKIE CONGLOMERATE, LLP, a Georgia limited liability partnership ("Cookie LLP"), and THE COOKIE CONGLOMERATE, INC., a Georgia corporation ("Cookie Co.") (Cookie LLP and Cookie Co. are collectively hereinafter referred to as "Seller" in the singular and "Sellers" in the plural); and RONALD A. EICHEL and ALAN M. KUEHN, individuals residing in Georgia, the partners of Cookie LLP and the shareholders of Cookie Co. (collectively, "Seller Related Parties"); each a "party" in the singular and "parties" in the plural. A. The Sellers are franchisees of Great American Cookie Company, a Delaware corporation ("Franchisor") pursuant to certain license agreements (collectively, the "Franchise Agreements") and subleases (collectively, the "Subleases") between Sellers and the Franchisor. The Seller Related Parties are the respective partners and shareholders of Cookie LLP and Cookie Co. and will receive financial and other benefits by reason of the consummation of the transactions contemplated by this Agreement. B. The parties desire that the Buyer purchase from the Sellers, and that the Sellers sell to the Buyer, the Acquired Assets (defined below), and that the Buyer assume the Assumed Liabilities (defined below), upon the terms and subject to the conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the premises and of the respective representations, warranties, covenants, agreements and conditions contained herein, the parties hereto hereby agree as follows: 1. Purchase, Sale and Assumption. ----------------------------- (a) Purchase and Sale. On the terms and subject to the conditions of ----------------- this Agreement, each of the Sellers agrees to sell, transfer, assign and deliver to the Buyer, and the Buyer agrees to accept and purchase from the Sellers, at the Closing (defined below), free and clear of Liens (defined below), all of the retail cookie and related business and operations owned and operated by the Sellers as the "Cookie Conglomerate" at eleven (11) stores and related kiosks (each a "Store"; collectively, the "Stores") listed on Exhibit A, owned and operated by each of the Sellers (such business and operations being herein called, collectively, the "Acquired Business"), and all the assets and properties of each the Sellers of every kind and description used or held for use in connection with the Acquired Business (such assets and properties being herein called, collectively, the "Acquired Assets"), other than the

Excluded Assets (defined below). The Acquired Assets shall include without limitation (i) all improvements, fixtures, signage, easements, rights-of- way and other appurtenances thereto; (ii) all tangible personal property, such as machinery, equipment, supplies, inventories (unless designated by the Buyer on or before the Closing as an Excluded Asset), furniture and tools; (iii) all agreements, contracts and instruments (but excluding the Franchise Agreements, the Subleases, and any license and development agreements between any of the Sellers and the Franchisor) that are expressly assumed by the Buyer at the Closing; (iv) all customer and vendor lists, books, records, ledgers, files, documents, correspondence, plans, drawings, marketing information, materials and reports and other similar materials, in written or electronic form; (v) all recipes, techniques, processes, methods of production and commercialization, training methods and know-how owned by each of the Sellers; (vi) store change funds in the aggregate amount set forth by Store on Exhibit B (the "Store Cash"); and (vii) all other assets listed on Schedule 1(a). The Acquired Assets shall be transferred and conveyed to the Buyer at the Closing in the form of a bill of sale (the "Bill of Sale") substantially in the form of Exhibit C. (b) Excluded Assets. The term "Excluded Assets" means, collectively, --------------- the following: (i) all cash and cash equivalents in the Sellers' bank accounts other than Store Cash; (ii) all rights of the Sellers under the Franchise Agreements and Subleases (to be terminated at the Closing); (iii) all rights and claims of each of the Sellers with respect to the Excluded Liabilities (defined below); (iv) all assets listed on Schedule 1(b)(iv); (v) deposits with the Franchisor; (vi) other deposits made in connection with lease, utility service and other similar agreements; (vii) rebates and prepaid expenses relating to the period on or prior to the Closing Date; (viii) all office furniture, fixtures and computer equipment located at the Sellers' principal office at Chamblee Dunwoody Road, Georgia; and (iv) any other assets of the Sellers not used in the Acquired Business and not set forth in subparagraph (a) above. (c) Assumed Liabilities. On the terms and subject to the conditions ------------------- of this Agreement, the Buyer agrees to assume, at and effective from the Closing, the Assumed Liabilities, other than the Excluded Liabilities. The term "Assumed Liabilities" means, collectively, the following liabilities and obligations of each of the Sellers: (i) all obligations under the agreements, contracts, leases, licenses, and other arrangements referred to in the description of Acquired Assets either (A) to furnish goods, services and other non-cash benefits to another party after Closing, or (B) to pay for goods, services and other non-cash benefits that another party will furnish to the Acquired Business after Closing; and (ii) all other liabilities of any of the Sellers listed on Schedule 1(c)(ii). (d) Excluded Liabilities. The term "Excluded Liabilities" means any -------------------- liability or obligation of any of the Sellers not expressly assumed in this 2

Agreement, including without limitation: (i) any liability in respect of any Excluded Assets (including without limitation the Franchise Agreements and Subleases), any Vendor Accounts (defined below) or any Bulk Sales Liabilities (defined below); (ii) any obligation or liability to any of the Sellers or Seller Related Parties, including those in connection with the transactions contemplated by this Agreement or the liquidation or dissolution of any of the Sellers; (iii) any liability for any Taxes (defined below) attributable to taxable years or periods ending at the time of or prior to the Closing, or, in the case of any Straddle Period (defined below), the portion of such Straddle Period (as determined in Section 11(a)(i)) ending at the time of the Closing; (iv) any obligation to indemnify any person by reason of the fact that such person was a director, officer, employee, partner, manager or agent of any of the Sellers or was serving at any of the Sellers' request as a managing member, partner, trustee, director, officer, employee or agent of another entity; (v) any obligation or liability of any of the Sellers with respect to any contract, agreement, arrangement or understanding with any of its directors, officers, partners, managers, employees or agents; (vi) any liability under any Benefit Plan (defined below) or other incentive plans or arrangements sponsored by any of the Sellers; (vii) any obligation or liability with respect to the payment of expenses pursuant to Section 16; and (viii) except to the extent expressly assumed by the Buyer pursuant to Section 1(c), any obligation or liability arising before the Closing (defined below) under any agreement, contract, lease, sublease, license or arrangement of any of the Sellers, including without limitation those arising under any of the Franchise Agreements. (e) Purchase Price. The purchase price for the Acquired Assets (the --------------- "Purchase Price") shall be Two Million Eight Hundred Thousand Dollars ($2,800,000), payable by wire transfer or delivery of other immediately available funds, of which: (A) Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000) is payable in cash at the Closing (the "Cash Purchase Price"), and (B) Fifty Thousand Dollars ($50,000) (the "Deferred Payments") shall be deposited at the Closing into the Centennial Escrow Account (defined below) for disbursement 3

to the Sellers subject to the terms and conditions of (S) 1(f) below and the Centennial Escrow Agreement (defined below). (f) The Centennial Escrow. The Deferred Payments shall be deposited --------------------- into an interest bearing escrow (the "Centennial Escrow Account") established by the Buyer and the Seller prior to the Closing with Centennial Bank ("Centennial") at its offices located at 46th and Harrison Streets, Ogden, Utah, 84403, for disbursement subject to the terms and conditions of this Agreement and that certain escrow agreement executed by the Buyer, the Sellers and Centennial on or before the Closing substantially in the form and substance of Exhibit D hereto (the "Centennial Escrow Agreement"). Subject to the terms and conditions of this Agreement and the Centennial Escrow Agreement, the Deferred Payments, less all amounts that after Closing may be paid or recouped from or set-off against the Deferred Payments pursuant to (S) 11(e) below, shall be paid from the Centennial Escrow Account upon the later of (i) sixty (60) days from the Closing Date, or (ii) the date on which the Sellers, through their respective financial officers and partners, certify to the Buyer that the Vendor Accounts, any Bulk Sales Liabilities (defined below) and any prorations to be paid by the Seller pursuant to (S) 1(h) below, have been paid or otherwise fully satisfied. The Closing Date shall be set forth in the Escrow Agreement. (g) Allocation of Purchase Price. At the Closing, the Purchase Price ---------------------------- (including, for purposes of this Section 1(g), any other consideration paid to the Sellers, including the Assumed Liabilities) shall be allocated among the Acquired Assets and the covenant not to compete set forth in Section 5(f) in accordance with Exhibit E (the "Allocation Schedule"). The Sellers and the Buyer agree that the Allocation Schedule attached to this Agreement at Closing shall reflect the estimated value of the tangible Acquired Assets. On or before thirty (30) days after the Closing Date, the Sellers shall provide the Buyer with a revised Allocation Schedule (the "Final Allocation Schedule") reflecting (i) the actual book value of the tangible Acquired Assets; and (ii) a corresponding adjustment to Goodwill. The Final Allocation shall be subject to the Buyer's written approval. The parties further agree that all Tax Returns (defined below) shall be filed in accordance with the Final Allocation Schedule. (h) Proration. All utility charges, rental charges, Taxes, payments --------- to the Franchisor, and other like items assessed or payable with respect to any of the Acquired Assets for the period in which the Closing occurs shall be prorated as of the date of Closing between the Buyer and the Seller. The parties shall use their commercially reasonable best efforts to determine the amount of any such prorated items as of the Closing and shall, to the extent of information available at the time of Closing, prorate such items between them as provided in a Closing Memorandum (the "Closing Memorandum") to be executed by the parties at the Closing. To the extent information relating to such prorated items is not available 4

at the time of Closing, the parties shall, as soon as practical after the Closing, examine all relevant books and records in order to make the determination of the apportionments of such prorated items as herein provided. Payment of any such items which are not apportioned and prorated at the Closing shall be made by the appropriate party by check within thirty (30) days after such determination. Proration of ad valorem taxes (whether assessed against real property interests or personal property) shall be determined based upon previous year's taxes. (i) Nonassignable Assets. To the extent that any of the Acquired -------------------- Assets is not capable of being assigned or transferred without the consent or waiver of a third party (whether or not a governmental authority), or if such assignment or transfer would constitute a breach thereof or a violation of applicable law, this Agreement (and any related documents delivered at the Closing) shall not constitute an actual or attempted assignment or transfer thereof unless and until such consent or waiver of such third party has been duly obtained or such assignment, transfer, sublease or sublicense has otherwise become lawful (any of the Acquired Assets not assigned or transferred as a result of this Section 1(i) is hereinafter referred to as an "Unassigned Asset"). (j) Bulk Sales. The parties intend and agree that the purchase and ---------- sale of the Acquired Assets is excluded from the requirements of so-called "Uniform Commercial Code - Bulk Transfers" laws (the "Bulk Sales Laws"). However, to the extent that the Bulk Sales Laws apply, the parties hereby waive any compliance therewith. In consideration of the Buyer's agreement to waive any such compliance, each of the Sellers: (i) shall furnish to the Buyer at the Closing a list, certified by a financial officer or partner having knowledge thereof, setting forth such Sellers' accounts payable (and pay-off amounts therefor) as of the Closing (including, without limitation, all accounts with and liabilities to the Franchisor and to any persons that may have a remedy under the Bulk Sales Laws, if applicable, with respect to the transactions contemplated by this Agreement (collectively, the "Vendor Accounts")); (ii) hereby agrees to pay the Vendor Accounts payable to the Franchisor at the Closing pursuant to the terms of the Closing Escrow Agreement (defined below); (iii) in the event the amount of the Seller's aggregate Vendor Accounts less the portion thereof to be paid to the Franchisor at Closing (the "Net Accounts") exceeds $50,000, hereby agrees to authorize the Closing Escrow Agent (defined below) to pay from the Cash Purchase Price all Net Accounts in excess of $50,000 at Closing pursuant to the terms of the Closing Escrow Agreement; 5

(iv) hereby agrees to pay each of the Vendor Accounts not otherwise paid pursuant to Section 1(j)(ii) and 1(j)(iii) above, and each of the Bulk Sales Liabilities, in the ordinary course of business following the Closing but in no event later than sixty (60) days after the Closing; (v) pursuant to Section 11(b), that each of the Sellers and the Seller Related Parties jointly and severally agree to indemnify and hold the Buyer (and its officers, directors, employees, agents and affiliates) harmless of and from any Loss (defined below) arising from or in connection with (A) any of the Vendor Accounts, or (B) the parties' non-compliance with any of the Bulk Sales Laws (collectively, the "Bulk Sales Liabilities"). Such indemnification of the Buyer (and related indemnified persons or entities) shall be in addition to, and not in lieu of, any rights or remedies granted or available to the Buyer (and any related indemnified persons or entities) under any Bulk Sales Laws or other laws, under this Agreement or otherwise. 2. Closing; Transactions to be Effected; Purchase Price Adjustment. --------------------------------------------------------------- (a) Closing. The closing (the "Closing") of the purchase and sale of ------- the Acquired Assets and the Buyer's assumption of the Assumed Liabilities shall be held at the offices of the Sellers' Counsel, Lawler & Tanner, P.C., in Atlanta, Georgia, or as otherwise agreed by the parties, at a time established by agreement of the parties, on the third business day after October 1, 1998 on which all of the conditions to Closing set forth in Section 3 of this Agreement are satisfied. The date on which the Closing shall occur is hereinafter referred to as the "Closing Date". The anticipated Closing Date is October 6, 1998. The Closing shall be conducted in accordance with this Agreement and an Escrow Agreement in substantially the form attached hereto as Exhibit F (the "Closing Escrow Agreement") to be entered into by and among the Buyer, the Seller and Tanner & Lawler, P.C. which, pursuant to the Closing Escrow Agreement, shall serve as the Escrow Agent (the "Closing Escrow Agent") for the Closing. (b) Transactions to be Effected. At the Closing, on the terms and --------------------------- subject to the conditions of this Agreement and the Closing Escrow Agreement: (i) the Closing Escrow Agent shall make the disbursements required by Section 2.b of the Closing Escrow Agreement to pay the Franchisor Accounts (as defined in the Closing Escrow Agreement) and the Net Accounts in excess of $50,000, if any; (ii) the Closing Escrow Agent shall deliver to the Buyer (A) the appropriately executed and authenticated Bill of Sale and such other 6

instruments of sale, assignment, transfer and conveyance to the Buyer of the Acquired Assets as the Buyer or its counsel may reasonably request, such instruments to be reasonably satisfactory in form to the Buyer and its counsel; (B) the documents to be delivered by any of the Sellers or Seller Related Parties pursuant to Section 3(a); and (C) any other documents to be delivered by any of the Sellers or the Seller Related Parties pursuant to the Closing Escrow Agreement; (iii) the Closing Escrow Agent shall deliver to the Sellers (A) the Cash Purchase Price, by wire transfer to a bank account which shall be designated in writing by the Seller at least two business days prior to the Closing Date; (B) such instruments of assumption with respect to the Assumed Liabilities, appropriately executed and authenticated by the Buyer, as the Sellers and Seller Related Parties or their counsel may reasonably request, such instruments to be reasonably satisfactory in form to the Sellers, the Seller Related Parties and their counsel; (C) the documents to be delivered by the Buyer pursuant to Section 3(b); and (D) any other documents to be delivered by the Buyer to the Sellers pursuant to the Closing Escrow Agreement; and (iv) the Buyer shall deliver to Centennial the Deferred Payments specified in (S) 1(e) above. 3. Conditions to Closing. --------------------- (a) Buyer's Obligation. The obligation of the Buyer to purchase the ------------------ Acquired Assets is subject to the satisfaction (or waiver by the Buyer) as of the Closing of the following conditions: (i) The representations and warranties of each of the Sellers and Seller Related Parties made in this Agreement shall be true and correct as of the date hereof and on and as of the Closing, as though made on and as of the Closing Date, and each of the Sellers and Seller Related Parties shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by each of the Sellers and Seller Related Parties by the time of the Closing; and each of the Sellers and Seller Related Parties shall have delivered to the Closing Escrow Agent a certificate dated the Closing Date and signed by an authorized officer or representative of each of them, confirming the foregoing; (ii) No injunction or order of any court or administrative agency of competent jurisdiction shall be in effect, and no statute, rule or regulation of any governmental authority of competent jurisdiction shall have been 7

promulgated or enacted, as of the Closing which restrains or prohibits the purchase and sale of the Acquired Assets; (iii) The Buyer shall have concluded and, in its sole discretion, shall be satisfied with the results of, its due diligence investigation of the Sellers, the Seller Related Parties, the Acquired Business, the Acquired Assets and the Assumed Liabilities; (iv) There shall have been no material adverse changes in any of the Acquired Assets or the Acquired Business; (v) Each of the Sellers and the Buyer shall have obtained consents, in a form reasonably satisfactory to each of the Sellers and the Buyer, to the transactions contemplated hereby from the persons whose consent is required for the transfer or assignment to the Buyer of any of the Acquired Assets, including without limitation the consents required with respect to each of the agreements identified on Schedule 3(a)(vi); (vi) Each of the Sellers and the Franchisor shall have entered into agreements substantially in the form of Exhibit G providing for the termination of the Franchise Agreements and the subleases and the subleases, effective as of the Closing Date; (vii) The Buyer shall have received an opinion dated the Closing Date of Lawler & Tanner, P.C., counsel to the Sellers and the Seller Related Parties, substantially in the form of Exhibit H; (viii) Each of the Sellers shall have executed and delivered to the Closing Escrow Agent, the Centennial Escrow Agreement. (b) Sellers' Obligation. The obligation of the Sellers to sell, ------------------- assign, transfer and deliver the Acquired Assets to the Buyer is subject to the satisfaction (or waiver by all of the Sellers acting together) as of the Closing of the following conditions: (i) The representations and warranties of the Buyer made in this Agreement shall be true and correct as of the date hereof and on and as of the Closing, as though made on and as of the Closing Date, and the Buyer shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by the Buyer by the time of the Closing; and the Buyer shall have delivered to the Closing Escrow Agent a certificate dated the Closing Date and signed by an authorized officer of the Buyer confirming the foregoing. 8

(ii) The conditions contemplated by Sections 3(a)(ii), 3(a)(iii), 3(a)(vi) and 3(a)(vii) shall have been satisfied; and (iii) The Buyer shall have executed and delivered to the Closing Escrow Agent the Centennial Escrow Agreement. (c) Waiver of Closing Conditions. The parties hereto acknowledge and ---------------------------- agree that if the Buyer or the Sellers shall have received prior to the Closing written notice from the Sellers or the Buyer, respectively, providing specific information as to the failure of any condition set forth in paragraph (a) or (b) above, respectively, and such party or parties determine to proceed with the Closing, such party or parties will be deemed to have waived such condition and shall not be entitled to be indemnified pursuant to Section 11 for any losses arising from any matters relating to such conditions. 4. Representations and Warranties of the Sellers and Seller Related ---------------------------------------------------------------- Parties. Each of the Sellers and Seller Related Parties hereby represents and ------- warrants to the Buyer that the statements contained in this Section 4 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 4), except as set forth in the disclosure schedule delivered by the Sellers to the Buyer on the date hereof (the "Disclosure Schedule"). Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein (unless the representation or warranty has to do with the existence of the document or the item itself). The Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Section 4. For purposes of this Agreement, "ordinary course" means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency). (a) Organization and Standing of the Sellers. Cookie Co. is a ---------------------------------------- corporation duly organized, validly existing under the laws of the jurisdiction of its formation or incorporation. Cookie LLP is a limited liability partnership duly organized, formed, validly existing under the laws of the jurisdiction of its formation. Except as disclosed in Schedule 4(a), each of the Sellers has power and authority, and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to enable it to use its name and to own, lease or otherwise hold its properties and assets and to carry on its business as presently conducted other than such franchises, licenses, permits, authorizations and approvals, the lack of which, individually or in the aggregate, would not have a material adverse effect on the assets, financial condition or results of operations of the Acquired Business. Cookie Co. has made available to the Buyer true and 9

complete copies of the Certificate of Incorporation, as amended to date, and the By-laws, as in effect on the date hereof, of Cookie Co. Cookie LLP has made available to the Buyer true and complete copies of the partnership agreement, as in effect on the date of this Agreement, of Cookie LLP. (b) Authority; No Conflict. Each of the Sellers and Seller Related ---------------------- Parties has all requisite power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. All acts and other proceedings required to be taken by each of the Sellers and Seller Related Parties to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly and properly taken. This Agreement has been duly executed and delivered by each of the Sellers and Seller Related Parties, and constitutes a valid and binding obligation of each of them, enforceable against each of the them in accordance with its terms. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and thereby and compliance with the terms hereof and thereof will not, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation, or result in the creation of any Lien (de fined below) upon any of the Acquired Assets under, any provision of (i) any relevant corporation or partnership law or statute, (ii) the articles of incorporation, bylaws or partnership agreement (as applicable) of any of the Sellers or Seller Related Parties, (iii) except as disclosed on the Schedules hereto, any license, lease, contract, commitment or agreement to which any of the Sellers and Seller Related Parties is a party or by which any of the Acquired Assets is bound, or (iv) any judgment, order or decree, or, to the knowledge of the Seller and Seller Related Parties, material statute, law, ordinance, rule or regulation applicable to any of the Sellers or Seller Related Parties or any of the Acquired Assets, the violation of which would have a material adverse affect on the Acquired assets. Each officer, director, shareholder, partner and manager, as applicable, of each of the Sellers is listed (by Seller) on Schedule 4(b). (c) Financial Statements; Undisclosed Liabilities. Schedule 4(c) sets --------------------------------------------- forth the unaudited balance sheets of the Sellers as of December 31, 1997, and for the seven-month period ending July 31, 1998, and the unaudited statements of income of the Sellers for the fiscal years or periods then ended (collectively, the "Financial Statements"). The Financial Statements fairly present the financial condition and the results of operations of the Sellers as of and for the periods indicated and have been prepared in a manner consistent with the Sellers' past accounting practices. The Acquired Assets constitute, with the exception of any Excluded Assets, all the assets, properties, rights and interests reflected on the balance sheet included as a part of the Financial Statements of the Sellers as of July 31, 1998 (the "Balance Sheet") (other than those assets, properties, rights and interests, acquired, sold or 10

disposed of in the ordinary course of the Acquired Business, consistent with past practice, since the date of the Balance Sheet). To the knowledge of each of the Sellers and Seller Related Parties, (i) all of the Assumed Liabilities arise out of or relate to the Acquired Business; and (ii) no Seller has material liabilities or obligations of any nature (whether accrued, absolute, contingent, unasserted or otherwise), except (A) as set forth in the Balance Sheet and the notes thereto, (B) for items disclosed in the Schedules hereto or (C) for liabilities and obligations incurred in the ordinary course of business consistent with past practice since the date of the Balance Sheet. (d) Taxes. Except as set forth on Schedule 4(d), each of the Sellers ----- has, in respect of the Acquired Business, filed all material Tax Returns which are required to be filed (all such returns being true, correct and complete in all material respects) and has paid all Taxes shown to be due on such Tax Returns, and all monies required to be withheld by each of the Sellers from employees of the Acquired Business for income Taxes and social security and other payroll Taxes have been collected or withheld, and either paid to the respective taxing authorities, set aside in accounts for such purpose, or accrued, reserved against and entered upon the books of the Acquired Business. Any Taxes in respect of the period since the date of such Balance Sheet have arisen in the ordinary course of business. Except as set forth on Schedule 4(d), there are no ongoing audits or examinations of any of the Tax Returns of any of the Sellers, nor has any of the Sellers been notified by any governmental authority that any such audit is contem plated or pending. Except as set forth on Schedule 4(d), no governmental authority is now asserting or threatening to assert against any of the Sellers any deficiency or claim for additional Taxes. Except as set forth on Schedule 4(d), no extension of time with respect to any date on which a Tax Return was or is to be filed by any of the Sellers is in force, and no waiver agreement by any of the Sellers is in force for the extension of time for the assessment or payment of any Taxes. There are no liens for Taxes upon any of the Acquired Assets other than Liens for Taxes not yet due or payable. For purposes of this Agreement, "Taxes" shall mean federal, state, local or foreign income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or add-on minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty, imposed by any governmental authority. For purposes of this Agreement, "Tax Returns" shall mean all federal, state, local and foreign tax returns, declarations, statements, reports, schedules, forms and information returns and any amended Tax Returns relating to Taxes. (e) Title to Acquired Assets. Except as set forth in Schedule 4(e), ------------------------ the Sellers have good and marketable title to the Acquired Assets, free and clear of all mortgages, liens, claims, security interests, easements, rights of way, pledges, restrictions, charges or encumbrances of any nature whatsoever (collectively, 11

"Liens"). At the Closing, the Buyer shall acquire the Acquired Assets free and clear of all Liens. (f) Condition of Assets. Except as disclosed on Schedule 4(f), the ------------------- tangible personal assets included in the Acquired Assets have been maintained in all material respects in accordance with generally accepted industry practice and in all material respects are in good operating condition and repair (ordinary wear and tear excepted). (g) Trademarks, etc. Schedule 4(g) sets forth a true and complete --------------- list of all material patents, trademarks (registered or unregistered), trade names (registered or unregistered), service marks (registered or unregistered), registered copyrights and material unregistered copyrights and computer software applications, other than off-the-shelf applications owned or used by or licensed to any of the Sellers, and all license agreements related thereto that are not Excluded Assets to which any of the Sellers is a party (collectively "Intellectual Property"). Except as disclosed on Schedule 4(g), each of the Sellers owns or has the valid right to use, without payment to any other party, the Intellectual Property used in or necessary for the conduct of its businesses, and the consummation of the transactions contemplated hereby will not alter or impair any such rights. All material Intellectual Property owned by each of the Sellers is valid and all registrations related thereto have been duly maintained. Except as disclosed on Schedule 4(g), all Intellectual Property owned by each of the Sellers is free and clear of all Liens. Except as disclosed on Schedule 4(g), to the knowledge of each of the Sellers and Seller Related Parties, no claims or other proceedings are pending or threatened by any person or entity with respect to the ownership, validity, enforceability or use of any Intellectual Property. To the knowledge of each of the Sellers and Seller Related Parties, (i) the conduct of its business does not infringe upon the rights of any third party, (ii) no third party is infringing upon any Intellectual Property owned by any of the Sellers except as set forth in Schedule 4(g), and (iii) the Intellectual Property identified on Schedule 4(g) is all of the Intellectual Property necessary to conduct the Acquired Business as presently conducted. (h) Contracts. Except as described in Schedule 4(h) and except for --------- contracts or agreements exclusively relating to the Excluded Assets, none of the Sellers is a party to or bound by any: (i) employment or other agreement with any employee, officer, director, partner, shareholder, manager or agents of any of the Sellers, with any of the Seller Related Parties or agents thereof, or with any affiliates of any of the Sellers or Seller Related Parties; (ii) employee collective bargaining agreement or other contract with any labor union; 12

(iii) covenant not to compete (other than pursuant to the Franchise Agreement); (iv) lease or similar agreement to which any of the Seller Related Parties, or any affiliates of any of the Sellers or Seller Related Parties is a lessor or sublessor of, or makes available for use by any third party, any portion of Premises of the Stores; (v) lease or similar agreement to which any of the Seller Related Parties, or any affiliates of any of the Sellers or Seller Related Parties is a party with respect to any machinery, equipment or other tangible personal property; (vi) continuing contract for the future purchase of materials, supplies, equipment or services (other than purchase orders for inventory in the ordinary course of business consistent with past practice); (vii) agreement or commitment under which any of the Seller Related Parties or any affiliates of the Sellers or Seller Related Parties has borrowed or loaned any money, issued any note or other evidence of indebtedness, or guaranteed any indebtedness or obligations; (viii) agreement or contract under which any other person has directly or indirectly guaranteed any indebtedness, liabilities or obligations of any of the Sellers; (ix) mortgage, pledge, security agreement, deed of trust or other document granting a Lien upon any of the Acquired Assets; (x) any agreement providing for the sale or purchase of assets, not in the ordinary course of business; and (xi) other agreement, contract, lease, license, commitment or instrument pursuant to which the Buyer will have any liability after the Closing. Except as disclosed on Schedule 4(h), each agreement, contract, lease, license, commitment or instrument of any of the Sellers described on Schedule 4(h) or the other Schedules hereto (collectively, the "Contracts") is valid, binding and in full force and effect. Except as disclosed in Schedule 4(h), each of the Sellers has performed all material obligations required to be performed by it to date under the Contracts and it is not (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder and, to the 13

knowledge of each of the Sellers and Seller Related Parties, no other party to any of the Contracts is (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder. (i) Litigation; Decrees. Schedule 4(i) sets forth a list of all ------------------- lawsuits, claims, proceedings or investigations pending, or, to the knowledge of each of the Sellers and Seller Related Parties, threatened, as of the date of this Agreement, by or against or affecting any of the Sellers or any of the Acquired Assets. Except as disclosed on Schedule 4(i), none of the Sellers is in default under any material judgment, order or decree of any court, agency or other governmental authority applicable to such Seller, the Acquired Business or any of the Acquired Assets. (j) Insurance. The insurance policies currently maintained with --------- respect to each of the Sellers, the Acquired Business and the Acquired Assets are listed on Schedule 4(j). All such policies are in full force and effect. Each of the Sellers has heretofore made available to the Buyer true and complete copies of all such policies. (k) Benefit Plans. None of the Sellers has maintained or contributed ------------- to any "employee pension benefit plans" (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes referred to herein as "Pension Plans"), "employee welfare benefit plans" (as defined in Section 3(l) of ERISA), bonus, stock option, stock purchase, deferred compensation plans or arrangements, incentive and other employee fringe benefit plans (all the foregoing being herein called "Benefit Plans") for the benefit of any employees of any of the Sellers who are employed primarily in the Acquired Business. (l) Absence of Changes or Events. Except as disclosed on Schedule ---------------------------- 4(l), since the date of the Balance Sheet, there has not been any material adverse change in the assets, financial condition or results of operations of the Acquired Business. Since the date of the Balance Sheet, each of the Sellers has conducted the Acquired Business in the ordinary course and in substantially the same manner as presently conducted, and neither of the Sellers has taken any action that, if taken after the date hereof, would constitute a material breach of any of the covenants set forth in Section 5. (m) Compliance with Applicable Laws; Environmental Matters. ------------------------------------------------------ (i) Except as set forth in Schedule 4(m), the each of the Sellers, to the knowledge of each of the Sellers and Seller Related Parties, is in compliance with all applicable statutes, laws, ordinances, rules, orders and regulations of any governmental authority or instrumentality, domestic or foreign, except where noncompliance would not have a material adverse 14

effect on the assets, financial condition or results of operations of the Acquired Business. Except as set forth in Schedule 4(m), none of the Sellers or Seller Related Parties has received any written communication from a governmental authority that alleges that any of the Sellers is not in compliance, in respect of the Acquired Business, in all material respects, with applicable laws, ordinances, rules and regulations. (ii) Except as set forth in Schedule 4(m), to the knowledge of each of the Sellers and Seller Related Parties, none of the operations or properties of any of the Sellers is the subject of any investigation, in respect of the Acquired Business, evaluating whether any remedial action is needed to respond to a release of any Hazardous Substance (defined below) into the environment, and none of the Sellers has received any written communication from a governmental authority that alleges that any of the Sellers is not in compliance in any material respects, with any applicable foreign laws, ordinances, rules and regulations relating to the environment ("Environmental Laws") in respect of the Acquired Business. Each of the Sellers has filed all material notices required in respect of the Acquired Business to be filed by them under any Environmental Law. To the knowledge of the Sellers and Seller Related Parties, none of the Sellers has any material contingent liabilities in respect of the Acquired Business in connection with any Hazardous Substance that individually or in the aggregate would have adverse effect on the assets, financial condition or results of operations of the Acquired Business. "Hazardous Substance" includes: (i) any hazardous, toxic or dangerous waste, substance or material defined as such in (or for the purposes of) the Comprehensive Environmental Response, Compensation and Liability Act, as amended, and any so-called superfund or superlien law, or any other Environmental Law, including Environmental Laws relating to or imposing liability or standards of conduct concerning any hazardous or toxic waste, substance or material in effect on the date of this Agreement, (ii) asbestos or polychlorinated biphenyls, and (iii) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any federal, state, foreign or local governmental authority pursuant to any Environmental Law or any health and safety or similar law, code, ordinance, rule or regulation, order or decree, and which could reasonably pose a hazard to the health and safety of workers at or users of any properties included in the Acquired Assets or cause damage to the environment. (n) Employee and Labor Relations. Except as set forth on Schedule ---------------------------- 4(n), (i) there is no labor strike, dispute, or work stoppage or lockout actually pending, or, to the knowledge of any of the Sellers and Seller Related Parties, threatened, against or affecting the Acquired Business; (ii) to the knowledge of any of the 15

Sellers and Seller Related Parties, no union organizational campaign is in progress with respect to the employees of the Acquired Business; (iii) to the knowledge of the Sellers and Seller Related Parties, each of the Sellers is in compliance in all material respects with all laws applicable to the Acquired Business respecting employment (including wages and hours) and employment practices, and is not engaged in any unfair labor practice; (iv) there is no pending or, to the knowledge of the Sellers and Seller Related Parties, threatened unfair labor practice charge or complaint or grievance against any of the Sellers in connection with the Acquired Business; and (vi) no charges with respect to or relating to the Acquired Business are pending before the Equal Employment Opportunity Commission or any state or local agency responsible for the prevention of unlawful employment practices. (o) Licenses; Permits. Except as disclosed on Schedule 4(o), all ----------------- material licenses, permits or authorizations issued or granted to each of the Sellers by governmental authorities or agencies and applicable to the Acquired Business are validly held by each such Seller, and each such Seller has complied with all material requirements in connection therewith. (p) Inventory. Except as set forth in Schedule 4(p), all inventory of --------- the Acquired Business is of a quality usable and salable in the ordinary course of business. (q) [Intentionally Omitted.] --------------------- (r) Product Liability. Except as set forth on Schedule 4(r), to the ----------------- knowledge of any of the Sellers and Seller Related Parties, there is no liability and no basis for asserting any present or future action arising out of any injury to individuals as a result of the consumption or use of any products prepared, sold, or delivered by any of the Sellers. (s) Certain Business Relationships with the Company. None of the ----------------------------------------------- Sellers or Seller Related Parties has been involved in any business arrangement or relationship with the Company within the past twelve (12) months, and none of the Sellers or Seller Related Parties owns any asset, tangible or intangible, which is used in the operation of the Acquired Business. (t) Disclosure. The representations and warranties contained in this ---------- Section 4 do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Section 4 not misleading. (u) No Representation Regarding Lease Consents. Notwithstanding any ------------------------------------------ provision herein to the contrary, Sellers and the Seller Related Parties make no representation, warranty, or covenant regarding the consents, approvals or notices 16

required by any of the leases of the Premises in connection with the purchase of the Acquired Assets or the termination of the Subleases pursuant to this Agreement and the Franchise Termination Agreement. 5. Covenants of the Sellers and Seller Related Parties. Each of the --------------------------------------------------- Sellers and Seller Related Parties covenants and agrees as follows: (a) Access. Prior to the Closing, each of the Sellers will give the ------ Buyer and its representatives, employees, counsel and accountants reasonable access, during normal business hours and upon reasonable notice, to the personnel, properties, books and records of each of the Sellers; provided, however, that such access does not unreasonably disrupt the -------- ------- normal operations of the Sellers. (b) Conduct of the Sellers. Except with the prior written consent of ---------------------- the Buyer or as otherwise expressly permitted by this Agreement, none of the Sellers shall take (and none of the Seller Related Parties shall cause or permit any of the Sellers to take) any action, at any time on or after the date hereof and at or prior to the Closing, that would, or that could reasonably be expected to, result in (i) any of the representations and warranties of any of the Sellers or Seller Related Parties set forth in this Agreement being breached or (ii) any of the conditions to the purchase and sale of the Acquired Assets set forth in Section 3 not being satisfied. (c) Preservation of the Acquired Business. Each of the Sellers will ------------------------------------- carry on (and the Seller Related Parties will cause the Sellers to carry on) the Acquired Business diligently and in the ordinary course, substantially in the same manner as heretofore conducted, and keep its retail operations substantially intact, including its present relationships with suppliers and customers and others having business relations with it. Each of the Sellers will maintain (and the Seller Related Parties will cause the Sellers to maintain) inventory at each of the Stores, prior to the Closing Date, at a level consistent with the Sellers' past practices. Except with the written consent of the Buyer, none of the Sellers will grant or permit any new Lien to be placed upon any of the Acquired Assets, and none of the Sellers will close, or permit the closure of, any of its Stores upon which the Acquired Business is presently conducted. Except with the written consent of the Buyer, the Sellers shall not amend (and the Seller Related Parties shall not cause or permit the Sellers to amend) in any material respect or terminate any of the agreements identified in Schedule 4(h) or enter into any new agreement (other than any supply agreement or contract, with respect to which the Sellers have consulted with the Buyer) relating to the Acquired Business which, if existing as of the date hereof, would be required to be disclosed on any of the Schedules to the representations and warranties of any of the Sellers and Seller Related Parties in Section 4 of this Agreement. (d) Confidentiality. Each of the Sellers and Seller Related Parties --------------- will 17

keep confidential, and cause its affiliates and instruct its and its affiliates' officers, directors, employees and advisors to keep confidential, all information concerning the transactions contemplated by this Agreement (including as to the parties hereto) and all nonpublic information relating to the Acquired Business, except as required by law or administrative process and except for information which becomes public other than as a result of a breach of this Section 5(d). (e) Insurance. The Sellers shall keep, or cause to be kept, all --------- insurance policies set forth on Schedule 4(j), or replacements therefor with reputable firms and providing no lesser coverage (in amount or scope), in full force and effect through the close of business on the Closing Date. (f) Covenant Not To Compete. Each of the Sellers and Seller Related ----------------------- Parties agrees that he, she or it (as applicable) will not directly or indirectly compete with the Buyer for a period of one (1) year from the Closing Date. The phrase "directly or indirectly compete" shall include: (i) owning, managing, operating, or controlling, or participating in the ownership, management, operation, or control of, or being connected with or having any interest in, as a stockholder, director, officer, employee, agent, consultant, assistant, advisor, sole proprietor, partner or otherwise, any business (other than any existing business of the Sellers not acquired hereunder) involving the production, distribution or sale of cookies, cookie-like or decorated cookie products within a radius of five (5) miles of any of the Stores or any store that is owned, operated or franchised by the Buyer or a subsidiary of the Buyer, at present or in the future, and (ii) soliciting or attempting to solicit the services of any employees of Buyer or any affiliate of Buyer. If any of the provisions of this Section 5(f) is held to be unenforceable, the remaining provisions shall nevertheless remain enforceable, and the court making such determination shall modify, among other things, the scope, duration, or geographic area of this covenant to preserve the enforceability hereof to the maximum extent then permitted by law. The enforceability of this covenant is subject to the injunctive and other equitable powers of a court. (g) Other Transactions. Prior to the Closing, none of the Sellers, ------------------ Seller Related Parties or any affiliate of any of the Sellers or Seller Related Parties, shall, directly or indirectly, encourage, solicit, initiate or participate in discussions or negotiations with any corporation, partnership, person, or other entity or group (other than the Buyer and its representatives) concerning any merger, sale of securities, sale of substantial assets or similar transaction involving any of the Sellers. In the event that any of the Sellers receives an offer relating to any such transaction, such Seller will promptly notify the Buyer of such proposal. 6. Representations and Warranties of the Buyer. The Buyer hereby ------------------------------------------- represents and warrants to the Sellers as follows: 18

(a) Authority. The Buyer is a corporation duly organized, validly --------- existing and in good standing under the laws of the State of Delaware. The Buyer has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby and thereby. All corporate acts and other proceedings required to be taken by the Buyer to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby and thereby have been duly and properly taken. This Agreement has been duly executed and delivered by the Buyer and constitutes a valid and binding obligation of the Buyer, enforceable against the Buyer in accordance with its terms. When executed and delivered at the Closing, it will be duly executed and delivered by the Buyer and will constitute its valid and binding obligation, enforceable against it in accordance with its terms. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby and thereby and compliance with the terms hereof and thereof will not, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation, or result in the creation of any Lien upon any of the properties or assets of the Buyer under, any provision of (i) the General Corporation Law of the State of Delaware, (ii) the Certificate of Incorporation or By-laws of the Buyer, (iii) any material note, bond, mortgage, indenture, deed of trust, license, lease, contract, commitment or agreement to which the Buyer is a party or by which any of its properties are bound, or (iv) any judgment, order, or decree, or material statute, law, ordinance, rule or regulation applicable to the Buyer or their respective properties or assets. (b) Actions and Proceedings, etc. There are no (i) outstanding ---------------------------- judgments, orders, writs, injunctions or decrees of any court, governmental agency or arbitration tribunal against the Buyer which have a material adverse effect on the ability of the Buyer to consummate the transactions contemplated hereby, or (ii) actions, suits, claims or legal, administrative or arbitration proceedings or investigations pending or, to the best knowledge of the Buyer, threatened against the Buyer, which are likely to have a material adverse effect on the ability of the Buyer to consummate the transactions contemplated hereby. 7. Covenants of the Buyer. The Buyer covenants and agrees that, except ---------------------- as contemplated by this Agreement, the Buyer will keep confidential, and cause its affiliates and instruct its and its affiliates' officers, directors, employees and advisors to keep confidential, all nonpublic information relating to the Sellers or the Acquired Business, except as required by law or administrative process and except for information which becomes public other than as a result of a breach of this Section 7; provided, however, that the -------- ------- obligations of the Buyer under this Section 7 shall terminate upon the occurrence of the Closing. 8. Mutual Covenants. Each of the Sellers and the Buyer covenants and ---------------- agrees 19

as follows: (a) Best Efforts. Subject to the terms and conditions of this ------------ Agreement, each of the parties will use its best efforts to cause the Closing to occur. The Buyer acknowledges that certain consents to the transactions contemplated by this Agreement may be required from third parties and that such consents have not been obtained. Each of the Sellers and the Buyer shall use its best efforts to, and shall cooperate with each other to obtain as soon as practicable, the consent, approval or waiver, in form reasonably satisfactory to the Sellers and the Buyer, from any person whose consent, approval or waiver is necessary to assign or transfer any Acquired Asset to the Buyer or otherwise to satisfy the conditions; provided however, that nothing contained in this (S) 8(a) shall require the Buyer or the Sellers or Seller Related Parties to incur any liability or pay any amounts to third parties except as otherwise required by this Agreement. The covenants contained in this Section 8(a) shall continue after the Closing Date. (b) Cooperation. The Buyer and each of the Sellers shall cooperate ----------- with each other for a period of ninety (90) days after the Closing to ensure the orderly transition of the Acquired Business from the Sellers to the Buyer and to minimize any disruption to the Acquired Business that might result from the transactions contemplated hereby. (c) Publicity. Each of the Sellers and the Buyer agree that, from the --------- date hereof through the Closing Date, no public release or announcement concerning the transactions contemplated hereby shall be issued by any such party without the prior consent of the other parties, and, to the extent practical, of each person named therein (which consent shall not be unreasonably withheld), except as such release or announcement may be required by any franchising or other law or the rules or regulations of any United States or foreign securities exchange, in which case the party required to make the release or announcement shall allow the other parties reasonable time to comment on such release or announcement in advance of such issuance. (d) Notice of Developments; Supplementing of Schedules. Each of the -------------------------------------------------- parties will give prompt written notice and full disclosure to the other parties of (A) any information which would have been required to be set forth or described in any such Schedule which is necessary to make the Schedule (and the information contained therein) complete, correct and accurate, or (B) any material development affecting the ability of the parties to consummate the transactions contemplated by this Agreement. No disclosure by any party pursuant to this Section 8(d), however, shall be deemed to amend or supplement the Schedules or to prevent or cure any misrepresentation, breach of warranty or breach of covenant contained in this Agreement or the Schedules or in any exhibit thereto or in any document delivered in connection with the transactions contemplated by 20

this Agreement. 9. Employee and Related Matters. ---------------------------- (a) Employment Offers. The Buyer and each of the Sellers agree that ----------------- all Store level employees of the Sellers actively employed by the Sellers (not including employees on a leave of absence for any reason) on the Closing Date (collectively, the "Employees") shall be offered employment with the Buyer (all such employees who accept such employment offers are hereinafter referred to as "Continued Employees"). The Buyer agrees that each employment offer to an Employee shall be conditioned upon the waiver in writing by each such employee of any right of such employee to severance payments from the Sellers. Notwithstanding the foregoing, it is understood that nothing in this Agreement shall prohibit or restrict the Buyer, at any time subsequent to the Closing Date, from terminating Continued Employees, changing compensation levels or other terms and conditions of employment. The Buyer does not assume, and each of the Sellers jointly and severally hereby agrees to indemnify against, and hold Buyer harmless of and from, claims and damages for wages or benefits accrued on or before the Closing Date or relating to periods ending prior to or on the Closing Date. (b) Employee Withholding and Reporting. Each Seller shall transfer to ---------------------------------- the Buyer copies of any records (including, but not limited to, copies of Forms W-4, Employee Withholding Allowance Certificates) relating to withholding and payment of income and employment taxes (federal, state and local) and FICA taxes with respect to wages paid by such Seller during the 1998 calendar year to any Continued Employees. Each Seller shall provide all of its employees, including Continued Employees, with Forms W-2, Wage and Tax Statements, for the 1998 calendar year setting forth the wages paid and taxes withheld by such Seller with respect to such employees for the 1998 calendar year. (c) No Rights of Employment. Nothing in this Section 9, express or ----------------------- implied, is intended to confer or shall confer upon any Sellers' employees, former employees or any Continued Employee any rights or remedies of any nature or kind whatsoever under or by reason of this Agreement, including, without limitation, any rights of employment. 10. Further Assurances. From time to time, as and when requested by a ------------------ party hereto, the other parties shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken all such further or other actions, as such other party may reasonably deem necessary or desirable to consummate the transactions contemplated by this Agreement. 11. Indemnification. --------------- 21

(a) Tax Indemnification. ------------------- (i) Each of the Sellers and Seller Related Parties jointly and severally agrees to indemnify the Buyer and its affiliates, and each of their respective officers, directors, employees and agents, and hold them harmless from any loss, liability, claim, damage or expense (including reasonable legal fees and expenses) (collectively, "Loss") suffered or incurred by any such indemnified party arising from Taxes applicable to the Acquired Business or the Acquired Assets, in each case attributable to taxable years or periods ending at the time of or prior to the Closing and, with respect to any Straddle Period, the portion of such Straddle Period ending at the time of the Closing. The Buyer shall be liable for and shall pay and shall indemnify each of the Sellers and Seller Related Parties for all Taxes applicable to the Acquired Business or the Acquired Assets that are attributable to taxable years or periods beginning immediately after the Closing or, with respect to any Straddle Period, the portion of such Straddle Period beginning immediately after the Closing. For purposes of this Section 11(a), any Straddle Period shall be treated on a "closing of the books" basis as two partial periods, one ending at the time of the Closing and the other beginning immediately after the Closing; provided, however, that Taxes (such as property Taxes) imposed on a -------- ------- periodic basis shall be allocated pro rata on a daily basis in accordance with the principles under Section 164(d) of the Code. "Straddle Period" means any taxable year or period beginning before and ending after the Closing. (ii) Notwithstanding paragraph (i), any sales Tax, use Tax, real property transfer or gains Tax, documentary stamp Tax or similar Tax attributable to the sale or transfer of the Acquired Business or the Acquired Assets (the "Transfer Tax") shall be paid by the Sellers. Each of the Sellers and Seller Related Parties jointly and severally agrees to indemnify the Buyer and its affiliates, and each of their respective officers, directors, employees and agents, and hold them harmless from any Loss arising from or related to the Transfer Tax. (iii) The Sellers (and each of the Seller Related Parties) or the Buyer, as the case may be, shall provide prompt reimbursement for any Tax paid by a party or parties all or a portion of which is the responsibility of one or more of the other parties in accordance with the terms of this Section 11(a); provided, however, that any claim for -------- ------- reimbursement asserted against any of the Sellers or Seller Related Parties may, at the Buyer's election, be offset against the unpaid portion, if any, of the Deferred Payments as provided in Section 11(e). Within a reasonable time prior to the payment of any such Tax, the party paying such Tax shall give notice to the other parties of the Tax payable and the portion which is the liability of 22

each such party or parties, although failure to do so will not relieve such party or parties from its liability hereunder except to the extent the indemnifying party is materially adversely affected thereby. (iv) Each party shall promptly notify the other parties in writing, upon receipt of notice of any pending or threatened Tax audits, examinations or assessments which may affect the Tax liabilities for which a party would be required to indemnify another party pursuant to paragraph (i) of this Section 11(a), although failure to do so will not relieve a party from its liability hereunder, except to the extent such is materially adversely affected thereby. The Sellers shall have the right to control any Tax audit or administrative or court proceeding relating to taxable periods ending at the time of or before the Closing, and to employ counsel of their choice at their expense; provided, however, that the Buyer shall be -------- ------- entitled to participate at its own expense in (but shall have no right to control) any Tax audit or administrative or court proceeding relating to taxable periods ending at the time of or before the Closing to the extent that its interest could be materially adversely affected. In the case of the Straddle Period, the Sellers shall be entitled to participate at their expense in (but, except as provided below, shall have no right to control) any Tax audit or administrative or court proceeding relating in whole or in part to Taxes attributable to the portion of such Straddle Period ending at the time of the Closing and, with the written consent of the Buyer, and at the sole expense of the Sellers and the Seller related Parties, may assume the entire control of such audit or proceeding. Neither the Buyer nor any of its affiliates may settle any Tax claim for any taxable year or period ending at or before the time of the Closing or for any Straddle Period which may be the subject of indemnification by the Sellers or Seller Related Parties under paragraph (i) of this Section 11(a) without the prior written consent of the Sellers, which consent may not be unreasonably withheld. (v) After the Closing, the Sellers on the one hand, and the Buyer, on the other hand, shall: (1) assist the other party in preparing any Tax Returns which such other party is responsible for preparing and filing; (2) cooperate fully in preparing for any audits of, or disputes with taxing authorities regarding, any Tax Returns relating to the Acquired Business or the Acquired Assets; (3) make available to the other and to any taxing authority as reasonably requested all information, records, and documents relating to Taxes relating to the Acquired Business or the Acquired 23

Assets; (4) provide timely notice to the other in writing of any pending or threatened Tax audits or assessments relating to the Acquired Business or the Acquired Assets for taxable periods for which the other may have a liability under this Section 11(a); and (5) furnish the other with copies of all correspondence received from any taxing authority in connection with any Tax audit or information request with respect to any such taxable period. (b) Other Indemnification by the Sellers and Seller Related Parties. --------------------------------------------------------------- Each of the Sellers and Seller Related Parties jointly and severally agree to indemnify the Buyer and its affiliates and each of their respective officers, directors, employees and agents, and hold them harmless from any Loss suffered or incurred by any such indemnified party (other than any relating to Taxes for which the exclusive indemnification provisions are set forth in Section 11(a)) to the extent arising from: (i) any breach of any representation or warranty of any of the Sellers or Seller Related Parties contained in this Agreement or in any Schedule, exhibit, certificate, instrument or other document delivered pursuant hereto or thereto (respectively, the "Related Documents"); (ii) any breach of any covenant of any of the Sellers or Seller Related Parties contained in this Agreement requiring performance after the Closing Date; (iii) any Excluded Liabilities, any Vendor Accounts, any of the prorations to be paid by the Seller pursuant to Section 1(h) hereof, any penalty, fee or other liability arising from the Sellers' lack of authority to do business in any jurisdiction in which it presently conducts business, or any Bulk Sales Liabilities; (iv) any lawsuit, claim, proceeding or investigation, known or unknown, existing as of the date of this Agreement or asserted at any time thereafter, by or against the Buyer (or affiliate of Buyer) or any of the Acquired Assets, including without limitation the proceedings, investigations or matters disclosed, or for which disclosure is required, pursuant to this Agreement; provided, however, that none of the Sellers or Seller Related Parties shall -------- ------- have any liability under Section 11(b)(i) or (ii) to the extent the liability or obligation arises as a result of any action taken or omitted to be taken by the Buyer or any of its affiliates contrary to the express requirements of this Agreement. 24

Notwithstanding anything contained in this (S) 11(b) to the contrary, the Sellers shall not be required to indemnify the Buyer or its affiliated entities from any Loss pursuant to (S) 11(b) until the Buyer, or the Buyer and its affiliated entities in the aggregate, have suffered Loss in excess of a $25,000 aggregate threshold (the "Indemnification Threshold"); provided however, once the Buyer, or the Buyer and its affiliated entities -------- ------- have suffered Loss in an aggregate amount equal to or greater than the Indemnification Threshold, the Seller shall be obligated to indemnify the Buyer and its affiliated entities for all such Loss, including the first $25,000 of Loss; provided that the Indemnification Threshold shall not apply to, and the Sellers jointly and severally hereby agree to indemnify, save and hold harmless the Buyer and its affiliates on a dollar for dollar basis for, any Loss described in (S)(S) 11(a) or 11(b)(iii) above. (c) Indemnification by the Buyer. The Buyer shall indemnify each of ---------------------------- the Sellers and Seller Related Parties and their respective officers, directors, employees and agents against and hold them harmless from any Loss suffered or incurred by any such indemnified party (other than any relating to Taxes for which the exclusive indemnification provisions are set forth in paragraph (a) of this Section 11) to the extent arising from: (i) any breach of any representation or warranty of the Buyer contained in this Agreement or in any certificate delivered pursuant hereto; (ii) any breach of any covenant of the Buyer contained in this Agreement requiring performance after the Closing Date; or (iii) any Assumed Liabilities. (d) Procedures Relating to Indemnification (Other than under Section ---------------------------------------------------------------- 11(a)). In order for a party (the "indemnified party") to be entitled to ------ any indemnification provided for under this Agreement (other than under Section 11(a)) in respect of, arising out of or involving a claim or demand made by any person, firm, governmental authority or corporation against the indemnified party (a "Third Party Claim"), such indemnified party must notify the indemnifying party in writing, and in reasonable detail, of the Third Party Claim within ten (10) business days after receipt by such indemnified party of written notice of the Third Party Claim; provided, -------- however, that failure to give such notification shall not affect the ------- indemnification provided hereunder except to the extent the indemnifying party shall have been actually prejudiced as a result of such failure. Thereafter, the indemnified party shall deliver to the indemnifying party, within five (5) business days after the indemnified party's receipt thereof, copies of all notices and documents (including court papers) received by the indemnified party relating to the Third Party Claim. 25

If a Third Party Claim is made against an indemnified party, the indemnifying party will be entitled to participate in the defense thereof and, if it so chooses, to assume the defense thereof with counsel selected by the indemnifying party and reasonably satisfactory to the indemnified party. Should the indemnifying party so elect to assume the defense of a Third Party Claim, the indemnifying party will not be liable to the indemnified party for legal expenses subsequently incurred by the indemnified party in connection with the defense thereof. If the indemnifying party assumes such defense, the indemnified party shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the indemnifying party, it being understood that the indemnifying party shall control such defense. The indemnifying party shall be liable for the fees and expenses of counsel employed by the indemnified party for any period during which the indemnifying party has not assumed the defense thereof (other than during any period in which the indemnified party shall have failed to give notice of the Third Party Claim as provided above). If the indemnifying party chooses to defend or prosecute any Third Party Claim, all the parties hereto shall cooperate in the defense or prosecution thereof. Such cooperation shall include the retention and (upon the indemnifying party's request) the provision to the indemnifying party of records and information which are reasonably relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Whether or not the indemnifying party shall have assumed the defense of a Third Party Claim, the indemnified party shall not admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the indemnifying party's prior written consent (which consent shall not be unreasonably withheld). (e) Certain Set-off Rights. At the Buyer's election, all payments, if ---------------------- any, to be made by any of the Sellers or Seller Related Parties under Section 11 of this Agreement may, on prior written notice to Sellers and Seller Related Parties, be made by reducing on a dollar-for-dollar basis any unpaid balance of the Deferred Payments. The rights and remedies granted to the Buyer under this Section 11(e) are in addition to any other remedies to which the Buyer may be entitled, at law or in equity. Notwithstanding the foregoing, before any set-off rights may be exercised, the Buyer shall give written notice to Sellers (and to Centennial so long as it holds or controls any of the Deferred Payments) of any claim for indemnification hereunder, specifying in reasonable detail the grounds for indemnification and the amount of the set-off, and Sellers may object to any such set-off by delivering a written objection to the Buyer (and to Centennial so long as it holds or controls any of the Deferred Payments) within thirty (30) days after Sellers' receipt of the Buyer's notice. If Sellers fail to object within the thirty (30) day period specified, Sellers shall waive any right to object to the Buyer's right of indemnification hereunder or the amount of the set-off. If Sellers dispute either the Buyer's right to indemnification, or the amount of the set-off, or both, then 26

Centennial shall retain the amount of the set-off pending resolution of the dispute. Each such party agrees to make available to the other party and the attorneys and accountants of the other such party, within a reasonable time after a request is made, all books and records which are reasonably required by such requesting party to evaluate a claim for indemnification or objection hereunder. 12. Assignment. This Agreement and the rights and obligations hereunder ---------- shall not be assignable or transferable by the Buyer or the Sellers (other than by operation of law in connection with a merger, a sale of substantially all the assets, or a liquidation of the Buyer or the Sellers) without the prior written consent of the other parties hereto (which consent shall not be unreasonably withheld); provided, however, that the Buyer may assign its right to purchase -------- ------- the Acquired Assets hereunder to a parent, subsidiary or affiliate of the Buyer without the prior written consent of any of the Sellers or Seller Related Parties; provided further, however, that no assignment shall limit or affect the ---------------- ------- assignor's obligations hereunder. In connection with seeking any such consent, a party proposing to so assign or transfer its rights and obligations shall give to the party whose consent is sought reasonable details of the proposed assignment or transfer, including the proposed method of making adequate provision for such party's obligations hereunder. 13. No Third-Party Beneficiaries. Except as provided for indemnified ---------------------------- parties in Section 11, this Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing herein expressed or implied shall give or be construed to give to any person or entity, other than the parties hereto and such assigns, any legal or equitable rights hereunder. 14. Termination. ----------- (a) Anything contained herein to the contrary notwithstanding, this Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Closing Date upon the following terms: (i) The Buyer and all of the Sellers, but only all of the Sellers acting together, may terminate this Agreement by mutual written consent at any time prior to the Closing; (ii) The Buyer may terminate this Agreement at any time by giving written notice to the Sellers if the Buyer is not satisfied in its sole discretion with the results of its continuing business, legal and accounting due diligence investigation regarding the Sellers, Acquired Business, the Acquired Assets or the Assumed Liabilities pursuant to Section 3 above; (iii) The Buyer may terminate this Agreement by giving written notice to the Sellers at any time prior to the Closing (A) in the event any of the Sellers or Seller Related Parties has breached any material 27

representation, warranty, or covenant contained in this Agreement in any material respect, the Buyer has notified the Sellers of the breach, and the breach has continued without cure for a period of fifteen (15) days after the notice of breach; or (B) if the Closing shall not have occurred on or before October 30, 1998, by reason of the failure of any condition precedent under (S) 3(a) hereof (unless the failure results primarily from the Buyer breaching any representation, warranty, or covenant contained in this Agreement); (iv) The Sellers, but only all of the Sellers acting together, may terminate this Agreement by giving written notice to the Buyer at any time prior to the Closing (A) in the event the Buyer has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the Sellers have notified the Buyer of the breach, and the breach has continued without cure for a period of fifteen (15) days after the notice of breach; or (B) if the Closing shall not have occurred on or before October 30, 1998 by reason of the failure of any condition precedent under (S) 3(b) hereof (unless the failure results primarily from either of the Sellers or Seller Related Parties breaching any representation, warranty, or covenant contained in this Agreement). (b) In the event of termination by the Sellers or the Buyer pursuant to this Section 14, written notice thereof shall forthwith be given to the other parties and the transactions contemplated by this Agreement shall be terminated, without further action by either party. If the transactions contemplated by this Agreement are terminated as provided herein: (i) the Buyer shall return all documents and other material received from the Sellers relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to the Sellers; and (ii) all confidential information received by the Buyer with respect to the Acquired Business shall be kept confidential. (c) If this Agreement is terminated and the transactions contemplated hereby are abandoned as described in this Section 14, this Agreement shall become void and of no further force and effect, except for the provisions of (i) Section 16 hereof relating to certain expenses, (ii) Section 8(c) hereof relating to publicity, (iii) Section 22 hereof relating to finder's fees and broker's fees, and (iv) this Section 14. Nothing in this Section 14 shall be deemed to release either party from any liability for any breach by such party of the terms and provisions of this Agreement or to impair the right of either party to compel specific performance by the other party of its obligations under this Agreement. 15. Survival of Representations. The representations and warranties in --------------------------- this 28

Agreement and in any other document delivered in connection herewith shall survive the Closing and shall terminate at the close of business eighteen (18) months following the Closing Date, except that all representations and warranties relating to Taxes shall continue in full force and effect after Closing subject only to any applicable statutes of limitations. 16. Expenses. Whether or not the transactions contemplated hereby are -------- consummated, except as otherwise expressly provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses. 17. Amendments; Waiver. No amendment of any provision of this Agreement ------------------ shall be valid unless the same shall be in writing and signed by the Buyer and each of the Sellers and Seller Related Parties. No waiver by any party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. 18. Notices. All notices or other communications required or permitted to ------- be given hereunder shall be in writing and shall be delivered by hand or sent prepaid telex, cable or telecopy, or sent, postage prepaid, by registered, certified or express mail, or reputable overnight courier service and shall be deemed given when so delivered by hand, telexed, cabled or telecopied, or if mailed, three days after mailing (one business day in the case of express mail or overnight courier service), as follows: (i) if to a Seller or Seller Related Party: The Cookie Conglomerate 4536 Chamblee Dunwoody Road, Suite 221 Atlanta, GA 30338 Telecopy: (770) 554-9356 with a copy to: Lawler & Tanner, P.C. 200 Galleria Parkway Attn: Frances Faddis Tanner Suite 1640 Atlanta, GA 30339 Telecopy: (770) 563-8810 29

(ii) if to the Buyer: Mrs. Fields' Original Cookies 2855 E. Cottonwood Parkway, Suite 400 Salt Lake City, Utah 84121 Attention: Legal Department Telecopy: (801) 736-5945 with a copy to: Jones, Waldo, Holbrook & McDonough, P.C. 170 South Main Street, Suite 1500 Salt Lake City, Utah 84101 Attention: Glen D. Watkins Telecopy: (801) 328-0537 19. Interpretation. The headings contained in this Agreement, in any -------------- exhibit or Schedule hereto and in the table of contents to this Agreement, are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 20. Counterparts. This Agreement may be executed in one or more ------------ counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other party. 21. Entire Agreement. This Agreement contains the entire agreement and ---------------- understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, representations and understandings, written or oral, relating to such subject matter. The exhibits, annexes and Schedules identified in this Agreement are hereby incorporated by reference. 22. Fees. Each party hereto hereby agrees, represents and warrants that ---- no person has acted in connection with this Agreement or the transactions contemplated hereby as a broker or finder and that no person is entitled to any brokerage fee, finder's fee or commission with respect thereto. The parties further agree to hold the other party harmless from any damages, claims or expenses asserted against such party as a result of any person claiming a commission or finder's fee for the transactions contemplated herein. 23. Severability. If any provision of this Agreement or the application ------------ of any such provision to any person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof. 30

24. Attorney's Fees. Should any litigation be commenced with respect to --------------- any matters governed by this Agreement, the party prevailing shall be entitled, in addition to such other relief as may be granted, to a reasonable sum for such party's attorneys' fees and expenses determined by the court in such litigation. 25. No Third-Party Beneficiaries. This Agreement shall not confer any ---------------------------- rights or remedies upon any person or entity other than the parties and their respective successors and permitted assigns. 26. Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the internal laws of the State of Utah applicable to agreements made and to be performed entirely within such State, without regard to the conflicts of law principles of such State. 27. Remedies. Each of the parties acknowledges and agrees that each other -------- party would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the parties agrees that each other party shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof, having jurisdiction over the parties and the matter, in addition to any other remedy to which it may be entitled, at law or in equity. 28. Submission to Jurisdiction. Each of the parties submits to the -------------------------- jurisdiction of any state or federal court sitting in Salt Lake City, Utah, in any action or proceeding arising out of or relating to this Agreement or the Centennial Escrow Agreement and agrees that all claims in respect of the action or proceeding may be heard and determined in any such court. Each party also agrees not to bring any action or proceeding arising out of or relating to this Agreement or the Centennial Escrow Agreement in any other court. Each of the parties waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other party with respect thereto. Each party agrees that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law or at equity. 31

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first written above. SELLERS: BUYER: THE COOKIE CONGLOMERATE, LLP MRS. FIELDS' ORIGINAL COOKIES, INC. By: By: -------------------------- ------------------------- Its: Its: ------------------------ ------------------------ THE COOKIE CONGLOMERATE, INC. By: -------------------------- Its: ------------------------- SELLER RELATED PARTIES: ----------------------------- Ronald A. Eichel ----------------------------- Alan M. Kuehn 32

EXHIBIT "A" List of Stores Citadel Mall Haywood Mall 728 Citadel Mall 700 Haywood Road Charleston, SC 29407 Greenville, SC 29607 McAlister Square Carolina Place Mall 291 McAlister Square 11025 Carolina Place Parkway Greenville, SC 29607 Pineville, NC 28134 Independence Mall Columbiana Mall 3500 Oleander Drive 100 Columbiana Circle Wilmington, NC 28403 Columbia, SC 29212 Dayton Mall 2700 Miamisburg Centerville Dayton, OH 45459 Columbia Mall 7201 AL-156 Two Notch Road Columbia, SC 29223 Westgate Mall 205 Blackstock Road Spartanburg, SC 29301 Asheville Mall 3 South Tunnel Road Asheville, NC 28828 Northwoods Mall 2150 Northwoods Blvd. North Charleston, SC 29406 Page 1 of Exhibit A

EXHIBIT "B" Store Cash (by Store) Page 1 of Exhibit B

EXHIBIT "C" BILL OF SALE KNOW ALL MEN BY THESE PRESENTS, that ________________________, a ________ corporation ("Seller"), for and in consideration of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, has transferred, granted, bargained, sold, conveyed, and by these presents does hereby transfer, grant, bargain, sell, convey, and deliver to Mrs. Fields' Original Cookies, Inc., a Delaware corporation ("Buyer"), and its successors and assigns, all right, title and interest in and to the assets described in Exhibit A (the "Assets"). TO HAVE AND TO HOLD the Assets unto the Buyer, and its successors and assigns, to and for its own use, forever. Seller warrants to Buyer, and its successors and assigns, that at the time of delivery of this Bill of Sale to Buyer, Seller has good and valid legal title to the Assets and good and lawful right to grant, bargain, sell, convey, and deliver as aforesaid, and that title to the Assets is, as of the date of delivery of the Assets to Buyer, free of all claims, liens, security interests, and encumbrances whatsoever. Seller further warrants that upon delivery of the Bill of Sale to Buyer, Buyer shall have good and valid legal title to the Assets, free and clear of all claims, liens security interests, and other encumbrances of any nature, other than those of persons claiming by, through or under the Buyer. Page 1 of Exhibit C

IN WITNESS WHEREOF, the undersigned Seller has executed this Bill of Sale as of the ____ day of __________, 1998. SELLER: THE COOKIE CONGLOMERATE, LLP, a Georgia limited liability partnership By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- THE COOKIE CONGLOMERATE, INC. a Georgia corporation By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- STATE OF ) -------------- : ss. COUNTY OF ) ------------- On the ____ the day of _______________, 1999, personally appeared before me _____________ and _____________ who, being by me duly sworn, did say that they are the general partners of The Cookie Conglomerate, L.L.P, a Georgia limited liability partnership, that such instrument was signed in behalf of such partnership, and ___________________ and ___________________ acknowledged to me that the partnership executed the same. --------------------------------------- NOTARY PUBLIC Residing at: --------------------------- My Commission Expires: Page 2 of Exhibit C

STATE OF ) -------------- : ss. COUNTY OF ) ------------- On the ____ the day of _______________, 1999, personally appeared before me _____________ who, being by me duly sworn, did say that he is the _____________________ of The Cookie Conglomerate, Inc. a Georgia corporation, that such instrument was signed in behalf of such company by authority of a resolution of its Board of Directors and ___________________ acknowledged to me that the company executed the same. --------------------------------------- NOTARY PUBLIC Residing at: --------------------------- My Commission Expires: ----------------------- Page 3 of Exhibit C

EXHIBIT A TO BILL OF SALE (Attach List of Acquired Assets) Page 4 of Exhibit C

EXHIBIT "D" CENTENNIAL ESCROW AGREEMENT Mrs. Fields' Original Cookies, Inc. THIS ESCROW AGREEMENT (this "Agreement"), dated as of September ____, 1998, is entered into by and among MRS. FIELDS' ORIGINAL COOKIES, INC., a Delaware corporation (the "Buyer"), the undersigned Sellers and Seller Related Parties (collectively, "Seller Parties"), and CENTENNIAL BANK, a banking institution chartered under the laws of the State of Utah (the "Bank"). (a) The Buyer and Seller Parties have entered into that certain Asset Purchase Agreement, dated as of ______________, 1998 (the "Asset Purchase Agreement"), setting forth the terms and conditions upon which the Buyer will purchase from the Sellers all or substantially all of the Sellers' assets. A copy of the Asset Purchase Agreement is attached hereto as Exhibit A. (b) Pursuant to the Asset Purchase Agreement, the Buyer and Seller Parties have agreed that at the Closing (as defined in the Asset Purchase Agreement) Deferred Payments (as defined in the Asset Purchase Agreement and representing $50,000 of the Purchase Price payable thereunder), shall be deposited into an Escrow Account (the "Escrow Account") with the Escrow Agent and disbursed therefrom subject to the terms and conditions of the Asset Purchase Agreement and this Agreement. The Closing Date (as defined in the Asset Purchase Agreement) shall be set forth on Exhibit B attached hereto and by reference made a part hereof. (c) Subject to the terms of the Asset Purchase Agreement and this Agreement, the Buyer and Seller Parties have agreed that the Bank shall serve as the escrow agent with respect to the Escrow Account, and the Bank (hereinafter referred to as the "Escrow Agent") has agreed to serve in such capacity. NOW, THEREFORE, based on the foregoing premises, which are hereby incorporated by this reference, and for and in consideration of the mutual covenants and promises herein contained, the parties hereto agree as follows: 1. Delivery Into Escrow. Upon Closing, the sum of Fifty Thousand -------------------- Dollars ($50,000.00), representing the full amount of the Deferred Payments (the "Escrow Funds"), shall be delivered by the Buyer to the Escrow Agent for deposit into the Escrow Account. Page 1 of Exhibit D

2. Disbursement From Escrow. ------------------------ a. Disbursements to Seller Parties. Subject to subparagraph 2.b. ------------------------------- below, the Escrow Agent shall disburse the Escrow Funds to the Seller Parties on the later of _______________, or the date determined in accordance with subsection 1(f)(ii) of the Asset Purchase Agreement. b. Condition to Disbursement to Seller Parties. The Escrow Agent ------------------------------------------- shall disburse the Escrow Funds to Seller Parties in accordance with subparagraph 2.a. above, provided that (1) each of the conditions set forth in subsection 1(f) of the Asset Purchase Agreement is satisfied, and (2) prior to any disbursement of the Escrow Funds, neither the Buyer nor its agents shall have delivered a Set-Off Notice (defined below) to the Escrow Agent. c. Disbursement In Event of Escrow Agent's Receipt Of Set-Off ---------------------------------------------------------- Notice. In the event Buyer or its agent or representative delivers a ------ Set-Off Notice to Seller Parties and the Escrow Agent, the Escrow Agent, after providing written notice to Seller Parties of the Escrow Agent's receipt of the Set-Off Notice, shall pay the amount demanded in the Set- Off Notice from the Escrow Funds to the Buyer unless, within thirty (30) days after Seller Parties' Receipt Date (defined below), the Escrow Agent receives a written objection from Seller Parties (the "Objection") to the Escrow Agent's disbursement of the amount demanded by the Buyer in the Set-Off Notice. In the event it receives no Objection, the Escrow Agent shall: (1) no earlier than the applicable date specified in paragraph 2.a. above, disburse (A) to Seller Parties, the portion of the Escrow Funds scheduled for such disbursement, if any, with respect to which the Buyer has not exercised its set-off rights pursuant to the Set-Off Notice, and (B) to the Buyer, the portion of the Escrow Funds scheduled for such disbursement, if any, with respect to which the Buyer has exercised its set off rights pursuant to the Set-Off Notice and the Escrow Agent has not received an Objection; and, (2) hold in the Escrow Account any remaining portion of the Escrow Funds, and disburse the same, only in accordance with an order of a court having jurisdiction as Page 2 of Exhibit D

provided in paragraph 2.g. below or pursuant to the Buyer's and Seller Parties' joint written instructions to the Escrow Agent. The procedures outlined in this paragraph are not intended to replace the rights or obligations of the Buyer or Seller Parties under the Asset Purchase Agreement. d. Payment of Interest. Interest earned on the Escrow Funds shall ------------------- be paid monthly by the Escrow Agent to Seller Parties or, at Seller Parties' election, shall be deposited into the Escrow Account; provided that, in the event the Escrow Agent receives a Set-Off Notice from Buyer, accrued and accruing interest shall not be paid to the Seller but shall be held in the Escrow Account for disbursement only in accordance with paragraphs 2.b. and c. above as a part of the Escrow Funds subject thereto. e. Set-Off Notice. As used in this Agreement, the term "Set-Off -------------- Notice" shall mean a written notice given to the Escrow Agent of the Buyer's exercise of its set-off rights pursuant to Section 11(e) of the Asset Purchase Agreement and setting forth the date on which such notice was received by Seller Parties from the Buyer ("Seller Parties' Receipt Date"). f. Method of Delivery. The Escrow Agent shall make the ------------------ disbursements of the Escrow Funds as required by this Agreement, by wire transfer or other immediately available funds. g. Disputes. If the Escrow Agent shall be unable to disburse the -------- Escrow Funds in accordance with this Agreement, the Escrow Agent shall disburse the Escrow Funds in the manner directed by any court having jurisdiction over all of the parties to the Agreement, whether pursuant to an interpleader action commenced by the Escrow Agent or otherwise. 3. Manner of Holding Escrow Funds; Security. The Escrow Funds shall be ---------------------------------------- deposited and held by the Escrow Agent in a FDIC-insured, interest-bearing account established by the Buyer and Seller Parties with the Escrow Agent on or before the Closing. In addition to such FDIC insurance, the Escrow Agent shall pledge as security for the deposit securities issued by the government of the United States or an agency thereof and owned by the Escrow Agent in a principal amount not less than the principal amount of the Escrow Funds on deposit in the Escrow Account and interest accrued thereon. No less frequently than on a quarterly basis, the Escrow Agent shall increase, or decrease, as the case may be, the principal amount of such securities that the Escrow Agent is required to pledge pursuant to paragraph 3 so that the amount of such securities Page 3 of Exhibit D

will equal the amount of Escrow Funds then on deposit with Escrow Agent. 4. Term. The term of this Agreement shall commence on the date hereof ---- and, except as otherwise provided herein, shall terminate on the earlier of (A) the disbursement of all of the Escrow Funds and interest accrued thereon, or (B) the Escrow Agent's interpleader of the Escrow Funds as permitted hereby. In the event of an interpleader of or other litigation concerning the disbursement of the Escrow Funds, the Buyer's and Seller Parties' rights thereto shall be governed by the terms and conditions of the Asset Purchase Agreement rather than by this Agreement. 5. Duties of Escrow Agent. The parties agree as follows: ---------------------- a. The Escrow Agent is not and shall not be deemed to be an agent for any other party for any purpose and is merely acting as a depository and in a ministerial capacity hereunder with the limited duties herein prescribed. b. The Escrow Agent does not have and shall not be deemed to have any responsibility in respect of any instructions, certificate or notice delivered to it other than to faithfully carry out the obligations undertaken in this Agreement and to follow the directions in such instructions or notice in accordance with the terms hereof. c. The Escrow Agent is not and shall not be deemed to be liable for any action taken or omitted by it in good faith and may rely on, and act in accordance with, the advice of its counsel without liability on its part for any action taken or omitted in accordance with such advice. In any event, its liability hereunder shall be limited to liability for gross negligence, willful misconduct, or bad faith on its part. d. The Escrow Agent may conclusively rely on and act in accordance with any certificate, instruction, notice, letter, telegram, cablegram, or other written instrument believed by it to be genuine and to have been signed by the proper party or parties. e. The Escrow Agent may apply for advice of counsel of its choice and may rely upon such advice or may act or refrain from acting in accordance with such advice. f. The Buyer shall pay all of the Escrow Agent's fees and costs in setting up and servicing the Escrow Account during the term of this Agreement. In addition, the Buyer and Seller Parties shall reimburse the Escrow Agent for its reasonable fees and expenses, Page 4 of Exhibit D

including attorneys' fees, incurred to save harmless, indemnify, and defend the Escrow Agent for, from, and against any loss, damages, liability, judgment, costs, and expenses, whatsoever, including counsel fees, suffered or incurred by it by reason of, or on account of, any misrepresentations made to it or its status or activities as Escrow Agent under this Agreement except for any loss, damage, liability, judgment, costs, or expenses resulting from gross negligence, willful misconduct, or bad faith on the part of the Escrow Agent. g. If any legal proceeding is instituted against it, the Escrow Agent agrees promptly to give notice of such proceeding to all of the other parties to this Agreement. The Escrow Agent shall not be required to institute legal proceedings of any kind. h. The Escrow Agent shall not, by act, delay, omission, or otherwise, be deemed to have waived any right or remedy it may have either under this Agreement or generally, unless such waiver be in writing, and no waiver shall be valid unless it is in writing, signed by the Escrow Agent, and then only to the extent expressly therein set forth. A waiver by the Escrow Agent under the terms of this Agreement shall not be construed as a bar to, or waiver of, the same or any other such right or remedy which it would otherwise have on any other occasion. i. The Escrow Agent may resign as such hereunder by giving written notice of such resignation to the Buyer and Seller Parties. Upon receipt of such notice, the Buyer and Seller Parties shall furnish to the Escrow Agent written instructions for the release of the Escrow Funds (or such portion thereof as may then be in escrow) to a substitute Escrow Agent which (whether designated by written instructions from the parties hereto jointly or, in the absence thereof, by instructions from a court of competent jurisdiction to the Escrow Agent) shall be a law firm doing business in the State of Utah, an attorney licensed to practice in the State of Utah, or a title company, bank, or trust company organized and doing business under the laws of the United States or any state thereof. Such substitute Escrow Agent shall thereafter hold the Escrow Funds received by it pursuant to the terms of this Agreement and otherwise act hereunder as if it were the Escrow Agent originally named herein. The Escrow Agent's duties and responsibilities hereunder shall terminate upon the release of all of the Escrow Funds then held in escrow according to such written instruction or upon such delivery as herein provided. This Agreement shall not otherwise be assignable by the Escrow Agent without the prior written consent of each of the parties hereto. Page 5 of Exhibit D

j. The Escrow Agent hereby acknowledges receipt of a copy of the Asset Purchase Agreement, but, except for reference thereto for certain terms and conditions not set forth herein, the Escrow Agent is not charged with any duty or obligation arising under any such documents or any other agreements between any of the other parties hereto, and the Escrow Agent's responsibilities, as Escrow Agent, shall be governed solely by this Agreement. k. The Buyer and Seller Parties expressly agree that Escrow Agent has the absolute right at the Escrow Agent's election to file an action in interpleader and to deposit with the clerk of the court all documents and funds held pursuant to this Agreement. In the event such action is filed, the Buyer and Seller Parties jointly and severally agree to pay the Escrow Agent's cancellation charges and costs, expenses and reasonable attorneys' fees which the Escrow Agent is required to expend or incur in the interpleader action, the amount thereof to be fixed and judgment therefor to be rendered by the court in such action. Upon filing the action, the Escrow Agent shall thereupon be fully released and discharged from all obligations to further perform any duties or obligations otherwise imposed by this Agreement. The rights of the Escrow Agent under paragraphs 5.g. and k. and 9. shall survive any termination or expiration of this Agreement. 6. Diligence. Should it be necessary for the Escrow Agent to accept or --------- act upon any instruments, directions, documents or instruments signed or issued by, or on behalf of, any corporation, partnership, trade name or individual, it shall not be necessary for the Escrow Agent to inquire into the authority of the person or persons who have issued or authenticated such papers unless and to the extent specifically provided hereinabove. 7. Notices. All notices hereunder shall be deemed to have been duly ------- given if mailed by United States registered or certified mail, with return receipt requested, postage prepaid, if sent by overnight express mail or courier service, or if sent by electronic facsimile, to the parties at the following addresses and numbers (or at such other addresses and numbers as shall be given in writing by either party to the other), and shall be deemed complete upon receipt or refusal to accept delivery as indicated in the return receipt or in the receipt of such express mail or courier service: If to Seller Parties: As Set Forth In the Asset Purchase Agreement Page 6 of Exhibit D

If to the Buyer: As Set Forth In the Asset Purchase Agreement If to the Escrow Agent: Centennial Bank 4605 Harrison Boulevard Ogden, Utah 84403 Facsimile: (801) 475-4280 8. Amendment. This Agreement may be altered or amended only with the --------- written consent of all of the parties hereto. Should the parties hereto attempt to change this Agreement in a manner that would either increase the duties or responsibilities of the Escrow Agent or which the Escrow Agent in its sole and absolute discretion deems undesirable, the Escrow Agent may resign as Escrow Agent by notice to the parties hereto, and until a successor of the Escrow Agent is appointed by the parties other than Escrow Agents and accepts such appointment, the Escrow Agent's only duty shall be to hold the Escrow Funds in accordance with the original instructions contained in this Agreement. 9. Attorneys' Fees. In the event of any suit or other proceeding --------------- between the parties hereto with respect to any of the transactions contemplated hereby or the subject matter hereof, the prevailing party shall, in addition to such other relief as the court may award, be entitled to recover attorneys, fees, expenses, and costs incurred in connection therewith. 10. Entire Agreement. This Agreement contains the entire agreement ---------------- among the parties hereto, and supersedes any and all previous oral and written and all contemporaneous oral negotiations, commitments, writings and understandings among the parties with respect to the matters specified herein. 11. Applicable Law. This Agreement shall be construed in accordance -------------- with and governed by the laws of the State of Utah without giving effect to choice of law provisions. 12. Counterparts. This Agreement may be executed in two or more ------------ counterparts and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together, and shall constitute one and the same document. Page 7 of Exhibit D

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. BUYER: MRS. FIELDS' ORIGINAL COOKIES, INC. By --------------------------------- Its -------------------------------- SELLERS: THE COOKIE CONGLOMERATE, LLP ----------------------------------- By --------------------------------- Its -------------------------------- ----------------------------------- Date THE COOKIE CONGLOMERATE, INC. ----------------------------------- By --------------------------------- Its -------------------------------- ----------------------------------- Date SELLER RELATED PARTIES: ----------------------------------- Ronald A. Eichel ----------------------------------- Alan M. Kuehn Page 8 of Exhibit D

BANK/ESCROW AGENT: CENTENNIAL BANK By --------------------------------- Its -------------------------------- Page 9 of Exhibit D

Exhibit A to Escrow Agreement Intentionally Omitted Page 10 of Exhibit D

Exhibit B to Escrow Agreement (Closing Date) Closing Date of Asset Purchase Agreement: _________________, 1998. Page 11 of Exhibit D

EXHIBIT "E" Allocation Schedule <TABLE> <CAPTION> <S> <C> Tangible Assets (Estimated) $ 740,000.00 Covenant Not To Compete $ 100,000.00 Goodwill (Estimated) $1,960,000.00 ------------- Total: $2,800,000.00 ============= </TABLE> Page 1 of Exhibit E

EXHIBIT "F" CLOSING ESCROW AGREEMENT THIS ESCROW AGREEMENT (this "Agreement"), dated as of October __, 1998, is entered into by and among MRS. FIELDS' ORIGINAL COOKIES, INC., a Delaware corporation (the "Buyer"), THE COOKIE CONGLOMERATE, LLP, a Georgia limited liability partnership ("Cookie LLP"), and THE COOKIE CONGLOMERATE, INC., a Georgia corporation ("Cookie Co.") (Cookie LLP and Cookie Co. are collectively hereinafter referred to as the "Seller"); RONALD A. EICHEL and ALAN M. KUEHN, the partners of Cookie LLP and the shareholders of Cookie Co. (collectively, "Seller Related Parties"); each a "party" in the singular and "parties" in the plural, and LAWLER & TANNER, P.C., a Georgia professional corporation (the "Escrow Agent"). The Buyer, the Seller, and the Seller Related Parties have entered into that certain Asset Purchase Agreement, dated as of _______________ (the "Asset Purchase Agreement"), setting forth the terms upon which the Buyer will purchase the Acquired Assets (as described and defined in the Asset Purchase Agreement) from the Seller. Unless otherwise defined herein, the capitalized defined terms used in this Agreement have the meanings set forth in the Asset Purchase Agreement. In consideration of its purchase of the Acquired Assets, the Buyer has agreed at the Closing to deliver the Cash Purchase Price to the Escrow Agent to be disbursed on and subject to the terms and conditions of the Asset Purchase Agreement and this Escrow Agreement. NOW, THEREFORE, based on the foregoing premises, which are hereby incorporated by this reference, and for and in consideration of the mutual covenants and promises herein contained, the parties hereto agree as follows: 1. Delivery Into Escrow. Prior to or at the Closing, the following -------------------- described documents (collectively, the "Escrowed Documents") and the following described funds (collectively, the "Escrowed Funds") shall be deposited into escrow with the Escrow Agent. a. By the Seller. The Seller, in addition to executed counter ------------- parts of this Escrow Agreement, shall deposit the following with the Escrow Agent: (1) the Bill of Sale executed by the Seller in the form required by the Asset Purchase Agreement; Page 1 of Exhibit F

(2) counterparts of agreements terminating the Franchise Agreements, effective as of the Closing, executed by the Seller in the form required by the Asset Purchase Agreement (the "Franchise Termination Agreements"); (3) counterparts of the Escrow Agreement between the Buyer, the Seller, the Seller Related Parties, and Centennial Bank as escrow agent thereunder (the "Centennial Escrow Agreement"), providing for the disbursement of the Deferred Payments; (4) the opinion letter from counsel to the Seller and the Seller Related Parties in the form required by the Asset Purchase Agreement (the "Opinion Letter"); (5) the information (current as of the Cutoff Date (defined below)) concerning the Vendor Accounts that the Seller is required to furnish to the Buyer pursuant to Section 1(j)(i) of the Asset Purchase Agreement (the "Vendor Account List"); and (6) the Seller's Closing Certificates in a form approved by the Buyer or its counsel, a Board Resolution from Cookie Co., and a Partnership Resolution from Cookie LLP (the "Seller's Closing Certificates"). b. By the Buyer. The Buyer, in addition to executed counterparts ------------ of this Escrow Agreement, shall deposit the following with the Escrow Agent: (1) the Cash Purchase Price; (2) the Buyer's Closing Certificate in a form approved by the Seller or its counsel; (3) counterparts of the Franchise Termination Agreement executed by the Franchisor. 2. Delivery Out of Escrow. ---------------------- a. Conditions to Disbursement from Escrow. The Escrow Agent shall -------------------------------------- disburse the Escrowed Documents and the Escrowed Funds in accordance with subparagraphs 2.b. and 2.c. below, only upon the occurrence of the following conditions: Page 2 of Exhibit F

(1) The Escrowed Documents have been executed and deposited into escrow with the Escrow Agent as required by this Escrow Agreement and the Asset Purchase Agreement; (2) The Escrowed Funds have been deposited in escrow with the Escrow Agent as required by this Escrow Agreement and the Asset Purchase Agreement; (3) Each of the conditions to Closing set forth in this Escrow Agreement and the Asset Purchase Agreement has been satisfied or waived; and (4) Each of the parties to the Asset Purchase Agreement or its respective counsel has notified the Escrow Agent in writing to proceed with the disbursement of the Escrowed Documents and the Escrowed Funds in accordance with this Escrow Agreement and the Asset Purchase Agreement. b. Disbursement of Escrowed Documents and Escrowed Funds. On ----------------------------------------------------- October 6, 1998 (the "Closing Date"), subject to the satisfaction of each of the conditions contained in subparagraph 2.a. above, the Escrow Agent shall disburse the Escrowed Documents and the Escrowed Funds as follows: (1) To Franchisor: ------------- (a) Escrowed Funds in the amount of ______________________________ owed by the Seller to the Franchisor for rent accruing for periods through the Closing Date, based on information available to the parties at the Closing, and for inventory delivered to the Seller through the Closing Date; and (b) Escrowed Funds in the amount of ______________________________ owed by the Seller to the Franchisor for franchise fees through _______________ (the "Cutoff Date"). The amounts set forth in subparagraphs 2.b(1)(a) and 2.b(1)(b) above are collectively referred to herein as the "Franchisor Accounts." Payments to the Franchisor for rent Page 3 of Exhibit F

based on information obtained by the parties after the Closing Date, and for franchise fees for the period from the Cutoff Date to the Closing Date shall be paid in accordance with Section 1(h) of the Asset Purchase Agreement. (2) To Vendors: Escrowed Funds as necessary to pay fully each ---------- of the Vendor Accounts, but only to the extent that the aggregate amount of the Vendor Accounts, exclusive of the Franchisor Accounts, exceeds Fifty Thousand Dollars (the "Net Accounts"), in accordance with the following procedures (the "Closing Disbursement Procedures"): (a) The Escrow Agent shall issue checks at the Closing drawn upon the Escrow Account (defined below) in payment of the Net Accounts. (b) Copies of the checks so issued shall be provided to the Buyer no later than seven days after the Closing Date (defined below). (3) To Seller: --------- (a) the Buyer's Closing Certificate; (b) executed counterparts of this Agreement and the Centennial Escrow Agreement; (c) executed counterpart of the Franchise Termination Agreement; and (d) by wire transfer to Seller's bank account as shown on Schedule 2.b(3)(d) hereto, the balance of the Escrowed Funds remaining after: (i) Escrow Agent's disbursement of Escrowed Funds to pay fully each of the Net Accounts in excess of $50,000 according to the Closing Disbursement Procedures; and (ii) Escrow Agent's disbursement of Escrowed Funds to pay fully the Franchisor Accounts. (4) To Buyer: -------- Page 4 of Exhibit F

(a) the Seller's Closing Certificates; (b) the Opinion Letter; (c) the Bill of Sale; (d) executed counterparts of this Agreement and the Centennial Escrow Agreement; and (e) the Franchise Termination Agreement. c. Date of Disbursement. The Disbursement of the Escrowed -------------------- Documents and the disbursement of the Escrowed Funds and Retained Escrowed Funds shall occur as provided in subparagraph 2.b above, but in any event no later than October 30, 1998. Notwithstanding any date that may be affixed to the Bill of Sale, any closing certificate or the Franchise Termination Agreement, each of such instruments and documents shall be deemed executed and delivered on, and effective as of, the Closing Date. All prorations pursuant to Section 1(h) of the Asset Purchase Agreement shall be made based on the Closing Date, to-wit: the Buyer shall be liable for all utility charges, Taxes, costs of operation and the Assumed Liabilities pursuant to Sections 1(c), 1(h) and 11(a)(i) of the Asset Purchase Agreement arising from periods commencing on or after the Closing Date, and shall be entitled to all revenues, profits and other benefits of operation arising from periods commencing on or after the Closing Date; the Seller shall be liable for all such utility charges, Taxes and costs of operation arising from periods ending prior to the Closing Date, and shall be entitled to keep and retain all revenues, profits and other benefits of operation arising from all periods ending prior to the Closing Date. d. Return of Escrow Deposits; Disputes. If the Closing does not ----------------------------------- occur by October 30, 1998, or as otherwise provided in subparagraph 2.b., the Escrow Agent shall immediately return the Escrowed Documents and the Escrowed Funds to the parties depositing the same. 3. Manner of Holding Escrowed Funds. The Escrowed Funds, while held in -------------------------------- the escrow account, shall be placed in the Escrow Agent's trust account (the "Escrow Account"), provided that there are no restrictions on such account that would prevent the Escrow Agent from disbursing the Escrowed Funds in accordance with the schedule established in this Escrow Agreement. Page 5 of Exhibit F

4. Termination. Except as set forth in subparagraph 7 below, this ----------- Escrow Agreement shall terminate (i) pursuant to subparagraph 2.d. if the Closing has not occurred by October 30, 1998; (ii) upon the disbursement of all of the Escrowed Documents and the Escrowed Funds in accordance with this Agreement; or (iii) at any time by the written consent of each of the parties. 5. Duties of Escrow Agent. The parties to this Agreement agree as ---------------------- follows: a. The Escrow Agent is not and shall not be deemed to be an agent with respect to any obligation or performance required of the Escrow Agent under this Agreement and is merely acting as a depository and in a ministerial capacity hereunder with the limited duties herein prescribed. The parties acknowledge that the Escrow Agent, in its capacity as Escrow Agent, is acting solely as a stakeholder at their request and for their convenience and that the Escrow Agent shall not be liable to either Buyer or Seller for any act or omission on its part unless taken or suffered in bad faith or in willful disregard of this Escrow Agreement or involving gross negligence on the part of the Escrow Agent. b. The Escrow Agent does not have and shall not be deemed to have any responsibility in respect of any instructions, certificate, or notice delivered to it other than to faithfully carry out the obligations undertaken in this Escrow Agreement and to follow the directions in such instructions or notice in accordance with the terms hereof. c. The Escrow Agent may conclusively rely on and act in accordance with any certificate, instruction, notice, letter, telegram, cablegram, or other written instrument reasonably believed by it to be genuine and to have been signed by the proper party or parties. d. If any legal proceeding is instituted by or against the Escrow Agent with respect to the Escrowed Documents, the Escrowed Funds or any matter governed by or that is the subject of this Agreement, the Escrow Agent agrees promptly to give notice of such proceeding to all of the parties to this Escrow Agreement. e. The Escrow Agent may resign as such hereunder by giving written notice of such resignation to the parties to Page 6 of Exhibit F

this Escrow Agreement. Upon receipt of such notice, the parties hereto shall furnish to the Escrow Agent written instructions for the release of the Escrowed Documents and the Escrowed Funds (or such portion thereof as may then be in escrow) to a substitute Escrow Agent which (whether designated by written instructions from the parties hereto jointly or, in the absence thereof, by instructions from a court of competent jurisdiction to the Escrow Agent) shall be a law firm doing business in the State of Georgia, an attorney licensed to practice in the State of Georgia, or a title company, bank, or trust company organized and doing business under the laws of the United States or any state thereof. Such substitute Escrow Agent shall thereafter hold the Escrowed Documents and the Escrowed Funds received by it pursuant to the terms of this Escrow Agreement and otherwise act hereunder as if it were the Escrow Agent originally named herein. The Escrow Agent's duties and responsibilities hereunder shall terminate upon the release of all of the Escrowed Documents and the Escrowed Funds then held in escrow according to such written instruction or upon such delivery as herein provided. This Escrow Agreement shall not otherwise be assignable by the Escrow Agent without the prior written consent of each of the parties hereto. f. In the event of any dispute between the parties hereto, the Escrow Agent shall have the right, at any time, to deposit the Escrowed Funds with the clerk of any state or federal court of appropriate jurisdiction in Georgia and shall give written notice of such deposit to the Seller and the Buyer. Upon such deposit, the Escrow Agent shall be relieved and discharged of all further obligations and responsibilities hereunder. g. The Escrow Agent hereby acknowledges receipt of a copy of the Asset Purchase Agreement, but, except for reference thereto for certain terms and conditions not set forth herein, the Escrow Agent is not charged with any duty or obligation arising under any such documents or any other agreements between or among any of the parties hereto, and the Escrow Agent's responsibilities, as Escrow Agent, shall be governed solely by this Escrow Agreement. h. The Escrow Agent or any member of his firm shall be permitted to act as counsel for the Seller in any dispute as to disbursement of the Escrowed Funds or any other dispute Page 7 of Exhibit F

between the parties whether or not the Escrow Agent is in possession of the Escrowed Funds and continues to act as Escrow Agent. 6. Diligence. Should it be necessary for the Escrow Agent to accept or --------- act upon any directions, documents or instruments signed or issued by, or on behalf of, any corporation, partnership, trade name or individual, it shall not be necessary for the Escrow Agent to inquire into the authority of the person or persons who have issued or authenticated such papers unless and to the extent specifically provided hereinabove. 7. Indemnification of Escrow Agent. The Buyer, the Seller, and the ------------------------------- Seller Related Parties, jointly and severally, agree to indemnify and to save and hold harmless the Escrow Agent, in its capacity as Escrow Agent hereunder, from any claim, action, cause of action, suit, judgment, amount paid in settlement, cost or expense (individually a "Loss" and collectively "Losses") suffered or incurred by Escrow Agent, in its capacity as Escrow Agent hereunder, based upon or arising out of this Escrow Agreement or Escrow Agent's performance hereunder unless it shall be determined by a court of competent jurisdiction from which no appeal is taken or allowed that the act or omission of Escrow Agent giving rise to such Loss or Losses was taken or suffered in bad faith or in willful disregard of this Escrow Agreement or constitutes gross negligence on the part of the Escrow Agent. The provisions of this Paragraph 7 shall survive the termination of this Agreement. 8. Notices. All notices hereunder shall be deemed to have been duly ------- given if mailed by United States registered or certified mail, with return receipt requested, postage prepaid, if sent by overnight express mail or courier service, or if sent by electronic facsimile, to the parties at the following addresses and numbers (or at such other addresses and numbers as shall be given in writing by either party to the other) and shall be deemed complete upon receipt or refusal to accept delivery as indicated in the return receipt or in the receipt of such express mail or courier service: (i) if to a Seller or Seller Related Party: The Cookie Conglomerate 4536 Chamblee Dunwoody Road, Suite 221 Atlanta, GA 30338 Telecopy: (770) 554-9356 with a copy to: Lawler & Tanner, P.C. 200 Galleria Parkway Page 8 of Exhibit F

Attn: Frances Faddis Tanner Suite 1640 Atlanta, GA 30339 Telecopy: (770) 563-8810 (ii) if to the Buyer: Mrs. Fields' Original Cookies 2855 E. Cottonwood Parkway, Suite 400 Salt Lake City, Utah 84121 Attention: Legal Department Telecopy: (801) 736-5945 with a copy to: Jones, Waldo, Holbrook & McDonough, P.C. 170 South Main Street, Suite 1500 Salt Lake City, Utah 84101 Attention: Glen D. Watkins Telecopy: (801) 328-0537 9. Amendment. This Escrow Agreement may be altered or amended only --------- with the written consent of all of the parties hereto. Should the parties hereto attempt to change this Escrow Agreement in a manner either that the Escrow Agent in its sole and absolute discretion deems undesirable or that would increase the duties or responsibilities of the Escrow Agent, the Escrow Agent may resign as Escrow Agent by notice to the parties hereto, and until a successor of the Escrow Agent is appointed by the parties other than the Escrow Agent and accepts such appointment, the Escrow Agent's only duty shall be to hold the Escrowed Documents and the Escrowed Funds in accordance with the original instructions contained in this Escrow Agreement. 10. Attorneys Fees. In the event of any suit or other proceeding -------------- between the parties hereto with respect to any of the transactions contemplated hereby or the subject matter hereof, the prevailing party shall, in addition to such other relief as the court may award, be entitled to recover reasonable attorneys fees, expenses, and costs incurred in connection therewith. 11. Entire Agreement. This Escrow Agreement contains the entire ---------------- agreement between the parties hereto, and supersedes any and all previous oral and written and all contemporaneous oral negotiations, commitments, writings and understandings of the parties with respect to the matters specified herein. 12. Applicable Law. This Agreement shall be construed in accordance -------------- with and governed by the laws of the State of Georgia without giving effect to Page 9 of Exhibit F

choice of law provisions. 13. Submission to Jurisdiction. Each of the parties submits to the -------------------------- jurisdiction of any state or federal court of appropriate jurisdiction in Georgia in any action or proceeding arising out of this Escrow Agreement and agrees that all claims in respect of the action or proceeding shall be heard and determined in any such court. Each party also agrees not to bring any action or proceeding arising out of this Escrow Agreement in any other court. Each of the parties waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other party with respect thereto. Each party agrees that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law or at equity. 14. Counterparts. This Agreement may be executed in two or more ------------ counterparts and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together, and shall constitute one and the same document. Page 10 of Exhibit F

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. BUYER: MRS. FIELDS' ORIGINAL COOKIES, INC. By ------------------------------------ Its ----------------------------------- SELLERS: THE COOKIE CONGLOMERATE, LLP -------------------------------------- By ------------------------------------ Its ----------------------------------- -------------------------------------- Date THE COOKIE CONGLOMERATE, INC. -------------------------------------- By ------------------------------------ Its ----------------------------------- -------------------------------------- Date SELLER RELATED PARTIES: -------------------------------------- Ronald A. Eichel -------------------------------------- Alan M. Kuehn ESCROW AGENT: LAWLER & TANNER, P.C. Page 11 of Exhibit F

By ------------------------------------ Its ----------------------------------- Page 12 of Exhibit F

SCHEDULE 2.b(3)(d) SELLER'S BANK ACCOUNT Page 13 of Exhibit F

EXHIBIT "G" TERMINATION AGREEMENT AND MUTUAL RELEASE THIS TERMINATION AGREEMENT AND MUTUAL RELEASE (the "Agreement") is made and entered into ____________________________, by and between GREAT AMERICAN COOKIE COMPANY, INC., a Delaware corporation ("Company"), and THE COOKIE CONGLOMERATE, LLP, a Georgia limited liability partnership, and THE COOKIE CONGLOMERATE, INC., a Georgia corporation, RONALD A. EICHEL and ALAN M. KUEHN (collectively, the "Franchise Parties"). R E C I T A L S A. The Company and the Franchise Parties have entered into certain License Agreements (the "License Agreements") and Sublease Agreements (the "Subleases") for the operation of Cookie System Facilities (the "Facilities") at eleven (11) locations set forth in Exhibit "A" attached hereto. B. The Franchise Parties no longer desire to operate the Facilities. C. Company and the Franchise Parties desire, upon the terms contained in this Agreement, to terminate the License Agreements and Subleases and, except as provided in this Agreement, to release each other from any liability under the License Agreements and Subleases or otherwise arising as a result of the parties' relationship. NOW, THEREFORE, in consideration of the mutual covenants and promises contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, Company and the Franchise Parties agree as follows: 1. Recitals and Exhibits. The recitals and Exhibits hereto are --------------------- incorporated in this Agreement by this reference. 2. Termination. Upon the terms described in this Agreement, and except ----------- as provided in Paragraph 7 of this Agreement, the License Agreements and Subleases and all of the parties' respective rights and obligations under those documents are terminated effective as of the date of this Agreement. Within thirty (30) days of the date of this Agreement, the Franchisor shall return to the Franchise Parties the deposits, listed on Exhibit A attached hereto, paid to the Franchisor by the Franchise Parties pursuant to the Subleases. The Page 1 of Exhibit G

Franchise Parties agree that Company may take over the Facilities and all of their assets, without paying any further consideration to the Franchise Parties, on the effective date of this Agreement or as the parties otherwise agree. 3. Release of Company Parties. The Franchise Parties, for themselves -------------------------- and their successors, heirs, executors, administrators, personal representatives, agents, assigns, partners, shareholders, directors, officers, employees and affiliated entities (collectively, the "Releasing Parties"), hereby forever release and discharge Company and its affiliated corporations, and all of their respective officers, directors, shareholders, employees, agents, successors and assigns (collectively, the "Company Parties"), from any and all claims, damages, demands, causes of action, suits, duties, liabilities and agreements of any nature and kind which any of the Releasing Parties now have, ever had or, but for this Agreement, hereafter would or could have against any of the Company Parties arising out of their obligations under the License Agreements and Subleases or otherwise from the Releasing Parties' relationship with any of the Company Parties from the beginning of time to the date of this Agreement. However, this release does not release Mrs. Fields' Original Cookies, Inc., an affiliate of the Company ("MFOC") from the obligations, representations and warranties of MFOC under the Asset Purchase Agreement executed by the Releasing Parties and MFOC concurrently herewith or any document executed in connection therewith. 4. Covenant Not to Sue the Company Parties. The Franchise Parties, for --------------------------------------- themselves and the other Releasing Parties, further covenant not to sue any of the Company Parties on any of the claims, damages, demands, causes of action, suits, duties, liabilities and agreements released by Paragraph 3 of this Agreement. 5. Representations of the Franchise Parties. The Franchise Parties ---------------------------------------- represent and warrant to the Company Parties that they have full power and authority to execute this Agreement and bind all of the Releasing Parties to its provisions. The Franchise Parties, for themselves and the other Releasing Parties, further represent and warrant to the Company Parties that they have not assigned any of the claims, damages, demands, causes of action, suits, duties, liabilities and agreements released by Paragraph 3 to any individual or entity who is not bound by Paragraph 3. 6. Indemnification of Company Parties. The Franchise Parties hereby ---------------------------------- agree to indemnify any and all of the Company Parties for, and to defend and hold all of the Company Parties harmless from, any loss, cost, liability or expense (including, without limitation, attorneys' fees, arbitrators' fees, expert witness fees, cost of investigation and proof of facts and other costs of litigation or arbitration, whether or not litigation or arbitration is commenced) arising out Page 2 of Exhibit G

of or relating to the breach of any provision of this Agreement by any of the Releasing Parties. 7. Release of Releasing Parties. Except as provided at the end of this ---------------------------- Paragraph 7, Company, for itself and the other Company Parties, hereby forever releases and discharges the Releasing Parties from any and all claims, damages, demands, causes of action, suits, duties, liabilities and agreements from any nature and kind which any of the Company Parties now has, ever had or, but for this Agreement, hereafter would or could have against any of the Releasing Parties arising out of their obligations under the License Agreements and Subleases or otherwise from the Company Parties' relationship with any of the Releasing Parties from the beginning of time to the date of this Agreement. However, this release does not relieve the Releasing Parties from the following: (a) the obligations, representations and warranties of the Releasing Parties under the Asset Purchase Agreement executed by the Releasing Parties and MFOC concurrently herewith. (b) any of their monetary obligations to Company or any third parties arising from the Franchise Parties' operation of the Facilities prior to the date of this Agreement, including without limitation: (i) any rent, percentage rent or common area maintenance charges owed by the Franchise Parties pursuant to the Subleases; and (ii) any royalties or license fees owed by the Franchise Parties pursuant to the License Agreement; and (c) any of their post-term deidentification, confidentiality, noncompete and indemnification obligations under the License Agreements or the Subleases. 8. Covenant Not to Sue Releasing Parties. Company, for itself and the ------------------------------------- other Company Parties, further covenants not to sue any of the Releasing Parties on any of the claims, damages, demands, causes of action, suits, duties, liabilities and agreements released by Paragraph 7 of this Agreement. 9. Representations of Company. Company represents and warrants to the -------------------------- Releasing Parties that it has full power and authority to execute this Agreement and bind all of the Company Parties to its provisions. Company, for itself and the other Company Parties, further represents and warrants to the Releasing Parties that it has not assigned any of the claims, damages, demands, causes of actions, suits, duties, liabilities and agreements released by Paragraph 7 to any individual or entity who is not bound by Paragraph 7. Page 3 of Exhibit G

10. Indemnification of Releasing Parties. Company hereby agrees to ------------------------------------ indemnify all of the Releasing Parties for, and to defend and hold all of the Releasing Parties harmless from, any loss, cost, liability or expense (including, without limitation, attorneys' fees, arbitrators' fees, expert witness fees, cost of investigation and proof of facts and other costs of litigation or arbitration, whether or not litigation or arbitration is commenced) arising out of or relating to the breach of any provision of this Agreement by any of the Company Parties. 11. Binding Effect. This Agreement is binding upon the parties, their -------------- heirs, successors, assigns, personal representatives and administrators, and shall not be modified except by written agreement signed by all of the parties to this Agreement. 12. Miscellaneous. ------------- (a) This Agreement constitutes the entire understanding between the parties with respect to the transaction this Agreement contemplates. (b) This Agreement shall be construed and interpreted in accordance with the laws of the State of Georgia. (c) The captions and headings are annexed only for convenience of reference, are not a part of this Agreement and shall not limit or construe the provisions to which they apply. (d) This Agreement may be executed in multiple copies, each of which shall be deemed an original. (e) Each of the Company Parties and Releasing Parties shall be deemed to be a third party beneficiary of this Agreement with an independent right to enforce it. Page 4 of Exhibit G

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on the date and year first written above. GREAT AMERICAN COOKIE THE COOKIE CONGLOMERATE, LLP COMPANY, INC. --------------------------- ------------------------------- By By ----------------------------- Its Its ---------------------------- --------------------------- ------------------------------- Date Date THE COOKIE CONGLOMERATE, INC. ------------------------------- By ---------------------------- Its ---------------------------- ------------------------------- Date ------------------------------- Ronald A. Eichel ------------------------------- Alan M. Kuehn Page 5 of Exhibit G

EXHIBIT "H" Page 1 of Exhibit H

DISCLOSURE SCHEDULE Page 2 of Exhibit H

STOCK PURCHASE AGREEMENT THIS AGREEMENT ("Agreement") is made and entered into as of December 9, 1998, by and among Mrs. Fields' Original Cookies, Inc., a Delaware corporation (the "Buyer"), and Martin E. Lisiewski, a shareholder of Pretzel Time, Inc., a Pennsylvania corporation (the "Company"), (the "Seller"). The Buyer and the Seller are referred to collectively herein as the "Parties." A. The Seller owns thirty (30) shares of the issued and outstanding common stock of the Company; B. This Agreement contemplates a transaction in which the Buyer will purchase from the Seller, and the Seller will sell to the Buyer, three (3) shares of the outstanding common stock (par value $10.00 per share) of the Company owned by the Seller (the "Shares"), as part of a series of transactions in which the Buyer is ultimately acquiring all of the common stock in the Company. WHEREAS, the Buyer will purchase the Shares of the Company in return for cash as set forth below. NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows. 1. Purchase and Sale of Shares. (a) Basic Transaction. On and subject to the terms and conditions of this Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees to sell to the Buyer, each of the Shares for the consideration specified below in Section 1(b). (b) Purchase Price. The Buyer agrees to pay to the Seller at the Closing the sum of Five Hundred Thousand Dollars ($500,000) (the "Purchase Price"), by delivery of certified funds for the Purchase Price payable in accordance with this Agreement. (c) The Closing. The closing of the transactions contemplated by this Agreement (the "Closing") will take place at the offices of the Buyer in Salt Lake City, Utah, on or before December 9, 1998 (the "Closing Date"), unless extended by written agreement of the Parties. (d) Deliveries at the Closing. At Closing, the Seller will deliver to

the Buyer, the various documents referred to in Section 5(a) below. The Seller acknowledges that the Company will (A) cancel the Seller's existing share certificate(s) at the Closing, (B) issue and deliver certificate(s) to the Buyer for the three (3) Shares of the Company's common stock purchased by the Buyer from the Seller pursuant to this Agreement, and (C) issue and deliver certificate(s) to the Seller for his remaining twenty seven (27) Shares of the Company's common stock. 2. Representations and Warranties Concerning the Transaction. (a) Representations and Warranties of the Seller. The Seller represents and warrants to the Buyer that the statements contained in this Section 2(a) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 2(a)) with respect to himself except as set forth on the Disclosure Schedule affixed hereto. (i) Organization of Certain Seller. If the Seller is a corporation or other entity, the Seller is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its organization. (ii) Authorization of Transaction. The Seller has full power and authority (including, if the Seller is an entity, full power and authority) to execute and deliver this Agreement and to perform his obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Seller, enforceable in accordance with its terms and conditions. The Seller need not give any notice to, make any filing with, or obtain any authorization, consent or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement. (iii) Noncontravention. To the best of Seller's knowledge, neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (A) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge or other restriction of any government, governmental agency or court to which the Seller is subject or, if the Seller is a corporation, any provision of its charter or bylaws, or (B) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice under any agreement, contract, lease, license, instrument or other 2

arrangement to which the Seller is a party or by which the Seller is bound or to which any of the Seller's assets is subject. (iv) Brokers' Fees. The Seller has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement for which the Buyer could become liable or obligated. (v) Shares. The Seller holds of record and owns beneficially the number of Shares (but no more or other shares of the common stock of the Company than) set forth in paragraph A above. The Seller holds and owns each of the Shares free and clear of any restrictions on transfer, any federal, state or local taxes of any kind, taxes, mortgage, pledge, lien, encumbrance, charge or other security interests, options, warrants, purchase rights, contracts, commitments, equities, claims and demands. Other than this Agreement and other written agreements with the Company and/or the Buyer, the Seller is not a party to (A) any option, warrant, purchase right, shareholders agreement, co-sale agreement, buy-sell agreement or other contract or commitment that could require the Seller to sell, transfer or otherwise dispose of any capital stock of the Company (other than this Agreement), or (B) any voting trust, proxy or other agreement or understanding with respect to the voting of any capital stock of the Company. (vi) Legal Compliance/Litigation. To the best of his knowledge, the Seller and his respective predecessors and affiliates have complied with all applicable laws of federal, state, local and foreign governments (and all agencies thereof), and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand or notice has been filed or commenced against any of them alleging any failure so to comply. To the best of his knowledge, there are no outstanding injunctions, judgments, orders, decrees, rulings or charges affecting their Shares. To the best of his knowledge, there are no actions, suits, proceedings, hearings or investigations, and the Seller does not have reason to believe that any such action, suit, proceeding, hearing or investigation may be brought or threatened, against the Seller. (vii) Investigation. The Seller has investigated or had full opportunity to investigate the terms and conditions of the transactions contemplated by this Agreement, including the Purchase Price, and deems them to be fair and appropriate. 3

3. Pre-Closing Covenants. With respect to the period between the execution of this Agreement and the Closing, (A) each of the Parties will use its/his reasonable best efforts to take all action and to do all things necessary, proper or advisable in order to consummate and make effective the transactions contemplated by this Agreement, (B) the Seller will use his best efforts to obtain any third-party consents that the Buyer may request or to otherwise consummate the transactions contemplated hereby, and (C) the Seller will give prompt written notice to the Buyer of any material adverse development causing a breach of any of the representations and warranties in Section 2 above. 4. Post-Closing Covenants. The Parties agree that if at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request. 5. Conditions to Closing. (a) Conditions to Obligation of the Buyer. The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to the satisfaction (or waiver by the Buyer) of the following conditions: (i) The representations and warranties set forth in Section 2 above shall be true and correct in all material respects at and as of the Closing Date. (ii) The Seller shall have performed and complied with all of his covenants hereunder in all material respects through the Closing. (iii) The Seller shall have procured any third party consents required for the sale of the Shares. (iv) No action, suit or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement, (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, or (C) affect adversely the right of the Buyer to own the Shares. (v) The Seller shall be prepared to deliver the certificates 4

and documents in the form and executed as required by this Agreement. (vi) All actions to be taken by the Seller in connection with consummation of the transactions contemplated by this Agreement, and all certificates, and other documents required to effect the transactions contemplated hereby, will be satisfactory in form and substance to the Buyer. (vii) [Intentionally omitted.] (viii) Neither the Company nor the Seller shall be in breach under any of the terms and conditions of any of the Stock Acquisition Agreements (as defined in Section 6 below) and the documents executed in connection with the Related Transactions (as defined in the First Acquisition Agreement as defined below). The Buyer may waive any condition specified in this Section 5(a) if it executes a writing so stating at or prior to the Closing. The Buyer's waiver of any condition to Closing set forth in Section 5(a)(viii) above shall not constitute a waiver of any breach (or a waiver of any right or remedy arising from any breach) by the Seller of any of the Stock Purchase Agreements or the documents executed in connection with the Related Transactions. (b) Conditions to Obligation of the Seller. The obligation of the Seller to consummate the transactions to be performed by him in connection with the Closing is subject to satisfaction of the following conditions: (i) No action, suit or proceeding shall be pending threatened before any court or quasi-judicial or administrative agency of any federal, state, local or foreign jurisdiction for before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement, or (B) cause any of the transactions between the Buyer and the Seller contemplated by this Agreement to be rescinded following consummation (and no such injunction, judgment, order, decree, ruling or charge shall be in effect). (ii) The Buyer shall be prepared to deliver the Purchase Price as required by Section 1(b). (iii) [Intentionally Omitted.] 5

The Seller may waive any condition specified in this Section 5(b) if he executes a writing so stating at or prior to the Closing. 6. Remedies for Breaches of This Agreement. (a) Survival of Representations and Warranties. All of the representations and warranties of the Seller contained in this Agreement shall survive the Closing hereunder (even if the damaged Party knew or had reason to know of any misrepresentation or breach of warranty at the time of Closing) and continue in full force and effect forever thereafter (subject to any applicable statutes of limitations). (b) Indemnification Provisions for Benefit of the Buyer. (i) In the event the Seller breaches any of its representations, warranties, and covenants contained herein, and, if the Buyer makes a written claim for indemnification against any of the Seller therefor, then, the Seller agrees to indemnify the Buyer from and against the entirety of any Adverse Consequences (as defined in the First Acquisition Agreement) that the Buyer may suffer through and after the date of the claim for indemnification (including any Adverse Consequences the Buyer may suffer after the end of any applicable survival period) resulting from, arising out of, relating to, in the nature of, or caused by the breach. (ii) If any third party shall notify Buyer or Fields (defined below) with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against the Seller under this ' 6, then Buyer or Fields, as applicable, shall promptly notify the Seller thereof in writing, provided, however, that no delay on the part of Fields or Buyer, as applicable, in notifying the Seller shall relieve the Seller from any obligation hereunder unless (and then solely to the extent) the Seller is prejudiced. The indemnification procedure respecting a Third Party Claim hereunder shall be the same as set forth in Section 9(c) of that certain Stock Acquisition Agreement, dated as of September 2, 1997 (the "First Acquisition Agreement"), by and between Mrs. Fields' Holding Company, Inc., a Delaware corporation ("Fields"), the Company and the Seller (therein referred to as the Principal Shareholder). (For purposes of this Agreement, the term Stock Acquisition Agreements shall mean collectively (A) the First Acquisition Agreement, (B) the Stock Purchase Agreement, dated as of January 2, 1998, by and between Fields and the Seller, and (C) the Stock Purchase Agreement, dated as of June 12, 1998, by 6

and between Fields and the Seller.) (iii) All claims for indemnification made under this Agreement shall be subject to the terms and conditions of Sections 9(d) (Determination of Adverse Consequences), (f) (Rights of Offset) and (g) (Limitation of Rights of Offset) of the First Acquisition Agreement, and the indemnity payment required of the Seller for such claims shall be determined as if the claims were made under the First Acquisition Agreement. (iv) The foregoing indemnification provisions are in addition to, and not in derogation of, any statutory, equitable, or common law remedy Fields or the Seller may have for breach of representation, warranty, or covenant. 7. Termination. (a) Termination of Agreement. The Parties may terminate this Agreement as provided below: (i) The Buyer and the Seller may terminate this Agreement by mutual written consent at any time prior to the Closing. (ii) The Buyer or the Seller may terminate this Agreement if the Closing does not occur on or before December 15, 1998. (b) Effect of Termination. If any Party terminates this Agreement pursuant to this Section, all rights and obligations of the Parties hereunder shall terminate without any liability of any Party to any other Party (except for any liability of any Party then in breach). 8. Miscellaneous. (a) No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. (b) Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements or representations by or among the Parties, written or oral, to the extent they relate in any way to the subject matter hereof. 7

(c) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of his or its rights, interests or obligations hereunder without the prior written approval of the Buyer and the Seller; provided, however, that the Buyer may (i) assign any or all of its rights and interests hereunder to one or more of its affiliates, and (ii) designate one or more of its affiliates to perform its obligations hereunder (in any or all of which cases the Buyer nonetheless shall remain responsible for the performance of all of its obligations hereunder). (d) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. (e) Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (f) Notices. All notices, requests, demands, claims and other communications hereunder will be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: If to the Seller: Martin E. Lisiewski 7070 N.E. 8th Drive Boca Raton, FL 33487 With a copy to: Mette, Evans & Woodside Attention: Elyse E. Rogers 3401 North Front Street Harrisburg, PA 17110 If to the Buyer: Mrs. Fields' Original Cookies, Inc. 2855 E. Cottonwood Parkway, Suite 400 Salt Lake City, UT 84121 Attention: Legal Department 8

With a Copy to: Jones, Waldo, Holbrook & McDonough, P.C. 170 South Main Street, Suite 1500 Salt Lake City, UT 84101 Attention: Glen D. Watkins Any Party may send any notice, request, demand, claim or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth. (g) Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Utah without giving effect to any choice or conflict of law provision or rule thereof. (h) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyer and each of the Sellers. No waiver by any Party of any default, misrepresentation or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. (i) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. (j) Expenses. Each of the Parties will bear his or its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. The Seller agrees that none of the Company and its Subsidiaries has borne or will bear any of the Seller's costs and expenses (including any of their legal fees and expenses) in connection with this Agreement or any of the transactions contemplated hereby. (k) Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference 9

and made a part hereof. (l) Specific Performance. Each of the Parties acknowledges and agrees that the other Parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the Parties agrees that the other Parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter, in addition to any other remedy to which they may be entitled, at law or in equity. IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written. BUYER: MRS. FIELDS' ORIGINAL COOKIES, INC. By: ---------------------------------------------- Its: ------------------------------------------ SELLER: ------------------------------------------------- Martin E. Lisiewski 10

DISCLOSURE SCHEDULE TO STOCK ACQUISITION AGREEMENT Section 2(a): ------------ None, unless otherwise stated below. ---------------- ----------------- Buyer's Initials Seller's Initials

STOCK PURCHASE AGREEMENT THIS AGREEMENT ("Agreement") is made and entered into as of December 30, 1998, by and among Mrs. Fields' Holding Company, Inc., a Delaware corporation ("MFH"), Mrs. Fields' Original Cookies, Inc., a Delaware corporation and a wholly owned subsidiary of MFH (the "Buyer"), Pretzel Time, Inc., a Pennsylvania corporation (the "Company"), and Martin E. Lisiewski, a shareholder of the Company (the "Seller"); all of whom are referred to collectively herein as the "Parties." MFH and Buyer are referred to collectively herein as "Fields." A. Pursuant to certain Stock Acquisition Agreements (defined below), the Buyer (directly or by transfer from MFH) has acquired and presently owns, seventy-three (73) shares of the issued and outstanding common stock (par value $10 per share) of the Company. For purposes of this Agreement, the term Stock Acquisition Agreements shall mean collectively each of the agreements listed on Exhibit A. (Defined terms set forth in this Agreement are hereby incorporated --------- into this Agreement.) B. In connection with the First Acquisition Agreement, some or all of the parties entered into a Shareholders Agreement, Management Agreement, Exchange Agreement, Registration Rights Agreement and Employment Agreement (the "Old Employment Agreement"), each dated as of September 2, 1997, and more particularly identified on Exhibit B (collectively, "Lisiewski Contracts"). --------- C. Pursuant to that certain Option Agreement, dated as of December 9, 1998, the Seller granted to the Buyer an option (the "Option") entitling the Buyer to acquire all of the Seller's remaining issued and outstanding shares of common stock of the Company, consisting of twenty-seven (27) shares (par value $10.00 per share) (the "Shares"). A copy of the Option is attached hereto as Exhibit C. --------- D. This Agreement (referred to in the Option Agreement as the "Purchase Agreement") contemplates contemporaneous transactions at the Closing (defined below), in which (1) the Buyer will exercise the Option, (2) the Buyer will purchase from the Seller, and the Seller will sell to the Buyer, all of the Shares, whereupon the Seller will own all of the issued and outstanding common stock of the Company, (3) the Parties will terminate the Lisiewski Contracts, and (4) the mutual general release provided for herein will become effective between the Seller Released Parties and the Buyer Released Parties (defined respectively below). NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows.

1. Purchase and Sale of Shares. (a) Exercise of Option; Execution of Definitive Agreement. The Seller hereby acknowledges the Buyer's valid and timely exercise of the Option (for the purchase of all but not less than all of the Shares) pursuant to the Buyer's written notice thereof, the receipt of which is hereby acknowledged by the Seller. A copy of such notice is attached hereto as Exhibit D. The Parties --------- further acknowledge and agree that this Agreement, upon its execution by all Parties, shall exclusively set forth the terms and conditions of such purchase and sale of the Shares (and all transactions related thereto), and shall supersede and replace the Option in its entirety. Notwithstanding the previous sentence, the Buyer acknowledges that as of the date hereof the Seller continues to be operationally in compliance with his area developer and franchise relationships with the Buyer as described in the Option. (b) Basic Transaction. On and subject to the terms and conditions of this Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees to sell to the Buyer, each of the Shares for the consideration specified below in Section 1(c), free and clear of all Liens and Restrictions (respectively defined below). (c) Purchase Price. The purchase price for the Shares shall be $4,739,989.39 (the "Purchase Price"), which, subject to paragraph 2 below, shall be paid by the Buyer to the Seller by wire transfer or in certified funds in installments, as follows: (i) on or before January 5, 1999, the sum of $2,539,989.39 (the "January 1999 Installment Payment"); and (ii) on or before December 30, 1999, the sum of $2,000,000.00 (the "December 1999 Installment Payment"); and (iii) during the 1999 calendar year, semi-monthly payments of $6,666.66. The total payment to the Seller pursuant to this subsection 1(c)(iii) will be $160,000.00; and (iv) during each of the calendar years 1999, 2000, 2001 and 2002, semi-monthly payments of $416.66, payable pursuant to an employment agreement to be executed at the Closing by the Seller, as employee, and the Buyer, as employer, in the form of Exhibit E (the "New Employment --------- Agreement"). The total payment to the Seller pursuant to this subsection 1(c)(iv) and the New Employment Agreement will be $10,000 in each such calendar year. (d) The Closing. The exercise of the Option, the Parties' execution of this Agreement and the closing of the transactions contemplated by this Agreement (the "Closing") will take place at the offices of the Buyer in Salt Lake City, Utah, on 2

a date selected by the Buyer on or before December 30, 1998 (the "Closing Date"), unless extended by written agreement of the Parties. The Closing Date selected by the Buyer is December 30, 1998. (e) Security. The payments to be made by the Buyer to the Seller pursuant to Sections 1.(c)(i), (ii) and (iii) above, shall be secured by the Buyer's pledge of the Shares pursuant to a pledge agreement executed by the Buyer and the Seller, and delivered to the Seller, at the Closing in the form of Exhibit F. --------- (f) Transfer of Shares; Deliveries at the Closing. (i) The transfer of the Shares by the Seller to the Buyer, pursuant to this Agreement shall be accomplished as follows: (A) the Company shall cancel the Seller's existing certificate(s) for the Shares at the Closing, and (B) the Company shall issue and deliver new certificate(s) to the Buyer for the Shares, which certificates (together with a copy of this Agreement and the Pledge Agreement) shall be delivered to the Escrow Agent (defined below) for deposit into an escrow established pursuant to an escrow agreement (the "Escrow Agreement") to be executed by the Buyer, the Seller and the Escrow Agent in the form of Exhibit G. The parties agree that, in --------- the event Escrow Agent deems it appropriate, a stock power may temporarily be substituted for a new share certificate for delivery to the Escrow Agent, to give effect to this subparagraph (i). (ii) At Closing, the Seller will deliver to the Buyer, the fully executed Pledge Agreement. The appropriate Parties and the Escrow Agent shall execute and deliver to each other at the Closing fully executed counterparts of the Addendum and the New Employment Agreement and the Escrow Agreements. 2. Payment of Seller's Indebtedness to the Buyer and Company. The Parties acknowledge and agree that the Seller is indebted to the Buyer or the Company (other than for trade payables or on-going fees under the Franchise Agreement), as the case may be, in the aggregate amount of $1,149,239.39 as more particularly itemized in Exhibit H (collectively, the Seller's Indebtedness"), --------- which shall be paid to the Buyer and the Company (as appropriate) as follows: (i) $1,039,989.39 shall be deducted and paid from the January 1999 Installment Payment; and (ii) $109,250.00 shall be deducted and paid from the December 1999 Installment Payment. Buyer acknowledges that, except as set forth on Exhibit H, Seller has paid all initial franchise fees for those locations set forth on Exhibit I. 3

3. Representations and Warranties of the Seller. The Seller represents and warrants to the Buyer that the statements contained in this Section 3 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 3). (i) Noncontravention. To the best of Seller's knowledge, neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (A) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge or other restriction of any government, governmental agency or court to which the Seller is subject or, if the Seller is a corporation, any provision of its charter or bylaws, or (B) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice under any agreement, contract, lease, license, instrument or other arrangement to which the Seller is a party or by which the Seller is bound or to which any of the Seller's assets is subject. (ii) Brokers' Fees. The Seller has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement for which the Buyer could become liable or obligated. (iii) Shares Being Acquired Pursuant To This Agreement. The Seller holds of record and owns beneficially the number of Shares (but no more or other shares of the common stock of the Company than) set forth in paragraph C above. The Seller holds and owns each of the Shares free and clear of any of the following (collectively, "Liens"): restrictions on transfer, Taxes (as defined below), mortgage, pledge, lien, encumbrance, charge or other security interests, options, warrants, purchase rights, contracts, commitments, equities, claims and demands. Other than this Agreement and other written agreements with the Company and/or the Buyer (and MFH), the Seller is not a party to any of the following (collectively, the "Restrictions"): (A) any option, warrant, purchase right, shareholders agreement, co-sale agreement, buy-sell agreement or other contract or commitment that could require the Seller to sell, transfer or otherwise dispose of any capital stock of the Company (other than this Agreement), or (B) any voting trust, proxy or other agreement or understanding with respect to the voting of any capital stock of the Company. (iv) Legal Compliance/Litigation. To the best of his knowledge, the 4

Seller and his respective predecessors and affiliates have complied with all applicable laws of federal, state, local and foreign governments (and all agencies thereof) affecting title to the Shares. To the best of Seller's knowledge, no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand or notice affecting title to the Shares has been filed or commenced against him alleging any failure so to comply. To the best of his knowledge, there are no outstanding injunctions, judgments, orders, decrees, rulings or charges affecting the Shares. To the best of his knowledge, there are no actions, suits, proceedings, hearings or investigations, and the Seller does not have reason to believe that any such action, suit, proceeding, hearing or investigation affecting title to the Shares may be brought or threatened, against the Seller. (v) Shares Previously Acquired. Pursuant to a series of Stock Acquisition Agreements entered into by the Buyer (or MFH) as of and after January 2, 1998 (other than this Agreement), the Buyer (or MFH) purchased from the Seller, and the Seller sold to the Buyer (or MFH), seventeen (17) issued and outstanding shares of the common stock (par value $10.00) of the Company (collectively, the "Previously Acquired Shares"). In consideration of the execution of this Agreement and the Closing of the Transactions contemplated thereby, the Seller (as of the respective dates of purchase and sale and transfer thereof to the Buyer (or MFH), and as of the dates set forth in the first sentence of Subsection 3 above) hereby represents and warrants to the Buyer (and MFH) with respect to each of the Previously Acquired Shares, as follows: (A) Prior to the sale and transfer thereof to the Buyer (or MFH), the Seller held of record and owned beneficially each of the Previously Acquired Shares, and held and owned each of the Previously Acquired Shares free and clear of any Liens and Restrictions; (B) Each of the Previously Acquired Shares was sold and transferred by the Seller to the Buyer (or MFH, as the case may be), free and clear of Liens and Restrictions; and (C) Each of the representations and warranties set forth in Subsection 2(iv) above is true and correct with respect to each of the Previously Acquired Shares. (vi) Investigation. The Seller has investigated or had full opportunity to investigate the terms and conditions of the transactions contemplated by this Agreement, including the Purchase Price, and deems them to be fair and appropriate. 5

4. Pre-Closing Covenants. With respect to the period between the execution of this Agreement and the Closing, (A) each of the Parties will use its/his reasonable best efforts to take all actions and to do all things necessary, proper or advisable in order to consummate and make effective the transactions contemplated by this Agreement, (B) the Seller will use his best efforts to obtain any third-party consents that the Buyer may request or to otherwise consummate the transactions contemplated hereby, and (C) the Seller will give prompt written notice to the Buyer of any material adverse development causing a breach of any of the representations and warranties in Section 3 above. The Buyer and the Seller further agree that they will execute following the Closing (or shall cause their appropriate affiliates to execute) agreements setting forth all of the franchise, license and area developer relationships and agreements, oral or written, between the Seller and the Buyer (or any of their respective affiliates), collectively, the "Franchise Agreements," all of which shall be listed on Exhibit I. --------- 5. Post-Closing Covenants. The Parties agree that if at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request, subject to reimbursement of reasonable costs by the Party requesting such action. 6. Conditions to Closing. (a) Conditions to Obligation of the Buyer and the Company. The obligations of the Buyer and the Company to consummate the transactions to be performed respectively by them in connection with the Closing are subject to the satisfaction (or waiver by the Buyer) of the following conditions: (i) The representations and warranties set forth in Section 3 above shall be true and correct in all material respects at and as of the Closing Date. (ii) The Seller shall have performed and complied with all of his covenants hereunder in all material respects through the Closing. (iii) The Seller shall have procured any third party consents required for the sale of the Shares. (iv) No action, suit or proceeding shall be pending or threatened before any court or quasi- judicial or administrative agency of any federal, state, local or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement, (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, or (C) affect adversely the right of the Buyer to own the Shares. 6

(v) The Seller shall be prepared to deliver the documents in the form and executed as required by this Agreement. (vi) All actions to be taken by the Seller in connection with consummation of the transactions contemplated by this Agreement, and all certificates, and other documents required to effect the transactions contemplated hereby, will be satisfactory in form and substance to the Buyer. (vii) Other than the First Acquisition Claims (which are being paid and satisfied pursuant to this Agreement), the Seller shall not be in breach under any of the terms and conditions of any of the Stock Acquisition Agreements or the documents executed in connection with the Related Transactions (as defined in the First Acquisition Agreement as defined below). (viii) The Seller shall have executed the New Employment Agreement. (ix) The Seller and the Buyer or, as appropriate, their respective affiliates shall have executed the Franchise Agreements. (x) The Seller shall have signed and delivered to the Buyer an Addendum to the Stock Purchase Agreement, dated as of June 12, 1998, by and between MFH and the Seller (the "Addendum"), in a form acceptable to the Seller, showing the buyer therein as the Buyer rather than MFH. The Addendum shall be in the form of Exhibit J attached hereto. (xi) Effective upon the Closing, Richard Huber and the Seller shall have resigned as directors of the Company. The Buyer (for itself and on behalf of MFH and the Company) may waive any condition specified in this Section 6(a) if Buyer executes a writing so stating at or prior to the Closing. The Closing itself shall be deemed a waiver or satisfaction of the conditions to Closing. (b) Conditions to Obligation of the Seller. The obligation of the Seller to consummate the transactions to be performed by him in connection with the Closing is subject to satisfaction of the following conditions: (i) No action, suit or proceeding shall be pending or threatened before any court or quasi- judicial or administrative agency of any federal, state, local or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would (A) 7

prevent consummation of any of the transactions contemplated by this Agreement, or (B) cause any of the transactions between the Buyer and the Seller contemplated by this Agreement to be rescinded following consummation (and no such injunction, judgment, order, decree, ruling or charge shall be in effect). (ii) The Buyer shall be prepared to deliver the Pledge Agreement, the Shares (pursuant to the Pledge Agreement), the Escrow Agreement, and the New Employment Agreement. The Seller may waive any condition specified in this Section 6(b) if he executes a writing so stating at or prior to the Closing. The Closing itself shall be deemed a waiver or satisfaction of the conditions to Closing. 7. Remedies for Breaches of This Agreement. (a) Survival of Representations and Warranties. All of the representations and warranties of the Seller contained in this Agreement shall survive the Closing hereunder (even if the damaged Party knew or had reason to know of any misrepresentation or breach of warranty at the time of Closing) and continue in full force and effect for a period of one (1) year after the Closing. (b) Indemnification Provisions for Benefit of the Buyer. (i) In the event the Seller breaches any of its representations, warranties, and covenants contained herein, and, if Fields (or any of them) makes a written claim for indemnification against the Seller therefor, then, the Seller agrees to indemnify Fields (and any of them as appropriate) from and against the entirety of any Adverse Consequences that the Buyer or MFH may suffer through and after the date of the claim for indemnification (including any Adverse Consequences Fields or any of them may suffer after the end of any applicable survival period) resulting from, arising out of, relating to, in the nature of, or caused by the breach. For purposes of this Agreement, "Adverse Consequences" means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid in settlement, liabilities, obligations, taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys' fees and expenses. "Taxes" means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Sec. 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including 8

any interest, penalty, or addition thereto, whether disputed or not. (ii) If any third party shall notify Fields (or any them) with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against the Seller under this ' 7, then Fields (or any of them) shall promptly notify the Seller thereof in writing, provided, however, that no delay on the part of Fields (or any of them), as applicable, in notifying the Seller shall relieve the Seller from any obligation hereunder unless (and then solely to the extent) the Seller is prejudiced. (iii) The indemnification procedure respecting a Third Party Claim hereunder shall be as follows: (c) Matters Involving Third Parties. (i) If any third party shall notify Fields (or any of them) with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against the Seller under this Section 7, then Fields (or any them) shall promptly notify the Seller thereof in writing; provided, however, that no delay on the part of Fields (or any of them) in notifying the Seller shall relieve the Seller from any obligation hereunder unless (and then solely to the extent) the Seller thereby is prejudiced. (ii) The Seller will have the right to defend Fields (and each of them) against the Third Party Claim with counsel of its choice satisfactory to Fields so long as: (A) the Seller notifies Fields in writing within 15 days after Fields has given notice of the Third Party Claim that the Seller will indemnify Fields (and each of them) from and against the entirety of any Adverse Consequences Fields (and any of them) may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim; (B) the Seller provides Fields with evidence acceptable to Fields that the Seller will have the financial resources to defend against the Third Party Claim and fulfill its indemnification obligations hereunder; (C) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief; 9

(D) the settlement of, or an adverse judgment with respect to, the Third Party Claim is not, in the good faith judgment of Fields, likely to establish a precedential custom or practice materially adverse to the continuing business interests of Fields (or any of them); and (E) the Seller conducts the defense of the Third Party Claim actively and diligently. (iii) The party not conducting the defense of the Third Party Claim above may retain separate co- counsel at its sole cost and expense and participate in the defense of the Third Party Claim; (iv) The party conducting the defense (A) will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the other party (not to be withheld unreasonably); and (B) will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the other party (not to be withheld unreasonably). (v) In the event any of the conditions in Section 7(c)(ii) above is or becomes unsatisfied, however, (A) Fields (or either of them) may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner it reasonably may deem appropriate, and Fields (or either of them) need not consult with, or obtain any consent from, Seller in connection therewith); (B) the Seller will reimburse Fields (and each of them) promptly and periodically for the costs of defending against the Third Party Claim (including reasonable attorneys' fees and expenses); and (C) the Seller will remain responsible for any Adverse Consequences Fields (or any of them) may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this Section 7. 10

(d) Other Rights and Remedies. The foregoing indemnification provisions are in addition to, and not in derogation of, any statutory, equitable, or common law remedy Fields (or any of them) may have for breach of a representation, warranty, or covenant. 8. Termination of Certain Agreements Among the Parties. (a) Except as set forth in Section 8(b) below, the Parties expressly intend and agree that, subject to and effective upon the occurrence of the Closing, all of the Lisiewski Contracts and the Stock Acquisition Agreements shall automatically and irrevocably terminate and be of no further force or effect (hereinafter collectively, the "Terminated Agreements"). Each Party hereby agrees that he/it has received, or has waived in consideration of the Closing of the transactions contemplated by this Agreement, all respective payments and performances which he/it is presently entitled to receive, or, prior to the termination thereof, may be entitled to receive, under any of the Terminated Agreements. Each Party further acknowledges and agrees that no further payments or performances of any kind will or is required to be made to him/it under any of the Terminated Agreements. (b) Notwithstanding Section 8(a) above, none of the following written agreements executed by some or all of the Parties, shall terminate by reason of the execution of this Agreement or the Closing of the transactions contemplated thereby or shall otherwise constitute Terminated Agreements, it being the Parties' express intention that each such agreement shall terminate or expire, if at all, according to the express terms and conditions of each such agreement: (i) This Agreement, the New Employment Agreement and any document or instrument executed or delivered in connection with the Closing of the transactions that are the subject of this Agreement; (ii) The Franchise Agreements; (iii) The Affidavit of Stock Certificate and Indemnity Agreement, dated as of September 4, 1997, executed by Seller and delivered in connection with the First Acquisition Agreement; and (iv) The Notes; provided however that upon payment to the Buyer of the Seller's Indebtedness, the Notes shall be marked "paid in full" and delivered to the Seller. 9. The Seller's Release of Claims. Subject to and effective only upon the occurrence of the Closing, the Seller, for himself and his heirs, successors, agents, assigns and legal representatives, hereby forever releases and discharges Fields (and each of them) and the Company and their respective officers, directors, shareholders, managers, 11

parent, sister and affiliated entities, accountants, attorneys (whether in-house or otherwise), predecessors, successors, agents, assigns and legal representatives (collectively, the "Buyer Released Parties"), from any and all payments, charges, costs, wages, salaries, benefits, payments, performances, claims, actions, liabilities, profits, bonuses, distributions, dividends and damages of whatever kind or nature, known or unknown, now accrued or existing or accruing or arising in the future, whether asserted or unasserted, whether based on tort, contract, statutory or other theory of liability (whether asserted at law or in equity) (collectively, "Claims"); provided however, nothing contained in this Section 9 shall release or discharge any Buyer Released Party from the performance of any obligation required of a Buyer Released Party under any of this Agreement, the Pledge Agreement, the New Employment Agreement and the Franchise Agreements. The Seller represents and warrants that he has not assigned or conveyed to third parties any claims or actions against any of the Buyer Released Parties. 10. The Company's and Fields' Release of Claims. Subject to and effective only upon the occurrence of the Closing, Fields and the Company, each for itself and its respective parent, sister and affiliated entities, successors, agents, assigns and legal representatives, hereby forever releases and discharges the Seller and his respective heirs, successors, agents, assigns and legal representatives, accountants, attorneys, and affiliated entities (collectively, the "Seller Released Parties"), from any and all Claims, provided however, nothing contained in this Section 10 shall release or discharge any Seller Released Party from the performance of any obligation under any of the this Agreement, the Pledge Agreement, the New Employment Agreement and the Franchise Agreements. The Buyer represents and warrants that it has not assigned or conveyed to third parties any claims or actions against any of the Seller Released Parties. 11. Miscellaneous. (a) No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. (b) Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements or representations by or among the Parties, written or oral, to the extent they relate in any way to the subject matter hereof. (c) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of his or its rights, interests or obligations hereunder without the prior written approval of the Buyer and the Seller; provided, however, that the Buyer may (i) assign any or all of its rights and interests hereunder to one or more of its affiliates, and (ii) designate one or more of its affiliates to perform its obligations hereunder (in any or all of which cases the Buyer nonetheless shall remain responsible for the 12

performance of all of its obligations hereunder). (d) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. (e) Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (f) Notices. All notices, requests, demands, claims and other communications hereunder will be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: If to the Seller: Martin E. Lisiewski 7070 N.E. 8th Drive Boca Raton, FL 33487 With a copy to: Mette, Evans & Woodside Attention: Elyse E. Rogers 3401 North Front Street Harrisburg, PA 17110 If to the Buyer or MFH: Mrs. Fields' Original Cookies, Inc. 2855 E. Cottonwood Parkway, Suite 400 Salt Lake City, UT 84121 Attention: Legal Department With a Copy to: Jones, Waldo, Holbrook & McDonough, P.C. 170 South Main Street, Suite 1500 Salt Lake City, UT 84101 Attention: Glen D. Watkins Any Party may send any notice, request, demand, claim or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth. 13

(g) Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Utah without giving effect to any choice or conflict of law provision or rules thereof. (h) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyer and each of the Sellers. No waiver by any Party of any default, misrepresentation or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent occurrence. (i) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. (j) Expenses. Each of the Parties will bear his or its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. The Seller agrees that none of the Company and its Subsidiaries has borne or will bear any of the Seller's costs and expenses (including any of their legal fees and expenses) in connection with this Agreement or any of the transactions contemplated hereby. (k) Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. (l) Specific Performance. Each of the Parties acknowledges and agrees that the other Parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the Parties agrees that the other Parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter, in addition to any other remedy to which they may be entitled, at law or in equity. (m) Joinder of Spouse. The spouse of the Seller is executing this Agreement to acknowledge its fairness (and the fairness of the Stock Acquisition Agreements) and that it is in such spouse's best interest to bind such spouse's community property interest, if any, to the terms of this Agreement (and the Stock Acquisition Agreements). 14

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written. BUYER: MRS. FIELDS' ORIGINAL COOKIES, INC. By: ---------------------------------------------- Its: ------------------------------------------ MFH MRS. FIELDS' HOLDING COMPANY, INC. By: ---------------------------------------------- Its: ------------------------------------------ COMPANY PRETZEL TIME, INC. By: ---------------------------------------------- Its: ------------------------------------------ SELLER: ------------------------------------------------- Martin E. Lisiewski ------------------------------------------------- Jan Lisiewski S-1

LIST OF EXHIBITS A Stock Acquisition Agreements B Lisiewski Contracts C Option Agreement D Notice of Exercise of Option E New Employment Agreement F Pledge Agreement G Escrow Agreement H Summary of Seller's Indebtedness I List of Franchise Agreements J Addendum

EXHIBIT A (Listing of Stock Acquisition Agreements) (A) Stock Acquisition Agreement, dated as of September 2, 1997, by and among MFH, the Company and the Seller (therein referred to as the Principal Shareholder), assigned (together with all of the Company's stock acquired thereunder) by MFH to the Buyer pursuant to that certain Capital Contribution and Assumption Agreement, dated as of November 26, 1997 (the "Assumption Agreement"), by and between MFH and the Buyer) (the "First Acquisition Agreement"); (B) Stock Purchase Agreement, dated as of August 19, 1997, among the Company, MFH and persons (other than MFH and the Company) owning common stock of the Company, assigned by MFH to the Buyer pursuant to the Assumption Agreement; (C) Stock Purchase Agreement, dated as of January 2, 1998 (the "Second Acquisition Agreement"), by and between MFH and the Seller, assigned (together with all of the Company's stock acquired thereunder) by MFH to the Buyer pursuant to the Assumption Agreement; (D) Stock Purchase Agreement, dated as of June 12, 1998, by and between MFH and the Seller, as amended by the Addendum; (E) Stock Purchase Agreement, dated as of December 9, 1998, by and between the Buyer and the Seller; and (F) Side Letter between MFH and the Seller dated September 2, 1997, concerning future franchise rights of Seller. Page 1

EXHIBIT B (Listing of Lisiewski Contracts) The Lisiewski Contracts, each of which was assigned by MFH to MFOC pursuant to the Assumption Agreement, consist of the following: A. Shareholders Agreement of Pretzel Time, Inc., dated as of September 2, 1997, by and between the Seller, MFH and the Company; B. Management Agreement, dated as of September 2, 1997, by and between MFH and the Company; C. Exchange Agreement, dated as of September 2, 1997, by and between MFH and the Seller; D. Registration Rights Agreement, dated as of September 2, 1997, by and between MFH and the Seller; and E. Employment Agreement, dated as of September 2, 1997, by and between the Seller and the Company, as clarified by that certain Side Letter of even date executed by the Seller and the Company. Page 1

EXHIBIT C Attach Copy of Option

EXHIBIT D Option Exercise

EXHIBIT E MRS. FIELDS' ORIGINAL COOKIES, INC. 2855 E. Cottonwood Parkway, Suite 400 Salt Lake City, Utah 84121 December 30, 1998 Mr. Martin E. Lisiewski 7070 N.E. 8th Drive Boca Raton, FL 33487 Mette, Evans & Woodside Attn: Ms. Elyse E. Rogers 3401 North Front Street Harrisburg, PA 17110 Re: Option ("Option") granted pursuant to Option Agreement, dated December 9, 1998 ("Option Agreement"), by and between Martin E. Lisiewski (Mr. "Lisiewski"), Mrs. Fields' Original Cookies, Inc. ("MFOC") and others --------------------------------------------------------------------- Dear Mr. Lisiewski and Ms. Rogers: Notice is hereby given that MFOC, effective as of the date hereof, has exercised the Option with respect to all of the Shares (as defined and described in the Option Agreement) of Pretzel Time, Inc., a Pennsylvania corporation. The Closing shall occur on December 30, 1998. Sincerely, Michael R. Ward Vice President of Administration

EXHIBIT E Attach New Employment Agreement

EXHIBIT F Attach Pledge Agreement

PLEDGE AGREEMENT This Pledge Agreement ("Agreement") dated as of December 30, 1998, is made and entered into by and between Mrs. Fields Original Cookies, Inc., a Delaware corporation ("Grantor"), and Martin E. Lisiewski (the "Secured Party"). WHEREAS, Grantor, Secured Party and Pretzel Time, Inc., a Pennsylvanian corporation (the "Company"), have, as of the date hereof, entered into that certain Stock Purchase Agreement (the "Purchase Agreement") pursuant to which Grantor is purchasing twenty seven (27) shares of the Common Stock of the Company (the "Collateral"); WHEREAS, Grantor has agreed to grant Secured Party a security interest in the Collateral as security for payment of amounts due under Section 1(c)(i), (ii) and (iii) of the Purchase Agreement (the "Obligations"); NOW, THEREFORE, in consideration of financial accommodations given or to be given or continued by Secured Party to Grantor, Grantor hereby agree with Secured Party as follows: 1. GRANT OF SECURITY INTEREST; DEFINED TERMS 1.1 Collateral. As collateral security for the prompt and complete ---------- payment and performance when due of the Obligations, Grantor hereby conveys, mortgages, hypothecates, and pledges to Secured Party, and grants to Secured Party, a continuing lien upon and security interest in, all of Grantor's right, title and interest, now owned or hereafter acquired, and without any further act on the part of the Grantor or Secured Party (other than as provided herein), in the Collateral. 1.2 Other Terms. All capitalized terms used but not defined herein shall ----------- have the same meanings ascribed to such terms in the Note and the Uniform Commercial Code as in effect on the date hereof in the State of Utah (the "Code"). 2. COVENANTS Grantor covenants and agree that from and after the date of this Agreement and for so long as the Obligations remain outstanding: 2.1 Recording and Legal Costs. Each party shall be responsible for its ------------------------- own expenses, including attorney fees, incident to the Obligations and other expenses incident to perfecting Secured Party's security interest in the Collateral. 2.2 Further Documentation and Actions. At any time, and from time to --------------------------------- time, upon

request and at the sole expense of Grantor, Grantor will endorse, execute and deliver to Secured Party all reasonable instruments or documents, including, but not limited to, financing or continuation statements under the Code in effect in any jurisdiction with respect to the liens created under this Agreement, and do all things reasonably necessary to carry into effect the provisions of this Agreement or to create, preserve or perfect any interest granted hereby or to enable or assist Secured Party to exercise and enforce their rights and the rights of Secured Party hereunder or in connection herewith or with the Obligations, and to facilitate collection of Collateral. Grantor authorizes Secured Party to file any financing statement or continuation statement in such form, with or without Grantor's name signed thereon, and in such places as may be appropriate. 2.3 Further Covenants. Without the prior written consent of Secured ----------------- Party, Grantor will not sell, transfer, lease or otherwise dispose of any of the Collateral, or attempt, offer or contract to do so. 2.4 Maintenance of Collateral. Grantor shall pay promptly when due all ------------------------- property and other taxes, assessments and governmental charges or levies imposed upon, and all claims (including claims for labor, materials and supplies) against, the Collateral, except to the extent the validity thereof is being contested in good faith. 2.5 Delivery of Certificates to Escrow Agent. On the date hereof, the ---------------------------------------- share certificates evidencing the Collateral shall be delivered to Jones, Waldo, Holbrook & McDonough, P.C., to be held in accordance with the terms of an Escrow Agreement of even date herewith. 3. EVENTS OF DEFAULT The following shall constitute "Events of Default" hereunder: 3.1 Nonperformance. Failure to pay the Obligations when due, subject to a -------------- five (5) day period to cure from the due date, or the failure to cure any other default under this Agreement within thirty (30) days of the receipt of written notice from Secured Party of such a default; 3.2 Termination of Interest. Lapse or termination of Grantor's interest ----------------------- in any of the Collateral; and 3.3 Extraordinary Events. If (i) Grantor shall file a voluntary petition -------------------- in bankruptcy or a petition or answer seeking a reorganization, arrangement, composition, readjustment, liquidation, dissolution or other relief of the same or different kind under any provision of the bankruptcy laws or Grantor shall make an assignment for the benefit of creditors; or (ii) an involuntary petition in bankruptcy against Grantor or a petition or answer made by a person other than Grantor seeking a reorganization, arrangement, composition, readjustment, liquidation, dissolution or other relief against Grantor of the same or different kind under any provision of the bankruptcy laws is filed or if a receiver is appointed having jurisdiction of the business property or assets of Grantor, and, in any of such events, if such petition shall not be dismissed or the receivership vacated within Page 2

ninety (90) days from the date filed or commenced. 4. CERTAIN RIGHTS; EFFECT OF EVENT OF DEFAULT 4.1 Obligations Due; Commitments Terminated. If an Event of Default shall --------------------------------------- occur, then, notwithstanding any other agreement now or hereafter existing, Secured Party may declare all Obligations immediately due and payable and exercise any remedies provided herein. 4.2 Action Regarding Collateral. Secured Party, at any time after the --------------------------- occurrence of an Event of Default (and subject to any applicable cure periods), may collect, receive, appropriate and realize upon any Collateral or any part thereof. Upon any Event of Default, Secured Party may sell, re-sell, assign, transfer, lease and deliver or otherwise deal or dispose of or decline to deal with all or any part of the Collateral, in each case in accordance with the Code, at public or private sale or sales, at such price or prices as it may deem best, and upon such terms and conditions as it may deem advisable, either for cash or credit or future delivery without assumption of any credit risk as Secured Party may elect. Secured Party shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable costs and expenses incurred therein or incidental to the care or safekeeping of any of such Collateral or relating to such Collateral or the rights of Secured Party hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations, and only after such application and after the payment by Secured Party of any other amount required by any provision of law, including, without limitation, Section 9-504(l)(c) of the Code, need Secured Party account for the surplus, if any, to Grantor. 4.3 Additional Remedies upon Event of Default. If an Event of Default ----------------------------------------- shall occur and be continuing, Secured Party may exercise, in addition to all other rights and remedies granted under this Agreement, and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the Code. 4.4 Continuing Security Interest. This Agreement shall create a ---------------------------- continuing security interest in the Collateral and shall (i) remain in full force and effect until the payment in full of the Obligations, (ii) be binding upon Grantor, its successors and assigns, and (iii) inure to the benefit of the parties hereto together with their successors and assigns. Upon the payment of the Obligations the security interest granted hereby shall terminate, and all rights in the Collateral shall revert to Grantor. Upon any such termination Secured Party will promptly execute and deliver to Grantor such documents as Grantor shall reasonably request to evidence such termination. Page 3

5. GENERAL PROVISIONS 5.1 Remedies Cumulative. All rights, remedies and powers of Secured Party ------------------- hereunder and in connection herewith are cumulative, and not alternative or exclusive, may be exercised singly or concurrently and shall be in addition to all other rights, remedies and powers of Secured Party whether under law, equity or agreement. All representations, warranties, covenants and other agreements of Grantor herein shall be cumulative and if, and to the extent, there is any inconsistency or conflict between terms contained herein and in the Purchase Agreement, the terms of the Purchase Agreement shall govern and control. 5.2 Governing Law; Severability. This Agreement shall be governed by and --------------------------- construed in accordance with the laws of the State of Utah, without giving effect to the conflicts of laws provisions thereof. Each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 5.3 Construction. The captions in this Agreement are for convenience only ------------ and shall not affect the construction or interpretation hereof. 5.4 Assignment. This Agreement shall inure to and be binding upon the ---------- heirs, personal representatives, successors, and assigns of the parties. Neither party shall have any right to assign this Agreement without the prior written consent of the other party. 5.5 Notice. All notices, requests, demands, and other communications ------ which are required to be or may be given under this Agreement shall be deemed to have been duly given if (and then two business days after) it is sent by registered or certified mail, postage prepaid, return receipt requested, and addressed to the intended recipient as set forth below: To Secured Party: Martin E. Lisiewski 7070 N.E. 8th Drive Boca Raton, FL 33487 with a copy to: Mette, Evans & Woodside Attention: Elyse E. Rogers 3401 North Front Street Harrisburg, PA 17110 To Grantor: Mrs. Fields' Original Cookies, Inc. Attention: Legal Department 2855 East Cottonwood Parkway, Suite 400 Salt Lake City, Utah 84121 Facsimile: (801) 736-5945 Page 4

with a copy to: Jones, Waldo, Holbrook & McDonough, P.C. 170 South Main St., Suite 1500 Salt Lake City, UT 84101 Any party may send any notice, request, demand, claim or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other party notice in the manner herein set forth. 5.6 Waivers and Amendments. None of the terms or provisions of this ---------------------- Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by Grantor and Secured Party, provided that any -------- provision of this Agreement may be waived by Secured Party in a written letter or agreement executed by Secured Party. Any such waiver, amendment, supplement or other modification shall be binding upon Grantor and Secured Party. 5.7 Counterparts. This Agreement may be executed in counterparts, all of ------------ which together shall constitute one and the same original. 5.8 Dispute Resolution. All disputes arising out of this Agreement shall ------------------ be settled in accordance with the provisions set forth in the Purchase Agreement. 5.9 Joinder of Spouse. The spouse of the Sellers is executing this ----------------- Agreement to acknowledge its fairness and that it is in such spouse's best interest to bind such spouse's community property interest, if any, to the terms of this Agreement. Page 5

IN WHEREOF, Grantor has duly executed this Agreement as of the day and year first above written. GRANTOR: SECURED PARTY: Mrs. Fields' Original Cookies, Inc. By: ----------------------------------- -------------------------------------- Name Martin E. Lisiewski ----------------------------------- -------------------------------------- Title Jan Lisiewski Page S-1

EXHIBIT G Attach Escrow Agreement

ESCROW AGREEMENT ---------------- ESCROW AGREEMENT ("Agreement"), dated as of December 30, 1998, by and among Mrs. Fields' Original Cookies, Inc., a Delaware corporation (the "Debtor"), Martin E. Lisiewski (the "Secured Party"), and Jones, Waldo, Holbrook & McDonough, P.C., a Utah professional corporation with offices at 1500 Wells Fargo Tower, 170 South Main Street, Salt Lake City, Utah 84101 (the "Escrow Agent"). W I T N E S S E T H: WHEREAS, pursuant to a Stock Purchase Agreement made and entered into as of December 30, 1998 (the "Purchase Agreement"), by and among the Debtor, as buyer, and the Secured Party, as seller, the Secured Party has agreed to sell to the Debtor twenty-seven (27) shares of the Common Stock (par value $10.00) of Pretzel Time, Inc., a Pennsylvania corporation (the "Shares"); and WHEREAS, pursuant to the Purchase Agreement, the Secured Party has executed and delivered a Pledge Agreement of even date herewith (the "Pledge Agreement"), granting a security interest in the Shares to secure the Debtor's performance of the Obligations (as defined in the Pledge Agreement). WHEREAS, the Debtor and the Secured Party have agreed that at the Closing (as defined in the Purchase Agreement) the Shares shall be delivered to the Escrow Agent to be held by it in escrow pursuant to the terms and conditions of this Escrow Agreement for delivery to the Debtor upon the payment of the Obligations. NOW, THEREFORE, intending to be legally bound hereby, the parties hereto agree as follows: 1. Escrow Agent. The Escrow Agent hereby agrees to act as Escrow Agent ------------ in accordance with the terms and conditions of this Escrow Agreement. 2. Deposits Into Escrow. -------------------- At the Closing, the Secured Party and the Debtor shall deliver to the Escrow Agent fully executed counterparts of this Escrow Agreement. The Debtor shall deliver or cause to be delivered into escrow with Escrow Agent a stock certificate representing the Share(s) (the "Certificate") together with a Stock Power, endorsed in blank, for such Certificate(s) (collectively, the "Escrowed Documents"). 3. Disbursement of the Escrowed Documents. -------------------------------------- a. Conditions to Disbursement. The Escrow Agent shall disburse all of -------------------------- the Escrowed Documents in accordance with this Escrow Agreement only upon Page 1

the Escrow Agent's receipt of any of the following directing or permitting the disbursement of the Shares as set forth therein: (i) joint written instructions from the Secured Party and the Debtor; or (ii) written notice signed by the Debtor, (A) stating that the Obligations have been paid in full, (B) instructing the Escrow Agent to deliver the Escrowed Documents to the Debtor pursuant to the Pledge Agreement, (C) certifying that a copy of the notice delivered pursuant to the Escrow Agent pursuant to this subparagraph (ii) was concurrently delivered to the Secured Party; provided however, the Escrow Agent shall not act in accordance with such notice if, pursuant to subparagraph c. below, the Secured Party objects thereto; or (iii) written notice signed by the Secured Party, (A) stating that a Default (as defined in the Purchase Agreement) by Debtor has occurred, (B) instructing the Escrow Agent to deliver the Shares to the Secured Party pursuant to the Pledge Agreement, (C) certifying that a copy of the notice delivered pursuant to this subparagraph (iii) was concurrently delivered to the Debtor; provided however, the Escrow Agent shall not act in accordance with any such notice if, pursuant to subparagraph c. below, the Debtor objects thereto; or (iv) an order of a court having jurisdiction as herein specified. b. Disbursement. Subject to the terms and conditions of subparagraph 1 above, the Escrow Agent shall disburse the Escrowed Documents from escrow as follows: (i) to the Debtor, upon payment of the Obligations; or (ii) to the Secured Party, upon the occurrence of a Default. c. Disputes. The Debtor or the Secured Party as the case may be shall give the Escrow Agent written notice within fifteen (15) calendar days of a notice as specified in Paragraph 3.a. of any objection to, or any dispute between the Secured Party and the Debtor concerning, proposed or requested disbursement of the Escrowed Documents. Absent such an objection, then sixteen (16) calendar days following receipt of the notice provided for in Paragraph 3.a., Escrow Agent may disburse the Escrowed Documents as provided in Paragraph 3.b. The Debtor and the Secured Party hereby agree that notwithstanding any such objection by or dispute between the Debtor and the Secured Party, the Escrow Agent may at any time disburse all of the Escrowed Documents in the manner directed by any court specified in paragraph 17 below. Page 2

4. Duties of Escrow Agent. The parties to this Agreement agree as ---------------------- follows: a. The Escrow Agent is not and shall not be deemed to be an agent with respect to any obligation or performance required of the Escrow Agent under this Agreement and is merely acting as a depository and in a ministerial capacity hereunder with the limited duties herein prescribed. The parties acknowledge that the Escrow Agent, in its capacity as Escrow Agent, is acting solely as a stakeholder at their request and for their convenience and that the Escrow Agent shall not be liable to either Buyer or Seller for any act or omission on its part unless taken or suffered in bad faith or in willful disregard of this Escrow Agreement or involving gross negligence on the part of the Escrow Agent. b. The Escrow Agent does not have and shall not be deemed to have any responsibility in respect of any instructions, certificate, or notice delivered to it other than to faithfully carry out the obligations undertaken in this Escrow Agreement and to follow the directions in such instructions or notice in accordance with the terms hereof. c. The Escrow Agent may conclusively rely on and act in accordance with any certificate, instruction, notice, letter, telegram, cablegram, or other written instrument reasonably believed by it to be genuine and to have been signed by the proper party or parties. d. If any legal proceeding is instituted by or against the Escrow Agent with respect to the Escrowed Documents or any matter governed by or that is the subject of this Agreement, the Escrow Agent agrees promptly to give notice of such proceeding to all of the parties to this Escrow Agreement. e. The Escrow Agent may resign as such hereunder by giving written notice of such resignation to the parties to this Escrow Agreement. Upon receipt of such notice, the parties hereto shall furnish to the Escrow Agent written instructions for the release of the Escrowed Documents (or such portion thereof as may then be in escrow) to a substitute Escrow Agent which (whether designated by written instructions from the parties hereto jointly or, in the absence thereof, by instructions from a court of competent jurisdiction to the Escrow Agent) shall be a title company, bank, or trust company organized and doing business under the laws of the United States or any state thereof. Such substitute Escrow Agent shall thereafter hold the Escrowed Documents received by it pursuant to the terms of this Escrow Agreement and otherwise act hereunder as if it were the Escrow Agent originally named herein. The Escrow Agent's duties and responsibilities hereunder shall terminate upon the release of all of the Escrowed Documents then held in escrow according to such written instruction or upon such delivery as herein provided. This Escrow Agreement shall not otherwise be assignable by the Escrow Agent without the prior written Page 3

consent of each of the parties hereto. f. In the event of any dispute between the parties hereto, the Escrow Agent shall have the right, at any time, to deposit the Escrowed Documents with the clerk of any state or federal court of appropriate jurisdiction in Utah and shall give written notice of such deposit to the Seller and the Buyer. Upon such deposit, the Escrow Agent shall be relieved and discharged of all further obligations and responsibilities hereunder. g. The Escrow Agent hereby acknowledges receipt of a copy of the Purchase Agreement and the Pledge Agreement, but, except for reference thereto for certain terms and conditions not set forth herein, the Escrow Agent is not charged with any duty or obligation arising under any such documents or any other agreements between or among any of the parties hereto, and the Escrow Agent's responsibilities, as Escrow Agent, shall be governed solely by this Escrow Agreement. h. The Escrow Agent or any attorney thereof, shall be permitted to act as counsel for the Seller in any dispute as to disbursement of the Escrowed Documents or any other dispute between the parties whether or not the Escrow Agent is in possession of the Escrowed Documents and continues to act as Escrow Agent. 5. Indemnification of Escrow Agent. The Buyer and the Seller, jointly ------------------------------- and severally, agree to indemnify and to save and hold harmless the Escrow Agent, in its capacity as Escrow Agent hereunder, from any claim, action, cause of action, suit, judgment, amount paid in settlement, cost or expense (individually a "Loss" and collectively "Losses") suffered or incurred by Escrow Agent, in its capacity as Escrow Agent hereunder, based upon or arising out of this Escrow Agreement or Escrow Agent's performance hereunder unless it shall be determined by a court of competent jurisdiction from which no appeal is taken or allowed that the act or omission of Escrow Agent giving rise to such Loss or Losses was taken or suffered in bad faith or in willful disregard of this Escrow Agreement or constitutes gross negligence on the part of the Escrow Agent. The provisions of this Paragraph 5 shall survive the termination of this Agreement. 6. No Assertion of Rights by Escrow Agent. The Escrow Agent shall not -------------------------------------- assert any right to use, garnish, attach, levy upon, claim a set-off against or otherwise encumber the Escrowed Documents. 7. Diligence. Should it be necessary for the Escrow Agent to accept or --------- act upon any instruments, directions, documents or instruments signed or issued by, or on behalf of, any corporation, partnership, trade name or individual, it shall not be necessary for the Escrow Agent to inquire into the authority of the person or persons who have issued or authenticated such papers unless and to the extent specifically provided hereinabove. Page 4

8. Notice of Agreements. Except for this Escrow Agreement and the -------------------- provisions of the Purchase Agreement referenced herein, the Escrow Agent shall not be bound in any way by any agreement or contract to which the Debtor and the Secured Party are parties, whether or not the Escrow Agent has knowledge of the existence of such an agreement or contract or its terms and conditions, and the only duties or responsibilities of the Escrow Agent shall be to hold the Escrowed Documents to disburse the same in accordance with the terms and conditions of this Escrow Agreement. 9. Amendment. This Escrow Agreement may be altered or amended only with --------- the written consent of the Debtor, the Secured Party and the Escrow Agent. Should the Debtor and the Secured Party attempt to change this Escrow Agreement in a manner that would either increase the duties or responsibilities of the Escrow Agent or which the Escrow Agent in his sole and absolute discretion deems undesirable, the Escrow Agent may resign as Escrow Agent by notice to the Debtor and the Secured Party, and until a successor of the Escrow Agent is appointed by the Debtor and the Secured Party and accepts such appointment, the Escrow Agent's only duty shall be to hold the Escrowed Documents in accordance with the original instructions contained in this Escrow Agreement. 10. Notices. All notices pursuant to this Escrow Agreement shall be given ------- in writing, hand-delivered or mailed by registered or certified mail, return receipt requested, or by overnight courier (such as Federal Express) to the parties hereto at the following addresses: If to Escrow Agent: Jones Waldo, Holbrook & McDonough, P.C. 1500 Wells Fargo Plaza 170 South Main Street Salt Lake City, Utah 84101 ATTN: Glen D. Watkins If to Debtor: To Mrs. Fields' Original Cookies, Inc. (with copies to counsel) in accordance with the Purchase Agreement If to Secured Party: To Martin E. Lisiewski (with copies to counsel) in accordance with the Purchase Agreement 11. Entire Agreement. This Escrow Agreement contains the entire agreement ---------------- between the parties hereto, and supersedes any and all previous oral and written and all contemporaneous oral negotiations, commitments, writings and understandings of the parties with respect to the matters specified herein. 12. Governing Law. This Escrow Agreement shall be governed by and ------------- construed in accordance with the laws of the State of Utah (without giving effect to choice of law provisions). 13. Submission to Jurisdiction. Each of the parties submits to the -------------------------- jurisdiction of Page 5

any state or federal court of appropriate jurisdiction in Utah in any action or proceeding arising out of this Escrow Agreement and agrees that all claims in respect of the action or proceeding shall be heard and determined in any such court. Each party also agrees not to bring any action or proceeding arising out of this Escrow Agreement in any other court. Each of the parties waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other party with respect thereto. Each party agrees that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law or at equity. 14. Waiver. No failure or delay on the part of any party hereto to ------ exercise any right hereunder shall operate as a waiver of, or impair, any such right. No single or partial exercise of any such right shall preclude any other or further exercise thereof or the exercise of any other right. No waiver of any such right shall be effective unless given in writing. No waiver of any such right shall be deemed a waiver of any other right hereunder. 15. Counterparts. This Escrow Agreement may be executed in counterparts, ------------ and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. 16. Descriptive Headings. Descriptive headings are for convenience only -------------------- and shall not control or affect the meaning or construction of any provision of this Escrow Agreement. 17. Joinder of Spouse. The spouse of the Sellers is executing this ----------------- Agreement to acknowledge its fairness and that it is in such spouse's best interest to bind such spouse's community property interest, if any, to the terms of this Agreement. Page 6

DEBTOR MRS. FIELDS' ORIGINAL COOKIES, INC. By -------------------------------------------- Its ----------------------------------------- SECURED PARTY ---------------------------------------------- Martin E. Lisiewski ---------------------------------------------- Jan Lisiewski ESCROW AGENT JONES, WALDO, HOLBROOK & MCDONOUGH By -------------------------------------------- Its ----------------------------------------- Page S-1

EXHIBIT H (Summary of the Seller's Indebtedness to the Buyer) The Seller's Indebtedness to the Buyer and the Company, in the aggregate amount $1,149,239.39, consists of or arises from the following: (A) a loan to the Seller in the unpaid principal amount of $500,000, plus accrued interest from September 2, 1997 through January 4, 1999, of $66,988.11, pursuant to that certain Promissory Note, dated as of September 2, 1997, issued by the Seller, as Maker, to MFH, as Holder (a copy of which is attached hereto as Attachment D-1), assigned by MFH to the Buyer -------------- pursuant to the Assumption Agreement; (B) $7,500 for certain franchise fees of Dom Portonova; (C) a loan to the Seller in the unpaid principal amount of $15,000 pursuant to that certain Promissory Note, dated as of September 2, 1997 issued by the Seller, as Maker, to the Company, as Holder (a copy of which is attached hereto as Attachment D-2, together with Attachment D-1, the -------------- "Notes"); (D) $450,501.28 in liabilities arising under the First Acquisition Agreement, as more particularly set forth in Attachment D-3, for which -------------- Fields has asserted claims for indemnification against the Seller under the First Acquisition Agreement (the "First Acquisition Claims"); and (E) $109,250 for unpaid franchise fees for the Bangor and Steeplegate franchises, a Brass Mills Mrs. Fields location ($2,500), and unpaid area developer fees for Maine, Massachusetts, New Hampshire, Vermont, and the greater Dallas-Fort Worth, Texas Metroplex.

EXHIBIT I List of Franchise Agreements Bangor, Maine Steeplegate (2 locations - PT/TCBY & MFC) *Northshore Mall *Haywood Mall *Brass Mills (3 locations) Area Developer Agreement for Maine, Massachusetts, New Hampshire, Vermont, and the greater Dallas-Fort Worth, Texas Metroplex. --------------------------- * not executed

EXHIBIT J Attach Addendum to Stock Purchase Agreement Page 1 of Exhibit J

ADDENDUM TO STOCK PURCHASE AGREEMENT THIS ADDENDUM TO STOCK PURCHASE AGREEMENT ("Addendum") is made and entered into as of June 12, 1998, by and among Mrs. Fields' Original Cookies, Inc., a Delaware corporation ("MFOC"), Mrs. Fields Holding Company, Inc., a Delaware corporation ("MFH")and Martin E. Lisiewski (the "Seller"); all of whom are hereinafter collectively referred to as the "Parties." A. The Seller and MFOC entered into that certain Stock Purchase Agreement, dated as of June 12, 1998 (the "Agreement"), pursuant to which the Seller agreed to sell to the Buyer, incorrectly identified in the Agreement as MFH, three (3) shares of the outstanding common stock (par value $10.00 per share) of the Company owned by the Seller (the "Shares"). B. At the Closing (as defined in the Agreement), a certificate for the Shares was issued and delivered to MFOC. C. Contemporaneously with the Closing, MFH, MFOC and the Seller orally agreed that the Agreement should be corrected to reflect that MFOC purchased the Shares from the Seller, and the Parties are executing this Addendum for such purpose. NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows. 1. Substitution of MFOC as Buyer. The Agreement, effective as the date thereof, is hereby amended to provide that MFOC, not MFH, is the Buyer for all purposes under the Agreement, including without limitation the performance of all duties and responsibilities required of or owed to MFH (or the Buyer) under the Agreement, as if MFOC had originally executed the Agreement as the Buyer. MFOC hereby agrees that it shall have and perform all of the duties and obligations of the Buyer under the Agreement. The Parties hereby agree that MFH has no duties or liabilities of any kind or nature under the Agreement. 2. Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements or representations by or among the Parties, written or oral, to the extent they relate in any way to the subject matter hereof. 3. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. 4. Joinder of Spouse. The spouse of the Sellers is executing this Agreement to acknowledge its fairness and that it is in such spouse's best interest to bind such spouse's community property interest, if any, to the terms of this Agreement. Page 1

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written. MFOC: MRS. FIELDS' ORIGINAL COOKIES, INC. By: ------------------------------------------- Its: --------------------------------------- MFOC: MRS. FIELDS' HOLDING COMPANY, INC. By: ------------------------------------------- Its: --------------------------------------- SELLER: ---------------------------------------------- Martin E. Lisiewski ---------------------------------------------- Jan Lisiewski Page 2

STOCK PURCHASE AGREEMENT among MRS. FIELDS' ORIGINAL COOKIES, INC., as Buyer, and THOSE PERSONS LISTED ON THE SIGNATURE PAGE HEREOF, holders of all outstanding capital stock of PRETZELMAKER HOLDINGS, INC., as Sellers November 19, 1998

TABLE OF CONTENTS 1. Definitions.......................................................... 1 2. Purchase and Sale of Company Shares.................................. 8 (a) Basic Transaction................................................ 8 (b) Purchase Price................................................... 9 (c) Purchase Price Payments.......................................... 11 (d) Working Capital Requirement; Purchase Price Adjustment for Working Capital.................................................. 11 (e) The Closing...................................................... 12 (f) Escrow; Power of Attorney; Agent Sellers; Pledgees' Agent........ 12 (g) Deliveries at Closing............................................ 13 (h) Preparation of Closing Balance Sheet; Payment of Purchase Price Adjustment for Working Capital................................... 13 3. Representations and Warranties Concerning the Transaction........ 15 (a) Representations and Warranties of the Sellers.................... 15 (i) Authorization of Transaction............................ 15 (ii) Noncontravention........................................ 15 (iii) Brokers' Fees........................................... 16 (iv) Company Shares.......................................... 16 (b) Representations and Warranties of the Buyer...................... 17 (i) Organization of the Buyer............................... 17 (ii) Authorization of Transaction............................ 17 (iii) Non-Contravention....................................... 17 (iv) Brokers' Fees........................................... 17 (v) Investment.............................................. 17 4. Representations and Warranties Concerning the Company................ 18 (a) Organization, Qualification, and Corporate Power................. 18 (b) Capitalization................................................... 19 (c) Non-Contravention................................................ 19 (d) Brokers' Fees.................................................... 20 (e) Title to Assets.................................................. 20 (f) Subsidiaries..................................................... 20 (g) Financial Statements............................................. 21 (h) Events Subsequent to Most Recent Fiscal Year End................. 22 (i) Undisclosed Liabilities.......................................... 24 (j) Legal Compliance................................................. 25 (k) Tax Matters...................................................... 25 i

(l) Real Property................................................... 27 (m) Intellectual Property........................................... 28 (n) Tangible Assets................................................. 30 (o) Inventory....................................................... 30 (p) Contracts....................................................... 31 (q) Notes and Accounts Receivable................................... 32 (r) Powers of Attorney.............................................. 33 (s) Insurance....................................................... 33 (t) Litigation...................................................... 34 (u) Product Warranty................................................ 34 (v) Product Liability............................................... 34 (w) Employees....................................................... 34 (x) Employee Benefit................................................ 35 (y) Guaranties...................................................... 37 (z) Environment, Health, and Safety................................. 37 (aa) Certain Business Relationships with the Company................. 38 (ab) Company Debt; Shareholder Loans; Non-Compete Payments........... 38 (ac) Disclosure...................................................... 38 5. Pre-Closing Covenants................................................. 38 (a) General......................................................... 38 (b) Notices and Consents............................................ 39 (c) Operation of Business........................................... 39 (d) Preservation of Business........................................ 41 (e) Full Access..................................................... 41 (f) Notice of Developments.......................................... 41 (g) Waiver of Refusal Rights........................................ 41 (h) Exclusivity; Encumbrance or Transfer of Shares.................. 41 (i) Conversion of Preferred Shares; Cancellation of Options......... 42 6. Post-Closing Covenants................................................ 42 (a) General......................................................... 42 (b) Litigation Support.............................................. 42 (c) Transition...................................................... 43 (d) Confidentiality................................................. 43 (e) Covenant Not to Compete......................................... 43 (f) Post-Closing Audit and Preparation of Consolidated Financial Statements............................................ 44 (g) Office Lease; Location of Company Records....................... 45 7. Conditions to Obligation to Close..................................... 45 (a) Conditions to Obligation of the Buyer........................... 45 (b) Conditions to Obligation of the Sellers......................... 47 ii

8. Remedies for Breaches of This Agreement................................ 48 (a) Survival of Representations and Warranties........................ 48 (b) Indemnification................................................... 48 (i) Principal Sellers' Indemnification of Buyer....................... 48 (ii) Buyer's Indemnification of Sellers......................... 49 (iii) Buyers Indemnification of Sellers and Company.............. 49 (iv) Reimbursement of Costs............................................ 50 (c) Matters Involving Third Parties................................... 51 (d) Determination of Adverse Consequences............................. 52 (e) Certain Set-Off Rights............................................ 52 (f) Other Indemnification Provisions.................................. 53 (g) Sellers' Release of Claims........................................ 53 (h) Termination....................................................... 54 (i) Termination of Agreement................................... 54 (ii) Action By Fewer Than All Sellers........................... 54 (iii) Effect of Termination...................................... 54 9. Miscellaneous.......................................................... 55 (a) Press Releases and Public Announcements........................... 55 (b) No Third-Party Beneficiaries...................................... 55 (c) Entire Agreement.................................................. 55 (d) Succession and Assignment......................................... 55 (e) Counterparts...................................................... 55 (f) Headings.......................................................... 55 (g) Notices........................................................... 55 (h) Governing Law..................................................... 56 (i) Amendments and Waivers............................................ 57 (j) Severability...................................................... 57 (k) Expenses.......................................................... 57 (l) Construction...................................................... 57 (m) Incorporation of Exhibits, Annexes, and Schedules................. 57 (n) Dispute Resolution................................................ 58 (o) Submission to Jurisdiction........................................ 60 (p) Attorneys' Fees................................................... 60 iii

EXHIBITS -------- A LTM EBITDA Adjustments B Sellers and Company Shares C Purchase Price Allocation D Escrow Agreement E Financial Statements of the Company F Form of Opinion of the Seller's Counsel ANNEXES ------- II Exceptions to Buyer's Representations DISCLOSURE SCHEDULE ------------------- 1.1 Shareholder Obligations 1.2 Working Capital 3(a)(vii) Sellers' Indebtedness 4(a) Organization 4(c) Non-Contravention 4(e) Security Interests 4(g) Financial Statements on Exhibit E 4(h) Subsequent Events 4(i) Undisclosed Liabilities Balance Sheet 4(k) Tax Returns 4(l)(i) Real Property Owned 4(l)(ii) Real Property Leased or Subleased 4(m)(iii) Intellectual Property 4(m)(iv) Licenses From Third Parties 4(o) Inventory 4(p) Contracts 4(r) Powers of Attorney 4(s) Insurance 4(t) Litigation 4(t)(ii) Threatened Litigation 4(w) Employees 4(x) Employee Benefit Plans 4(y) Guaranties 4(aa) Business Relationships 2(b)(iv) Promissory Notes iv

STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT entered into effective as of November 19, 1998, by and among Mrs. Fields Original Cookies, Inc., a Delaware corporation (the "Buyer"), Pretzelmaker Holdings, Inc., a Colorado corporation (the "Company"), and those persons listed on the signature page hereof (referred to herein individually as a "Seller" and collectively as the "Sellers"). The Buyer and the Sellers are referred to collectively herein as "Party" in the singular and "Parties" in the plural. The Sellers presently own, or at the Closing will own, one hundred percent (100%) of the issued and outstanding capital stock of the Company. This Agreement contemplates a transaction in which the Buyer will purchase from the Sellers, and the Sellers will sell to the Buyer, all of the issued and outstanding capital stock of the Company in return for cash and other consideration set forth herein. Now, therefore, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows. 1. Definitions. "Adjusted EBITDA" means the Company's earnings for the twelve month period ending on August 31, 1998, before interest, taxes, depreciation and amortization, adjusted for non-recurring expenses as set forth on Exhibit A. "Adjustment for Reduction of Company Debt" has the meaning set forth in (S) 2(b)(i)(B) below. "Adverse Consequences" means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and fees, including court costs and attorneys' fees and expenses. "Affiliate" has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act. "Affiliated Group" means any affiliated group within the meaning of Code Sec. 1504, or any similar group defined under a similar provision of state, local or foreign law. "Agent Sellers" has the meaning set forth in (S) 2(f)(iii).

"Audit" has the meaning set forth in (S) 6(f) below. "Auditors" has the meaning set forth in (S) 6(f) below. "Basis" means any past or present fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction that forms or could form the basis for any specified consequence. "Bonus Payments" shall mean amounts to be paid to the Bonus Recipients pursuant to Exhibit C in consideration for service to the Company. "Bonus Recipients" shall mean those persons listed on Exhibit C who are receiving Bonus Payments pursuant to this Agreement. "Buyer" has the meaning set forth in the preface above. "Buyer's Deposit" has the meaning set forth in (S) 2(f)(i). "Closing" has the meaning set forth in (S) 2(e) below. "Closing Balance Sheet" has the meaning set forth in (S) 2(h)(ii) below. "Closing Date" has the meaning set forth in (S) 2(e) below. "Closing Installment" has the meaning set forth in (S) 2(b)(i) below. "Closing Working Capital" has the meaning set forth in (S) 2(d)(i) below. "Code" means the Internal Revenue Code of 1986, as amended. "Common Share" means any share of the common stock, $.001 par value per share, of the Company. "Company" has the meaning set forth in the preface above. "Company Debt" means the unpaid balance at the Closing of the Company's (i) bank debt, but in no event in an amount in excess of $486,000, (ii) notes payable to franchisees of the Company, but in no event in an amount in excess of $49,500, and (iii) capital lease obligations, but in no event in an amount in excess of $180,200; provided the aggregate amount of all Company Debt shall 2

not exceed $715,700 at Closing. "Company Share" means any Common Share, Preferred Share or Conversion Share of the Company. "Confidential Information" means any information concerning the businesses and affairs of the Company that is not generally available to the public. "Consolidated Financial Statements" has the meaning set forth in (S) 6(f) below. "Consulting Payments" shall mean amounts to be paid to the Consultants pursuant to Exhibit C in consideration for service to the Company. "Consultants" shall mean those persons listed on Exhibit C who are receiving Consulting payments pursuant to this Agreement. "Conversion Share" means any Common Shares or other securities of the Company issued in connection with the conversion of the Preferred Shares by the Preferred Shareholders. "Deferred Payments" has the meaning set forth in (S) 2(c)(i) below. "Disclosure Schedule" has the meaning set forth in (S) 4 below. "Employee Benefit Plan" means any (a) nonqualified deferred compensation or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan. "Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec. 3(2). "Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec. 3(1). "Environmental, Health, and Safety Laws" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, and the Occupational Safety and Health Act of 1970, each as amended, together with all other laws (including 3

rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of federal, state, local, and foreign governments (and all agencies thereof) concerning pollution or protection of the environment, public health and safety, or employee health and safety, including laws relating to emissions, discharges, releases, or threatened releases of pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials or wastes into ambient air, surface water, ground water, or lands or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials or wastes. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Escrow Account" has the meaning set forth in (S) 2(f) below. "Escrow Agent" has the meaning set forth in (S) 2(f) below. "Escrow Agreement" has the meaning set forth in (S) 2(f) below. "Estimated Closing Working Capital" has the meaning set forth in (S) 2(h)(i) below. "Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of the Emergency Planning and Community Right-to-Know Act of 1986, as amended. "Fiduciary" has the meaning set forth in ERISA Sec. 3(21). "Financial Statements" has the meaning set forth in (S) 4(g) below. "GAAP" means United States generally accepted accounting principles as in effect from time to time. "Indemnified Party" has the meaning set forth in (S) 8(c) below. "Indemnifying Party" has the meaning set forth in (S) 8(c) below. "Intellectual Property" means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, 4

and reexaminations thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets and confidential business information (including ideas, research and development, know-how, recipes, formulas, production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (f) all computer software (including data and related documentation), (g) all other proprietary rights, and (h) all copies and tangible embodiments thereof (in whatever form or medium). "Knowledge" means actual knowledge after reasonable investigation. "Liability" means any liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including any liability for Taxes. "Management Letter" has the meaning set forth in (S) 6(f) below. "Most Recent Balance Sheet" means the balance sheet contained within the Most Recent Financial Statements. "Most Recent Financial Statements" has the meaning set forth in (S) 4(g) below. "Most Recent Fiscal Month End" has the meaning set forth in (S) 4(g) below. "Most Recent Fiscal Year End" has the meaning set forth in (S) 4(g) below. "Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37). "Non-Compete Payments" means the unpaid balance at the Closing of the Company's covenant not to compete payments owed by the Company to the Non-Compete Recipients. "Non-Compete Recipients" means the recipients of the Non-Compete Payments set forth on Exhibit C. 5

"Notes" shall have the meaning set forth in (S) 2(b)(i). The principal balance of the Notes in the aggregate after application of the appropriate portion of the Closing Installment as set out on Exhibit C shall not exceed Four Million Two Hundred Seventy-Six Thousand Five Hundred Eighteen Dollars and 78/100 ($4,276,518.78), plus the Adjustment for Reduction of Company Debt, if any. The Notes shall be held by the Pledgees' Agents until they are paid in full. "Objections" has the meaning set forth in (S) 2(h)(iv). "Option Holders" means the following named Sellers: Marc N. Geman, Donald G. Cox, Jr., Brian Woods, Anthony Joseph, Dale Fowler, Lynn Gore and Mark Maximovich. "Options" means any rights granted by the Company to purchase the Company Shares. "Ordinary Course of Business" means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency). "Party" has the meaning set forth in the preface above. "PBGC" means the Pension Benefit Guaranty Corporation. "Person" means an individual, a partnership, a corporation, limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof). "Pledge Agreement" means Security Agreement-Pledge securing the obligations of the Buyer to the Sellers under the Notes and the Buyer's payment of the Bonus Payments, Severance Payments, Consulting Payments, Shareholder Loans and, subject to the terms of (S) 2(h)(vii) below, the payment, if any, required by the Buyer to the Sellers pursuant to such (S) 2(h)(vii). The Pledge Agreement shall not secure any other obligations of the Buyer, whether under this Agreement or otherwise. The Pledge Agreement shall be executed by the Pledgees' Agent on behalf of the Sellers and shall be held by the Pledgees' Agent on behalf of the Sellers. "Pledgees' Agent" shall have the meaning set forth in (S) 2(f)(iv). "Preferred Shares" means any preferred shares, including Series A 6

Preferred Stock and Series B Preferred Stock, of the Company. "Preferred Shareholders" means all legal or beneficial owners and holders of Preferred Shares, all of whom are listed on Exhibit B. "Principal Sellers" means jointly and severally Marc N. Geman, Donald G. Cox, Jr. and Louis H. Marks. "Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and Code Sec. 4975. "Purchase Price" has the meaning set forth in (S) 2(b) below. "Purchase Price Adjustment for Working Capital" has the meaning set forth in (S) 2(d)(ii) below. "Reportable Event" has the meaning set forth in ERISA Sec. 4043. "Securities Act" means the Securities Act of 1933, as amended. "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended. "Security Interest" means any mortgage, pledge, lien, encumbrance, charge, or other security interest, other than (a) mechanic's, materialmen's, and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that the taxpayer is contesting in good faith through appropriate proceedings, (c) purchase money liens and liens securing rental payments under capital lease arrangements, and (d) other liens arising in the Ordinary Course of Business and not incurred in connection with the borrowing of money. "Seller" and "Sellers" have the meaning set forth in the preface above. "Series A Preferred Shares" means any share of the Series A Preferred Stock, $.001 par value, of the Company. "Series B Preferred Shares" means any share of the Series B Preferred Stock, $.001 par value, of the Company. "Severance Payments" shall mean amounts to be paid to the Severance Recipients pursuant to Exhibit C in consideration for service to the Company. "Severance Recipients" shall mean those persons listed on Exhibit C who 7

are receiving Severance Payments pursuant to this Agreement. "Shareholder Loans" means the unpaid balance at the Closing of loans to the Company from the present and former shareholders listed on Schedule 1.1 in the amounts set forth thereon, but in no event in an aggregate amount greater than $540,000. "Store" or "Stores" has the meaning set forth in (S)4(a) below. "Store Leases" has the meaning set forth in (S)4(l)(ii) below. "Subsidiary" means any (A) corporation with respect to which a specified Person (or a Subsidiary thereof) owns a majority of the common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors, (B) limited liability company of which a specified Person (or a Subsidiary thereof) is a member or managing member, (C) any other entity in which the Company has any ownership interest, (D) Pretzelmaker, Inc., a Colorado corporation, one hundred percent (100%) of the capital stock of which is owned by the Company, and (E) Pretzelmaker Canada, Inc., one hundred percent (100%) of the capital stock of which is owned by Pretzelmaker, Inc. "Tax" means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, wind fall profits, environmental (including taxes under Code Sec. 59A), customs duties, capital stock, franchise, profits, capital gains, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. "Third Party Claim" has the meaning set forth in (S) 8(c) below. "Working Capital" shall mean the excess of Company's current assets (consisting of the Company's cash, accounts receivable, notes receivable, inventories and pre-paid expenses and supplies), less the Company's current liabilities (consisting of the Company's accounts payables, other payables, income taxes payable, deferred initial franchise fees and deferred revenues). For purposes of computing Working Capital, those current assets and liabilities of the Company listed on Schedule 1.2 shall be treated in the manner set forth 8

thereon. "Working Capital Requirement" has the meaning set forth in (S) 2(d). 2. Purchase and Sale of Company Shares. (a) Basic Transaction. On and subject to the terms and conditions of this Agreement, for the consideration specified below in this (S) 2, the Buyer agrees to purchase from each of the Sellers, and each of the Sellers agrees to sell to the Buyer, all of the Company Shares owned by each such Seller, as described on Exhibit B, in the aggregate constituting all of the issued and outstanding Company Shares. (b) Purchase Price. Subject to (S)(S) 2(c), 2(f) and 8(e) below, the Buyer, in consideration for the Sellers' delivery of the Company Shares at the Closing, shall deliver to or on behalf of the Sellers at the Closing aggregate consideration to be allocated among the Sellers, Consultants, Bonus Recipients, Severance Recipients, and Non-Compete Recipients in the manner set forth on Exhibit C) (the "Purchase Price"), as follows. (i) at the Closing, the Buyer shall deliver promissory notes (collectively, the "Notes") in the aggregate amount of: (A) Five Million Six Hundred Thousand Dollars ($5,600,000), plus (B) the amount (the "Adjustment for Reduction of Company Debt"), if any, by which the Company Debt as of the Closing is less than Seven Hundred Fifteen Thousand Seven Hundred Dollars ($715,700), which amount, if any, shall be allocated pro rata among all of the Notes; less (C) Bonus Payments, Severance Payments and Consulting Payments in the aggregate principal amount of Three Hundred Nineteen Thousand Five Hundred Ninety-Eight Dollars ($319,598). The Notes shall be payable in four (4) installments, with the first installment due at the Closing in the amount of One Million Three Thousand Eight Hundred Eighty-Two and 96/100 Dollars ($1,003,882.96) (the "Closing Installment"). The Closing Installment shall bear no interest and shall be applied at the Closing as a principal reduction of the Notes as set forth in Exhibit C. The three (3) remaining installments under the 9

Notes, payable on December 15, 1998, December 23, 1998 and January 4, 1999, respectively (the "Payment Dates"), will bear interest at the rate of ten percent (10%) per annum; and (ii) on and after the Closing, the Buyer shall pay or cause the Company to pay the Non-Compete Payments, Consulting Payments, Severance Payments, Bonus Payments and Shareholder Loans, as follows: (A) the Buyer shall pay or cause the Company to pay the Non-Compete Payments to the Non-Compete Recipients (the aggregate amount of which shall not exceed $182,300 and shall bear no interest under this Agreement). The Non-Compete Payments shall be made in four (4) installments, with the first installment of Thirty-Five Thousand Four Hundred Ninety-Two and 04/100 Dollars ($35,492.04) to be paid by the Buyer at the Closing, and with the three (3) remaining installments to be paid on the Payment Dates in the amounts set forth in Exhibit C; (B) the Buyer shall pay or cause the Company to pay the Consulting Payments to the Consultants the aggregate principal amount of which shall not exceed $26,800. The Consulting Payments shall be made in four (4) installments, with the first installment of Four Thousand Nine Hundred Sixty-five Dollars ($4,965) to be paid by the Buyer at the Closing, and with the three (3) remaining installments (together with interest thereon), as specified in Exhibit C, to be paid on the Payment Dates; (C) the Buyer shall pay or cause the Company to pay the Severance Payments to the Severance Recipients the aggregate principal amount of which shall not exceed $151,200. The Severance Payments shall be made in four (4) installments, with the first installment of Twenty-eight Thousand Five Dollars ($28,005) to be paid by the Buyer at the Closing, and with the three (3) remaining installments (together with interest thereon), as specified in Exhibit C, to be paid on the Payment Dates; (D) the Buyer shall pay or cause the Company to pay the Bonus Payments to the Bonus Recipients the aggregate principal amount of which shall not exceed $149,300. The Bonus Payments shall be made in four (4) installments, with the first installment of Twenty-Seven Thousand Six Hundred Fifty-five Dollars ($27,655) to be paid by the Buyer at the Closing, and with the three (3) 10

remaining installments (together with interest thereon), as specified in Exhibit C, to be paid on the Payment Dates; (E) the Buyer shall pay or cause the Company to pay the Shareholder Loans to the holders thereof, as set forth in Exhibit C, in a single installment on January 4, 1999 (the aggregate principal amount of which shall not exceed $540,000). The Shareholder Loans will bear interest at the rate set forth in the promissory notes identified in the Company's Note Register affixed to (S) 1.1 of the Disclosure Schedule) evidencing the Shareholder Loans; provided however, the ---------------- Shareholder Loans shall bear no interest under this Agreement); and (iii) at the Closing, the Company shall retain Company Debt up to a maximum of Seven Hundred Fifteen Thousand Seven Hundred Dollars ($715,700) less the amount of the Adjustment For Reduction of Company Debt; provided that in no event shall the aggregate amount of the Purchase Price, excluding any Purchase Price Adjustment for Working Capital or interest payable under this Agreement, exceed the aggregate amount of Seven Million Thirty-Eight Thousand Dollars ($7,038,000). (c) Purchase Price Payments. (i) The payments of the Purchase Price shall be paid by wire transfer to the Sellers or delivery of other immediately available funds to the Agent Sellers on behalf of the Sellers. (ii) From the final installment payment to be made under the Notes, the sum of One Hundred Thousand Dollars ($100,000.00) shall be deducted on a pro rata basis from all of the Notes and deposited by the Buyer into the Escrow Account, for disbursement to the Sellers subject to the terms and conditions of (S) 2(f) below and the Escrow Agreement (collectively, the "Deferred Payments"). Notwithstanding the foregoing, the Sellers may, at or prior to the Closing, elect to substitute a Letter of Credit for the full amount of the Deferred Payments, the terms, conditions and issuer of which shall be acceptable to the Buyer in its sole discretion. (d) Working Capital Requirement; Purchase Price Adjustment for Working Capital. Upon and immediately after the Closing: 11

(i) the Company shall have Working Capital ("Closing Working Capital") in an amount not less than Thirty-One Thousand Nine Hundred Thirty-Eight Dollars ($31,938) (the "Working Capital Requirement"), which the Sellers represent and warrant, based on the Company's historical experience, is an adequate amount of working capital for the operation of the Company's business after the Closing in the same manner as presently conducted; and (ii) to the extent that the amount, if any, by which the Company's Closing Working Capital is less than the Working Capital Requirement, the Purchase Price shall be decreased by such amount; to the extent that the amount, if any, by which the Company's Closing Working Capital is greater than the Working Capital Requirement, the Purchase Price shall be increased by such amount. The adjustment to the Purchase Price based on the Working Capital as described herein shall be referred to as the "Purchase Price Adjustment for Working Capital". The Purchase Price Adjustment for Working Capital shall be determined in accordance with (S) 2(h), below. (e) The Closing. Unless otherwise agreed by the Parties, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of the Company in Denver, Colorado, commencing at a mutually agreeable time, following the satisfaction or waiver of all other conditions to the obligations of the Parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the respective Parties will take at the Closing itself) on November 19, 1998, or such other date as the Buyer and the Agent Sellers may mutually determine (the "Closing Date"). (f) Escrow; Power of Attorney; Agent Sellers; Pledgees' Agent. (i) The Deferred Payments shall be deposited into an interest bearing escrow (the "Escrow Account") established by the Parties prior to the Closing with Centennial Bank (the "Escrow Agent") at its offices located at 46th and Harrison Streets, Ogden, Utah 84403, for disbursement subject to the terms and conditions set forth in that certain escrow agreement executed by the Parties and the Escrow Agent on or before the Closing substantially in the form and substance of Exhibit D hereto (the "Escrow Agreement"). Concurrently with the deposit of the Deferred Payments into the Escrow Account, the Buyer shall deposit from its own funds the sum of One Hundred Thousand Dollars ($100,000) (the "Buyer's Deposit") against which claims may be recouped or set-off by the Buyer pursuant to (S) 8(e) below for amounts in excess of the Deferred Payments up to the amount of the Buyer's Deposit. The first $100,000 of claims shall be recouped or set-off against the Deferred Payments, and after the release 12

of the balance of the Deferred Payments, directly from the Sellers, and only after $100,000 has been recovered from the Sellers shall claims be recouped or set-off against the Buyer's Deposit. Interest earned on the Escrow Account shall be shared between the Sellers and the Buyer pro rata according to the relative amounts and duration of the Deferred Payments and the Buyer's Deposit. (ii) Subject to the terms and conditions of the Escrow Agreement, (A) the Deferred Payments, less all amounts that after Closing may be recouped from or set-off against the Deferred Payments pursuant to (S) 8(e) below, shall be payable from the Escrow Account to the Agent Sellers on behalf of the Sellers on the first anniversary of the Closing Date, and (B) the Buyer's Deposit, less all amounts that after Closing may be recouped from or set-off against the Buyer's Deposit pursuant to (S) 8(e) below, shall be payable from the Escrow Account to the Buyer on the second anniversary of the Closing Date. (iii) Each Seller hereby irrevocably appoints the Principal Sellers to serve as its attorney-in-fact (the "Agent Sellers") for purposes of the Escrow Agreement, this Agreement, and the transactions contemplated hereby. This appointment is coupled with an interest and is irrevocable. The Agent Sellers shall have the authority, duties and responsibilities granted by the Sellers to the Agent Sellers under the Escrow Agreement, and this Agreement, including without limitation the power and authority to resolve disputes, claims and set-off obligations on behalf of each Seller. Each Seller hereby authorizes the Agent Sellers to approve and execute closing and settlement statements on behalf of each Seller. The Agent Sellers shall only act unanimously when acting on behalf of the Sellers. Buyer shall be entitled to rely on the representations and agreements of the Agent Sellers for all purposes hereunder. (iv) Each Seller hereby irrevocably appoints each of the Sellers Marc N. Geman and Donald G. Cox, Jr. to act jointly as the Pledgees' Agent (as defined in the Pledge Agreement) for the Pledgees (as defined in the Pledge Agreement). (g) Deliveries at Closing. At the Closing, (i) the Sellers will deliver to the Buyer the various certificates, instruments, and documents referred to in (S) 7(a) below, (ii) the Buyer will deliver to the Sellers the various certificates, instruments, and documents referred to in (S) 7(b) below, (iii) the Sellers will deliver to the Buyer the stock certificates representing all of the issued and outstanding Company Shares, endorsed in blank or accompanied by duly executed assignment documents or other appropriate instruments in a form satisfactory to the Buyer; and (iv) the Buyer will deliver to the Sellers and, as appropriate, the Consultants, Bonus Recipients, Severance Recipients and Non-Compete Recipients, the Closing Installment and the Buyer will deliver to the Seller the Notes, the Pledge Agreement, and the Collateral (as defined in the Pledge 13

Agreement). All of the documents described herein will be dated as of the Closing Date. (h) Preparation of Closing Balance Sheet; Payment of Purchase Price Adjustment for Working Capital. (i) Immediately prior to the Closing Date, the Seller shall prepare and deliver to the Buyer for its review and approval, a written estimate of the Company's Working Capital on the Closing Date (the "Estimated Closing Working Capital"), together with supporting documentation and schedules therefor; (ii) Within thirty (30) days after the Closing Date, the Buyer or auditors engaged by the Buyer will prepare and deliver to the Sellers a balance sheet for the Company and its Subsidiaries as of the Closing Date (determined on a pro forma basis as though the Parties had not consummated the transactions contemplated by this Agreement) (the "Closing Balance Sheet"). The Buyer will prepare the Closing Balance Sheet in accordance with GAAP except with respect to those matters specified in Schedule 1.2 applied on a basis consistent with the preparation of the Financial Statements. (iii) The Closing Balance Sheet shall set forth (A) the Closing Working Capital of the Company; and (B) the amount, if any, of the Purchase Price Adjustment for Working Capital, reflecting the amount that the Closing Working Capital exceeds (or is less than) the Working Capital Requirement. (iv) If the Agent Sellers have any objections to the Closing Balance Sheet, the Agent Sellers will deliver a detailed written statement describing their objections ("Objections") to the Buyer within fifteen (15) days after receiving the Closing Balance Sheet. The Buyer and the Agent Sellers will use reasonable efforts to resolve any Objections themselves. If the Parties do not obtain a final resolution within thirty (30) days after the Buyer has received the statement of Objections, the Buyer and the Agent Sellers will select an accounting firm mutually acceptable to them to resolve any remaining Objections. If they are unable to agree on the choice of an accounting firm, they will select a nationally- recognized accounting firm by lot (after excluding their respective, regular outside accounting firms). The determinations of such accounting firm regarding the Objections will be set forth in writing and will be conclusive and binding upon the Parties. The Buyer will revise the Closing Balance Sheet as appropriate to reflect the resolution of any objections thereto pursuant to this (S) 2(h)(iv). (v) In the event the Buyer and Agent Sellers submit any unresolved Objections to the accounting firm for determination as provided for in (S) 2(h)(iv) above, the Buyer and the Sellers will share equally the fees and expenses of the 14

accounting firm. (vi) The Buyer will make the work papers and back-up materials used in preparing the Closing Balance Sheet available to the Agent Sellers and their accountants and other representatives at reasonable times and upon reasonable notice at any time during (A) the preparation by the Buyer of the Closing Balance Sheet, (B) the review by the Agent Sellers of the Closing Balance Sheet and (C) the resolution by the Parties of any objections thereto. (vii) Within three (3) business days after completion of the Closing Balance Sheet and the resolution of any Objections thereto pursuant to (S)(S) 2(h)(iv) above, either (A) the Buyer will pay to the Sellers the amount, if any, by which the Closing Working Capital exceeds the Working Capital Requirement, or (B) the Escrow Agent will pay to the Buyer the amount, if any, by which the Closing Working Capital is less than the Working Capital Requirement up to the amount of $50,000. To the extent that the Working Capital Requirement exceeds the Closing Working Capital by more than $50,000, any such excess amount shall be paid directly to the Buyer by the Sellers. The Sellers' obligations in this (S) 2(h)(vii) shall constitute joint and several obligations of all of the Sellers. Any obligation of Buyer pursuant to this (S) 2(h)(vii) shall be secured by the Pledge Agreement; provided that Buyer, at its election, may pay any amount disputed pursuant to (S) 2(h)(iv) into an escrow account pending resolution of such dispute, whereupon the security interest under the Pledge Agreement provided for in this (S) 2(h)(vii) shall automatically terminate. (i) Pledge of Company Shares. At the Closing, the Buyer shall execute and deliver the Pledge Agreement, from the Buyer to the Sellers, of the Company Shares. 3. Representations and Warranties Concerning the Transaction. (a) Representations and Warranties of the Sellers. Each of the Sellers represents and warrants to the Buyer, jointly and severally with the other Sellers, that the statements contained in this (S) 3(a) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this (S) 3(a)). (i) Authorization of Transaction. Each of the Sellers has full power and authority to execute and deliver this Agreement and to perform his or her obligations hereunder. This Agreement constitutes the valid and legally binding obligation of each of the Sellers, enforceable in accordance with its terms and conditions. The Sellers need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or 15

governmental agency in order to consummate the transactions contemplated by this Agreement. (ii) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (A) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency or court to which any Seller is subject, or (B) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument or other arrangement to which any Seller is a party or by which he or it is bound or to which any of his or its assets is subject. (iii) Brokers' Fees. The Sellers have no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Buyer could become liable or obligated. (iv) Company Shares. The Sellers hold of record and own beneficially the total number of Company Shares set forth next to his or her or its name in Exhibit B, free and clear of any restrictions on transfer (other than any restrictions under the Securities Act and state securities laws), Taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims and demands. Except as set forth in (S) 3(a)(v) below: (A) None of the Sellers is a party to any option, warrant, purchase right, or other contract or commitment that could require any Seller to sell, transfer or otherwise dispose of any capital stock of the Company (other than this Agreement); and (B) None of the Sellers is a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of any capital stock of the Company. Upon delivery of the certificates representing the Company Shares, the Buyer will acquire valid, marketable title thereto, free and clear of any liens, encumbrances and claims of any other Seller or any third parties. (v) Conversion of Preferred Shares. The Sellers and the Company have irrevocably agreed that, prior to the Closing, each of the legal or beneficial owners or holders of any Preferred Shares will convert them into Common Shares of the Company as set forth in Exhibit B, whereupon there shall be no 16

Preferred Shares of the Company issued or outstanding. Prior to Closing, the Sellers shall furnish the Buyer with documentation demonstrating to the Buyer's satisfaction that such conversion of the Preferred Shares and the issuance of the Common Shares have occurred. (vi) Cancellation of Options Before Closing. The Option Holders and the Company have irrevocably agreed that, prior to the Closing, the Options shall be cancelled, and the Company shall have no further obligation or liability under the Options, and no Options shall be outstanding. (vii) Absence of Indebtedness and Claims. Except as set forth on (S) 3(a)(vii) of the Disclosure Schedule attached hereto, none of the Sellers is indebted to the Company or any of its Affiliates, other than in the ordinary course of business, and no Seller has any claims against the Company. (b) Representations and Warranties of the Buyer. The Buyer represents and warrants to the Sellers that the statements contained in this (S) 3(b) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this (S) 3(b)), except as set forth in Annex II attached hereto. (i) Organization of the Buyer. The Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the state of its incorporation. (ii) Authorization of Transaction. The Buyer has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Buyer, enforceable in accordance with its terms and conditions. The Buyer need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement. (iii) Non-Contravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge or other restriction of any government, governmental agency or court to which the Buyer is subject or any provision of its charter or bylaws. (iv) Brokers' Fees. The Buyer has no Liability or obligation to pay 17

any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement for which Sellers could become liable or obligated. (v) Investment. The Buyer is not acquiring the Company Shares with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act. The Buyer represents that the Buyer has had access to information regarding the Company and the Subsidiaries. The Buyer has had an opportunity to ask questions of and receive answers from the Company's representatives concerning this investment. 4. Representations and Warranties Concerning the Company. Each of the Principal Sellers jointly and severally represents and warrants to the Buyer that the statements contained in this (S) 4 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this (S) 4), except as set forth in the disclosure schedule delivered by the Seller to the Buyer on the date hereof (the "Disclosure Schedule"). Nothing in the Disclosure Schedule shall be deemed adequate to disclose an exception to a representation or warranty made herein, however, unless the Disclosure Schedule identifies the exception with reasonable particularity and describes the relevant facts in reasonable detail. The Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this (S) 4. (a) Organization, Qualification, and Corporate Power. The Company is a corporation duly organized, validly existing, and in good standing under the laws of Colorado. The Company is duly authorized to conduct business and is in good standing under the laws of each jurisdiction where such qualification is required. The Company has full corporate power and authority and all licenses, permits, and authorizations necessary to carry on the businesses in which it is engaged and in which it presently proposes to engage and to own and use the properties owned, used, leased or operated by it, including, without limitation, all of its existing and proposed retail stores (collectively, "Store" in the singular or "Stores" in the plural), each of which is listed on (S) 4(a) of the Disclosure Schedule and appropriately designated thereon as a Company-owned, franchised, master-licensed or licensed Store, or a Store for which the lease is being negotiated, or a Store that is in the process of being built out. (S) 4(a) of the Disclosure Schedule lists the directors and officers of the Company. The Sellers have delivered or made available to the Buyer copies of the Company's charter and bylaws (as amended to date). The Sellers have delivered to the Buyer correct and complete copies of the Company's minute books (containing the records of meetings of the stockholders, the board of directors, and any committees of the board of directors), and, except as disclosed on (S) 4(a) of the Disclosure Schedule, they are correct and complete in all material respects. The Sellers have delivered to the Buyer copies of the 18

Company's stock record books, and, except as disclosed on (S) 4(a) of the Disclosure Schedule, they are correct and complete in all respects and accurately reflect the record ownership and, to the Knowledge of the Principal Sellers, the beneficial ownership of all the outstanding Company Shares. Except as set forth on (S) 4(a) of the Disclosure Schedule, there are no shareholder, buy/sell, co-sale, option, first- right-of-refusal or other similar agreements between or among any of the Sellers and the Company with respect to the capital stock of the Company or any of the Subsidiaries. The Company is not in default under or in violation of any provision of its charter or bylaws. (b) Capitalization. On or before the date of execution of this Agreement, the entire authorized capital stock of the Company consists of: (i) 1,000,000 Common Shares, of which 100,000 Common Shares are issued and outstanding; (ii) 300,000 Series A Preferred Shares, of which 275,942 are issued and outstanding; and (iii) 800 Series B Preferred Shares, all of which are issued and outstanding. All of the issued and outstanding Company Shares have been duly authorized, are validly issued, fully paid, and non-assessable, and are held of record as set forth on Exhibit B. There are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights (other than those associated with the Preferred Shares to be converted immediately before Closing), exchange rights, or other contracts or commitments that could require the Company to issue, sell or otherwise cause to become outstanding any of its capital stock. Immediately before Closing, but following the conversion of the Preferred Shares to Common Shares, (i) the entire authorized capital stock of the Company will consist of (A) 1,000,000 Common Shares, of which 135,155 shares will be issued and outstanding to the Sellers, (B) 300,000 Series A Preferred Shares, none of which shall be issued or outstanding, and (C) 800 Series B Preferred Shares, none of which shall be issued or outstanding; and (ii) there shall be no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that could require the Company to issue, sell or otherwise cause to become outstanding any of its capital stock. Notwithstanding any adjustment at Closing in the number of shares of capital stock, the Buyer shall acquire at Closing all of the issued and outstanding shares of Capital Stock of the Company at the Closing. There are no outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights with respect to the Company. There are no voting trusts, proxies, or other agreements or understandings with respect to the voting of the capital stock of the Company which shall not have been terminated prior to the Closing. (c) Non-Contravention. Except as set forth on (S) 4(c) of the Disclosure Schedule, neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate any constitution, 19

statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Company or any Subsidiary is subject or any provision of the charter, bylaws, or other constituent document of the Company or any subsidiary, (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement (including without limitation, any franchise agreement), contract, lease or sublease (including without limitation, any store lease or sublease), license, instrument or other arrangement to which the Company or any subsidiary is a party or by which it is bound or to which any of its assets is subject (or result in the imposition of any Security Interest upon any of its assets). Except as set forth on Schedule 4(c), neither the Company nor any subsidiary needs to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by this Agreement. (d) Brokers' Fees. Neither the Company nor any Subsidiary has any Liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement. (e) Title to Assets. The Company and each Subsidiary has good and marketable title to, or a valid leasehold interest in, the properties and assets used by it, located on its premises, or shown on the Most Recent Balance Sheet or acquired after the date thereof, free and clear of all Security Interests, except for properties and assets disposed of in the Ordinary Course of Business since the date of the Most Recent Balance Sheet. (f) Subsidiaries. (i) Each Subsidiary is an entity duly organized, validly existing, and in good standing under the laws of jurisdiction of incorporation or organization. Each Subsidiary is duly authorized to conduct business and is in good standing under the laws of each jurisdiction where such qualification is required. Each Subsidiary has full corporate power and authority and all licenses, permits, and authorizations necessary to carry on the businesses in which it is engaged and in which it presently proposes to engage and to own and use the properties owned, used, leased or operated by it. (S) 4(a) of the Disclosure Schedule lists the respective directors and officers of each of the Subsidiaries. The Sellers have delivered to the Buyer correct and complete copies of the charter and bylaws (as amended to date) of each of the Subsidiaries. With respect to each of the Subsidiaries, the Sellers have delivered to the Buyer correct and complete copies of the minute books (containing the records of meetings of the stockholders, the board of directors, 20

and any committees of the board of directors), and, except as set forth in (S) 4(a) of the Disclosure Schedule, they are correct and complete in all material respects. The Sellers have delivered to the Buyer copies of each Subsidiary's stock record books and, except as set forth in (S) 4(b) of the Disclosure Schedule, they are correct and complete in all respects and accurately reflect the record ownership and, to the knowledge of the Sellers, the beneficial ownership of all the outstanding capital stock of each of the Subsidiaries. No Subsidiary is in default under or in violation of any provision of its charter or bylaws. (ii) (S) 4(f) of the Disclosure Schedule sets forth for each Subsidiary of the Company (i) its name, its date and jurisdiction of incorporation or formation, and each jurisdiction in which the Subsidiary conducts business, or has conducted business within the five (5) year period prior to the date of this Agreement, (ii) the number of shares of authorized capital stock of each class of its capital stock or other ownership interests, (iii) the number of issued and outstanding shares of each class of its capital stock (or other ownership interest), the names of the holders thereof, and the number of shares (or other interests) held by each such holder, and (iv) the number of shares of its capital stock (or other interests) held in treasury. All of the issued and outstanding shares of capital stock (or other interests) of each Subsidiary have been duly authorized and are validly issued, fully paid, and non-assessable. Either the Company or a Subsidiary holds of record and owns beneficially all of the outstanding shares (or other interests) of each Subsidiary of the Company, free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws), Taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands, as described on (S) 4(f) of the Disclosure Schedule. There are no outstanding or authorized options, warrants, purchase rights, conversion rights, exchange rights, or other contracts or commitments that could require any of the Company or its Subsidiaries to sell, transfer, or otherwise dispose of any capital stock (or other interests) of any of its Subsidiaries or that could require any Subsidiary of the Company to issue, sell, or otherwise cause to become outstanding any of its own capital stock (or other interests). There are no outstanding stock appreciation, phantom stock, profit participation, or similar rights with respect to any Subsidiary of the Company. There are no voting trusts, proxies, or other agreements or understandings with respect to the voting of any capital stock (or other interests) of any Subsidiary of the Company. None of the Company or its Subsidiaries controls directly or indirectly or has any direct or indirect equity participation in any corporation, partnership, limited liability company, trust, or other business association which is not a Subsidiary of the Company. (g) Financial Statements. Attached hereto as Exhibit E are the following financial statements (collectively the "Financial Statements"): (i) audited consolidated 21

balance sheets and statements of operations, stockholders' equity, and cash flows as of and for the fiscal years ended December 31, 1996 and 1995 for the Company; (ii) unaudited, consolidating balance sheets and statements of operations as of and for the fiscal year ended December 31, 1997 and the ten (10) month period ended October 31, 1998 for the Company; (iii) audited balance sheets, statements of operations, stockholders equity, and cash flows as of, and for the years ended December 31, 1997 and 1996 for Pretzelmaker, Inc.; (iv) unaudited balance sheets and statements of operations as of and for the eight (8) month period ended August 31, 1998 for Pretzelmaker, Inc. (the balance sheets set forth in (ii) and (iv) for the ten (10) month periods ended October 31, 1998 collectively referred to as the "Most Recent Balance Sheets", and the items set forth for the year end December 31, 1997 in items (ii), (iii) and (iv) collectively referred to as the "Most Recent Financial Statements"). For purposes of this Agreement, the "Most Recent Fiscal Year End" shall mean December 31, 1997, and the "Most Recent Fiscal Month End" shall mean October 31, 1998. The Financial Statements (including the notes thereto) have been prepared in accordance with GAAP (except with respect to those matters specified in Schedule 1.2) applied on a consistent basis throughout the periods covered thereby, present fairly the financial condition of the Company and the Subsidiaries as of such dates and the results of operations of them for such periods, are correct and complete, and are consistent with their books and records (which books and records are correct). The Company's Adjusted EBITDA for the last twelve month period ending on August 31, 1998, is not less than $1,387,600. (h) Events Subsequent to Most Recent Fiscal Year End. Since the Most Recent Fiscal Year End, there has not been any material adverse change in the business, financial condition, operations, results of operations or future prospects of the Company. Without limiting the generality of the foregoing, except as set forth in (S) 4(h) of the Disclosure Schedule, since that date: (i) neither the Company nor any Subsidiary has sold, leased, transferred or assigned any of its assets, tangible or intangible, other than for a fair consideration in the Ordinary Course of Business; (ii) neither the Company nor any Subsidiary has entered into any agreement, contract, lease or license (or series of related agreements, contracts, leases and licenses) outside the Ordinary Course of Business; (iii) no party (including the Company) has accelerated, terminated, modified, or canceled any agreement, contract, lease or license (or series of related agreements, contracts, leases, and licenses) involving more than $5,000 in any single instance or in the aggregate to which the Company or any Subsidiary 22

is a party or by which any of them is bound; (iv) neither the Company nor any Subsidiary has granted any Security Interest in any of its assets, tangible or intangible; (v) neither the Company nor any Subsidiary has made any capital expenditure (or series of related capital expenditures) either involving more than $25,000 or outside the Ordinary Course of Business; (vi) neither the Company nor any Subsidiary has made any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans and acquisitions) either involving more than $5,000 or outside the Ordinary Course of Business; (vii) neither the Company nor any subsidiary has issued any note, bond or other debt security or created, incurred, assumed or guaranteed any indebtedness for borrowed money or capitalized lease obligation either involving more than $5,000 singly or $10,000 in the aggregate; (viii) neither the Company nor any Subsidiary has delayed or postponed the payment of accounts payable and other Liabilities outside the Ordinary Course of Business; (ix) neither the Company, nor any Subsidiary, has canceled, compromised, waived or released any right or claim (or series of related rights and claims) either involving more than $5,000 or outside the Ordinary Course of Business; (x) neither the Company nor any Subsidiary has granted any license or sublicense of any rights under or with respect to any Intellectual Property except as set forth in (S)4(m) of the Disclosure Schedule setting forth each of the Company's master franchise, franchise, sub-franchise, license, area developer and other similar documents; (xi) there has been no change made or authorized in the charter, bylaws, or other constituent documents of the Company or any Subsidiary; (xii) neither the Company nor any Subsidiary has issued, sold, or otherwise disposed of any of its capital stock, or other interests, or granted any options, warrants or other rights to purchase or obtain (including upon conversion, exchange or exercise) any of its capital stock or other interests; (xiii) neither the Company nor any Subsidiary has declared, set aside, 23

or paid any dividend or made any distribution with respect to its capital stock or other interests (whether in cash or in kind) or redeemed, purchased or otherwise acquired any of its capital stock or other interests; (xiv) neither the Company nor any Subsidiary has experienced any damage, destruction, or loss (whether or not covered by insurance) to its property; (xv) neither the Company nor any Subsidiary has made any loan to, or entered into any other transaction with, any of its directors, officers and employees outside the Ordinary Course of Business; (xvi) neither the Company nor any Subsidiary has entered into any employment contract or collective bargaining agreement, written or oral, or modified the terms of any such existing contract or agreement; (xvii) neither the Company nor any Subsidiary has granted any increase in the base compensation of any of its directors, officers, or employees outside the Ordinary Course of Business; (xviii) neither the Company nor any Subsidiary has adopted, amended, modified or terminated any bonus, profit-sharing, incentive, severance, or other plan, contract or commitment for the benefit of any of its directors, officers, and employees (or taken any such action with respect to any other Employee Benefit Plan); (xix) neither the Company nor any Subsidiary has made any other change in employment terms for any of its directors, officers or employees outside the Ordinary Course of Business; (xx) neither the Company nor any Subsidiary has made or pledged to make any charitable or other capital contribution outside the Ordinary Course of Business; and (xxi) to the Knowledge of the Principal Sellers, there has not been any other material occurrence, event, incident, action, failure to act or transaction outside the Ordinary Course of Business. (i) Undisclosed Liabilities. Neither the Company nor any Subsidiary has any Liability (and, to the Knowledge of the Principal Sellers, there is no Basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand against any of them giving rise to any Liability), except for (i) Liabilities set forth on the face of the Most Recent Balance Sheet, and (ii) Liabilities which have arisen 24

after the Most Recent Fiscal Month End in the Company's or any Subsidiary's Ordinary Course of Business (none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of contract, breach of warranty, tort, infringement or violation of law). (j) Legal Compliance. The Company and each Subsidiary has complied, in all material respects, with all applicable laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of federal, state, local, and foreign governments (and all agencies thereof), and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against any of them alleging any failure so to comply. The Company has made available or will make available to Buyer copies of all Uniform Franchise Offering Circulars used by the Company and each Subsidiary, together with copies of all state and/or Federal Franchise registrations and other filings made by the Company and each Subsidiary for franchise law compliance purposes. (k) Tax Matters. Except as disclosed on Schedule 4(k): (i) The Company and each Subsidiary has filed all Tax Returns that it was required to file. All such Tax Returns were correct and complete in all respects. All Taxes owed by the Company and each Subsidiary (whether or not shown on any Tax Return) have been paid, or adequate reserves have been made by the Company and the Subsidiaries for payment as set forth in the Financial Statements. The Company and each Subsidiary is not currently the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made by an authority in a jurisdiction where the Company or a Subsidiary does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no Security Interests on any of the assets of the Company or any Subsidiary that arose in connection with any failure (or alleged failure) to pay any Tax. (ii) The Company and each Subsidiary has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party. (iii) No Principal Seller or director or officer (or employee responsible for Tax matters) of the Company or any Subsidiary expects any authority to assess any additional Taxes for any period for which Tax Returns have been filed. There is no dispute or claim concerning any Tax Liability of the Company or any Subsidiary either (A) claimed or raised by any authority in writing or (B) as to which any of the Sellers, the directors and officers (and employees responsible for Tax matters) of the Company or such Subsidiary has Knowledge 25

based upon personal contact with any agent of such authority. (S) 4(k) of the Disclosure Schedule lists all federal, state, local, and foreign income Tax Returns filed with respect to the Company and each Subsidiary, indicates those Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject of audit. The Sellers have has delivered to the Buyer correct and complete copies of all examination reports, and statements of deficiencies assessed against or agreed to by the Company or any Subsidiary, and federal income Tax Returns related thereto. (iv) Neither the Company nor any Subsidiary has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. (v) Neither the Company nor any Subsidiary has filed a consent under Code Sec. 341(f) concerning collapsible corporations. Neither the Company nor any Subsidiary has made any payments, nor is it obligated to make any payments, nor is either of them a party to any agreement that under certain circumstances could obligate either of them to make any payments that will not be deductible under Code Sec. 280G. Neither the Company nor any Subsidiary has been a United States real property holding corporation within the meaning of Code Sec. 897(c)(2) during the applicable period specified in Code See. 897(c)(1)(A)(ii). Neither the Company nor any Subsidiary is a party to any Tax allocation or sharing agreement. Neither the Company nor any Subsidiary (A) has been a member of an Affiliated Group filing a consolidated federal income Tax Return or (B) has any Liability for the Taxes of any Person (other than the Company or such Subsidiary) under Treas. Reg. (S) 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise. (vi) (S) 4(k) of the Disclosure Schedule sets forth the following information with respect to the Company and each Subsidiary as of the most recent practicable date: (A) the basis of each of them in its assets; (B) the amount of any net operating loss, net capital loss, unused investment or other credit, unused foreign tax, or excess charitable contribution allocable to each of them. (vii) The unpaid Taxes of the Company and each Subsidiary: (A) did not, as of the Most Recent Fiscal Month End, exceed the reserve for Tax Liability (rather than any reserve for deferred Taxes 26

established to reflect timing differences between book and Tax income) set forth on the face of the Most Recent Balance Sheet (rather than in any notes thereto); and (B) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company and each Subsidiary in filing their Tax Returns. (l) Real Property. (i) Neither the Company nor any Subsidiary owns any real property or interests in real property. (ii) (S) 4(l)(ii) of the Disclosure Schedule lists and describes briefly all real property (a) leased or subleased to the Company and each Subsidiary including without limitation, each of the leases or subleases covering the Company's office at 1050 - 17th Street, Suite 1400, Denver, Colorado 80265, and covering the premises of each of the Stores (collectively, the "Store Leases"), and (b) leased or subleased by the Company and any Subsidiary to third parties, including the Company's and each Subsidiary's franchisees and area developers. The Sellers have delivered to the Buyer correct and complete copies of the leases and the subleases listed in (S) 4(l)(ii) of the Disclosure Schedule (as amended to date). With respect to each lease and sublease listed in (S) 4(l)(ii) of the Disclosure Schedule: (A) to the Knowledge of the Principal Sellers, the lease or sublease is legal, valid, binding, enforceable, and in full force and effect; (B) subject to the receipt of consents set forth in (S) 4(l)(ii) of the Disclosure Schedule, to the Knowledge of the Principal Sellers, the lease or sublease will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby, which transactions will not violate the terms thereof; (C) no party to the lease or sublease is in breach or default, and no event has occurred which, with notice or lapse of time, would constitute a breach or default or permit termination, modification, or acceleration thereunder; (D) no party to the lease or sublease has repudiated any provision thereof; 27

(E) there are no disputes, oral agreements, or forbearance programs in effect as to the lease or sublease; (F) with respect to each sublease, the representations and warranties set forth in subsections (A) through (E) above are true and correct with respect to the underlying lease; (G) neither the Company nor any Subsidiary has assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in the leasehold or subleasehold; (H) all facilities leased or subleased thereunder have received all approvals of governmental authorities (including licenses and permits) required in connection with the operation thereof and have been operated and maintained in accordance with applicable laws, rules and regulations; and (I) All facilities leased or subleased thereunder are supplied with utilities and other services necessary for the operation of said facilities. (m) Intellectual Property. (i) The Company and each Subsidiary owns or has the right to use pursuant to license, sublicense, agreement or permission all Intellectual Property necessary or desirable for the operation of the businesses of the Company as presently conducted and as presently proposed to be conducted. Each item of Intellectual Property owned or used by the Company and each Subsidiary immediately prior to the Closing hereunder will be owned or available for use by the Company on identical terms and conditions immediately subsequent to the Closing hereunder. (S) 4(m)(i) of the Disclosure Schedule lists each item of Intellectual Property owned, licensed by or used by the Company and each Subsidiary and sets forth whether it is owned by or licensed to them. (ii) To the Knowledge of the Principal Sellers, neither the Company nor any Subsidiary has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of third parties. Neither the Company nor any Subsidiary has ever received any charge, complaint, claim, demand, or notice alleging any such interference, infringement, misappropriation, or violation (including any claim that either of them must license or refrain from using any Intellectual Property rights of any third party). No third party has interfered with, infringed upon, misappropriated, or otherwise 28

come into conflict with any Intellectual Property rights of either of them. (iii) (S) 4(m)(iii) of the Disclosure Schedule identifies each patent, trademark, service mark, copyright, and other intellectual property right (together with the registration number) which has been issued to the Company or any Subsidiary, and any license, agreement or other permission which either of them has granted to any third party with respect to any of its Intellectual Property (together with any exceptions). The Principal Sellers have delivered or made available to the Buyer correct and complete copies of all such registrations, applications, licenses, agreements, and permissions (as amended to date) and has made available to the Buyer correct and complete copies of all other written documentation evidencing ownership of each such item. (S) 4(m)(iii) of the Disclosure Schedule also identifies each trade name or unregistered trademark used by the Company and each Subsidiary in connection with any of their businesses. With respect to each item of Intellectual Property required to be identified in (S) 4(m)(iii) of the Disclosure Schedule: (A) the Company or a Subsidiary possesses all right, title, and interest in and to the item, free and clear of any Security Interest, license or other restriction; (B) the item is not subject to any outstanding injunction, judgment, order, decree, ruling or charge; (C) no action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand is pending or is threatened which challenges the legality, validity, enforceability, use or ownership of the item; (D) neither the Company nor any Subsidiary has ever agreed to indemnify any Person for or against any interference, infringement, misappropriation or other conflict with respect to the item. (iv) (S) 4(m)(iv) of the Disclosure Schedule identifies each item of Intellectual Property that any third party owns and that the Company or any Subsidiary uses pursuant to any license, sublicense, agreement, or permission. The Sellers have delivered or made available to the Buyer correct and complete copies of all such licenses, sublicenses, agreements, and permissions (as amended to date). With respect to each item of Intellectual Property required to be identified in (S) 4(m)(iv) of the Disclosure Schedule: (A) the license, sublicense, agreement, or permission covering the item is legal, valid, binding, enforceable and in full force and effect; 29

(B) the license, sublicense, agreement, or permission will continue to be legal, valid, binding, enforceable and in full force and effect on identical terms following the Closing; (C) no party to the license, sublicense, agreement or permission is in breach or default, no event has occurred which with notice or lapse of time would constitute a breach or default or permit termination, modification, or acceleration thereunder; (D) no party to the license, sublicense, agreement or permission has repudiated any provision thereof; (E) to the Knowledge of the Principal Sellers, the underlying item of Intellectual Property is not subject to any outstanding injunction, judgment, order, decree, ruling or charge; (F) no action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand is pending or is threatened which challenges the legality, validity or enforceability of the underlying item of Intellectual Property; and (G) neither the Company nor any Subsidiary has granted any sublicense or similar right with respect to the license, sublicense, agreement or permission. (v) To the Knowledge of the Principal Sellers, the Intellectual Property of the Company and each Subsidiary does not interfere with, infringe upon, misappropriate or otherwise come into conflict with, any Intellectual Property rights of third parties as a result of the continued operation of its business as presently conducted. (n) Tangible Assets. The Company and each Subsidiary owns or leases all premises, machinery, equipment, and other tangible assets necessary for the conduct of its business as presently conducted and as presently proposed to be conducted. Each such tangible asset is free from defects, has been maintained in accordance with normal industry practice, is in good operating condition and repair (subject to normal wear and tear), and is suitable for the purposes for which it presently is used and presently is proposed to be used. (o) Inventory. The inventories and supplies of the Company and each Subsidiary are merchantable and fit for the purpose for which they were procured, and none of which is slow-moving, obsolete, damaged or defective, subject only to the reserve for inventory writedown set forth on the face of the Most Recent Balance Sheet 30

(rather than in any notes thereto) as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company and each Subsidiary. (p) Contracts. (S) 4(p) of the Disclosure Schedule lists the following contracts and other agreements to which the Company and each Subsidiary is a party: (i) each contract or agreement of any kind or nature entered into by any of the Company and Affiliates thereof, with any franchisee, sub-franchisee or area developer, or any officer, principal, owner, shareholder or representative of any such franchisee or area developer; (ii) any agreement (or group of related agreements) for the lease of personal property to or from any Person providing for lease payments in excess of $1,000 per annum; (iii) any agreement (or group of related agreements) for the manufacturing, brokering, distributing, delivering, marketing, supply, purchase or sale of materials, commodities, inventory, supplies, products or other personal property, or for the furnishing or receipt of services, the performance of which will extend over a period of more than one year, result in a material loss to the Company, or involve consideration in excess of $1,000; (iv) each contract or agreement of any kind or nature entered into by any of the Company and Affiliates thereof for the development, study or testing of products, inventory or supplies; (v) any agreement concerning a partnership or joint venture; (vi) any agreement (or group of related agreements) under which it has created, incurred, assumed, or guaranteed any indebtedness for borrowed money, or any capitalized lease obligation, in excess of $1,000 or under which it has imposed a Security Interest on any of its assets, tangible or intangible; (vii) any agreement concerning confidentiality or noncompetition; (viii) any agreement with any of the Sellers or their Affiliates (other than the Company); (ix) any profit sharing, stock option, stock purchase, stock appreciation, deferred compensation, severance, or other plan or arrangement for the benefit of its current or former directors, officers, and employees; (x) any collective bargaining agreement; 31

(xi) any agreement for the employment of any individual on a full-time, part-time, consulting, or other basis providing annual compensation in excess of $15,000 or providing severance benefits; (xii) any agreement under which it has advanced or loaned any amount to any of its directors, officers and employees; (xiii) any agreement with any governmental, regulatory or administrative office, agency, body, court, tribunal or organization of any foreign country or foreign or U.S. territory; (xiv) any agreement under which the consequences of a default or termination could have a material adverse effect on the business, financial condition, operations, results of operations, or future prospects of the Company and each Subsidiary; or (xv) any other agreement (or group of related agreements) the performance of which involves consideration in excess of $5,000 in a single instance or $10,000 in the aggregate. The Sellers have delivered to the Buyer a correct and complete copy of each written agreement listed in (S) 4(p) of the Disclosure Schedule (as amended to date) and a written summary setting forth the terms and conditions of each oral agreement referred to in (S) 4(p) of the Disclosure Schedule. With respect to each such agreement: (A) the agreement is legal, valid, binding, enforceable, and in full force and effect; (B) the agreement will continue to be legal, valid, binding, enforceable and in full force and effect on identical terms following the consummation of the transactions contemplated hereby; (C) no party is in breach or default, and, to the Knowledge of the Principal Sellers, no event has occurred which with notice or lapse of time would constitute a breach or default, or permit termination, modification or acceleration, under the agreement; and (D) none of the Company, any Subsidiary, or any other party has repudiated any provision of the agreement. (q) Notes and Accounts Receivable. All notes and accounts receivable of the Company and each Subsidiary are reflected properly on its books and records, are valid receivables, subject to no contractual setoffs or counterclaims (and there is no Basis for asserting any contractual setoffs or counterclaims with respect thereto) are current and collectible, and, to the Knowledge of the Principal Sellers, are collectible in accordance with their terms at their recorded amounts, subject only to (i) the reserve for bad debts set forth on the face of the Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company and each Subsidiary, and (ii) subject to the 32

limitations of bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium, or other laws relating to or generally affecting the rights of creditors and by general principles of equity. (r) Powers of Attorney. Except as set forth in (S) 4(r) of the Disclosure Schedule, there are no outstanding powers of attorney executed on behalf of the Company. (s) Insurance. (S) 4(s) of the Disclosure Schedule sets forth the following information with respect to each insurance policy (including policies providing property, casualty, liability, and workers' compensation coverage and bond and surety arrangements) to which the Company and any Subsidiary has been a party, a named insured, or otherwise the beneficiary of coverage at any time within the past three (3) years: (i) the name, address, and telephone number of the agent; (ii) the name of the insurer, the name of the policyholder, and the name of each covered insured; (iii) the policy number and the period of coverage; (iv) the scope (including an indication of whether the coverage was on a claims made, occurrence, or other basis) and amount of coverage; and (v) a description of any retroactive premium adjustments or other loss-sharing arrangements. With respect to each such insurance policy: (A) the policy is legal, valid, binding, enforceable, and in full force and effect; (B) the policy will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms through the date of the Closing; (C) none of the Company, any Subsidiary, nor any other party to the policy is in breach or default (including with respect to the payment of premiums or the giving of notices), and, no event has occurred which, with notice or the lapse of time, would constitute such a breach or default, or permit termination, modification, or acceleration, under the policy; and (D) none of the Company, any Subsidiary, or any other party to the policy repudiated any provision thereof. The Company and each Subsidiary has been covered during the past three (3) years by insurance in scope and amount customary and reasonable for the businesses in which it has engaged during the aforementioned period. (S) 4(s) of the Disclosure Schedule describes any self-insurance arrangements affecting the Company. (t) Litigation. (S) 4(t) of the Disclosure Schedule sets forth each instance in 33

which any of the Sellers, the Company and any Subsidiary (i) is subject to any outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a party or is threatened to be made a party to any action, suit, proceeding, hearing, or investigation of, in, or before any court or quasi-judicial or administrative agency of any federal, state, local or foreign jurisdiction or before any arbitrator. None of the actions, suits, proceedings, hearings, and investigations set forth in (S) 4(t) of the Disclosure Schedule could result in any material adverse change in the business, financial condition, operations, results of operations or future prospects of the Company. None of the Principal Sellers has any reason to believe that any such action, suit, proceeding, hearing or investigation may be brought or threatened against the Company or any Subsidiary. (u) Product Warranty. Each product made, sold or delivered by the Company and each Subsidiary has been in conformity with all applicable laws, statutes, regulations, retail and other applicable food industry standards, and, to the Knowledge of the Principal Sellers, neither the Company nor any Subsidiary has any Liability (and there is no Basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against any of them giving rise to any Liability) for damages in connection therewith. (v) Product Liability. To the Knowledge of the Principal Sellers, neither the Company nor any Subsidiary has any Liability and, to the Knowledge of the Principal Sellers, there is no Basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand giving rise to any Liability arising out of any injury to individuals or property as a result of the possession, consumption or use of any product made, sold or delivered by any of them. (w) Employees. (i) To the Knowledge of the Principal Sellers, no executive, key employee (including any store manager), or group of employees has any plans to terminate employment with the Company or any Subsidiary. To the Knowledge of the Principal Sellers, the Company has not committed any unfair labor practice. Neither the Company nor any Subsidiary is bound by any collective bargaining agreement, nor has any of them experienced any strikes, grievances, claims of unfair labor practices, or other collective bargaining disputes. Neither the Company nor any Subsidiary has committed any unfair labor practice. None of the Principal Sellers has any Knowledge of any organizational effort presently being made or threatened by or on behalf of any labor union with respect to the employees of the Company or any Subsidiary. (ii) (S)4(w)(ii) of the Disclosure Schedule sets forth the accrued vacation and sick and personal leave (if any) of the employees of the Company 34

and each Subsidiary. (x) Employee Benefit. (i) (S) 4(x) of the Disclosure Schedule lists each Employee Benefit Plan that the Company and each Subsidiary maintains or to which either contributes. (A) Each such Employee Benefit Plan (and each related trust, insurance contract, or fund) complies in form and in operation in all respects with the applicable requirements of ERISA, the Code, and other applicable laws. (B) All required reports and descriptions (including Form 5500 Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan Descriptions) have been filed or distributed appropriately with respect to each such Employee Benefit Plan. The requirements of Part 6 of Subtitle B of Title I of ERISA and of Code Sec. 4980B have been met with respect to each such Employee Benefit Plan which is an Employee Welfare Benefit Plan. (C) All contributions (including all employer contributions and employee salary reduction contributions) which are due have been paid to each such Employee Benefit Plan which is an Employee Pension Benefit Plan and all contributions for any period ending on or before the Closing Date which have been paid to each such Employee Pension Benefit Plan or accrued in accordance with past custom and practice. All premiums or other payments for all periods ending on or before the Closing Date have been paid with respect to each such Employee Benefit Plan which is an Employee Welfare Benefit Plan. (D) Each such Employee Benefit Plan which is an Employee Pension Benefit Plan meets the requirements of a "qualified plan" under Code Sec. 401(a) and has received, within the last four years, a favorable determination letter from the Internal Revenue Service. (E) The market value of assets under each such Employee Benefit Plan which is an Employee Pension Benefit Plan equals or exceeds the present value of all vested and nonvested Liabilities thereunder determined in accordance with PBGC methods, factors, and assumptions applicable to an Employee Pension Benefit Plan terminating on the date for determination. 35

(F) The Principal Sellers have delivered or made available to the Buyer correct and complete copies of the plan documents and summary plan descriptions, the most recent determination letter received from the Internal Revenue Service, the most recent Form 5500 Annual Report, and all related trust agreements, insurance contracts, and other funding agreements which implement each such Employee Benefit Plan. (ii) With respect to each Employee Benefit Plan that the Company or any Subsidiary maintains or ever has maintained or to which any of them contributes, ever has contributed, or ever has been required to contribute: (A) No such Employee Benefit Plan which is an Employee Pension Benefit Plan has been completely or partially terminated or been the subject of a Reportable Event as to which notices would be required to be filed with the PBGC. No proceeding by the PBGC to terminate any such Employee Pension Benefit Plan has been instituted or threatened. (B) There have been no Prohibited Transactions with respect to any such Employee Benefit Plan. No Fiduciary has any Liability for breach of fiduciary duty or any other failure to act or comply in connection with the administration or investment of the assets of any such Employee Benefit Plan. No action, suit, proceeding, hearing, or investigation with respect to the administration or the investment of the assets of any such Employee Benefit Plan (other than routine claims for benefits) is pending or threatened. None of the Sellers nor any of the directors and officers (and employees with responsibility for employee benefit matters) of the Company or any Subsidiary has any Knowledge of any Basis for any such action, suit, proceeding, hearing, or investigation. (C) Neither the Company nor any Subsidiary has incurred, and none of the Sellers, directors, or officers (and employees with responsibility for employee benefits matters) of the Company or any Subsidiary has any reason to expect that the Company or any Subsidiary will incur, any Liability to the PBGC (other than PBGC premium payments) or otherwise under Title IV of ERISA (including any withdrawal Liability) or under the Code with respect to any such Employee Benefit Plan which is an Employee Pension Benefit Plan. (iii) Neither the Company nor any Subsidiary contributes to, has contributed to, nor has been required to contribute to, any Multiemployer Plan or has any Liability (including withdrawal Liability) under any Multiemployer Plan. (iv) Neither the Company nor any Subsidiary maintains, has 36

maintained or contributed to, nor has been required to contribute to any Employee Welfare Benefit Plan providing medical, health, or life insurance or other welfare-type benefits for current or future retired or terminated employees, their spouses, or their dependents (other than in accordance with Code Sec. 4980B). (y) Guaranties. Neither the Company nor any Subsidiary is a guarantor or otherwise liable for any Liability or obligation (including indebtedness) of any other Person. (z) Environment, Health, and Safety. (i) To the Knowledge of the Principal Sellers, the Company and each Subsidiary has complied in all material respects with all Environmental, Health, and Safety Laws, and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against the Company or any Subsidiary alleging any failure so to comply. Without limiting the generality of the preceding sentence, the Company and each Subsidiary, and their respective predecessors and Affiliates, has obtained and been in compliance with all of the terms and conditions of all permits, licenses, and other authorizations which are required under, and has complied with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules, and timetables which are contained in, all Environmental, Health, and Safety Laws. (ii) Neither the Company nor any Subsidiary has any Liability (and none of the Company, any Subsidiary, or to the Knowledge of the Principal Sellers, their predecessors and Affiliates has handled or disposed of any substance, arranged for the disposal of any substance, exposed any employee or other individual to any substance or condition, or owned or operated any property or facility in any manner that could form the Basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against the Company or any Subsidiary giving rise to any Liability) for damage to any site, location, or body of water (surface or subsurface), for any illness of or personal injury to any employee or other individual, or for any reason under any Environmental, Health, and Safety Law. (iii) To the Knowledge of the Principal Sellers, all properties and equipment used in the business of the Company and each Subsidiary have been free of asbestos, PCB'S, methylene chloride, trichloroethylene, 1,2-trans dichloroethylene, dioxins, dibenzofurans, and Extremely Hazardous Substances. (aa) Certain Business Relationships with the Company. Except as disclosed 37

in (S) 4(aa) of the Disclosure Schedule, none of the Sellers has been involved in any business arrangement or relationship with the Company or any Subsidiary within the past twelve (12) months, and none of the Sellers owns any asset, tangible or intangible, which is used in the business of the Company or any Subsidiary. (bb) Company Debt; Shareholder Loans; Non-Compete Payments. (i) The aggregate Company Debt is less than or equal to $715,700 on the date hereof and shall be less than or equal to $715,700 at the Closing. (ii) The aggregate Shareholder Loans are less than or equal to $540,000 on the date hereof, and shall be less than or equal to $540,000 at the Closing. (iii) The aggregate Non-Compete Payments are less than or equal to $182,300 on the date hereof, and shall be less than or equal to $182,300 at the Closing. (cc) Disclosure. To the Knowledge of the Principal Sellers, the representations and warranties contained in this (S) 4 do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this (S) 4 not misleading. 5. Pre-Closing Covenants. The Parties agree as follows with respect to the period between the execution of this Agreement and the Closing. (a) General. Each of the Parties will use his or its best efforts to take all action and to do all things necessary in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in (S) 7 below). (b) Notices and Consents. The Sellers will cause the Company and each Subsidiary to give any notices to third parties, and will cause each of them to use its best efforts to obtain any third-party consents, that the Buyer may request in connection with the matters referred to in (S) 4(c) above. Each of the Parties will (and the Sellers will cause the Company to) give any notices to, make any filings with, and use its best efforts to obtain any authorizations, consents, and approvals of governments and governmental agencies in connection with the matters referred to in (S) 3(a)(ii), (S) 3(b)(iii), and (S) 4(c) above. (c) Operation of Business. Except as disclosed on (S) 5(c) of the Disclosure Schedule, the Sellers will not cause or permit the Company or any Subsidiary to engage in any practice, take any action or enter into any transaction outside the Ordinary Course of Business. Without limiting the generality of the foregoing, except with the written 38

consent of the Buyer, or as disclosed on (S)5(c) of the Disclosure Schedule, the Sellers will not cause or permit the Company or any Subsidiary to: (i) sell, lease, transfer or assign any of its assets, tangible or intangible, other than the sale of its inventory in the Ordinary Course of Business; (ii) enter into, or terminate, modify, accelerate or cancel, any agreement, contract, lease or license to which any of them is a party or by which they are bound; (iii) grant or permit any new Security Interest to be imposed upon any of their assets, tangible or intangible; (iv) close, or permit the closure of, any of its Stores or other premises upon which any of its business operations are presently conducted; commit to or acquire any new store or new store sites; (v) fail to maintain inventories and supplies necessary for the proper and continuing conduct of operations before and after the Closing in the manner presently conducted; (vi) make any capital expenditure (or series of related capital expenditures) other than in the Ordinary Course of Business; (vii) make any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans, and acquisitions); (viii) issue any note, bond or other debt security or create, incur, assume, or guarantee any indebtedness for borrowed money or capitalized lease obligation; (ix) delay or postpone the payment of accounts payable and other Liabilities outside the Ordinary Course of Business; (x) cancel, compromise, waive or release any right or claim (or series of related rights and claims); (xi) grant any license or sublicense of any rights under or with respect to any Intellectual Property; (xii) make or authorize any change in the charter, bylaws, or 39

constituent documents of the Company or any Subsidiary; (xiii) except as otherwise provided herein with respect to the conversion of the Preferred Shares, issue, sell or otherwise dispose of the Company's or any Subsidiary's capital stock or other interests, or grant any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange or exercise) the foregoing; (xiv) declare, set aside, or pay any dividend or make any distribution with respect to its capital stock or other interests (whether in cash or in kind) or redeem, purchase or otherwise acquire any of its capital stock or other interests; (xv) make any loan to, or enter into any other transaction or agreement with, any directors, officers or employees outside the Ordinary Course of Business; (xvi) grant any increase in the compensation of any directors, officers and employees; or adopt, amend, modify or terminate any bonus, profit-sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any directors, officers, or employees (or take any such action with respect to any other Employee Benefit Plan); or make any other change in employment terms for any directors, officers, or employees; (xvii) otherwise take any action or engage in any transaction outside the Ordinary Course of Business; provided that, subject to all other terms, limitations and requirements of this Section 5 (including without limitation the Sellers' obligations herein to preserve the Company's business pursuant to (S) 5(c)), and subject to the Working Capital Requirement, the Company may pay down Company Debt prior to the Closing in amounts larger and at times more frequent than in the Company's Ordinary Course of Business; or (xviii) otherwise engage in any practice, take any action, or enter into any transaction of the sort described in (S) 4(h) above. (d) Preservation of Business. Except as disclosed on (S) 5(d) of the Disclosure Schedule, the Sellers will cause the Company and each Subsidiary to keep its business and properties substantially intact, including its present operations, physical facilities, working conditions, and relationships with lessors, licensors, suppliers, customers, and employees. (e) Full Access. The Sellers will permit, and the Sellers will cause the Company and each Subsidiary to permit, representatives of the Buyer to have full access to all premises, properties, personnel, books, records (including Tax records), contracts 40

and documents of or pertaining to the Company and each Subsidiary at all reasonable times. (f) Notice of Developments/Updating the Disclosure Schedule. (i) Prior to the Closing Date, the Sellers will give prompt written notice to the Buyer of any adverse development causing a breach of any of the representations and warranties in (S) 4 above. Prior to the Closing Date, each Party will give prompt written notice to the other Parties of any adverse development causing a breach of any of his or its own representations and warranties in (S) 3 above; and (ii) from and after the execution of this Agreement, and prior to the Closing Date, the Sellers shall update and revise the Disclosure Schedule to refine the qualifications and disclosures set forth thereon, and as may be requested by the Buyer. (g) Waiver of Refusal Rights. Each Seller hereby waives any right of first refusal, co-sale right or other right that it may have to acquire the Company Shares of any other Seller. (h) Exclusivity; Encumbrance or Transfer of Shares. Prior to the earlier of the termination of this Agreement in accordance with (S) 9 below or the Closing Date, the Sellers will not (and the Sellers will not cause or permit the Company or any Subsidiary to) (i) solicit, initiate, or encourage the submission of any proposal or offer from any Person relating to the acquisition of any capital stock or other voting securities, or any substantial portion of the assets of, the Company or any Subsidiary (including any acquisition structured as a merger, consolidation, share exchange) or otherwise; or (ii) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any Person to do or seek any of the foregoing; or (iii) vote their Company Shares in favor of any such acquisition, whether structured as a merger, consolidation, share exchange or otherwise; or (iv) offer for sale, sell, hypothecate, pledge, encumber or transfer, or enter into any agreement or understanding involving the offering for sale, selling, hypothecating, pledging, encumbering or transferring, of any of the Company Shares or the stock of any of the Subsidiaries. The Sellers will promptly notify (and will cause the Company and each Subsidiary to promptly notify) the Buyer immediately if any Person makes any proposal, offer, inquiry, or contact with respect to any of the foregoing. (i) Conversion of Preferred Shares; Cancellation of Options. The Sellers, shall cause: (i) the Preferred Shares to be converted and the Conversion Shares to be issued in accordance with the requirements of (S)(S) 3(a)(v) and 4(b) above; and (ii) together with the Company, the Options to be cancelled prior to 41

the Closing. 6. Post-Closing Covenants. The Parties agree as follows with respect to the period following the Closing. (a) General. In case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party may reasonably request, all at the sole cost and expense of the requesting Party (unless the requesting Party is entitled to indemnification therefor under (S) 8 below). The Sellers acknowledge and agree that from and after the Closing the Buyer will be entitled to possession of all documents, books, records (including Tax records), agreements and financial data of any sort relating to the Company and each Subsidiary. (b) Litigation Support. In the event and for so long as any Party actively is contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving the Company or any Subsidiary, each of the other Parties will cooperate with him or it and his or its counsel in the contest or defense, make available their personnel, and provide such testimony and access to their books and records as shall be necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending Party (unless the contesting or defending Party is entitled to indemnification therefor under (S) 8 below). (c) Transition. The Sellers will not (and will not permit the Company or any subsidiary to) take any action that is designed or intended to have the effect of discouraging any lessor, sublessor, sub- lessee, licensor, licensee, franchisee, customer, supplier, or other business associate of the Company or any Subsidiary from maintaining the same business relationships with the Company and each Subsidiary after the Closing as it maintained prior to the Closing. The Sellers will refer all customer and vendor inquiries relating to the businesses of the Company and each Subsidiary to the Buyer from and after the Closing. After the Closing, the Sellers shall have reasonable access to the Company's and Subsidiaries' books and records pertaining to the periods of their operations prior to the Closing. Such access shall be provided upon reasonable notice to the Buyer and upon terms established by the Buyer, including without limitation, the execution of confidentiality and non-disclosure agreements satisfactory to the Buyer. (d) Confidentiality. Each of the Sellers will treat and hold as such all of the Confidential Information, refrain from using any of the Confidential Information except in connection with this Agreement, and deliver promptly to the Buyer or destroy, at the 42

request and option of the Buyer, all tangible embodiments (and all copies) of the Confidential Information which are in his or her possession. In the event that the Seller is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Confidential Information, such Seller will notify the Buyer promptly of the request or requirement so that the Buyer may seek an appropriate protective order or waive compliance with the provisions of this (S) 6(d). If, in the absence of a protective order or the receipt of a waiver hereunder, such Seller is, on the advice of counsel, compelled to disclose any Confidential Information to any tribunal, such Seller may disclose the Confidential Information to the tribunal; provided, however, that the disclosing Seller shall use his or her best efforts to obtain, at the request of the Buyer, an order or other assurance that confidential treatment will be accorded to such portion of the Confidential Information required to be disclosed as the Buyer shall designate. The foregoing provisions shall not apply to any Confidential Information which is generally available to the public immediately prior to the time of disclosure. (e) Covenant Not to Compete. Each of the Principal Sellers hereby agrees that he it will not "directly or indirectly compete" with the Buyer for a period of two (2) years from and after the Closing Date. For purposes of this Agreement, the phrase "directly or indirectly compete" shall include: (i) owning, managing, operating, or controlling, or participating in the ownership, management, operation, or control of, or being connected with or having any interest in, as a stockholder, director, officer, employee, agent, consultant, assistant, advisor, sole proprietor, partner or otherwise, any (A) business, (B) operation, or (C) single or multiple retail stores, any of the foregoing which singularly or in the aggregate derive fifteen percent (15%) or more of its sales or revenues from any retail baked-goods or mall-based, snack foods business (collectively, a "Competing Business"); and (ii) soliciting or attempting to solicit the services of any employee of Buyer or any affiliate of Buyer. Provided however, this paragraph 6(e) shall not apply to any -------- ------- Principal Seller operating a Competing Business as a franchisee or licensee of the Buyer. If the final judgment of a court of competent jurisdiction declares that any term or provision of this (S) 6(e) is invalid or unenforceable, the Parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed. (f) Post-Closing Audit and Preparation of Consolidated Financial Statements. The Parties acknowledge that after the Closing, the Buyer and the Company 43

intend to select, engage and pay an independent accounting firm (the "Auditors") to conduct an audit (the "Audit") of the books, records and operations and to prepare (i) audited consolidated balance sheets and statements of operations, stockholders' equity and cash flows of the Company as of and for the fiscal year ending December 31, 1997, and (ii) unaudited consolidated balance sheets and statements of the Company's operations for the interim period commencing on January 1, 1998, and ending on a date specified by the Buyer (collectively, the "Consolidated Financial Statements"). The Principal Seller Marc N. Geman agrees to fully cooperate with and assist the Auditors, the Buyer and the Company in connection with the Audit and the preparation of Consolidated Financial Statements, including (i) promptly reviewing, analyzing, and commenting upon information prepared for, compiled by or furnished to the Auditors by or on behalf of the Company, (ii) furnishing information requested by the Auditors, (iii) reviewing and approving Consolidated Financial Statements (and notes thereto) prepared by the Auditors, and (iv) executing and delivering to the Auditors a so-called "Representation" or "Management Letter" (the "Management Letter") containing statements and representations concerning the Consolidated Financial Statements and the books, records, assets, liabilities and operations of the Company prior to the Closing Date. The Management Letter shall be substantially in the same form as those management letters, dated February 11, 1997 and February 25, 1998, executed respectively by the Company and Pretzelmaker, Inc., and Pretzelmaker, Inc., and delivered to BDO Seidman, LLP in connection with the Financial Statements referred to in (S)(S) 4(g)(i) and (iii) above (copies of which are included as a part of Exhibit E), supplemented in accordance with the American Institute of Certified Public Accountants' then current standards and requirements applicable to such Management Letters. (g) Office Lease; Location of Company Records. Until the later of January 4, 1999 or the payment in full of the Notes, the Buyer shall (i) cause the offices of the Company to remain in its current location (subject to landlord approval), and (ii) to maintain the books and records of the Company at the current offices of the Company. 7. Conditions to Obligation to Close. (a) Conditions to Obligation of the Buyer. The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in (S) 3(a) and (S) 4 above shall be true and correct in all material respects at and as of the Closing Date; (ii) each of the Sellers shall have performed and complied with all of his or her covenants hereunder in all material respects through the Closing; 44

(iii) the Company shall have procured all of the third party consents specified in (S) 5(b) above including, without limitation, any required consent of the Company's landlords and sublandlords with respect to each of the Store Leases; (iv) no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would: (A) prevent consummation of any of the transactions contem plated by this Agreement; (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation; (C) affect adversely the right of the Buyer to own the Company Shares and to control the Company and each Subsidiary; or (D) affect adversely the right of the Company and each Subsidiary to own its assets and to operate its businesses (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect); (v) each of the Sellers shall have delivered to the Buyer a certificate to the effect that each of the conditions specified above in (S) 7(a)(i)-(iv) is satisfied in all respects; (vi) the Parties and the Company shall have received all other authorizations, consents, and approvals of governments and governmental agencies referred to in (S) 3(a)(ii), (S) 3(b)(ii), and (S) 4(c) above; (vii) the Buyer shall have received from counsel to the Sellers an opinion substantially in the form set forth in Exhibit F attached hereto, addressed to the Buyer, and dated as of the Closing Date; (viii) at least five (5) business days prior to the Closing, the Buyer shall have received the resignations, effective as of the Closing, of each of the Company's and the Subsidiaries' respective directors and the officers set forth on (S)(S) 4(a) and (b) of the Disclosure Schedule; (ix) the Buyer shall have obtained on terms and conditions satisfactory to it all of the financing it needs in order to consummate the transactions contemplated hereby; 45

(x) the Buyer's due diligence investigation of the Sellers, the Company and each Subsidiary shall have been completed to the Buyer's satisfaction, and the results of such due diligence investigation shall be acceptable to the Buyer in its sole discretion; (xi) the Parties and the Company's creditors shall have agreed with regard to the payment or assumption of the Company Debt or any of its components, and the release of encumbrances covering the assets and/or capital stock of the Company and/or the Subsidiaries; (xii) all actions to be taken by the Sellers in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Buyer; (xiii) [intentionally blank]; (xiv) the Buyer shall have determined in its sole discretion that there is no unacceptable material conflict between the respective development areas of the Company, the Subsidiaries and the Buyer; (xv) all voting trusts, proxies and other agreements or understandings with respect to the voting of the capital stock of the Company shall have been terminated before the Closing; (xvi) the conversion of the Preferred Shares to Common Shares, as described in (S)(S) 3(a)(v) and 4(b) above, shall have occurred, and before the Closing there shall be no issued or outstanding Preferred Shares; (xvii) the Options shall have been cancelled, and all obligations of the Company thereunder shall have been forever terminated. The Buyer may waive any condition specified in this (S) 7(a) if it executes a writing so stating at or prior to the Closing. (b) Conditions to Obligation of the Sellers. The obligation of the Sellers to consummate the transactions to be performed by them in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in (S) 3(b) above shall be true and correct in all material respects at and as of the Closing Date; 46

(ii) the Buyer shall have performed and complied with all of its covenants hereunder in all material respects through the Closing; (iii) no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement or (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect); (iv) the Buyer shall have delivered to the Sellers a certificate to the effect that each of the conditions specified above in (S) 7(b)(i)-(iii) is satisfied in all respects; (v) the Parties and the Company shall have received all other authorizations, consents, and approvals of governments and governmental agencies referred to in (S) 3(a)(ii), 3(b)(iii), and (S) 4(c) above; and (vi) all actions to be taken by the Buyer in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Sellers. The Sellers, through the Agent Sellers, may waive any condition specified in this (S) 7(b) if they execute a writing so stating at or prior to the Closing. 8. Remedies for Breaches of This Agreement. (a) Survival of Representations and Warranties. All of the representations and warranties of the Parties contained in this Agreement shall survive the Closing hereunder (even if the damaged Party knew or had reason to know of any misrepresentation or breach of warranty at the time of Closing) and continue in full force and effect for a period of two (2) years thereafter, except for representations regarding the Company's Tax Liabilities, which representations will expire and be terminated on the date of expiration of the statute of limitations for collection of such Tax Liabilities. (b) Indemnification. (i) Principal Sellers' Indemnification of Buyer. The Principal 47

Sellers, jointly and severally, shall indemnify, save and hold harmless each of the Buyer, its Affiliates and each of its officers, directors, employees, agents, legal representatives, advisors, consultants, successors and assigns, up to a maximum of $7,800,000 in the aggregate, from any Adverse Consequences suffered or incurred by any of them to the extent arising from: (A) any breach of any of the Sellers' or the Company's (and any Subsidiary's) representations, warranties and covenants contained in this Agreement, in the Disclosure Schedule, or in any certificate, instrument or other document delivered pursuant hereto or thereto; (B) any breach of any covenant of the Sellers contained in this Agreement requiring performance after the Closing Date; or (C) any Liability of the Company or any Subsidiary for the unpaid Taxes of any Person (other than the Company) under Treas. Reg. (S) 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise; provided, that the aggregate indemnification obligation, if any, of the Principal Seller Louis H. Marks under this Section 8(b)(i), which shall be the only financial obligation of Louis H. Marks under this Agreement, shall not exceed $1,500,000. The Principal Sellers expressly acknowledge and agree that the indemnification obligations of the other Principal Sellers, Marc N. Geman and Donald G. Cox, Jr., under this Agreement or otherwise, shall not be affected or limited in any manner by the limitation set forth in the preceding sentence concerning the indemnification obligations of the Principal Seller, Louis H. Marks. (ii) Buyer's Indemnification of Sellers. The Buyer shall indemnify, save and hold harmless each of the Sellers, their Affiliates and each of their respective officers, directors, employees, partners, members, agents, legal representatives, advisors, consultants, successors and assigns, from any Adverse Consequences suffered or incurred by any of them to the extent arising from: (A) any breach of any of the Buyer's representations, warranties and covenants contained in this Agreement, or in any certificate, instrument or other document delivered by the Buyer pursuant hereto or thereto; (B) any breach of any covenant of the Buyer contained in this Agreement requiring performance after the Closing Date. 48

(iii) Buyers Indemnification of Sellers and Company. The Buyer shall indemnify, save and hold harmless each of the Sellers and the Company, and the Affiliates of each of the Sellers and the Company, and each of their respective officers, directors, partners, members, employees, agents, legal representatives, advisors, consultants, successors and assigns, from any Adverse Consequences suffered or incurred by any of them to the extent arising from any Third Party Claim brought against the Sellers, the Company (or any of the Sellers' or the Company's Affiliates or their respective officers, directors, partners, members, employees, agents, legal representatives, advisors, consultants, successors or assigns) to restrict, restrain, prohibit or enjoin the execution of this Agreement, the execution or delivery of documents or instruments executed or delivered in connection herewith or the consummation of the transactions that are the subject of this Agreement or such related documents or instruments, or to recover damages arising from Third Party Claims that the execution of this Agreement, the execution or delivery of documents or instruments executed or delivered in connection herewith or the consummation of the transactions that are the subject of this Agreement or such related documents or instruments, (A) will or has violated any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency or court to which Buyer or any Affiliate of Buyer is subject or any provision of the charter or bylaws of Buyer or any Affiliate of Buyer, or (B) will or has conflicted with, resulted in a breach of, constituted a default under, resulted in the acceleration of, created in any party the right to accelerate, terminate, modify, or cancel, or required any notice be given by Buyer or by any Affiliate of Buyer (or by their respective officers, directors, partners, members, employees, agents, legal representatives, advisors, consultants, successors or assigns) for which notice was not given, under, any agreement, contract, lease, license, instrument or other arrangement to which Buyer or any Affiliate of Buyer is a party or by which Buyer or any Affiliate of Buyer is bound (other than this Agreement) or to which any of the assets of Buyer or of any Affiliate of Buyer is subject, or (C) will or does require the approval or consent of any third party, including but not limited to, any Affiliate of Buyer, or any officer, director, shareholder, partner, member, employee, agent, legal representative, advisor or consultant of Buyer or of any Affiliate of Buyer, and such approval or consent was not obtained. (iv) Reimbursement of Costs. In the event Buyer shall fail to consummate the transactions that are the subject of this Agreement on the Closing Date due to the parties being restricted, restrained, prohibited or enjoined from executing this Agreement, executing or delivering documents or instruments executed or delivered in connection herewith or consummating the transactions that are the subject of this Agreement or such related documents or instruments due to a Third Party Claim for which Buyer is required to indemnify, 49

save and hold harmless the Sellers and the Company in accordance with Section 8(b)(i) above, in addition to any Adverse Consequences that may be incurred by the Sellers, the Company, or both as a result thereof for which the Buyer shall be liable, Buyer shall reimburse and pay to the Company and the Sellers all costs and expenses incurred by the Company, the Sellers or both (or any of their Affiliates or respective officers, directors, shareholders, partners, members, employees, agents, legal representatives, advisors, consultants, successors or assigns) as a result of or associated with this Agreement, the negotiations hereunder or the preparation for the consummation of the transactions hereunder, including but not limited to, all travel, lodging and meal costs, copying costs, telephone costs, postage and other delivery charges, fees and expenses of non-employee and non-Seller attorneys, accountants, financial advisers, brokers, engineers and other professionals, advisors and consultants of the Company or the Sellers, and all other out of pocket expenses of any kind or nature. The Buyer shall pay such costs and expenses to the Company or the Sellers, as the case may be, within fifteen (15) days following presentation of an invoice and supporting documentation therefor. (c) Matters Involving Third Parties. (i) If any third party shall notify any Party (the "Indemnified Party") with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against any other Party (the "Indemnifying Party") under this (S) 8, then the Indemnified Party shall promptly notify the Indemnifying Party thereof in writing; provided, however, that no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party thereby is prejudiced. (ii) Any Indemnifying Party will have the right to defend the Indemnified Party against the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so long as: (A) the Indemnifying Party notifies the Indemnified Party in writing within 15 days after the Indemnified Party has given notice of the Third Party Claim that the Indemnifying Party will indemnify the Indemnified Party from and against the entirety of any Adverse Consequences the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim; (B) the Indemnifying Party provides the Indemnified Party with evidence acceptable to the Indemnified Party that the Indemnifying Party will have the financial resources to defend against the Third Party 50

Claim; (C) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief; (D) settlement of, or an adverse judgment with respect to, the Third Party Claim is not, in the good faith judgment of the Indemnified Party, likely to establish a precedential custom or practice materially adverse to the continuing business interests of the Indemnified Party; and (E) the Indemnifying Party conducts the defense of the Third Party Claim actively and diligently. (iii) So long as the Indemnifying Party is conducting the defense of the Third Party Claim in accordance with (S) 8(c)(ii) above, (A) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim; (B) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be withheld unreasonably); and (C) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party (not to be withheld unreasonably). (iv) In the event any of the conditions in (S) 8(c)(ii) above is or becomes unsatisfied, however, (A) the Indemnified Party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner it reasonably may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, any Indemnifying Party in connection therewith); (B) the Indemnifying Parties will reimburse the Indemnified Party promptly and periodically for the costs of defending against the Third Party Claim (including reasonable attorneys' fees and expenses); and 51

(C) the Indemnifying Parties will remain responsible for any Adverse Consequences the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this (S) 8. (d) Determination of Adverse Consequences. The Parties shall take into account the time cost of money in determining Adverse Consequences for purposes of this (S) 8. (e) Certain Set-Off Rights. At the Buyer's election, payments, if any, to be made by any of the Sellers under this (S) 8 shall be made by reducing, on a dollar-for-dollar basis, any unpaid balance of any of the Deferred Payments, by the amount of all or any portion of any Adverse Consequences the Buyer may suffer or incur. All such indemnification payments under this (S) 8 shall be deemed adjustments to the Purchase Price. Notwithstanding the foregoing, before any set-off rights may be exercised, the Buyer shall give written notice to the Agent Sellers of any claim for indemnification hereunder, specifying in reasonable detail the grounds for indemnification and the amount of the set-off, and the Agent Sellers may object to any such set-off by responding in writing within fifteen (15) days after receipt of the Buyer's notice. If the Agent Sellers fail to object within the fifteen (15)-day period specified, the Agent Sellers shall waive any right to object to the Buyer's right of indemnification hereunder or the amount of the set-off. If the Agent Sellers dispute either the Buyer's right to indemnification, or the amount of the set-off, or both, then Escrow Agent shall retain the amount of the set-off pending resolution of the dispute, and the Parties shall negotiate in good faith to resolve all issues in dispute. If, after a period of fifteen (15) days following the date on which the Agent Sellers give Buyer notice of its objection to Sellers indemnification hereunder, any such matter remains in dispute, then the Parties shall employ the dispute resolution procedures set forth in (S) 9 of this Agreement. Each Party agrees to make available to the other Party and the attorneys and accountants of the other Party, within a reasonable time after a request is made, all books and records which are reasonably required by the requesting Party to evaluate a claim for indemnification or objection hereunder. (f) Other Indemnification Provisions. The foregoing indemnification, set off and recoupment provisions are in addition to, and not in derogation of, any statutory, equitable, or common law remedy any Buyer may have for breach of representation, warranty or covenant against any of the Sellers. (g) Sellers' Release of Claims. Effective as of the Closing Date, each of the Sellers (for themselves and their respective officers, directors, members, shareholders, partners, beneficiaries, employees, agents, representatives, heirs, successors and assigns) hereby (i) releases, acquits and forever discharges the Company and each of the 52

Subsidiaries from any and all liabilities, obligations, indebtedness, claims, demands, actions or causes of action arising from or relating to any event, occurrence, act, omission or condition occurring or existing on or prior to the Closing Date, including, without limitation, any claim for indemnity or contribution from the Company or any of the Subsidiaries in connection with the obligations or liabilities of the Sellers hereunder, except for (A) any contractual obligations of the Buyer to the Sellers set forth in this Agreement, and (B) interests in benefit plans to which any of the Sellers are entitled; (ii) waives all breaches, defaults or violations of each agreement, if any, among or between shareholders applicable to the Company Shares and agrees that any and all such agreements are terminated as of the Closing Date, and (iii) waives any and all preemptive or other rights to acquire any shares of stock the Company or any of the Subsidiaries and releases any and all claims arising in connection with any prior default, violation or failure to comply with or satisfy any such preemptive or other rights. In addition, the Sellers shall obtain and deliver at Closing, in a form acceptable to the Buyer, releases from all Non-Compete Recipients, Consultants and holders of Shareholder Loans, who are not Sellers. (h) Termination. (i) Termination of Agreement. The Parties may terminate this Agreement as provided below: (A) The Buyer and all of the Sellers acting together may terminate this Agreement by mutual written consent at any time prior to the Closing; (B) The Buyer may terminate this Agreement for any or no reason, including without limitation, based on the results of its due diligence investigation, by giving written notice to the Sellers at any time prior to the Closing; (C) [Intentionally Omitted]; and (D) Time being of the essence, in the event of either party's failure to tender full performance of their or its closing duties set forth hereunder, for any reason whatsoever, before 5:00 p.m. MST on November 19, 1998 (unless mutually agreed to the contrary by the Buyers and the Agent Sellers), this Agreement shall terminate. Whether this Agreement closes or terminates pursuant to this section, such closing or termination, as the case may be, shall not prejudice either party's right to pursue any claim for damages, if any, resulting from any breach of condition or covenant (whether pre- or post-closing). 53

(ii) Action By Fewer Than All Sellers. Any action permitted to be taken under this (S) 8(h) by the Sellers holding a majority of the Company Shares shall, if so taken, be binding upon and constitute the act of all of the Sellers. (iii) Effect of Termination. If any Party terminates this Agreement pursuant to (S) 8(h)(i) above, all rights and obligations of the Parties under this Agreement, and any other agreement or instrument executed in connection herewith shall terminate without any Liability of any Party to any other Party (except for any Liability of any Party then in breach). 9. Miscellaneous. (a) Press Releases and Public Announcements. No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement prior to the Closing without the prior written approval of the Buyer and the Seller; provided, however, that any Party may make any public disclosure it believes in good faith is required by applicable law (in which case the disclosing Party will use its best efforts to advise the other Parties prior to making the disclosure). (b) No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. (c) Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they related in any way to the subject matter hereof. (d) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of his, her, or its rights, interests, or obligations hereunder without the prior written approval of the Buyer and the Seller; provided, however, that the Buyer may (i) assign any or all of its rights and interests hereunder to one or more of its Affiliates and (ii) designate one or more of its Affiliates to perform its obligations hereunder (in any or all of which cases the Buyer nonetheless shall remain responsible for the performance of all of its obligations hereunder). (e) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. (f) Headings. The section headings contained in this Agreement are inserted 54

for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (g) Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: If to any Seller, c/o Agent Sellers: Marc N. Geman c/o 3855 South Dahlia Street Englewood, CO 80110 Don Cox c/o Juices Wild 1015 South Cimarron Road Las Vegas, NV 89128 Louis H. Marks c/o M&R Enterprises 8707 Skokie Blvd., #301 Skokie, IL 60077-2292 Copy to: Smith McCullough, P.C. 4643 South Ulster Street Suite 900 Denver, CO 80237 If to the Buyer: Mrs. Fields' Original Cookies, Inc. ATTN: Legal Department 2855 E. Cottonwood Parkway, Suite 400 Salt Lake City, UT 84121 Copy to: Jones, Waldo, Holbrook & McDonough ATTN: Glen D. Watkins 1500 Wells Fargo Plaza 170 So. Main Street Salt Lake City, UT 84101 Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall 55

be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth. (h) Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Utah without giving effect to any choice or conflict of law provision or rule (whether of the State of Utah or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Utah. (i) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyer and the Seller. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. (j) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. (k) Expenses. Each of the Parties will bear his or its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby, provided that the Company shall pay the costs and expenses of the Sellers in connection with this Agreement up to the Closing. Nothing in this section shall be construed to affect the Working Capital Requirement. (l) Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. The Parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of the first representation, warranty, or covenant. 56

(m) Incorporation of Exhibits, Annexes, and Schedules. The Exhibits, Annexes, and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. (n) Dispute Resolution. Any dispute arising out of or relating to this Agreement, including, but not limited to, claims for indemnification pursuant to Section 8 shall be resolved in accordance with the procedures specified in this Section 9(n), which shall be the sole and exclusive procedures for the resolution of any such disputes; provided, however, that -------- ------- this Section 9(n) shall not apply to or govern the Parties' resolution of any Objections to the Closing Balance Sheets (for which the provisions of (S) 2(h) constitute the sole and exclusive dispute resolution procedures therefor). (i) The Parties shall attempt in good faith to resolve any dispute arising out of or relating to this Agreement promptly by negotiation between the Sellers and their appointed representatives and executives of Buyer who, if possible, are at a higher level of management than the persons with direct responsibility for administration of this Agreement. (A) Any Party may give the other Party written notice of any dispute not resolved in the normal course of business. Within fifteen (15) days after delivery of the notice, the receiving Party shall submit to the other a written response. The notice and response shall include (1) a statement of each Party's position and a summary of arguments supporting that position, and (2) the name and title of the executives or representatives who will represent that Party and of any other person who will accompany the executives or representatives. Within thirty (30) days after delivery of the disputing Party's notice, the executives or representatives of the Parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to attempt to resolve the dispute. All reasonable requests for information made by one Party to the other will be honored. (B) If the matter has not been resolved by these persons within sixty (60) days of the disputing Party's notice, or if the parties fail to meet within thirty (30) days of the disputing Party's notice, either Party may initiate mediation as provided hereinafter. (C) All negotiations pursuant to this clause are confidential and shall be treated as compromise and settlement negotiations for purposes of the Federal Rules of Evidence and State rules of evidence. (ii) If the dispute has not been resolved by negotiation as provided herein, the Parties shall endeavor to settle the dispute by nonbinding mediation and to bear equally the costs of the mediation. The Parties will jointly appoint a mutually acceptable 57

mediator promptly after a request for mediation is made by any Party. The Parties agree to participate in the mediation and all related negotiations in good faith. (iii) If the dispute has not been resolved by non-binding means as provided herein within ninety (90) days of the initiation of such procedure, either Party may initiate litigation (upon thirty (30) days' written notice to the other Party); provided, however, that if one Party has requested the other to participate in a non-binding procedure and the other has failed to participate, the requesting Party may initiate litigation before expiration of the above period. (iv) The procedures specified in this Section 9(n) shall be the sole and exclusive procedures for the resolution of disputes between the Parties arising out of or relating to this Agreement; provided, however, that a Party, without prejudice to the above procedures, may file a complaint (for statute of limitations or venue reasons) or to seek temporary or preliminary injunctive or other provisional judicial relief, if in its sole judgment such action is necessary to avoid irreparable damage or to preserve the status quo. Despite such action the Parties will continue to participate in good faith in the procedures specified in this Section. (v) All applicable statues of limitation and defenses based upon the passage of time shall be tolled while the procedures specified in this Section are pending. The Parties will take such action, if any, required to effectuate such tolling. (vi) Each Party is required to continue to perform its obligations under this Agreement pending final resolution of any dispute arising out of or relating to this Agreement. 58

(o) Submission to Jurisdiction. Each of the Parties submits to the jurisdiction of any state or federal court sitting in Salt Lake City, Utah, in any action or proceeding arising out of or relating to this Agreement and agrees that all claims in respect of the action or proceeding may be heard and determined in any such court. Each Party also agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Each of the Parties waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other Party with respect thereto. Each Party agrees that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law or at equity. (p) Attorneys' Fees. Should any litigation be commenced with respect to any matters governed by this Agreement, the Party prevailing shall be entitled, in addition to such other relief as may be granted, to a reasonable sum for such Party's attorneys' fees and expenses determined by the court in such litigation. [Remainder of page intentionally left blank] 59

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written. BUYER: MRS. FIELDS' ORIGINAL COOKIES, INC. By: --------------------------------- Its: -------------------------------- COMPANY: PRETZELMAKER HOLDINGS, INC. By: --------------------------------- Its: -------------------------------- SELLERS: ------------------------------ Marc Geman ------------------------------ -------------------------------- Marc N. Geman, IRA Marty Geman, IRA S-1

-------------------------------- ------------------------------------ Donald G. Cox, Jr. Jerrold H. Marks -------------------------------- ------------------------------------ Louis H. Marks Dr. Jeffrey L. Katzell -------------------------------- ------------------------------------ John Capone Bonnie Capone -------------------------------- ------------------------------------ Jack Ruggles Mildred Ruggles -------------------------------- ------------------------------------ Jeffrey Tripp April Tripp -------------------------------- ------------------------------------ Dale Fowler Brian Woods -------------------------------- ------------------------------------ Anthony Joseph Lynn Gore -------------------------------- Mark Maximovich S-2

JJJJM, LLC NORTHWESTERN TRUST, FBO C. LEROY SCHENK, IRA By: By: ------------------------ --------------------------- Its: Its: ----------------------- -------------------------- COLORADO PRETZEL PARTNERSHIP WILLIAM WIENER, IN TRUST FOR MICHAEL WIENER By: By: ------------------------ --------------------------- Its: Its: ----------------------- -------------------------- WILLIAM WIENER, IN TRUST FOR KEVIN WIENER By: ------------------------ Its: ----------------------- S-3

EXHIBIT A Attach LTM EBITDA Adjustment

EXHIBIT B Attach List of Sellers and Estimated Company Shares Owned

EXHIBIT C OLD--NEEDS TO BE REVISED!!! =========================== PURCHASE PRICE ESTIMATED ALLOCATIONS AND DEDUCTIONS ALLOCATIONS ============================================ SHAREHOLDER NET PROCEEDS % -------------------------------------------- Marc Geman (Promissory 22.7632% Note) -------------------------------------------- Marc Geman (Cash)/*/ 11.5695% -------------------------------------------- Geman IRA's 1.6629% -------------------------------------------- Louis Marks 9.6440% -------------------------------------------- Jerrold Marks 9.6440% -------------------------------------------- JJJJM, LLC 7.7156% -------------------------------------------- John & Bonnie Capone 1.9291% -------------------------------------------- Colorado Pretzel Partnership 1.9291% -------------------------------------------- LeRoy Schenk IRA 1.9291% -------------------------------------------- Jeffery & April Tripp/**/ 4.8000% -------------------------------------------- Bill Weiner, Trustee 1.9291% -------------------------------------------- Dr. Jeffrey L. Katzell 0.9642% -------------------------------------------- Don Cox 17.6369% -------------------------------------------- Jack & Mildred Ruggles 2.8933% -------------------------------------------- Brian Woods 0.4800% -------------------------------------------- Anthony Joseph/*/ 1.3694% -------------------------------------------- Dale Fowler 0.4562% -------------------------------------------- ------------------------ /*/ Tax on option exercise to be withheld from option employees gross proceeds and remitted to Pretzelmaker, Inc. /**/Sixteen Thousand Dollars ($16,000.00) to be withheld from Sellers Tripp and remitted to Pretzelmaker, Inc. in settlement of past royalties and advertising fees.

=========================================== SHAREHOLDER NET PROCEEDS% ------------------------------------------- Lynn Gore/*/ 0.2285% ------------------------------------------- Mark Maximovich/*/ 0.4562% ------------------------------------------- 100.000% ===========================================

EXHIBIT D Attach Escrow Agreement

EXHIBIT E Attach Financial Statements of the Company

EXHIBIT F Attach Form of Sellers' Opinion

ANNEX II Exceptions to Buyer's Representations None.

<TABLE> <S> <C> <C> <C> PLEASE INDICATE ONE TYPE OF CORPORATION ARTICLES OF INCORPORATION X DOMESTIC BUSINESS CORPORATION FEE __ DOMESTIC BUSINESS CORPORATION $100.00 COMMONWEALTH OF PENNSYLVANIA A CLOSE CORPORATION-COMPLETE BACK DEPARTMENT OF STATE - CORPORATE BUREAU 308 NORTH OFFICE BUILDING. HARRISBURG PA 17120 __ DOMESTIC PROFESSIONAL CORPORATION ENTER BOARD LICENSE NO. ------------------------------------------------------------------------------------------------------- 010 NAME OF CORPORATION (MUST CONTAIN A CORPORATE INDICATOR UNLESS EXEMPT UNDER 18 P.S. 2908 8) Mr Pretzel, Inc. ------------------------------------------------------------------------------------------------------- 011 ADDRESS OF REGISTERED OFFICE IN PENNSYLVANIA (P.O. BOX NUMBER NOT ACCEPTABLE) 2041 Herr Street ------------------------------------------------------------------------------------------------------- 012 CITY 023 COUNTY 013 STATE 064 ZIP CODE Harrisburg Dauphin Pa. 17102 ------------------------------------------------------------------------------------------------------- 050 EXPLAIN THE PURPOSE OR PURPOSES OF THE CORPORATION </TABLE> To do any lawful act concerning any or all lawful business for which corporation may be incorporated law, which is the law under the provisions of which the corporation is hereby incorporated. <TABLE> <S> (ATTACH 8.5 X 11 SHEET IF NECESSARY) <C> <C> <C> ------------------------------------------------------------------------------------------------------------------------------------ The Aggregate Number of Shares, Classes of Shares and Par Value of Shares Which the Corporation shall have Authority to Issue 040 Number and Class of Shares 1,000 common | 041 Stated Par Value Per | 042 Total Authorized Capital | 031 Term of existence | Share if Any $10.00 | 10,000 | perpetual ------------------------------------------------------------------------------------------------------------------------------------ The Name and Address of Each Incorporator, and the Number and Class of Shares Subscribed to by each Incorporator 061,062 060 Name 063,064 Address (Street, City, State, Zip Code) Number & Class of Shares ------------------------------------------------------------------------------------------------------------------------------------ Jan Murski 6466 Heatherfield Way. Hbg.,Pa 17112 1 common ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------ (ATTACH 8.5 X 11 SHEET IF NECESSARY) ------------------------------------------------------------------------------------------------------------------------------------ IN TESTIMONY WHEREOF, THE INCORPORATOR(S) HAS (HAVE) SIGNED AND SEALED THE ARTICLES OF INCORPORATION THE First DAY OF May 19 91 . ------------------------ ----------------------- ------ -------------------------------------------------------- ---------------------------------------------------------------------- X /s/ Jan Murski -------------------------------------------------------- ---------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------------ -FOR OFFICE USE ONLY- ------------------------------------------------------------------------------------------------------------------------------------ 001 ______ 002 CODE 000 REV BOX SEQUENTIAL NO. 100 MICROFILM NUMBER MAY 14 1991 ----------- REVIEWED BY 91281653 ----------------------------------------------------------------------------- SIGNATURE _______________ 004 SICC AMOUNT 001 CORPORATION NUMBER ------------------------- DATE APPROVED $ 2024644 --------------- ----------------------------------------------------------------------------- DATE REJECTED CERTIFY TO INPUT BY LOG IN LOG IN (REFILE) --- ----- --------------- ----------------------------------------------------------------------------- Secretary of the Commonwealth MAILED BY DATE --- ----- Department of the State __ OTHER VERIFIED BY LOG OUT LOG OUT (REFILE) Commonwealth of Pennsylvania -------------- ----------------------------------------------------------------------------- </TABLE>

<TABLE> <S> <C> <C> Microfilm Number Filed with the Department of State on Aug 28 1991 ----------- ---------------- Entity Number 2024644 /s/ signature -------------- ------------------------------------------------------ Deputy Secretary of the Commonwealth </TABLE> ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION DSC8:15-1915 (Rev 90) In compliance with the requirements of 15 Pa. C.S. * 1915 (relating to articles of amendment), the undersigned business corporation, desiring to amend its Articles, hereby states that: 1. The name of the corporation is: Mr. Pretzel, Inc. ----------------------- 2. The (a) address of this corporation's current registered office in this Commonwealth or (b) name of its commercial registered office provider and the county of venue is (the Department is hereby authorized to correct the following information to conform to the records of the Department): <TABLE> <S> <C> <C> <C> (a) 2041 Herr Street, Harrisburg, Pennsylvania 17102 (Dauphin County) -------------------------------------------------------------------------------------------------- Number and Street City State Zip County (b) c/o ---------------------------------------------------------------------------------------------- Name of Commercial Registered Office Provider County For a corporation represented by a commercial registered office provider, the county in (b) shall be deemed the county in which the corporation is located for venue and official publication purposes. 3. The statute by or under which it was incorporated is : PA Business Corporation Law ---------------------------------------- 4. The date of its incorporation is: May 14, 1991 ---------------------------------------------------------------- 5. (Check, and if appropriate complete, one of the following): X The amendment shall be effective upon filing these Articles of Amendment in the Department of State. ----- The amendment shall be effective on: at ----- -------------- -------------- Date Hour 6. (Check one of the following): X The amendment was adopted by the shareholders (or members) pursuant to 15 Pa.C.S. * 1914 (a) and (b). ----- The amendment was adopted by the board of directors pursuant to 15 Pa.C.S * 1914 (c). ----- 7. (Check, and if appropriate complete, one of the following): X The amendment adopted by the corporation, set forth in full, is as follows: ----- The name of the corporation shall be Pretzel Time Inc. ------------------------------------------------------------------------ The aggregate number of shares, classes of shares and Par Value of shares which the corporation shall have ---------------------------------------------------------------------------------------------------------- authority to issue is: 1,000 common at $10.00 par value per share and 100 preferred at $10,000.00 par value per share. ---------------------------------------------------------------------------------------------------------------------- The amendment adopted by the corporation is set forth in full in Exhibit A attached hereto and made a part thereof. --- </TABLE>

<TABLE> <S> <C> <C> DSC8:15-1915 (Rev 90)-2 8. (Check if the amendment restates the Articles): The restated Articles of incorporation supersede the original Articles and all amendments thereto. ---- IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles of Amendment to be signed by a duly authorized officer thereof the 1st day of August , 1991 . --------- --------------- -- Mr. Pretzel, Inc. ------------------------------------------------ (Name of Corporation) BY: /s/ Jan Murski --------------------------------------------- (Signature) TITLE: President ------------------------------------------ </TABLE>

CORPORATE RECORDS OF PRETZEL TIME, INC. **************** INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA ****************

BYLAWS INDEX I. OFFICES II. SEAL III. SHAREHOLDERS' MEETINGS IV. DIRECTORS V. NOTICE VI. OFFICERS VII. VACANCIES AND REMOVALS VIII. CORPORATE RECORDS IX CERTIFICATES OF STOCK, TRANSFER, ETC. X. DIVIDENDS. XI. INDEMNIFICATION XII. ANNUAL STATEMENTS XIII. MISCELLANEOUS PROVISIONS

BYLAWS OF PRETZEL TIME, INC ARTICLE I - OFFICES 1. Registered Office. The registered office of the corporation shall ----------------- be at 462 West Bearcat Drive, Salt Lake City, UT 84115. 2. Other Office. The corporation may also have offices at such other ------------ places as the Board of Directors may from time to time appoint or the business of the corporation may require. ARTICLE II - SEAL 1. The corporation seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Pennsylvania". ARTICLE III. SHAREHOLDERS' MEETING 1. Place. Meetings of the shareholders shall be held at the registered ----- office of the corporation or at such other place or places, either within or without the Commonwealth of Pennsylvania, as may from tine to time be selected. 2. Time. The annual meeting of the shareholders shall be held on the ---- 1st day of September in each year if not a legal holiday, and if a legal holiday, then on the next secular day following at 9:00 o'clock P.M., when they shall elect a Board of Directors, and transact such other business as may properly be brought before the meeting. If the annual meeting shall not be called and held within six (6) months after the designated time, any shareholder may call such meeting at any time thereafter. 3. Special Meetings. Special meetings of the shareholders may be ---------------- called at any time by the President, or the Board of Directors, or shareholders entitled to cast at least twenty (20%)

percent of the votes which all shareholders are entitled to cast at the particular meeting, At any time, upon written request of any person or persons who have duly called a special meeting, it shall be the duty of the Secretary to fix the date of the meeting, to be held not more than sixty (60) days after the receipt of the request, and to give due notice thereof. If the Secretary shall neglect or refuse to fix the date of the meeting and give notice thereof, the person or persons calling the meeting may do so. 4. Quorum and Action. Except as otherwise provided in these bylaws, ----------------- the presence, in person or by proxy, of shareholders entitled to cast a least a majority of the votes which all shareholders are entitled to cast on the particular matter shall constitute a quorum for the purpose of considering such matter. Unless otherwise provided by statute or in these bylaws, the acts of the shareholders present (in person or by proxy) at a duly organized meeting and entitled to cast at least a majority of the votes which all shareholders present are entitled to cast shall be the acts of the shareholders. The shareholders present at a duly organized meeting can continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, Adjournment or adjournments of any annual or special meeting may be taken, but any meeting at which directors are to be elected shall be adjourned only from day to day, or for such longer periods not exceeding fifteen (15) days each, as may be directed by shareholders who are present in person or by proxy and who are entitled to cast at least a majority of the votes which all such shareholders would be entitled to cast at an election of directors until such directors have been elected. If a meeting cannot be organized because a quorum has not attended, those present may, except as otherwise provided by statute, adjourn the meeting to such time and place as they may determine, but in the case of any meeting called for the election of directors, those who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors. 5. Proxies. Every shareholder entitled to vote at a meeting of ------- shareholders, or to express consent or dissent to corporate action in writing without a meeting, may authorize another person or persons to act for him by proxy. Every proxy shall be executed in writing by the shareholder, or by his duly authorized attorney in fact, and filed with the Secretary of the corporation. A -2-

proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until notice thereof has been given to the Secretary of the corporation. No unrevoked proxy shall be valid after eleven (11) months from the date of its execution, unless a longer time is expressly provided therein, but in no event shall a proxy, unless coupled with an interest, be valid after three years from the date of its execution. A proxy shall not be revoked by the death or incapacity of the maker unless before the vote is counted or the authority is exercised, written notice of such death or incapacity is given to the Secretary of the corporation. A shareholder shall not sell his vote or execute a proxy to any person for any sum of money or anything of value. A proxy coupled with an interest shall include an unrevoked proxy in favor of a creditor of a shareholder and such proxy shall be valid so long as the debt owed by him to the creditor remains unpaid. 6. Ballots Cumulative Voting. Elections for directors need not be by ------------------------- ballot, except upon demand made by a shareholder at the election and before the voting begins. Except as otherwise provided in the Articles, and subject to the provisions of these bylaws, in each election of directors cumulative voting shall be allowed. 7. Judges of Election. In advance of any meeting of shareholders, the ------------------ Board of Directors may appoint judges of election, who need not be shareholders, to act at such meeting or any adjournment thereof. If judges of election are not appointed, the chairman of any such meeting may, and on the request of any shareholder or his proxy shall, make such appointment at any meeting. The number of judges shall be one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the holders of a majority of shares present and entitled to vote shall determine whether one or three judges are to be appointed. On request of the chairman of the meeting, or any shareholder or his proxy, the judges shall make a report in writing of any challenge or question or matter determined by them, and execute a certificate of any fact found by them. No person who is a candidate for office shall act as judge. -3-

8. Business at Special Meetings. Business transacted at all special ---------------------------- meetings shall be confined to the objects stated in the call and matters germane thereto, unless all shareholders entitled to vote are present and consent. 9. Protocol. At every meeting of the shareholders, the chairman of -------- the board, if there be one, or, in the case of vacancy in office or absence of the chairman of the board, one of the following officers present in the order stated: the vice chairman of the board, if there be one, the president, the vice president in their order of rank and seniority, or a person chosen by vote of the shareholders present, shall act as chairman of the meeting. The secretary or, in the absence of the secretary, an assistant secretary, or in the absence of both the secretary and assistant secretaries, a person appointed by the chairman of the meeting, shall act as secretary. 10. Voting Lists. The officer or agent having charge of the transfer ------------ books shall make a complete list of shareholders entitled to vote at the meeting, arranged in alphabetical order, with the address of and the number of shares held by each. The list shall be produced and kept open at the time and place of the meeting, and shall be subject to the inspection of any shareholder during the whole time of the meeting. Failure to comply with the requirements of this section shall not affect the validity of any action taken at a meeting prior to a demand at the meeting by any shareholder entitled to vote thereat to examine the list. The original share register or transfer book, or a duplicate thereof kept in this Commonwealth, shall be prima facie evidence as to who are the shareholders entitled to examine the list or share register or transfer book or to vote at any meeting of shareholders. The original share ledger or transfer book, or duplicate thereof kept in this Commonwealth, shall be prima facie evidence as to who are the shareholders entitled to examine such list or share ledger or transfer book, or to vote in person or by proxy at any meeting of shareholders. 11. Record Date. The board of directors may fix a time prior to the ----------- date of any meeting of shareholders as a record date for the determination of the shareholders entitled to notice of, or to vote at, the meeting, which time, except in the case of an adjourned meeting, shall be not more than sixty (60) days prior to the date of the meeting of shareholders. Only shareholders of record -4-

on the date fixed shall be entitled to notice, notwithstanding any transfer of shares on the books of the corporation after any record date fixed as provided in this subsection. When a determination of shareholders of record has been made as provided in this section for purposes of a meeting, the determination shall apply to any adjournment thereof unless the board fixes a new record date for the adjourned meeting. If a record date is not fixed: (i) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the date next preceding the day on which notice is given or, if notice is waived, at the close of business on the day immediately preceding the day on which the meeting is held. (ii) The record date for determining shareholders entitled to express consent or dissent to corporate action in writing without a meeting, when prior action by the board of directors is not necessary, shall be the close of business on the day on which the first written consent or dissent is filed with the secretary of the corporation. 12. Unanimous Shareholders' Consents. Except as otherwise provided in -------------------------------- the Articles, any action which may be taken at a meeting of the shareholders or of a class of shareholders may be taken without a meeting, if a consent or consents in writing, setting forth the action so taken. shall be signed by all of the shareholders who would be entitled to vote at a meeting for such purpose and shall be filed with the Secretary of the corporation. 13. Identification of Shareholders. As of the adoption of these ------------------------------ bylaws, the Corporation has two shareholders, Martin E. Lisiewski and Mrs. Fields' Holding Company, Inc. References in these bylaws to "Lisiewski" shall mean Martin E. Lisiewski or his permitted successors in interest, and references to "Fields" shall mean Mrs. Fields' Holding Company, Inc. or their permitted successors in interest. -5-

ARTICLE IV - DIRECTORS 1. Powers. Unless otherwise provided by statute, all powers vested by ------ law in the corporation shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, the board of directors. 2. Qualification of Directors. Each director of the corporation -------------------------- shall be a natural person of full age who need not be a resident of Pennsylvania or a shareholder of the corporation. 3. Election and Number of Directors. The directors shall be elected -------------------------------- by the shareholders at the annual meeting of shareholders of the corporation, and each director shall be elected for the term of one year, and until his successor shall be elected and shall qualify. The number of directors shall be five. Two directors shall be nominated and elected by Lisiewski (the "Lisiewski" directors. Two directors shall be nominated and elected by Fields (the "Fields" directors), and one director shall be nominated and elected by both Fields and Lisiewski (the "Impartial" director). 4. Place of Meeting. The meetings of the Board of Directors may be ---------------- held at such place within this Commonwealth, or elsewhere, as a majority of the directors may from time to time appoint, or as may be designated in the notice calling the meeting. 5. Regular Meetings. Regular meetings of the Board shall be held at ---------------- such time and place as the Board, by resolution, shall determine. 6. Special Meetings. Special meetings of the Board may be called by ---------------- the President; special meetings shall be called by the President or Secretary on the written request of a majority of the directors in office. 7. Newly Elected Board. Each newly elected Board may meet at such ------------------- place and time as shall be fixed by the shareholders at the meeting at which such directors are elected and no -6-

notice shall be necessary to the newly elected directors in order legally to constitute the meeting, or they may meet at such place and time as may be fixed by the consent in writing of all the directors. 8. Quorum and Action. A majority of the directors in office, ------------------ including at least one Fields director and one Lisiewski director, shall be necessary to constitute a quorum for the transaction of business. Except as otherwise provided in these bylaws, acts of a majority of the directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors. 9. Supermajority Provisions. Notwithstanding any other provision of ------------------------ applicable law or these bylaws, none of the following acts shall be an act of the Board of Directors or Corporation unless approved by at least one Fields director and one Lisiewski director: (1) The obtaining or permitting to exist any loan, advance, or other borrowing, whether secured or unsecured, by the Corporation or any subsidiary of the Corporation, except in the ordinary course of business of the Corporation; (2) The creation of any security interest or lien against the Corporation or any subsidiary, or any assets of either; (3) The issuance or sale of any security of the Corporation or any subsidiary of the Corporation, including, without limitation, any share, option, warrant, bond, note, debenture, or other instrument convertible into any of the foregoing; (4) The amendment to any of the articles of incorporation, bylaws, or other organizational documents of the Corporation or any subsidiary of the Corporation, including, without limitation, authorizing additional shares of any class of stock; -7-

(5) The sale of all or substantially all of the business or assets of the Corporation or any subsidiary of the Corporation, or the merger, consolidation, other corporate reorganization of the Corporation or any subsidiary of the Corporation, or in any single or series of related transactions; (6) The guarantee of becoming liable in any way as a surety, endorser, or accommodation endorser or otherwise for debts or obligations of any other person or entity, other than in the ordinary course of business; (7) The declaration or payment of any dividend either in cash, stock of the Corporation or any subsidiary of the Corporation, or the redemption or retirement or purchase of any shares of stock of the Corporation or any subsidiary of the Corporation; (8) The commencement or institution of any voluntary proceedings relating to the bankruptcy, insolvency or appointment of a receiver by or on behalf of the Corporation; (9) The approval of the annual operating and capital budgets for the Corporation or the amendment to the approved annual operating and capital budgets of the Corporation; (10) The dissolution, liquidation, cessation of business, or winding up of the Corporation; and (11) The acquisition of the assets, stock or other equity of an entity engaged in the selling or franchising of pretzels (whether retail or wholesale). 10. Relationship to Corporation Reliance. A director of the ------------------------------------ corporation shall stand in a fiduciary relation to the corporation and shall perform his duties as a director, including his duties as a member of any committee of the board upon which he may serve, in good faith, in a manner he reasonably believes to be in the best interests of the corporation, and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use -8-

under similar circumstances. In performing his duties, a director shall be entitled to rely in good faith on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared by any of the following: (1) One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented. (2) Counsel, public accountants or other persons as to matters which the director reasonably believes to be within the professional or expert competence of such person. (3) A committee of the board upon which be does not serve, duly designated in accordance with law, as to matters within its designated authority, which the director reasonably believes to merit confidence. A director shall not be considered to be acting in good faith if he has knowledge concerning the matter in question that would cause his reliance to be unwarranted. In discharging the duties of their respective positions, the board of directors, committees of the board and individual directors may, in considering the best interests of the corporation, consider the effects of any action upon employees, upon suppliers and customers of the corporation and upon communities in which offices or other establishments of the corporation are located, and all other pertinent factors. The consideration of those factors shall not constitute a violation of this section. Absent breach of fiduciary duty, lack of good faith or self-dealing, actions taken as a director or any failure to take any action shall be presumed to be in the best interests of the corporation. 11. Personal Liability. A director of the corporation shall not be ------------------ personally liable for monetary damages as such for any action taken, or any failure to make any action, unless: -9-

(1) The director has breached or failed to perform the duties of his office under section 9 of this Article IV, and (2) The breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. The provisions of this section shall not apply to: (1) The responsibility or liability of a director pursuant to any criminal statute; or (2) the liability of a director for the payment of taxes pursuant to local, State or Federal law. 12. Notation of Dissent. A director who is present at a meeting of ------------------- the board of directors, or of a committee of the board, at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his or her dissent is entered in the minutes of the meeting or unless the director files a written dissent to the action with the secretary of the meeting before the adjournment thereof or transmits the dissent in writing to the secretary of the corporation immediately after the adjournment of the meeting. The right to dissent shall not apply to a director who voted in favor of the action. Nothing in this section shall bar a director from asserting that minutes of the meeting incorrectly omitted his or her dissent if, promptly upon receipt of a copy of such minutes, the director notifies the secretary in writing, of the asserted omission or inaccuracy. 13. Action by Written Consent. Any action required or permitted to be ------------------------- taken at a meeting of the directors may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto by all of the directors in office is filed with the secretary of the corporation. 14. Franchising Committee. The board of directors shall appoint two --------------------- directors, one a Lisiewski director and the other a Fields director, as the Franchising Committee. The Franchising Committee shall establish the terms and conditions by which an affiliate of either -10-

Fields or Lisiewski may be awarded area developer rights and/or franchise or subfranchise rights with respect to the Corporation, and shall approve all such terms and conditions. If for any reason the Franchising Committee is unable to act or agree upon such terms and conditions, it shall refer the matter to the entire board for its determination. The board may from time to time establish other committees. 15. Resignation. Any director may resign at any time upon written ----------- notice to the corporation. The resignation shall be effective upon receipt thereof by the corporation or at such subsequent time as shall be specified in the notice of resignation. 16. Compensation. Directors who are not employees of the ------------ Corporation or employees of an affiliate of the Corporation shall be compensated in accordance with policies from time to time adopted by the Corporation. Directors who are employees of the Corporation or of an affiliate of the Corporation shall not, as such, receive any stated salary for their services. By resolution of the Board, any director not compensated as such may receive actual expenses of attendance, if any. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. ARTICLE V - NOTICE 1. Written Notice - General Rule. Whenever written notice is required to be ----------------------------- given to any person under applicable provisions of law or by the articles or these bylaws, it may be given to the person either personally or by sending a copy thereof by first class or express mail, postage prepaid, or by telegram (with messenger service specified), telex or TWX (with answerback received) or courier service, charges prepaid, or by telecopier, to the address (or to the telex, TWX, telecopier or telephone number) of the person appearing on the books of the corporation or in the case of directors. supplied by the directors to the corporation for the purpose of notice. If the notice is sent by mail, telegraph or courier service, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office or courier service for delivery to that person or, in the case of telex or TWX, when dispatched or, in -11-

the case of telecopier, when received. A notice of meeting shall specify the place, day and hour of the meeting and any other information required by any other provision of the Business Corporation Law, the articles or these bylaws. 2. Adjourned Shareholder Meetings. When a meeting of shareholders is ------------------------------ adjourned, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which the adjournment is taken, unless the board fixes a new record date for the adjourned meeting. 3. Notice of Meetings of Board of Directors. Notice of a regular ---------------------------------------- meeting of the board of directors need not be given. Notice of every special meeting of the board of directors shall be given to each director by telephone or in writing at least 48 hours (in the case of notice by telephone, telex, TWX or telecopier) or 72 hours (in the case of notice by telegraph, courier service or express mail) or seven (7) days (in the case of notice by first class mail) before the time at which the meeting is to be held. Every such notice shall state the time and place of the meeting. Neither the business to be transacted, nor the purpose of, any regular or special meeting of the board need be specified in a notice of a meeting. 4. Notice of Meetings of Shareholders. Written notice of every meeting ---------------------------------- of the shareholders shall be given by, or at the direction of, the Secretary to each shareholder of record entitled to vote at the meeting at least; (I) twenty (20) days prior to the day named for a meeting called to consider a fundamental transaction under 15 Pa. C.S.A. Chapter 19 regarding amendments of articles of incorporation, mergers, consolidations, share exchanges, sale of assets, divisions, conversions, liquidations and dissolution; or (ii) ten (10) days prior to the day named for the meeting in any other case. -12-

If the Secretary neglects or refuses to give notice of a meeting the person or persons calling the meeting may do so. In the case of a special meeting of shareholders, the notice shall specify the general nature of the business to be transacted. 5. Notice of Action by Shareholders on Bylaws or Articles. In the ------------------------------------------------------ case of a meeting of shareholders that has as one of its purposes action on the bylaws or articles, written notice shall be given to each shareholder that the purpose, or one of the purposes, of the meeting is to consider the adoption, amendment or repeal of bylaws or articles. There shall be included in, or enclosed with, the notice a copy of the proposed amendment or a summary of the changes to be effected thereby. 6. Written Waiver of Notice. Whenever any written notice is required ------------------------ to be given under the provisions of the Business Corporation Law, the articles or these bylaws, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of the notice. Except as otherwise required by this subsection, neither the business to be transacted at, nor the purpose of, a meeting need be specified in the waiver of notice of the meeting. In the case of a special meeting of shareholders, the waiver of notice shall specify the general nature of the business to be transacted. 7. Waiver by Attendance. Attendance of a person at any meeting shall -------------------- constitute a waiver of notice of the meeting except where a person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. 8. Modification of Proposal Contained in Notice. Whenever the language -------------------------------------------- of a proposed resolution is included in a written notice of a meeting required to be given under the provisions of the Business Corporation Law or the articles or these bylaws, the meeting considering the resolution may without further notice adopt it with such clarifying or other amendments as do not enlarge its original purpose. -13-

9. Exception to Notice Requirement - Unlawfulness. Whenever any notice or ---------------------------------------------- communication is required to be given to any person under the provisions of the Business Corporation Law or by the articles or these bylaws or by the terms of any agreement or other instrument or as a condition precedent to taking any corporate action and communication with that person is then unlawful, the giving of the notice or communication to that person shall not be required. 10. Shareholders Without Forwarding Addresses. Notice or other ----------------------------------------- communications shall not be sent to any shareholder with whom the corporation has been unable to communicate for more than twenty-four (24) consecutive months because communications to the shareholder are returned unclaimed or the shareholder has otherwise failed to provide the corporation with a current address. Whenever the shareholder provides the corporation with a current address, the corporation shall commence sending notices and other communications to the shareholder in the same manner as to other shareholders. ARTICLE VI - OFFICERS 1. Executive and Other Officers. The executive officers of the corporation ---------------------------- shall be chosen by the directors and shall be a Chief Executive Officer, President, Secretary and Treasurer. The Board of Directors may also choose one or more Vice Presidents, and such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall have such authority and shall perform such duties as from time to time shall be prescribed by the Board. Any number of offices may be held by the same person. It shall not be necessary for the officers to be directors. 2. Salaries. The salaries of all officers and agents of the corporation -------- shall be fixed by the Board of Directors. 3. Term. The officers of the corporation shall hold office for one year and ---- until their successors are chosen and have qualified. Any officer or agent elected or appointed by the -14-

Board may be removed by the Board of Directors whenever in its judgment the bests interests of the corporation will be served thereby. 4. Authority. All officers of the corporation, as between themselves and --------- the corporation, shall have such authority and perform such duties in the management of the corporation as may be provided by or pursuant to resolution or orders of the board of directors or in the absence of controlling provisions in the resolutions or orders of the board of directors, as may be determined by or pursuant to these bylaws. 5. Chief Executive Officer Duties. The Chief Executive Officer shall be the ------------------------------ chief executive officer of the corporation; he shall preside at all meetings of the shareholders and directors: he shall have general and active management of the business of the corporation, shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the right of the directors to delegate any specific powers, except such as may be by statute exclusively conferred on the Chief Executive Officer, to any other officer or officers of the corporation. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation. He shall be EX-OFFICIO a member of all committees, and shall have the general powers and duties of supervision and management usually vested in the office of the Chief Executive Officer of a corporation. 6. President: Duties. The President shall have such responsibilities as may ----------------- be determined by the Board from time to time. 7. Secretary Duties. The Secretary shall attend all sessions of the Board ---------------- and all meetings of the shareholders and act as clerk thereof, and record all the votes of the corporation and the minutes of all its transactions in a book to be kept for that purpose; and shall perform like duties for all committees of the Board of Directors when required. He shall give, or cause to be given, notice of all meetings of the shareholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, and under -15-

whose supervision he shall be. He shall keep in safe custody the corporate seal of the corporation, and when authorized by the Board, affix the same to any instrument requiring it. 8. Treasurer Duties. The Treasurer shall have custody of the corporate ---------------- funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation, and shall keep the moneys of the corporation in a separate account to the credit of the corporation. He shall disburse the funds of the corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President and directors, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the corporation. 9. Resignations. Any officer may resign at any time upon written notice to ------------ the corporation. The resignation shall be effective upon receipt thereof by the corporation or at such subsequent time as may be specified in the notice of resignation. ARTICLE VII - VACANCIES AND REMOVALS 1. Officers. If the office of any officer or agent, one or more, becomes -------- vacant for any reason, the Board of Directors may choose a successor or successors, who shall hold office for the unexpired term in respect of which such vacancy occurred. 2. Directors. A vacancy in the Board of Directors, shall be filled by the --------- shareholder(s) who nominated and elected the director to the vacant position, and each person so elected shall be a director to serve for the balance of the unexpired term and until a successor is selected and qualified. 3. Removal by the Shareholders. Any individual director may be removed from --------------------------- office without assigning any cause by the vote of the shareholder(s) who elected such director. The board of directors may be removed at any time with or without cause by the unanimous vote or consent of shareholders entitled to vote thereon. -16-

4. Removal of Directors Elected by Cumulative Voting. If elected by ------------------------------------------------- cumulative voting an individual director shall not be removed (unless the entire board or class of the board is removed) if sufficient votes are cast against the resolution for his removal which, if cumulatively voted at an annual or other regular election of directors, would be sufficient to elect one or more directors to the Board or to the class. 5. Declaration of Vacancy. The board of directors may declare vacant the ---------------------- office of a director who has been judicially declared of unsound mind or who has been convicted of an offense punishable by imprisonment for a term of more than one year or if, within sixty (60) days after notice of his or her selection, the director does not accept the office either in writing or by attending a meeting of the board of directors. ARTICLE VIII - CORPORATE RECORDS 1. Required Records. The corporation shall keep complete and accurate books ---------------- and records of account minutes of the proceedings of the incorporators, shareholders and directors and a share register giving the names and addresses of all shareholders and the number and class of shares held by each. The share register shall be kept at either the registered office of the corporation in Pennsylvania or at its principal place of business wherever situated or at the office of its registrar or transfer agent. Any books, minutes or other records may be in written form or any other form capable of being converted into written form within a reasonable time. 2. Inspection. Every shareholder shall, upon written verified demand ---------- stating the purpose thereof, have a right to examine, in person or by agent or attorney, during the usual hours for business for any proper purpose, the share register, books or records of account, and records of the proceedings of the shareholders and directors, and make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a shareholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorized the attorney or other agent to act on behalf of the -17-

shareholder. The demand under oath shall be directed to the corporation at its registered office in this Commonwealth or at its principal place of business. -18-

ARTICLE IX - CERTIFICATES OF STOCK TRANSFER ETC. 1. Share Certificates. Certificates for shares of the corporation shall be ------------------ in such form as approved by the board of directors, and shall state that the corporation is incorporated under the laws of Pennsylvania, the name of the person to whom issued, and the number and class of shares and the designation of the series (if any) that the certificate represents. The share register or transfer books and blank share certificates shall be kept by the secretary or by any transfer agent or registrar designated by the board of directors for that purpose. 2. Issuance. The share certificates of the corporation shall be numbered -------- and registered in the share register or transfer books of the corporation as they are issued. They shall be signed by the president or a vice president and by the secretary or an assistant secretary or the treasurer or an assistant treasurer, and shall bear the corporate seal, which may be a facsimile, engraved or printed; but where such certificate is signed by a transfer agent or a registrar the signature of any corporate officer upon such a certificate may be a facsimile, engraved or printed. In case any officer who has signed, or whose facsimile signature has been placed upon, any share certificate shall have ceased to be such officer because of death, resignation or otherwise, before the certificate is issued, it may be issued with the same effect as if the officer had not ceased to be such at the date of its issue. The provisions of this Section 9.02 shall be subject to any inconsistent or contrary agreement at the time between the corporation and any transfer agent or registrar. 3. Transfer. Transfers of shares shall be made on the share register or -------- transfer books of the corporation upon surrender of the certificate therefor, endorsed by the person named in the certificate or by an attorney lawfully constituted in writing. No transfer shall be made inconsistent with the provisions of the Uniform Commercial Code, 13 Pa. C.S. 8101 et seq., and its amendments and supplements. 4. Record Holder of Shares. The corporation shall be entitled to treat the ----------------------- person in whose name any share or shares of the corporation stand on the books of the corporation as the -19-

absolute owner thereof, and shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares on the part of any other person. 5. Lost, Destroyed or Mutilated Certificates. The holder of any shares of ----------------------------------------- the corporation shall immediately notify the corporation of any loss, destruction or mutilation of the certificate therefor, and the board of directors may, in its discretion, cause a new certificate or certificates to be issued to such holder, in case of mutilation of the certificate, upon the surrender of the mutilated certificate or, in case of loss or destruction of the certificate, upon satisfactory proof of such loss or destruction and, if the board of directors shall so determine, the deposit of a bond in such form and in such sum, and with such surety or sureties, as it may direct. ARTICLE X - DIVIDENDS 1. Record Date. The Board of Directors may fix a time, not more than sixty ----------- (60) days, prior to the date fixed for the payment of any dividend or distribution, or the date for the allotment of rights, or the date when any change or conversion or exchange of shares will be made or go into effect, as a record date for the determination of the shareholders entitled to receive payment of any such dividend or distribution, or to receive any such allotment of rights, or to exercise the rights in respect to any such change, conversion, or exchange of shares. In such case, only such shareholders as shall be shareholders of record on the date so fixed shall be entitled receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after any record date fixed as aforesaid. 2. Declaration and Payout. The Board of Directors may declare and pay ---------------------- dividends upon the outstanding shares of the corporation, from time to time and to such extent as they deem advisable, in the manner and upon the terms and conditions provided by the Business Corporation Law and the Articles. -20-

ARTICLE XI - INDEMNIFICATION 1. Third Party Actions. The corporation shall indemnify any director, ------------------- officer and/or employee, or any former director, officer and/or employee, who was or is a party to, or is threatened to be made a party to, or who is called as a witness in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that such person is or was such representative of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, that the person had reasonable cause to believe that his conduct was unlawful. 2. Derivative Actions. The corporation shall indemnify any director, ------------------ officer and/or employee, who was or is a party to, or is threatened to be made a party to, or who is called as a witness in connection with, any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer and/or employee of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against amounts paid in settlement and expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of, or serving as a witness in, such action or suit if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation. -21-

Indemnification shall not be made under this section in respect of any claim, issue or matter as to which the person has been adjudged to be liable to the corporation, unless and only to the extent that the court of common pleas of the judicial district embracing the county in which the registered office of the corporation is located or the court in which the action was brought determines upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for the expenses that the court of common pleas or other court deems proper. 3. Presumption. Except as may be otherwise ordered by a court, there shall ----------- be a presumption that any director, officer and/or employee is entitled to indemnification as provided in this Bylaw unless either a majority of the directors who are not involved in such proceedings ("disinterested directors"), or, if there are less than three disinterested directors, then the holders of one-third of the outstanding shares of the corporation determine that the person is not entitled to such presumption by certifying such determination in writing to the Secretary of the corporation. In such event the disinterested director(s) or, in the event of certification by shareholders, the Secretary of the corporation shall request of independent counsel, who may be the outside general counsel of the corporation, a written opinion as to whether or not the parties involved are entitled to indemnification under this Bylaw. 4. Mandatory Indemnification. To the extent that an authorized ------------------------- representative of the corporation has been successful on the merits or otherwise in defense of any action or proceeding or in defense of any claim, issue or matter for which indemnification is available under those bylaws or the Business Corporation Law, such person shall be indemnified against expenses (including attorneys' fees and disbursements) actually and reasonably incurred by such person in connection therewith. 5. Advances. Expenses incurred in defending a civil or criminal action, -------- suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer and/or -22-

employee to repay such amount unless it shall ultimately be determined that such individual is entitled to be indemnified by the corporation as authorized in this Bylaw. 6. Non-Exclusivity. The indemnification provided by this Article shall not --------------- be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under any agreement, vote of shareholders, or disinterested directors, or otherwise1 both as to Action in such individual's official capacity while serving as a director, officer, and/or employee, or as to any action in another capacity while holding such office. The Board of Directors may, by resolution, provide for additional indemnification or advancement of expenses to or for any director, officer, and/or employee of the corporation provided said indemnification is not inconsistent with the provisions of these Bylaws, the Articles, the Business Corporation Law, or other applicable provisions of law. The indemnification provided by this Article shall continue as to a person who has ceased to be a director, officer and/or employee and shall inure to the benefit of the heirs and personal representatives of such person. 7. Contract Rights: Amendment or Repeal. All rights under this Article ------------------------------------ shall be deemed a contract between the corporation and the indemnified representative pursuant to which the corporation and each indemnified representative intend to be legally bound. Any repeal, amendment or modification hereof shall be prospective only and shall not affect any rights or obligations then existing. 8. Securing Obligation to Indemnify. The corporation may, by act of the -------------------------------- Board of Directors, create a fund to secure or insure its indemnification obligations under these Bylaws, the Articles, any resolution of Directors or agreement or vote of shareholders as authorized in Section 6 of this Bylaw, and applicable provisions of the Business Corporation Law. 9. Payment of Indemnification. An indemnified representative shall be -------------------------- entitled to payment by indemnification within thirty (30) days after a written request for indemnification has been delivered to the secretary of the corporation. 10. Arbitration. Any dispute related to the right to indemnification, ----------- contribution or advancement of expenses as provided under this Article, except with respect to indemnification -23-

for liabilities arising under the Securities Act of 1933 that the corporation has undertaken to submit to a court for adjudication, shall be decided only by arbitration in the county in which the principal offices of the corporation are located at the time, in accordance with the commercial arbitration rules then in effect of the American Arbitration Association, before a panel of three (3) arbitrators, one of whom shall be selected by the corporation, the second of whom shall be selected by the indemnified representative and third of whom shall be selected by the other two arbitrators. In the absence of the American Arbitration Association, or if for any reason arbitration under the arbitration rules of the American Arbitration Association cannot he initiated, or if one of the parties fails or refuses to select an arbitrator or if the arbitrators selected by the corporation and the indemnified representative cannot agree on the selection of the third arbitrator within thirty (30) days after such time as the corporation and the indemnified representative have each been notified of the selection of the other's arbitrator, the necessary arbitrator or arbitrators shall be selected by the presiding judge of the court of common pleas in such county. ARTICLE XII - ANNUAL STATEMENT I. The President and Board of Directors shall present at each annual meeting a full and complete statement of the business and affairs of the corporation for the preceding year. Unless otherwise agreed between the corporation and its shareholders, such statements shall be prepared and furnished to all shareholders in the manner required by Section 1554 of the Business Corporation Law, as amended. -24-

ARTICLE XIII - MISCELLANEOUS PROVISIONS 1. Checks, Etc. All checks, bills of exchange or demands for money and ----------- notes of the corporation shall be signed by such officer or officers as the Board of Directors may from time to time designate. 2. Fiscal Year. The fiscal year of the corporation shall begin on the first ----------- day of January. 3. Use of Conference Telephone and Similar Equipment. One or more directors ------------------------------------------------- or shareholders may participate in a meeting of the Board, or a committee of the Board or of the shareholders, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. 4. Deposits. All funds of the corporation shall be deposited from time to -------- time to the credit of the corporation in such banks, trust companies or other depositaries as the board of directors may approve or designate, and all such funds shall be withdrawn only upon checks signed by such one or more officers or employees as the board of directors shall from time to time determine. 5. Contractual Obligation. These bylaws have been adopted by the ---------------------- shareholders in conjunction with the execution of a Shareholders Agreement between the shareholders and the Corporation. These bylaws shall be contractual in nature, and shall be interpreted and applied so as to be consistent with the Shareholders Agreement. ******************************************* -25-

INFORMATION FOR PROSPECTIVE FRANCHISEES --------------------------------------- REQUIRED BY THE FEDERAL TRADE COMMISSION ---------------------------------------- PRETZEL TIME, INC. 2855 East Cottonwood Parkway Suite 400 Salt Lake City, Utah 84121 (801) 736-5600 Effective Date: May 15, 1998 As Amended: November 24, 1998 To protect you, we've required your franchisor to give you this information. We haven't checked it and don't know if it's correct. It should ---------------------------------------------------- help you make up your mind. Study it carefully. While it includes some information about your contract, don't rely on it alone to understand your contract. Read all of your contract carefully. Buying a franchise is a complicated investment. Take your time to decide. If possible, show your contract and this information to an advisor, like a lawyer or an accountant. If you find anything you think may be wrong or anything important that's been left out, you should let us know about it. It may be against the law. There may also be laws on franchising in your state. Ask your state agencies about them. FEDERAL TRADE COMMISSION Washington, D.C. 20580

FRANCHISE OFFERING CIRCULAR FOR PROSPECTIVE FRANCHISEES PRETZEL TIME, INC. 2855 East Cottonwood Parkway Suite 400 Salt Lake City, Utah 84121 (801) 763-5600 The name of the franchisor is Pretzel Time, Inc. If you become a Pretzel Time Store franchisee, you will have the right to operate a Pretzel Time Store from which you will offer a variety of freshly baked, hand-rolled soft pretzels prepared according to our unique recipe, other pretzel-related products, pretzel toppings, beverages and other food products and, in certain instances, TCBY frozen yogurt products. The initial franchise fee for a Pretzel Time Store is $25,000, unless the Pretzel Time Store is operated in a cart or kiosk format, in which case the initial franchise fee is $15,000. The estimated initial investment required for a franchise, including the initial franchise fee, is from $117,000 to $236,000. If you are granted the right to sell TCBY frozen yogurt products from the premises of your Pretzel Time Store, you will pay an additional $1,000 fee and an additional estimated initial investment of $39,500 to $93,000. These sums do not include real estate lease costs and assume you are not operating in a cart or kiosk format. These sums are not your total investment in your franchise. For a detailed explanation of your total investment, you should consult Items 5 through 7 of this Offering Circular. Risk Factors: ------------ THE FRANCHISE AGREEMENTS REQUIRE THAT ALL DISAGREEMENTS BE SETTLED BY ARBITRATION IN SALT LAKE CITY, UTAH. OUT OF STATE ARBITRATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT. IT MAY ALSO COST YOU MORE TO ARBITRATE WITH US IN UTAH THAN IN YOUR HOME STATE. THE FRANCHISE AGREEMENTS STATE THAT UTAH LAW GOVERNS THE AGREEMENTS, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS. ALTHOUGH THE FRANCHISE AGREEMENTS SET FORTH THE ARBITRATION AND GOVERNING LAW PROVISIONS DESCRIBED ABOVE, LOCAL LAW MAY GOVERN THESE REQUIREMENTS IN YOUR STATE, PLEASE REFER TO ANY STATE-SPECIFIC ADDENDUM THAT MAY BE ATTACHED TO THE OFFERING CIRCULAR FOR DETAILS. THERE MAY BE OTHER RISKS CONCERNING THESE FRANCHISES. Information comparing franchisors is available. Call the state administrators listed on Schedule 4 to this Offering Circular or your public library for sources of information. Registration of these franchises by a state does not mean that the state recommends them or has verified the information in this Offering Circular. If you learn that anything in this Offering Circular is untrue, contact the Federal Trade Commission or the state administrator in your state. Effective Date: May 15, 1998, as amended November 24, 1998. --------------

TABLE OF CONTENTS Item Page ---- ---- ITEM 1. THE FRANCHISOR, ITS PREDECESSORS, AND AFFILIATES 1 ITEM 2. BUSINESS EXPERIENCE 6 ITEM 3. LITIGATION 9 ITEM 4. BANKRUPTCY 10 ITEM 5. INITIAL FRANCHISE FEE 11 ITEM 6. OTHER FEES 12 ITEM 7. INITIAL INVESTMENT 18 ITEM 8. RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES 25 ITEM 9. FRANCHISEE'S OBLIGATIONS 27 ITEM 10. FINANCING 30 ITEM 11. FRANCHISOR'S OBLIGATIONS 32 ITEM 12. TERRITORY 41 ITEM 13. TRADEMARKS 43 ITEM 14. PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION 47 ITEM 15. OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS 49 ITEM 16. RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL 49 ITEM 17. RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION 50 ITEM 18. PUBLIC FIGURES 63 ITEM 19. EARNINGS CLAIMS 63 ITEM 20. LIST OF OUTLETS 64 ITEM 21. FINANCIAL STATEMENTS 69 ITEM 22. CONTRACTS 69 ITEM 23. RECEIPT 70 SCHEDULES --------- SCHEDULE 1 DEFINITIONS SCHEDULE 2 LIST OF AGENTS FOR SERVICE OF PROCESS SCHEDULE 3 FINANCIAL STATEMENTS SCHEDULE 4 STATE ADMINISTRATORS SCHEDULE 5 OPERATIONS MANUALS TABLE OF CONTENTS SCHEDULE 6 FRANCHISEE INFORMATION PART 1 - LIST OF PRETZEL TIME FRANCHISEES PART 2 - LIST OF PRETZEL TIME FRANCHISEES TERMINATED, CANCELLED, NOT RENEWED, OR THAT HAVE CEASED DOING BUSINESS SCHEDULE 7 LIST OF PRETZEL TIME AREA DEVELOPERS -i-

EXHIBITS -------- EXHIBIT A FRANCHISE AGREEMENT (WITH ACKNOWLEDGMENT ADDENDUM, OWNERSHIP ADDENDUM, AUTHORIZATION AGREEMENT FOR PREARRANGED PAYMENTS (APPENDIX A), TCBY YOGURT PRODUCT ADDENDUM, AND SATELLITE UNIT ADDENDUM) EXHIBIT B GUARANTY OF AGREEMENT EXHIBIT C RESERVATION LETTER EXHIBIT D SUBLEASE AGREEMENT NOTICE ------ UNLESS OTHERWISE INDICATED, THE INFORMATION APPEARING IN THIS OFFERING CIRCULAR APPLIES TO PRETZEL TIME STORE FRANCHISES. UNLESS OTHERWISE INDICATED, THE TERMS OF ALL FRANCHISE OFFERS ARE THE SAME. -ii-

ITEM 1. THE FRANCHISOR, ITS PREDECESSORS, AND AFFILIATES Description of the Franchisor and its Predecessors and Affiliates. ----------------------------------------------------------------- To simplify the language in this Offering Circular, "we", and similar words, refer to Pretzel Time, Inc., the franchisor; "MFHCI" means Mrs. Fields Holding Company, Inc., a Delaware corporation; "MFOCI" means Mrs. Fields' Original Cookies, Inc., a Delaware corporation; "MFBI" means The Mrs. Fields' Brand, Inc., a Delaware corporation; "GACC" means Great American Cookie Company, Inc., a Delaware corporation; "Pretzelmaker" means Pretzelmaker, Inc., a Utah corporation; and "Pretzelmaker-Canada" means Pretzelmaker-Canada, Inc., an Ontario corporation. "You" and similar words, means the person or persons, including a corporate or other legal entity, individually and collectively, buying a franchise from us; and "your Store" means the Pretzel Time Store that you will operate if we enter into a Pretzel Time franchise agreement with you. We have also attached as Schedule 1 a list of additional defined terms used in this Offering Circular. If a capitalized term is not defined in the body of this Offering Circular, please refer to Schedule 1 for the definition. We are a Pennsylvania corporation incorporated in May 1991. We originally incorporated under the name Mr. Pretzel, Inc., but shortly thereafter changed our name to Pretzel Time, Inc. We do business under the name Pretzel Time Stores (or variations of that name). In September 1997, MFHCI acquired 56% of our outstanding shares. At the same time, we entered into a Management Agreement with MFHCI under which MFHCI agreed to provide, either by itself or through one of its affiliates, management services to us. MFHCI is a Delaware corporation incorporated in August 1996. In November, 1997, MFHCI assigned all of its interest in our outstanding shares to MFOCI. MFOCI is a Delaware corporation incorporated in September 1996. MFOCI is a wholly-owned subsidiary of MFHCI and an Affiliate of us. In January 1998, MFOCI acquired an additional 4% of our outstanding shares. Similarly, in June 1998, MFOCI acquired an additional 10% of our outstanding shares. Consequently, as of the date of this Offering Circular, MFOCI owns 70% of our outstanding shares. Our principal business address is 2855 East Cottonwood Parkway, Suite 400, Salt Lake City, Utah 84121, and our telephone number is 801-736-5600. The principal business address and telephone number of MFHCI, MFOCI, MFBI, GACC, Pretzelmaker and Pretzelmaker-Canada are the same as ours. Our agents for service of process in the various states where we do business are listed on Schedule 2 to this Offering Circular. We have no predecessors from which we acquired a substantial portion of our assets. Pretzelmaker is a Utah corporation incorporated on August 31, 1992 under the name Four Pretzels, Inc. Pretzelmaker changed its name to Pretzelvania, Inc. on September 23, 1992 and to its current name on December 17, 1992. Pretzelmaker-Canada is an Ontario corporation incorporated on September 26, 1996, and a wholly-owned subsidiary of Pretzelmaker. On November 19, 1998, MFOCI acquired all of the stock of Pretzelmaker Holdings, Inc. ("PHI"), a Colorado corporation incorporated on February 24, 1995 and the parent corporation of Pretzelmaker. As a result of the merger, Pretzelmaker-Canada remains a wholly-owned subsidiary of Pretzelmaker, Pretzelmaker remains a wholly-owned subsidiary of PHI, and PHI is now a wholly-owned subsidiary of MFOCI. MFBI is a Delaware corporation incorporated in August 1996. MFBI is also a wholly-owned subsidiary of MFHCI and an Affiliate of us. MFBI has granted MFOCI a perpetual, fully paid license to use the Mrs. Fields trademarks in connection with all Mrs. Fields Cookie Stores. GACC is a Delaware corporation incorporated on June 10, 1977. GACC incorporated under the name "The Original Great American Chocolate Chip Cookie Company, Inc." and changed to its existing -1-

name as of December 10, 1993. Cookies USA, Inc. ("Cookies USA"), a Delaware corporation, acquired GACC on December 10, 1993 and GACC became a wholly-owned subsidiary of Cookies USA. On August 24, 1998, MFOCI acquired all of the stock of Cookies USA. Immediately thereafter, MFOCI merged Cookies USA with and into itself. As a result of the merger, GACC is now an indirect, wholly-owned subsidiary of MFOCI and an Affiliate of ours. Concurrent with MFOCI's acquisition of Cookies USA, MFOCI acquired 29 Great American Cookie Company Stores through the acquisition of all of the stock of 2 corporate Great American Cookie Company franchisees. Immediately thereafter, MFOCI merged the 2 Great American Cookie Company franchisees with and into GACC. GACC now operates these 29 Great American Cookie Company Stores for its own account. Concurrent with MFOCI's acquisition of Cookies USA, MFOCI also acquired 8 additional Great American Cookie Company Stores through the acquisition of all of the assets of 6 corporate Great American Cookie Company franchisees all owned by the same entity. Since the acquisition, MFOCI has operated these 8 Great American Cookie Company Stores as a franchisee of GACC. MFOCI intends to continue to operate both the Pretzel Time System and the Pretzelmaker System as separate franchise systems. In addition, MFOCI intends to continue to operate both the Mrs. Fields System and the Great American Cookie Company System as separate franchise systems. MFHCI, MFOCI, MFBI and GACC are separate corporations and, except as described in Item 21, are not liable to you for any actions taken or obligations incurred by us. The Business of the Franchisor, its Predecessors, and Affiliates. ---------------------------------------------------------------- Since January 1992, we have been in the business of granting licenses and franchises for the operation of Pretzel Time Stores. From October 1991 to December, 1997, we were also in the business of owning and operating Pretzel Time Stores. As of the date of this Offering Circular, we do not own or operate any Pretzel Time Stores. Pursuant to a national sales agreement we entered into with TCBY Systems, Inc. (as further described below in this Item 1), we have offered Pretzel Time franchisees the right to add the TCBY Concept to the Premises of new or existing Pretzel Time Stores since February 1995. We or one of our Affiliates may establish a new business or franchise system or acquire an existing business or franchise system (which may be one of your competitors) operating under trademarks, service marks and tradenames other than the Pretzel Time Trademarks or TCBY Trademarks. The new or existing business or franchise system may compete with you. Since January 1992, we have been in the business of granting area developer rights to certain qualified persons ("Area Developers") pursuant to a Pretzel Time Area Development Agreement (the "Development Agreement"). Under the Development Agreement, Area Developers are granted the right to develop, own and operate a specified number of Pretzel Time Stores at approved shopping mall locations within a defined geographic area (the "Territory"). Area Developers are also granted the right to market and service the Pretzel Time System at shopping mall locations within their Territories, for which they receive a fee. Finally, under the Development Agreement, Area Developers are granted the right to receive compensation from us for finding Pretzel Time franchisees for shopping mall locations within their Territories. Area Developers, however, do not have the authority to grant the rights to license or operate a Pretzel Time franchise or enter into a Pretzel Time franchise agreement with a potential franchisee. While an Area Developer may initiate contact with potential franchisees, only we may enter into a Pretzel Time franchise agreement with such potential franchisees. Currently, we are no -2-

longer entering into Development Agreements for additional Territories, although we may enter into new Development Agreements with new or existing Area Developers for existing Territories. In addition, we may offer some other form of area development grants for Pretzel Time Stores which permit the development and operation of multiple Pretzel Time franchises in designated geographic areas. We offer Area Developer rights and other area development rights through separate offering circulars, if at all. As of June 12, 1998, there were 10 Area Developers with whom we have entered into Development Agreements. See Item 2 and Schedule 7 for a list of our Area Developers and their respective Territories. These Area Developers are independent contractors. As further described in Item 11 of this Offering Circular, an Area Developer may be obligated to provide certain services to you if your Store is located in a shopping mall within such Area Developer's Territory. In July 1997, Mrs. Fields' Pretzel Concepts, Inc. ("MFPCI"), a wholly-owned subsidiary of MFHCI, purchased 79 Pretzel Time Stores from one of our Area Developers, H&M Concepts Ltd. Co. At the time of the purchase, MFPCI entered into an Area Development Agreement and a franchise agreement with us. MFPCI operated the 79 Pretzel Time Stores as our franchisee until MFPCI merged into MFOCI on November 26, 1997. Since the merger, MFOCI has operated the 79 Pretzel Time Stores as our franchisee. See Item 20 and Part 2 of Schedule 6 for more information on these Stores. In June 1998, MFOCI purchased a total of 5 Pretzel Time Stores from one of our Area Developers, Virginia Concepts, Inc. At the time of the purchase, Virginia Concepts, Inc. transferred to MFOCI the respective Area Development Agreement and 5 franchise agreements it had entered into with us. Since the purchase, MFOCI has operated the 5 Pretzel Time Stores as our franchisee. See Item 20 and Part 1 of Schedule 6 for more information on these Stores. Since September 1992, Pretzelmaker has been in the business of granting franchises for the operation of Pretzelmaker Stores in the United States. Since August 1995, Pretzelmaker has also been in the business of owning and operating Pretzelmaker Stores. In addition, since September 1996, Pretzelmaker-Canada has been in the business of granting franchises for the operation of Pretzelmaker Stores in Canada. A Pretzelmaker Store offers soft pretzels, pretzel products and other complementary food and beverages. In some circumstances, a Pretzelmaker Store may also offer branded frozen desserts and coffee products. Following our acquisition of PHI, there were approximately 215 Pretzelmaker Store franchises and licenses, 9 Pretzelmaker Store locations owned and operated by Pretzelmaker and no Pretzelmaker Stores owned and operated by Pretzelmaker- Canada. Since September 1996, MFOCI has been in the business of granting licenses and franchises for the operation of Mrs. Fields Cookie Stores and operating and owning Mrs. Fields Cookie Stores for its own account. A Mrs. Fields Cookie Store offers a variety of specially prepared food items, such as cookies, brownies, muffins and beverages. As of December 31, 1997, there were 165 Mrs. Fields Cookie Store franchises and 144 Mrs. Fields Cookie Stores owned and operated by MFOCI. Between September 1996 and November 1997, MFOCI was in the business of granting licenses and franchises for the operation of Hot Sam Pretzel and Bakery Stores. Currently, MFOCI is no longer granting Hot Sam Pretzel and Bakery Store licenses and franchises. Since September 1996, MFOCI has also been in the business of owning and operating Hot Sam Pretzel and Bakery Stores. A Hot Sam Pretzel and Bakery Store offers a variety of freshly prepared soft pretzels and pretzel products (including Bavarian and sweet dough pretzel sticks), various toppings and sauces, freshly squeezed lemonade and other food items and beverages which are similar to those offered at a Pretzel Time Store. As of December 31, 1997, there were no Hot Sam Pretzel and Bakery Store licenses or franchises, and 102 Hot Sam Pretzel and Bakery Stores owned and operated by MFOCI. -3-

In certain situations, you may be able to purchase an existing Hot Sam Pretzel and Bakery Store location and its physical assets from MFOCI and convert the location to a Pretzel Time Store of the type offered in this Offering Circular. The acquisition of the existing Hot Sam Pretzel and Bakery location and assets from MFOCI will be negotiated between you and MFOCI on an individual basis, independently, separately and in addition to your entering into a Pretzel Time Franchise Agreement with us to operate a Pretzel Time Store. This Offering Circular makes no disclosures or representations regarding the terms and conditions of any such transaction you may negotiate with MFOCI. Since September 1996, MFOCI has been in the business of operating and owning Original Cookie Company Stores for its own account. An Original Cookie Company Store offers a variety of specially prepared food items, such as cookies, brownies, muffins and beverages. As of December 31, 1997, there were 155 Original Cookie Company Stores owned and operated by MFOCI and no Original Cookie Company Store franchises. Since September 1977, GACC has been in the business of granting licenses and franchises for the operation of Great American Cookie Company Stores. Since June 1977, GACC has also been in the business of owning and operating Great American Cookie Company Stores. A Great American Cookie Company Store offers different types of cookies, other baked products and beverages and is typically located in an enclosed shopping mall. Following MFOCI's acquisition of Cookies USA and the 10 Great American Cookie Company franchisees, as described above, there were approximately 218 Great American Cookie Company Store licenses or franchises, and 106 Great American Cookie Company Stores owned and operated by GACC. These are the only franchised businesses that have been offered by us and our Affiliates. Description of the Franchises Offered. ------------------------------------- Pretzel Time Stores: ------------------- We offer franchises (the "Franchises") for Pretzel Time Stores offering various Pretzel Time Products in accordance with the terms of our Pretzel Time franchise agreement (the "Pretzel Time Franchise Agreement"). A copy of the Pretzel Time Franchise Agreement is attached to this Offering Circular as Exhibit A. If you enter into a Pretzel Time Franchise Agreement, you will be authorized to use the Pretzel Time System under which Pretzel Time Stores operate. If you do business as an Entity, we may require each of your Entity Owners at any time during the term of the Franchise Agreement to execute a Guaranty of Agreement in the form of Exhibit B to this Offering Circular, guaranteeing your obligations under the Franchise Agreement. On a case by case basis, we may offer existing Pretzel Time franchisees the right to operate a cart (the "Satellite Unit") in proximity to their Pretzel Time Store in accordance with the terms of our Satellite Unit Addendum to Pretzel Time Franchise Agreement (the "Satellite Unit Addendum"). A copy of the Satellite Unit Addendum is attached to the Franchise Agreement in Exhibit A of this Offering Circular. TCBY Concept: ------------ Under certain circumstances (as further described below in this Item 1), we offer Pretzel Time franchisees the right to add the TCBY Concept to the Premises of a new or existing Pretzel Time Store. Pretzel Time franchisees that are granted a TCBY Concept, offer TCBY Yogurt Products in accordance with the terms of a TCBY Yogurt Product Addendum to Pretzel Time Franchise Agreement (the "Yogurt -4-

Addendum"). A copy of the Yogurt Addendum is attached to the Franchise Agreement in Exhibit A of this Offering Circular. On June 15, 1994, we entered into a TCBY National Sales Agreement (the "TCBY Sales Agreement") with TCBY Systems, Inc., an Arkansas corporation with its principal office at 1200 TCBY Tower, 425 West Capitol Avenue, Little Rock, Arkansas 72201 ("TCBY"). Pursuant to the TCBY Sales Agreement, TCBY has granted to us the right to use the TCBY Trademarks, including "TCBY," and the TCBY System in conjunction with the operation and sale of Pretzel Time Retail Outlets. Pretzel Time Retail Outlets may only sell TCBY Yogurt Products if the location has been approved by both TCBY and us. TCBY has retained the right to operate or to grant other persons the right to operate TCBY Stores of any type at locations it decides and the right to sell products and services through similar or dissimilar channels of distribution. Your right to add the TCBY Concept to the Premises of a new or existing Pretzel Time Store depends on landlord restraints and the current territorial restrictions given by TCBY to existing and future TCBY franchisees. If you enter into a Yogurt Addendum, you will be authorized to sell TCBY Yogurt Products from the Premises of your Pretzel Time Store and use the TCBY System under which TCBY Stores operate. As further described in the Yogurt Addendum, your right to sell TCBY Yogurt Products from the Premises of your Pretzel Time Store and use the TCBY System will continue until the earliest of: (i) the termination or the expiration of the TCBY Sales Agreement (the expiration date of the TCBY Sales Agreement is June 14, 2009); or (ii) the termination of the Franchise Agreement. We do not operate, offer or sell TCBY franchises. We only offer the sale of TCBY Yogurt Products as a dual concept with the hand-rolled soft pretzel concept. Both concepts are incorporated into one leasehold space that makes up the Premises. Our right to grant TCBY Concepts is limited by territorial restrictions given by TCBY to TCBY franchisees and may not be available in all locations. Our right to grant TCBY Concepts may also be limited by the landlord of a given location. For example, a landlord might not allow the sale of TCBY Yogurt Products because of the existence of other tenants who sell yogurt in those malls. Thus, we cannot grant TCBY Concepts for all mall locations with a Pretzel Time Store. TCBY Stores offer a number of TCBY Yogurt Products. TCBY Stores sell yogurt in a variety of specialty flavors. Vanilla and chocolate are available in each TCBY Store daily along with 2, 4 or 6 other flavors depending on the number of frozen yogurt dispensing machines used. The yogurt is served in a variety of ways including in regular cones, waffle cones, sundaes, waffle sundaes, frozen on a stick, shakes and with a variety of toppings, including various candies, cookies and fruits and other food products approved or required by TCBY for sale at TCBY Stores. Neither TCBY nor any of its affiliates are directly or indirectly responsible for any obligation, undertaking, covenant, or other duty to perform or to refrain from any action under or by virtue of any agreement between us and you. Neither TCBY nor any of its affiliates are a party to any agreement between us and you, but TCBY does stand in a position of third party beneficiary under the agreement. The TCBY Trademarks are the property of TCBY or its affiliate, and nothing contained in this Offering -5-

Circular will in any manner create any property rights in or to, or relating to the TCBY Trademarks as against TCBY. TCBY's representatives have the right to inspect the Premises of your Store and your books to the extent they relate to the operations of a TCBY Concept. The Markets. ----------- Pretzel Time: ------------ Your Pretzel Time Store will offer a variety of Pretzel Time Products to the general public, and you will have to compete with bakeries, some fast-food restaurants, snack food stores, convenience stores (including Pretzelmaker Stores), and facilities owned by us or our Affiliates, all of which offer specialty retail snack foods and beverages. You will also have to compete with other Pretzel Time Retail Outlets selling various Pretzel Time Products and other products and services (such as frozen pretzel dough sold through various retail outlets) under the Pretzel Time Trademarks or other trademarks or service marks. In addition, you will have to compete with other individuals and entities in the search for suitable store locations, managers, and employees. Pretzel Time Products appeal to persons of all ages, but particularly appeal to families with children and to adults between the ages of 21 and 60. We are engaged in the business of the sale of frozen pretzels and other food products in the food service industry. We are interested in market penetration by distribution of frozen dough products, including frozen pretzels, to alternative locations such as airports, amusement parks, schools, hospitals, office work sites, military facilities, grocery stores, convenience stores, supermarkets, entertainment or sporting facilities and/or other similar facilities and eventual food service distribution in non-franchised outlets at or from which we, in our absolute discretion, authorize. We intend to distribute frozen pretzels for sale in other non-franchised and non-company-owned outlets. Our actions hopefully will promote consumer acceptance of Pretzel Time Products as well as our Pretzel Time Trademarks, with the -5A-

intention of ultimately benefiting the Pretzel Time System. We are interested in developing, marketing, and/or distributing other food products in the food service industry. TCBY: ---- TCBY Stores offer soft-serve premium frozen yogurt and ice cream as a treat, dessert, snack or light meal items. TCBY Stores compete with numerous other soft serve frozen yogurt stores, ice cream parlors, other snack food or dessert item restaurants and other fast food restaurants that complement their menus with soft-serve frozen yogurt. TCBY may also offer its frozen yogurt and other related products in supermarkets, grocery stores, and where convenience food operations are conducted and other retail outlets that may compete with TCBY franchises or TCBY Concepts. Some states may require franchisees to obtain restaurant, business, occupational, food products, and miscellaneous licenses. Some states also have laws regarding who may secure certain of these licenses. You may also have to obtain health licenses and to comply with health laws and regulations that apply to restaurant and food product sales establishments. We urge you to make inquiries about these laws and regulations. ITEM 2. BUSINESS EXPERIENCE Our officers and directors and all other persons who will have management responsibilities for our franchise program are as follows: Director, President and Chief Executive Officer - Larry Hodges -------------------------------------------------------------- Mr. Hodges has been a member of our Board of Directors and our President and Chief Executive Officer since September 1997. Mr. Hodges also has been President and Chief Executive Officer and one of the directors of MFOCI since September 1996. Between April 1993 and September 1996, he had been President and Chief Executive Officer and a director of both Mrs. Fields, Inc. ("MFI") and Mrs. Fields Development Corporation ("MFDC"). From October 1991 to February 1994, Mr. Hodges was President and Chief Executive Officer of Food Bond Stores, Inc. in Kansas City, Missouri. Director - Martin E. Lisiewski ------------------------------ Mr. Lisiewski has been a member of our Board of Directors since 1993. Mr. Lisiewski served as our Secretary/Treasurer and Chief Executive Officer from our inception in 1991 until September 1997. Mr. Lisiewski has served as President of Mar-Tai Management Corporation, Mar-Tai Development Corporation and A.D.M. Developers, Inc. which were real estate development corporations. He also served as Secretary/Treasurer of Gulf West Star Construction, Inc. an excavating firm. Director and Treasurer - L. Tim Pierce -------------------------------------- Mr. Pierce has been a member of our Board of Directors and our Treasurer since September 1997. Mr. Pierce also has been Senior Vice President, Chief Financial Officer, and Corporate Secretary of MFOCI since September 1996. Prior to that, he held the same position at MFDC. He became Vice President, Finance at the time MFDC was incorporated, Senior Vice President in December 1991, Chief Financial Officer in August 1993 and Corporate Secretary in April 1995. Since December 1991, Mr. Pierce has also served as Senior Vice President of MFI. -6-

Director - Richard J. Huber --------------------------- Mr. Huber has been a member of our Board of Directors since September 1997. Mr. Huber has also owned and operated Richard J. Huber CPA, an accounting firm located in Harrisburg, Pennsylvania, since January 1984. Vice President - Pat Knotts --------------------------- Mr. Knotts has been our Vice President since September 1997. Mr. Knotts also has been Senior Vice President of MFI since October 1996. Between January 1992 and October 1996, Mr. Knotts served as Executive Vice President of Operations for MFI's affiliates Original Cookie Company and Hot Sam Franchise Development Corporation. Secretary - Michael R. Ward --------------------------- Mr. Ward has been our Secretary since September 1997. Mr. Ward has been Vice President of Administration for MFOCI since September 1996. Between 1991 and 1996, Mr. Ward oversaw the Legal Department and Human Resources Department for MFI. He is admitted to practice law in the State of Utah. Vice President of Franchising - Scott Moffitt --------------------------------------------- Mr. Moffitt has been our Vice President of Franchising since April 1998. Mr. Moffitt also has been Vice President of Franchising of MFOCI since April 1998. Between July 1997 to March 1998, Mr. Moffitt was Vice President of Franchise Development of Lee's Franchise Services, Inc. in Nashville, Tennessee. From January 1994 to July 1997, he was the Vice President of Franchising for the Grandy's Division in Lewisville, Texas. Mr. Moffitt served as the Director of Franchise Sales for Pizza Inc., located in Dallas, Texas, from February 1990 to January 1994. From June 1988 to February 1990, he was a Franchise Operations Consultant for USACAFES, L.P. (Bonanza Restaurants) in Dallas, Texas. Mr. Moffitt also served as the Southwest Regional Training Manager for Sbarro's, Inc., located in Dallas, Texas, from March 1988 to June 1998; and the General Manager for Training and Support of El Chico Corporation, located in Dallas, Texas, from 1984 to March 1988. Franchise/License Training Director: Monnie L. Hughes ------------------------------------------------------ Ms. Hughes has been our National Director of Franchise and License Training since July 1997. She has also held the same position with MFOCI since September 1996 and MFDC since November 1995. Between 1983 and November 1995, Ms. Hughes served as Training Center Manager for Jack-in-the-Box Restaurants in the Bay Area, California. -7-

Our Area Developers are as follows: Area Developer - South Carolina: Pretzel Time of South Carolina, Inc. ------------------------------------------------------------------------ President: Edward DiNatale --------------------------- Mr. DiNatale is the President of Pretzel Time of South Carolina, Inc. which is a franchisee and Area Developer for South Carolina. Since 1987, Mr. DiNatale acted as President of True Value V & S Variety Store, a Trenton, New Jersey based retail store. He also serves as President of All Fathers Candys Company, a Trenton, New Jersey based Easter candy manufacturer since 1989. Area Developer - Southern New York, New Jersey, Rhode Island and Connecticut: ------------------------------------------------------------------------------ Pretzel Time of New York, Inc. ------------------------------ President: Alan Fleisher ------------------------- Mr. Fleisher is the area developer for the southern part of the state of New York, New Jersey, Rhode Island and Connecticut and also is a franchisee. From 1989 to 1992, Mr. Fleisher was President of Professional Laundry Systems, Inc. a New York based distributor of coin-operated laundry equipment. Mr. Fleisher was on the Board of Directors of Pretzel Time from 1993 until May of 1996. Area Developer - Ohio, Northern New York, and Western Pennsylvania: Kal ------------------------------------------------------------------------ Enterprises ------------ Co-Chairman: Alan Gick ----------------------- Mr. Gick has been self-employed as co-chairman of Kal Enterprises, Inc. of Fairview, Pennsylvania since September of 1988. Kal Enterprises owns and operates several retail food shops including Orange Julius, Dairy Queen and Karmelkorn. Since March of 1993 the company is also area developer for the above Pretzel Time territory. Area Developer - Alaska, Arizona, California, Hawaii, Idaho, Illinois, Indiana, ------------------------------------------------------------------------------- Iowa, Michigan, Minnesota, Montana, Nebraska, Nevada, North Dakota, Oregon, --------------------------------------------------------------------------- South Dakota, Utah, Virginia, Washington, West Virginia, Wisconsin, the ------------------------------------------------------------------------ Provinces of Alberta, British Columbia, Manitoba, Saskatchewan, Canada and -------------------------------------------------------------------------- Mexico: MFOCI -------------- Vice President of Administration: Michael R. Ward -------------------------------------------------- Mr. Ward is the Vice President of Administration of MFOCI. See Items 1 and 2 above for more information on Mr. Ward and MFOCI. Area Developer - Kansas and Missouri: Mid Continent Enterprises, Inc. ------------------------------------------------------------------------ President: Bernard W. Mazzoni ------------------------------ Mr. Mazzoni has been president of Mid Continent Enterprises, Inc. since June 1992, which is a franchisee of Pretzel Time. From February 14, 1990, through July 31, 1992, he was the division controller of Clarostat Manufacturing, Inc. in Dover, New Hampshire. From 1982 through 1990, Mr. Mazzoni was controller of Ericsson Wire and Cable, Inc., in Richardson, Texas. -8-

Area Developer - North Carolina: Pretzel Time of North Carolina, Inc. ---------------------------------------------------------------------- President: Stuart Miller ------------------------- Mr. Miller is the President of Pretzel Time of North Carolina, Inc. which has been a franchisee and Pretzel Time Area Developer for North Carolina since July 1993. From July 1987 until September 1993, Mr. Miller held the position of General Manager of Auto Lighting for General Electric in Cleveland, Ohio. This $100 million North American business focused on the retail and aftermarket channels of the automotive lighting industry. Mr. Miller managed all marketing, strategic planning, market research, advertising, promotion, and sales and production oversight. Area Developer - Maryland: Pretzel Time of Maryland, Inc. ---------------------------------------------------------- President: Sheri Ritz ---------------------- Mrs. Ritz is the President of Pretzel Time of Maryland, Inc. which has been a franchisee and area developer for the state of Maryland since November 1992. Previous to Pretzel Time of Maryland, Inc., Mrs. Ritz was the Marketing Director for a solar manufacturing company in Princeton, New Jersey. Area Developer - Georgia with the exception of the Savannah area: Peachtree --------------------------------------------------------------------------- Pretzel Time, Inc. ------------------ Secretary: Francis X.I. Purcell -------------------------------- Since January 1994, Mr. Purcell has been Secretary of Peachtree Pretzel Time, Inc. which holds the area developer rights for the above territory. From July 1991 to December 1993, Mr. Purcell was president of Pretzel Time, Inc. Prior to that Mr. Purcell worked for Pizza Hut, Inc. as district manager from December 1989 to March 1991. Area Developer - Alabama, Florida and the Savannah, Georgia area: Sunshine --------------------------------------------------------------------------- Pretzel Time, Inc. ------------------ President: Francis X.I. Purcell -------------------------------- Since January 1994, Mr. Purcell has been President of Sunshine Pretzel Time, Inc. which holds the area developer rights for the above territory. Mr. Purcell's full biography can be found above. Area Developer - Massachusetts, Maine, Vermont, New Hampshire and the --------------------------------------------------------------------- Dallas/Forth Worth, Texas area: New England Concepts, Inc. ----------------------------------------------------------- President: Bill Smith ---------------------- Since September 1997, Mr. Smith has been President of New England Concepts, Inc. which holds the area developer rights for the above territory. ITEM 3. LITIGATION State of Maryland v. Pretzel Time, Inc. (Before the Office of the Attorney ----------------------------------------- General of Maryland File Number FR930900) On December 11, 1992, the Maryland Division of Securities notified us that we had offered or sold franchises in Maryland in violation of Maryland franchise law without being registered under Maryland franchise law. On February 6, 1995, we entered into a consent agreement and, although we were not required to pay a fine, we offered 2 franchisees rescission rights under Maryland franchise law. -9-

State of New York v. Pretzel Time, Inc. (Supreme Court of the State of New ----------------------------------------- York, June 17, 1993, Index Number 404832/93). Between April 13, 1992 and March 19, 1993, we sold 4 franchises in violation of New York franchise law for selling franchises without being registered under New York franchise law. We entered into a consent judgment and paid a fine of $8,000. Schroeter, et al v. Pretzel Time of Independence, Inc. et al. (Superior Court -------------------------------------------------------------- Civil Action No. 95-1394D in the Commonwealth of Massachusetts). On March 13, 1995, Robert A. Schroeter, Gina Schroeter, Tulio Cabrera and Josephine Cabrera, filed suit against Pretzel Time of Independence, Inc., Patricia Krukoff, Steven Krukoff, Andrew Economopoulas, A.S.A.P. Construction, Bay Bank Boston, N.A., P.S. Pretzel Time of Watertown, Inc., Pretzel Time of New England, and us. To the best of our knowledge, the plaintiffs were shareholders in a corporation that they alleged was a Pretzel Time franchisee at Independence Mall in Kingston, Massachusetts. The plaintiffs claimed to have lost $50,000 based upon the alleged fraudulent misrepresentations, unjust enrichment, wrongful termination, unfair and deceptive trade practices of various parties, including us. We were sued on an agency theory (plaintiffs contended that we were liable for the acts of our former Massachusetts "area developer" because that person was allegedly our "agent" in name, but we denied any liability and had Massachusetts counsel file pleadings to answer plaintiffs' allegations). The matter was settled for $20,000. After the settlement, plaintiffs have admitted that we were not liable for any damages. Other than these 3 actions, no litigation must be disclosed in this Offering Circular. ITEM 4. BANKRUPTCY Larry Hodges, our President and Chief Executive Officer, was president and chief executive officer of Food Barn Stores, Inc., a grocery store chain, from January, 1992 to March, 1994. On January 5, 1993, Food Barn Stores, Inc., located at 624 Westport Road, Kansas City, Missouri 64111, filed a chapter 11 bankruptcy case. The case is still pending, although confirmation of a plan of reorganization has been accepted. Mr. Hodges was hired by Food Barn Stores, Inc., as part of a major "turnaround" effort, at a time when Food Barn Stores, Inc. was insolvent. As part of the turnaround effort, the chapter 11 bankruptcy case was filed with the concurrence of Mr. Hodges, shortly after he was named president. Food Barn Stores, Inc. is not affiliated in any way with us. (U.S. Bankruptcy Court for the Western District of Missouri, Kansas City, In re Food ---------- Barn Stores, Inc., Case No. 93-40012-2-11). ----------------- Coy-Kramer Excavating, Inc. and its related entities, Fran-Con Equipment, Inc., and Mar-Tie Construction Corp., Pennsylvania-based corporations with principal places of business at 2843 Walnut Street, Harrisburg, Pennsylvania, filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code (Fran-Con Equipment, Inc., United States Bankruptcy Court for the Middle ------------------------ District of Pennsylvania No. 1-89-01163; In re Mar-Tie Construction Corp., -------------------------------- United States Bankruptcy Court for the Middle District of Pennsylvania No. 1-89- 01162; In re Coy-Kramer Excavating, Inc., United States Bankruptcy Court for --------------------------------- the Middle District of Pennsylvania, Case No. 1-89-01161) on December 31, 1989. Martin E. Lisiewski, a Director of Pretzel Time, was the Chief Operating Officer of Coy-Kramer Excavating, Inc. and President of Fran-Con Equipment, Inc. and Mar-Tie Construction Corp. at the time of the bankruptcy petition. The cases were consolidated. During the pendency of the Chapter 11 reorganization, on December 29, 1989 the three companies were merged into one entity, Weststar Construction, Inc., of which Martin E. Lisiewski was named as secretary/treasurer. The case was converted to Chapter 7 of the U.S. Bankruptcy Code on January 18, 1991 for failure to pay state taxes. On February 8, 1994, the case was closed. Mr. Lisiewski has had no involvement with Weststar Construction since the case's conversion to Chapter 7. Pretzel Time has no affiliation with Coy-Kramer Excavating, Inc., Fran-Con Equipment, Inc., Mar-Tie Construction Corp. and Weststar Construction, Inc. -10-

Other than these 2 actions, no person previously identified in Item 1 or Item 2 of this Offering Circular has been involved as a debtor in proceedings required to be disclosed in this Item. ITEM 5. INITIAL FRANCHISE FEE Initial Franchise Fee. --------------------- Pretzel Time Store: ------------------ You must pay an initial franchise fee of $25,000 when you sign a Franchise Agreement for a Pretzel Time Store. However, if you operate your Store in either a cart or kiosk format, you must pay an initial franchise fee of $15,000. The initial franchise fee represents payment to us for the right to use the Pretzel Time Trademarks and the Pretzel Time System in the development and operation of your Store. The initial franchise fee also covers the cost of goods and services that we and our Affiliates may provide to you before your Store opens, such as site evaluation and approval, prototypical plans, grand opening marketing materials and training. You must pay the initial franchise fee in a lump sum upon execution of the Franchise Agreement. As explained in Item 6 of this Offering Circular, we may require you to pay an initial franchise fee upon grant of a successor franchise; however, that fee will not exceed 50% of the initial franchise fee then being charged to new franchisees. If an Area Developer has the rights to the Territory in which your Store is located, we are contractually obligated, pursuant to the applicable Development Agreement, to pay the Area Developer 25% of the initial franchise fee you pay to us. This payment is to reimburse the Area Developer for its expense in providing certain services to you, as further described in Item 11 of this Offering Circular. See Items 1 and 2, and Schedule 7 of this Offering Circular for a further description of our Area Developers. TCBY Concept: ------------ We do not directly charge you an initial franchise fee if you are granted the right to add the TCBY Concept to the Premises of your Store, however, you must pay a $1,000 fee to us, which we in turn pay to TCBY. A current franchisee may add the TCBY Concept to the Premises of its existing Pretzel Time Store; provided the existing franchisee receives the approval of TCBY and us, pays the $1,000 fee as described above, and signs our current form of Pretzel Time Franchise Agreement, with a Yogurt Addendum, and a general release in a form acceptable to us. Other Fees: ---------- If you or your initial store manager do not satisfactorily complete the initial training program, we will refund the initial franchise fee less all reasonable expenses incurred by us in preparing the Franchise Agreement and all related agreements, the grant of the Franchise, site selection and approval, and any other services performed by us in establishing and developing your Store. However, the total refund will not exceed 50% of the initial franchise fee. We will make the refund to you upon execution by you of all releases, waivers and other agreements necessary to terminate the relationship between you and us. We do not offer refunds of the initial franchise fee under any other circumstances. If you are interested in acquiring a Franchise, you must complete an application and sign a reservation letter in the form of Exhibit C to this Offering Circular. At the time you sign the reservation letter and submit the application to us, you must pay us a reservation fee of $1000. If you acquire the Franchise, we will apply the $1000 to payments due from you upon execution of the Franchise Agreement. However, if after we complete a credit check and a background check you do not qualify for -11-

a Franchise, or if you fail to complete our training program to our satisfaction, we will refund the $1000. Otherwise, we will not refund this fee. Under certain circumstances, we or one of our Affiliates may sublease the premises for your Store to you (a "Sublease"). If this occurs, you may be required to pay a security deposit to us or our Affiliate at the time you execute the Sublease. This security deposit and the conditions under which it may be refundable are explained in Note 8 under Item 6 of this Offering Circular. If you are developing a new Pretzel Time Store, you must conduct a grand opening advertising and promotion program for at least 7 days, beginning within 30 days after opening of your Store. You also agree to spend at least $2,500 for the grand opening of your Store. ITEM 6. OTHER FEES Pretzel Time Store: ------------------ <TABLE> <CAPTION> --------------------------------------------------------------------------------------------------------- Name of Fee Amount Due Date ----------- ------ -------- --------------------------------------------------------------------------------------------------------- <S> <C> <C> a. Continuing fees 7% of monthly Gross Revenues Payable weekly on or before the close (Note 1) of business on Wednesday of each week for the immediately preceding week. (Note 2) --------------------------------------------------------------------------------------------------------- b. Marketing fees 1% to 3% of Gross Revenues Same as continuing fees (Note 3) (Note 2) --------------------------------------------------------------------------------------------------------- c. Lease - required Will vary under circumstances When due advertising fees (Note 4) (Note 4) --------------------------------------------------------------------------------------------------------- d. Surcharge on product Will vary under circumstances Upon date of invoice (Note 5) (Note 5) --------------------------------------------------------------------------------------------------------- e. Training fee See Note 6 See Note 6 (Note 6) --------------------------------------------------------------------------------------------------------- f. Refresher training See Note 7 See Note 7 (Note 7) --------------------------------------------------------------------------------------------------------- g. Sublease See Note 8 Monthly (Note 8) (Note 8) --------------------------------------------------------------------------------------------------------- h. Special assistance See Note 9 See Note 9 (Note 9) --------------------------------------------------------------------------------------------------------- i. Late payments $100 for each delinquent When the delinquent payment is payment. made --------------------------------------------------------------------------------------------------------- </TABLE> -12-

<TABLE> <CAPTION> --------------------------------------------------------------------------------------------------------- Name of Fee Amount Due Date ----------- ------ -------- --------------------------------------------------------------------------------------------------------- <S> <C> <C> j. Interest expenses Will vary under circumstances When due (Note 10) --------------------------------------------------------------------------------------------------------- k. Audit Cost of financial audit plus 15 days after receipt of audit or interest at 1.5% per month or the inspection report highest legal rate on any underpayment (Note 11) --------------------------------------------------------------------------------------------------------- l. Operations Manuals See Note 12 Upon receipt of duplicate copy duplicate (Note 12) --------------------------------------------------------------------------------------------------------- m. Transfer fee $6,250 or the current transfer Payable upon a Transfer (Note 13) fee, whichever is greater. --------------------------------------------------------------------------------------------------------- n. Advertising, Will vary under When the materials are ordered marketing and the circumstances and/or delivered promotional (Note 14) (Note 14) materials --------------------------------------------------------------------------------------------------------- o. Interim management 10% of Gross Revenues At end of management period fees (Note 15) --------------------------------------------------------------------------------------------------------- p. UCC filing fees As set by state law; varies from Upon execution of the Franchise (Note 16) state to state Agreement and at the times UCC continuation statements are filed --------------------------------------------------------------------------------------------------------- q. Costs and attorneys' Will vary under circumstances Upon occurrence fees, and (Note 17) indemnification --------------------------------------------------------------------------------------------------------- r. Successor franchise Will vary under circumstances At times provided in successor agreement (Note 18) franchise agreement --------------------------------------------------------------------------------------------------------- s. Insurance Will vary under circumstances Upon demand by us reimbursement (Note 19) (Note 19) --------------------------------------------------------------------------------------------------------- t. Public or private $7,500 or current fee, whichever Prior to work being commenced offering is greater (Note 20) (Note 20) --------------------------------------------------------------------------------------------------------- </TABLE> -13-

General Comments: You must pay these fees to us except as explained in Notes 4, 5, 8 and 17 below. These fees are non-refundable. If we do not actually receive your payments on the due date, they will be deemed delinquent. You must pay all continuing fees, marketing fees, rental payments and other amounts owed to us or our Affiliates by pre-authorized electronic bank transfer from your general account. You must execute and complete the Authorization Agreement form attached to the Franchise Agreement as Appendix A or any other documentation we require from time to time to permit the electronic transfer. The pre-authorized electronic bank transfer requirements are further described in Section 6.4 of the Franchise Agreement and Appendix A to the Franchise Agreement. During the course of developing and operating your Store, you will also be required to purchase various items from designated and approved suppliers or in accordance with our standards and specifications. See Item 8 of this Offering Circular for an explanation of these requirements. Specific Notes: 1. See Schedule 1 to this Offering Circular for a definition of Gross Revenues. 2. The continuing fee and marketing fee are payable weekly on or before the close of business on Wednesday of each week for the immediately preceding week. As described in the General Comments above, these fees must be paid to us by electronic bank transfer from your general account. 3. The marketing fee for 1998 is 1% of Gross Revenues. Thereafter, we will notify you annually of the exact percentage you must pay as a marketing fee, except for any year in which the percentage is to remain unchanged from the preceding year. See Item 11 of this Offering Circular for more information on marketing. 4. In addition to the marketing fee described in Note 3 above, you must pay all advertising fees required by your lease and/or sublease and comply with all advertising requirements of your lease or sublease. If you are a sublessee of us or one of our Affiliates, you must pay to us any amounts in addition to the marketing fee necessary to meet all lease requirements. See Item 11 of this Offering Circular for more information on marketing. 5. The surcharge will vary. The surcharge is payable to the designated distributor from whom Pretzel Time franchisees purchase flour or frozen dough products when payment for these item is due. We may supply some of our own flour and frozen dough to certain franchisees of Pretzel Time Stores and other food service distribution points. 6. We provide training for you (or one of your principal owners) and the initial store manager (if different from you or your principal owner) free of charge. You must pay a $300 fee to us for each additional person that attends our training. This fee is due to us 10 days before the beginning of training. In addition to any training fees, you are responsible for all travel and living expenses for your trainees. Travel and living expenses are described in Item 7 of this Offering Circular. 7. We may require you and/or previously trained and experienced managers and employees to attend periodic refresher courses at the times and locations we designate. You will be required to pay the fees that we are then charging for these refresher courses. -14-

8. If you sublease the premises to be used as your Store from us, you must execute our standard Sublease Agreement in the form attached to this Offering Circular as Exhibit D. If you are an Entity, we may require each of your Entity Owners to execute a Guaranty of Agreement in the form attached to this Offering Circular as Exhibit B. The rent and other amounts due under the Sublease will be the same as the rent and other amounts due from the tenant under our lease (the "Master Lease") of the premises from the landlord. The rent due will vary with the location of the premises. Typically, monthly rental payments will be based on factors such as the current market value of similar properties and the perceived market value of your Store based upon its location and traffic patterns, sales volumes, and so forth. You must pay the monthly rent under the Sublease to us, and we will then pay the rent to the landlord under the Master Lease. However, you must make the payments to us at least 30 days in advance of the date the payments are due under the Master Lease (10 days in advance, for percentage rental payments). As described in the General Comments above, rental payments must be paid to us by electronic bank transfer from your general account. Rental payments are typically non-refundable. Depending on our evaluation of your credit-worthiness, we may require you to pay a security deposit (typically, the equivalent of one month's rent) under the Sublease. Upon termination of the Sublease, we will refund the security deposit to you if you have fulfilled all of your obligations under the Sublease. 9. We make no charge for the operating assistance and guidance we customarily provide to all of our franchisees. However, if we offer special assistance programs, you must pay the daily fees and charges that we establish for those programs. 10. You must pay all business debts, liens and taxes promptly when due. If you fail to do so, we may, but need not, pay the same and then be entitled to immediate reimbursement from you. Unpaid debts owed to us bear interest from the due date until paid at the lesser of 1.5% per month or the maximum contract rate permitted by the law of the state in which your Store is located. 11. You must pay the costs of the audit or inspection only if you fail to furnish us with reports, financial statements, tax returns or schedules, or if the audit results show an understatement of Gross Revenues of more than 2% or if the need for an audit was a result of your default under the Franchise Agreement in failing to provide records and reports in a timely manner. 12. We loan you one copy of the Operations Manuals free of charge. If you lose your copy of the Operations Manuals, you must obtain a replacement copy from us at our then current charge for replacement copies. 13. We will not charge a transfer fee if the Transfer is between Entity Owners or to an Entity Owner's wholly-owned corporation. 14. As further described in Item 11 of this Offering Circular, from time to time, we may provide you with copies of advertising, marketing and promotional formats and materials for use in your Store, which we or our advertising agencies have prepared. You are only required to pay the shipping and handling costs for these items. We may also offer you the option of purchasing other advertising, marketing and promotional formats and materials prepared by us or our advertising agencies that are suitable for use at local Pretzel Time Stores. If you elect to purchase such items from us, we will provide them to you at our cost plus a reasonable mark-up and any shipping, handling and storage charges. Finally, we may develop and market special mandatory promotional items for Pretzel Time Stores. You may be required to maintain a representative inventory of these promotional items to meet public demand. We will make these items available to you at our cost plus a reasonable mark-up and any shipping, handling and storage charges. -15-

15. If we elect to manage your Store pending our purchase of that store, as permitted by Section 14.5(e) of the Franchise Agreement, we have the right to charge a management fee of 10% of the Gross Revenues of that store during the period of management. 16. Article 16 of the Franchise Agreement grants us a security interest in the collateral described in that Section. Upon execution of the Franchise Agreement, you must execute the necessary Uniform Commercial Code financing statements and reimburse us for the costs of filing those statements with the appropriate government agencies. You must also execute continuation statements when required by law and reimburse us for the costs of filing those continuation statements. 17. If we or our Affiliates prevail in any arbitration proceeding or litigation against you, you must pay the costs and attorneys' fees incurred. You and each of your Entity Owners also have certain indemnification obligations to us and our Affiliates, as referenced in Item 9 of this Offering Circular. 18. If you accept an offer for a successor franchise agreement as provided in Section 13.5 of the Franchise Agreement, you must pay the fees specified in the form of Franchise Agreement in use at the time the successor agreement is granted. Those fees may differ from the fees provided in the current version of Franchise Agreement and may include the requirement that you pay a new initial franchise fee. However, we will not charge a new franchise fee exceeding 50% of the initial franchise fee then being charged to new franchisees. 19. If you fail to maintain in effect any insurance required by us or to furnish to us satisfactory evidence of such coverage, we may, but need not, obtain insurance coverage for you on your behalf. You must then immediately reimburse us for our costs and the cost of the insurance, and sign any related documentation required by us. 20. If you attempt to raise or secure funds by the sale of securities, you are obligated to pay to us our current fee to cover the expenses we incur in connection with reviewing any information regarding us or the Pretzel Time System that is included in the offering or the proposed offering. TCBY Concept: ------------ If you are granted the right to add the TCBY Concept to the Premises of a new or existing Pretzel Time Store, you will incur the following fees and payments in addition to those contained in the preceding chart. The continuing fee described above is applicable to the Gross Revenues for the sale of TCBY Yogurt Products from the Premises of your Store, although you are only required to pay a continuing fee of 4% for such sales. The marketing fee described above is also applicable to the Gross Revenues for the sale of TCBY Yogurt Products from the Premises of your Store. All marketing fees we collect, however, will be used for advertising and marketing programs for the Pretzel Time System, and not the TCBY System. In addition to the marketing fee, you may be required to contribute up to 3% of your Gross Revenues each year to a regional or local advertising cooperative created by TCBY and/or its franchisees for TCBY Stores. As of the date of this Offering Circular, you are not required to contribute to any advertising cooperative. See Item 11 of this Offering Circular for more information on marketing. You must pay a surcharge on your purchases of frozen yogurt mix to TCBY or its affiliates. Surcharges for frozen yogurt mix currently are determined by location of your Store within a specific product distribution area. TCBY reserves the right to establish a range for frozen yogurt mix surcharges. Currently the range for the surcharge is $4.94 to $5.29 per 576 net weight ounce case of frozen yogurt mix. This surcharge is subject to change. The surcharge is currently payable to the designated distributor from whom you buy your frozen yogurt mix. -16-

We or TCBY will furnish the initial TCBY training program to you (or one of your principal owners) and to the initial store manager (if different from you or your principal owner) free of charge. We or TCBY may charge a fee for the training for subsequent managers, which you will be required to pay at least 10 days prior to beginning of training. In addition to any training fees, you are responsible for all travel and living expenses for your trainees. Travel and living expenses are described in Item 7 of this Offering Circular. We may also require you and/or previously trained and experienced managers and employees to attend periodic refresher courses at the times and locations we designate. You will be required to pay the fees that we or TCBY are then charging for these refresher courses. We or TCBY will loan you one copy of the TCBY Operations Manual free of charge. If you lose your copy of the TCBY Operations Manual, you must obtain a replacement copy from us or TCBY at TCBY's then current charge for replacement copies. -17-

ITEM 7. INITIAL INVESTMENT Pretzel Time Store: ------------------ <TABLE> <CAPTION> To Whom Payment Description Amount Method of Payment When Due Is to Be Made ----------- ------ ----------------- -------- ----------------- <S> <C> <C> <C> <C> a. Reservation fee $1,000 Lump sum Upon signing reservation Us (Note 1) (Note 1) letter b. Initial franchise fee $25,000; or $15,000 for a Lump sum Upon signing Franchise Us (Note 2) Store operated in the cart Agreement or kiosk format (Note 2) c. Travel and living $1,500 - $3,000 Lump sum, as incurred As incurred during training Airlines, hotels, expenses while and restaurants training (Note 3) d. Real estate lease Note 4 Note 4 Note 4 Note 4 e. Improvements and $75,000 - $175,000 As agreed with the As incurred Various independent equipment contractors and suppliers contractors and (Note 5) providing labor, materials suppliers or equipment f. Opening product and $1,000 - $5,000 As agreed with suppliers As incurred Suppliers soft goods inventory (Note 6) g. Grand opening $2,500 Lump sum As incurred Us, and various promotion (Note 7) vendors and suppliers (Note 9) h. Security deposits, $1,000 - $5,000 Lump sum Before opening Landlord, utility utility deposits, companies, business licenses, and government agencies other deposits and prepaid expenses (Note 8) </TABLE> -18-

<TABLE> <CAPTION> To Whom Payment Description Amount Method of Payment When Due Is to Be Made ----------- ------ ----------------- -------- ------------- <S> <C> <C> <C> <C> i. Professional fees $500 - $1,500 Lump sum As incurred Attorneys, (Note 9) accountants, and other consultants j. Insurance (3 months) $2,500 - $3,500 Lump sum or installments, Before or upon execution of Insurance (Note 10) as determined by insurance Franchise Agreement carriers carriers k. Computer hardware and $0 - $3,500 Lump sum As incurred, if we require Various software you to purchase computer vendors and (Note 11) hardware and software suppliers l. Additional funds $8,000 - $12,000 Lump sum, as incurred As incurred Employees, (3 months) suppliers, (Note 12) utilities and other vendors </TABLE> Total: $117,000 - $236,000 NOTE: The above total assumes you are not operating in a cart or kiosk format and does not include real estate lease costs. -19-

General Comments: We have based the estimates provided in the chart above upon our past experience in establishing and operating Pretzel Time Stores; however, we do not guarantee that your costs will not be higher than set forth above. You should review these figures carefully with a business advisor before making any decision to purchase the Franchise. All payments you make to us or our Affiliates are non-refundable unless otherwise stated. Payments you make to parties other than us or our Affiliates may be refundable at the option of the other party. Because we do not know who these third parties are, we cannot state when or if payments made to these third parties will be refundable. Financing is not available for the initial franchise fee and we do not offer any other financing, directly or indirectly. The estimates in the above chart do not include continuing fees or marketing fees payable to us during the operation of your Store since these fees are payable out of the Gross Revenues of your Store. See the information in Item 6 for an explanation of the continuing fees and marketing fees. Specific Notes: 1. If you acquire a Franchise, we will apply the $1,000 reservation fee to payments due from you upon execution of the Franchise Agreement. 2. See Item 5 of this Offering Circular for the conditions when a portion of the initial franchise fee may be refundable. As further described in Item 5 of this Offering Circular, we may be contractually obligated to pay 25% of the initial franchise fee you pay to us to an Area Developer. 3. You are responsible for paying any incidental expenses that you and your manager and any other trainees incur while attending our initial training program, including car rental, gas, airline tickets, meals, hotel room, entertainment, and salaries. 4. If you do not currently own adequate space, you must lease the space for your Store. Typical locations are in shopping malls and strip shopping centers. The average Pretzel Time Store requires between 400 to 800 square feet of space. We cannot estimate the amount of your monthly rental payments, since rental amounts vary greatly from site to site and are affected by a number of factors, including location, size, visibility, accessibility, and competitive market conditions. In addition to rental payments, your lease may obligate you to make other payments to the landlord, such as payments for shopping center or building operating expenses, common area maintenance expenses, food court expenses, merchants' association assessments, assessment for shopping center promotion and advertising, and the like. Your lease may also require you to spend a certain amount on advertising and promotion for your particular store. Again, because these payments vary widely from lease to lease, we cannot estimate the amount you may be required to pay for these or other similar items. You will make rental payments to the landlord, unless you sublease the premises from us. In that case, you will make rental payments to us, as explained in Note 8, under Item 6 of this Offering Circular. 5. These estimates include construction costs (labor and material) for typical tenant improvements and remodeling necessary to prepare a site for operation of a Pretzel Time Store, as well as the estimated costs for necessary trade fixtures, such as display cases, menu board and signage, counters and work tables, and equipment, such as ovens, refrigerators, beverage dispensers, small wares and cash registers. The estimates also include construction management costs, general conditions, builders risk/liability insurance and financing costs. If you develop a new store, you must also employ and pay an -20-

architect or engineer to prepare a site plan and other construction documents. Although we will provide you with prototypical plans and specifications at no additional cost to you, you must pay an architect or engineer to adapt these plans and specifications to city, state and local building codes and to the specific site chosen for your Store. These estimates do not include lease costs. Your actual construction costs will depend on numerous factors, such as the condition of the premises, duration of the building process (delays), union labor requirements, contractors' fees, signage, availability of materials and equipment, interest rates, and the insurance coverage you choose. 6. This estimate includes supplies, opening inventory, accounting forms and systems, soft goods, such as napkins, cups, and other paper goods, utensils, packaging materials, and other items required to operate under the Pretzel Time System. The costs will vary depending upon your inventory levels and storage space. 7. If you are opening a newly developed Pretzel Time Store, you are required to spend at least $2,500 on a grand opening promotional program, as explained in more detail in Item 5 of this Offering Circular. 8. You may be required to pay a security deposit under your real estate lease and other deposits for utilities and insurance premiums. Lease security deposits are typically due upon signing the lease and are typically refundable if you do not default on your lease. Your lease may also require you to pay the last month's rent in advance. Deposits for utility services are typically required at the time the service is applied for, and may or may not be refundable. You must confirm all of the specific deposits required. The amount for licenses and permits can vary significantly in different areas, and you should verify specific amounts with local authorities. 9. You may find it necessary to retain an attorney to review the real estate lease or sublease, the franchise documents, or to assist in forming a corporation, partnership, or limited liability company. You may also retain an accountant for advice in establishing and operating your franchise business and filing necessary tax forms and returns. 10. We require you to obtain and keep in force the following insurance coverages, with us named as an additional insured on each policy: (a) Casualty Insurance. Casualty insurance for all of your goods, ------------------ fixtures, furniture, equipment, and other personal property located on your Store premises providing insurance to the extent of 100% of the full replacement cost against loss or damage from fire and other risks normally insured against in extended risk coverage. (b) Liability Insurance. Liability insurance, insuring against all ------------------- liability resulting from damage, injury, or death occurring to persons or property in or about your Store premises (including products liability insurance), the liability under this insurance to be at least $1,000,000 for one person injured, $1,000,000 for any one accident, and $1,000,000 for property damage. (c) Other Insurance Policies. Any additional insurance policies that ------------------------ a prudent franchisee in your position would maintain or as we may reasonably require You must also maintain and keep in force all workers' compensation insurance on your employees that is required under the applicable workers' compensation laws of the state in which your Store is located. Your real estate lease may also impose requirements for insurance coverage in addition to the -21-

requirements that we impose. The chart contains the estimated cost of required insurance coverage for a three month start-up period; however, the cost of insurance varies, depending upon the insurance company you select, lease requirements, variances in the cost of insurance from city to city and state to state, and other factors. Whether or not amounts paid for insurance premiums are refundable will be determined by individual insurance carriers and the terms of the insurance policies. 11. As of the date of this Offering Circular, we do not require you to use any computer hardware or software in the operation of your Store and, therefore, your initial investment for this item may be $0. If we do, however, require you in the future to purchase, install and use computer hardware and software which meet our specifications and standards, we estimate that you will incur costs of $1,250 to $3,500 or more. See Item 11 of this Offering Circular for more information on our right to require you to purchase, install and use computer hardware and software in the future. 12. This amount represents the range of your initial start-up expenses over the first 3 months of operation. These figures include estimated payroll costs. However, they do not include the salary for the store manager, on the assumption that you will manage the store. The figures also do not include inventory. These figures are estimates and we cannot guarantee that you will not have additional expenses starting your business. Your costs will depend upon factors such as how well you follow our methods and procedures; your management skill, experience, and business acumen; local economic conditions; the demand for specialty food and snack goods and services in your area; the prevailing wage rates; competition; the time of the year your Store is opened; and the sales level reached during the initial period. TCBY Concept: ------------ If you are granted the right to add the TCBY Concept to the Premises of a new or existing Pretzel Time Store, you will incur expenditures separate from and in addition to those described in the chart above. An estimate of these expenditures is summarized in the chart below. -22-

TCBY Concept: ------------ <TABLE> <CAPTION> To Whom Payment Description Amount Method of Payment When Due Is to Be Made ----------- ------ ----------------- -------- --------------- <S> <C> <C> <C> <C> a. TCBY fee $1,000 Lump sum Upon signing Yogurt Rider Us (Note 1) (Note 1) (Note 1) b. Travel and living $1,500 - $3,000 Lump sum, as incurred As incurred during training Airlines, hotels, expenses while training (Note 2) and restaurants c. Improvements and $30,000 - $75,000 As agreed with the As incurred Various independent equipment, if adding the contractors and suppliers contractors and TCBY Concept to a new or providing labor, materials, suppliers existing Store or equipment (Note 3) d. Opening product and $2,000 - $4,000 As agreed with suppliers As incurred Suppliers soft goods inventory, if adding the TCBY Concept to a new or existing Store (Note 4) e. Additional funds $5,000 - $10,000 Lump sum, as incurred As incurred Employees, suppliers, (3 months) utilities and other (Note 5) vendors Total: If adding the TCBY Concept to a new or existing Pretzel Time Store: $39,500 - $93,000 </TABLE> NOTE: The above totals assume you are not operating in a cart or kiosk format and do not include real estate lease costs. -23-

General Comments: The projected figures in the chart above are an estimate of the initial investment necessary to add the TCBY Concept to the Premises of a new or existing Pretzel Time Store. The estimate is for a Pretzel Time Store of 750 square feet in size. The estimate is based upon our past experience in establishing and operating Pretzel Time Stores; however, we do not guarantee that your costs will not be higher than set forth above. You should review these figures carefully with a business advisor before making any decision to acquire the right to add the TCBY Concept to the Premises of your Store. All payments you make to us or our Affiliates are non-refundable unless otherwise stated. Payments you make to parties other than us or our Affiliates may be refundable at the option of the other party. Because we do not know who these third parties are, we cannot state when or if payments made to these third parties will be refundable. Financing is not available for the TCBY fee and we do not offer any other financing, directly or indirectly. The estimates in the above chart do not include continuing fees or marketing fees payable to us during the operation of your Store since these fees are payable out of the Gross Revenues of your Store. See the information in Item 6 for an explanation of the continuing fees and marketing fees. Specific Notes: 1. As further described in Item 5 of this Offering Circular, you must pay a $1,000 fee to us, which we in turn pay to TCBY. 2. You are responsible for paying any incidental expenses that you and your manager and any other trainees incur while attending the TCBY training program, including car rental, gas, airline tickets, meals, hotel room, entertainment, and salaries. 3. These estimates include construction costs (labor and material) for typical tenant improvements and remodeling necessary to add the TCBY Concept to the Premises of your Store, as well as the estimated costs for necessary equipment, such as yogurt machines and refrigerators, furniture, menu board and signage, small wares and other items. The estimates also include construction management costs, general conditions, builders risk/liability insurance and financing costs. These estimates do not include lease costs. Your actual construction costs will depend on numerous factors, such as the condition of the premises, duration of the building process (delays), union labor requirements, contractors' fees, signage, availability of materials and equipment, interest rates, and the insurance coverage you choose. The cost of these items may also varying as a result of price differences between suppliers. 4. This estimate includes supplies, opening inventory, soft goods, such as napkins, cups, and other paper goods, utensils, packaging materials and other items required to operate under the TCBY System. The costs will vary depending on shipping distances from suppliers, price differences between suppliers, your inventory levels and storage space. 5. This amount represents the range of your initial start-up expenses over the first 3 months of operation if you add the TCBY Concept to a new or existing Pretzel Time Store. The figures do not include inventory. These figures are estimates and we cannot guarantee that you will not have additional expenses adding the TCBY Concept to your business. Your costs will depend upon factors such as how well you follow our methods and procedures; your management skill, experience, and business acumen; -24-

local economic conditions; the demand for TCBY Yogurt Products in your area; the prevailing wage rates; competition; and the sales level reached during the initial period. ITEM 8. RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES Purchases of Pretzel Products and Other Items. --------------------------------------------- Pretzel Time Products: --------------------- You must use only the Products, materials, equipment, smallwares, paper products, and supplies that Pretzel Time requires and has approved for Pretzel Time Units as meeting its specifications and standards for quality, design, appearance, function and performance. You must purchase Products, materials, equipment, smallwares, paper products and supplies from suppliers and distributors designated or approved by Pretzel Time detailed in the Operations Manuals. The recipes, formulations, and specifications for all Pretzel Time Products are trade secrets belonging exclusively to us. We may license manufacturers from time to time to manufacture Pretzel Time Premix Flour and other Pretzel Time Products following our secret recipes, formulations, and specifications. You must purchase all of your Pretzel Time Premix Flour from Pretzel Time or a Pretzel Time designated supplier. You must buy from Pretzel Time's designated distributor the following: lemonade, fruit punch, condiments, toppings, dips, pretzel ingredients, and vegetable spray. You must buy your carbonated beverages from Coca-Cola USA Fountain. Pretzel Time also specifies certain other brand name Products that you must buy. As to some items, Pretzel Time does not specify the distributor or the supplier. These include: ovens, mixers, ice machines and ice bins/yogurt machines, juice machines, menu boards, cooking paper, humidified cabinets, carts, and refrigeration. If you wish to buy from a supplier or distributor not approved by Pretzel Time or purchase materials or supplies not approved by Pretzel Time as meeting its specifications, then you must first submit a written request to Pretzel Time. Pretzel Time may require submission of sufficient information and samples to determine if the materials, supplies, suppliers or distributors meet its specifications. Pretzel Time may enter into national purchasing contracts with suppliers of products to be used in the Pretzel Time System on favorable terms. Some suppliers offer promotional allowance programs to promote products sold in Pretzel Time Units. Pretzel Time or its designee coordinates and administers these programs for the Pretzel Time System. You are required to buy from these approved suppliers and Pretzel Time and/or its designees may receive compensation for coordinating the administering the program. Pretzel Time is entitled to all promotional allowances, marketing contributions, rebates, or other consideration paid by these suppliers on account of supplies bought by you and other franchisees by these programs. Amounts received by Pretzel Time or its designees on account of suppliers purchased by you and other Franchisees will not lower marketing fees due from you or other franchisees. During 1997, we and our Affiliates recognized approximately $300,000 received from vendors based upon arrangements described above for purchases by us, our Affiliates and franchisees, and/or referrals from us of franchisees to those vendors. This amount represents approximately 8% of our total revenues for 1997. -25-

Location of your Store; Real Estate Lease ----------------------------------------- You must locate a site for your Store that is approved by us, and you may not execute a lease for the site until we have given our approval in writing. We approve locations on a case-by-case basis, considering items such as size, appearance, and other physical characteristics of the site, demographic characteristics, traffic patterns, competition from other businesses in the area (including other Pretzel Time Retail Outlets) and other commercial characteristics, such as purchase price, rental obligations and other lease terms. In certain circumstances, you may be able to lease a site from us or one of our Affiliates, but you are not required to sublease premises from us or any of our Affiliates. Rent received under a sublease is passed through to the landlord. Development of your Store ------------------------- You must construct and develop your Store. We will furnish you with prototypical plans and specifications for your Store, including requirements for exterior and interior materials and finishes, dimensions, design, image, interior layout, decor, fixtures, furnishings, equipment, color schemes and signs. You must develop your Store in accordance with these plans and specifications. You must prepare all required construction plans and specifications to suit the shape and dimensions of your site and to insure that the plans and specifications comply with applicable ordinances, building codes and permit requirements and with lease requirements and restrictions. You must submit construction plans and specifications to us for our approval before you begin construction of your Store, and you must submit all revised and "as built" plans and specifications to us during the course of construction. Fixtures, Furnishings, Equipment and Signs ------------------------------------------ In developing and operating your Store, you must use only the fixtures, furnishings, equipment (which may in the future include computer hardware and software) and signs that we require and have approved as meeting our specifications and standards for quality, design, appearance, function and performance. You may only display at your Store the signs, emblems, lettering, logos and display materials that we approve in writing. We have the right, at our sole discretion, to install all required signs at the Premises at your expense, although our current practice is to allow you to install the signs. You may purchase these items from any supplier who can satisfy our standards and specifications. Purchases of TCBY Yogurt Products and Other Items. ------------------------------------------------- If you are granted the right to add the TCBY Concept to the Premises of your Pretzel Time Store, your purchases of TCBY Yogurt Products must be made from TCBY, its designees or affiliates. The TCBY brand frozen yogurt line is distinctive as a result of being specially produced from secret formulae and processes. You will prepare and offer for sale from your TCBY Concept TCBY brand soft-serve frozen yogurt, ice cream and frozen desserts, all of which are produced only by an affiliate of TCBY. On purchases of frozen yogurt mix, a surcharge is imposed, as described in Item 6 of this Offering Circular. You must obtain TCBY's approval of your Store plans for the Premises. TCBY's approval will be in its sole discretion. An affiliate of TCBY offers equipment for sale, and you may purchase from that affiliate. You may purchase or lease all other goods, services, fixtures, equipment, inventory, real estate, and other materials required for the operation of your TCBY Concept from any source. Specifications for all inventory items are published in the confidential TCBY Operations Manual. These specifications are formulated and modified from time to time based on TCBY's experience in operating its own TCBY Stores, continuing research and development activities, and franchisee suggestions and comments. In evaluating manufacturers, TCBY looks to the reputation of the manufacturer, the product under consideration, the price of the product and its availability. Neither we nor TCBY negotiate prices for the -26-

TCBY System. Instead, TCBY generally relies on its distributors to obtain optimum pricing. TCBY-owned TCBY Stores buy inventory items at the same prices and on the same terms as do franchisee-owned TCBY Stores. Any volume rebates paid by a manufacturer of any approved inventory item are placed in the TCBY National Advertising Fund, and are not taken into account as income by TCBY and do not otherwise financially benefit TCBY. There are no purchasing or distribution cooperatives in the TCBY System, but TCBY believes that the current distributors adequately serve the needs of franchisees with reference to purchase prices specifically. Proportion of Designated Purchases ---------------------------------- The estimated proportion of the required purchases from designated vendors to all purchases by you of goods and services in establishing and operating the franchised business (except for construction and build-out costs) exceeds 90%. ITEM 9. FRANCHISEE'S OBLIGATIONS THIS TABLE LISTS YOUR PRINCIPAL OBLIGATIONS UNDER THE FRANCHISE AGREEMENT AND OTHER AGREEMENTS. IT WILL HELP YOU FIND MORE DETAILED INFORMATION ABOUT YOUR OBLIGATIONS IN THESE AGREEMENTS AND IN OTHER ITEMS OF THIS OFFERING CIRCULAR. <TABLE> <CAPTION> <S> <C> <C> Obligation Section in Agreement Item in Offering Circular ---------- -------------------- ------------------------- a. Site selection and Sections 4.1 and 4.2 of the Items 6, 7, 8, 11 and 12 acquisition/lease Franchise Agreement; Paragraphs 5(a) and 6 of the Yogurt Addendum; Paragraphs 1, 2 and 5 of the Satellite Unit Addendum; also see the Sublease b. Pre-opening Sections 4.2, 4.3, 4.4, 4.6, and 7.1 Items 5, 6, 7, and 8 purchases/leases of the Franchise Agreement; Paragraphs 7, 11 and 16 of the Yogurt Addendum; Paragraphs 3, 4 and 5 of the Satellite Unit Addendum c. Site development and Sections 4.3, 4.4, 4.5, 7.1 and 7.8 Items 6, 7 and 11 other pre-opening of the Franchise Agreement; requirements Paragraphs 11 and 16 of the Yogurt Addendum; Paragraphs 3, 4 and 5 of the Satellite Unit Addendum d. Initial and on-going Article 5 of the Franchise Items 6, 7 and 11 training Agreement; Paragraph 12 of the Yogurt Addendum </TABLE> -27-

<TABLE> <CAPTION> Obligation Section in Agreement Item in Offering Circular ---------- -------------------- ------------------------- <S> <C> <C> e. Opening Sections 4.5 and 4.6 of the Items 5, 6, 7 and 11 Franchise Agreement f. Fees Sections 3.2, 4.6, 5.1, 5.2, 5.3, Items 5, 6, 7, 11, and 17 6.1, 6.2, 6.3, 6.4, 6.5, 8.3, 9.1, 9.3, 12.3(f), 12.9, 13.5, 14.2 and 16.2 of the Franchise Agreement; Paragraphs 12, 13, 14, 15, 19, 20, 27(b) and 35 of the Yogurt Addendum; Exhibit C to the Offering Circular (Reservation Letter); Sections 1.4, 2.5, 4.4, Article 4, Article 5, and Sections 12.3, 12.4, and 12.5 of the Sublease; Paragraphs 3, 6, 7 and 8 of the Satellite Unit Addendum g. Compliance with Article 4, Sections 5.1, 5.2, 7.1, Items 6, 7, 8, 11, 13, 14, 15, and 16 standards and 7.2, 7.3, 7.4, 7.5, 8.1, 8.2, 9.2 policies/operating manual and Article 10 of the Franchise Agreement; Paragraphs 1, 4, 5, 7, 12, 16, 17, 18, 20, 21, 22 and 35 of the Yogurt Addendum; Paragraphs 3, 4, 5, 6, 7 and 8 of the Satellite Unit Addendum h. Trademarks and Article 10 and Sections 12.3(l), Items 8, 13, 14, and 17 proprietary information 13.1(d), 14.3 and 14.4 of the Franchise Agreement; Paragraphs 1, 4(b), 4(e), 5(e), 21, 22, 25(b), 27(c) and 27(d) of the Yogurt Addendum i. Restrictions on Sections 2.1, 7.1, 7.3, 9.2, and Items 1, 8, 14, and 16 products/services offered 10.7 of the Franchise Agreement; Paragraphs 1, 4(c), 6, 7, 16 and 17 of the Yogurt Addendum; Paragraph 1 of the Satellite Unit Addendum j. Warranty and customer Sections 4,1, 4.2(d), 5.3, 7.1, Item 11 service requirements 7.5, 15.2 and 15.6 of the Franchise Agreement; Acknowledgment Addendum to Franchise Agreement; Paragraphs 1, 6, 16, 32 and 34 of the Yogurt Addendum </TABLE> -28-

<TABLE> <CAPTION> Obligation Section in Agreement Item in Offering Circular ---------- -------------------- ------------------------- <S> <C> <C> k. Territorial None Development and Sales Quotas l. Ongoing Sections 4.4 and 7.1 of the Items 8 and 11 product/service purchases Franchise Agreement; Paragraphs 5(c), 5(d), 7, 11 and 16 of the Yogurt Addendum; Paragraphs 4, 7 and 8 of the Satellite Unit Addendum m. Maintenance, Sections 3.2, 4.4, 7.1, 9.2 and Items 11, 13, and 17 appearance and 13.5 of the Franchise Agreement; remodeling requirements Paragraphs 16 and 35 of the Yogurt Addendum; Paragraphs 4, 5 and 6 of the Satellite Unit Addendum n. Insurance Sections 7.1 and 7.8 of the Items 6, 7 and 11 Franchise Agreement; Article 8 of the Sublease o. Advertising Sections 4.6, 7.1, Article 9 and Items 5, 6, 7, 11, and 13 Article 10 of the Franchise Agreement; Paragraphs 19 and 20 of the Yogurt Addendum p. Indemnification Sections 7.8, 10.5, 12.9 and 15.6 Item 6 of the Franchise Agreement; Paragraph 32 of the Yogurt Addendum; Sections 2.5(a), 3.4, 6,.7, 6.9 and 8.1 of the Sublease q. Owner's Sections 5.1, 7.1, 7.2, 7.6 and Items 11 and 15 participation/ 7.7 of the Franchise Agreement; management/staffing Paragraph 12 of the Yogurt Addendum r. Records and reports Sections 7.1, 7.4, 7.6, 7.7, 8.1, None 8.2 10.4, and 12.9 of the Franchise Agreement; Paragraph 2 of the Satellite Unit Addendum </TABLE> -29-

<TABLE> <CAPTION> Obligation Section in Agreement Item in Offering Circular ---------- -------------------- ------------------------- <S> <C> <C> s. Inspections and audits Sections 7.4 and 8.3 of the Item 6 Franchise Agreement; Paragraphs 1 and 18 of the Yogurt Addendum; Section 2.6 of the Sublease t. Transfer Article 12 and Section 13.1(b) of Item 17 the Franchise Agreement; Paragraph 25 of the Yogurt Addendum; Article 11 of the Sublease u. Renewal Sections 3.2 and 13.5 of the Franchise Agreement; Paragraph 10 of the Yogurt Addendum; Paragraph 1 of the Satellite Unit Addendum v. Post-termination Sections 6.5, 7.8, 8.2, 8.3, 10.5, Item 17 obligations 10.8, 11.2, 12.3(l), Article 14, Section 15.6, Article 16 and Article 18 of the Franchise Agreement; Paragraphs 27 and 30 of the Yogurt Addendum; Sections 2.5(a), 4.2, 4.3, 4.4, 7.7, 7.9, 8.1, and 13.12 of the Sublease; Paragraph 9 of the Satellite Unit Addendum w. Non-competition Article 11 and Sections 12.3(j) Item 17 covenants and 12.5(c) of the Franchise Agreement; Paragraphs 24 and 25 of the Yogurt Addendum x. Dispute resolution Article 16 and Sections 17.1, Item 17 17.2, 17.3, 17.4, 17.5, 17.6 and 17.7 of the Franchise Agreement; Paragraph 9 of the Satellite Unit Addendum </TABLE> ITEM 10. FINANCING Except as described below, we do not offer direct or indirect financing to franchisees. We do not guarantee any note, lease or other obligation which you may enter or incur. As explained in Item 6 of this Offering Circular, we may sublease the premises for your Store to you. In such case, must execute our standard Sublease form. A copy of the Sublease form is attached to -30-

this Offering Circular as Exhibit D. If you are an Entity, each Entity Owner will be required to guaranty payment and performance of your obligations under the sublease by executing a Guaranty of Agreement in the form attached to this Offering Circular as Exhibit B. You must pay rent and other amounts due under the Sublease in the same amounts as the rent and other amounts due from the tenant under the Master Lease of the premises from the landlord (Article 1 and Article 4 of the Sublease). You must always pay us the full amount of all rental payments due. You may not deduct any amount for any claim you may have against us. The rent due will vary with the location of the premises, and we cannot estimate that amount. Typically, monthly rental payments will be based on factors such as the current market value of similar properties, the perceived market value of your Store based upon its location and traffic patterns, sales volumes, and so forth. We may require you to pay a security deposit under the Sublease (Section 1.4(c) and Section 5.1 of the Sublease). Typically, a security deposit will be the equivalent of one month's rent. The Sublease does not contain any prepayment penalties. If you do not make your rental payments within 10 days of the due date or if you commit another breach of the Sublease or the Master Lease and do not remedy the breach within the time periods specified in the Sublease, we have the right to re-enter the premises and relet the premises either with or without terminating the Sublease, and we may sue you to collect any unpaid rent or other amounts due (Section 12.2 of the Sublease). We can collect our costs of enforcement and collection, including court costs and attorneys' fees (Section 13.2 of the Sublease). We are permitted to charge a $100 late fee for each delinquent payment (Section 12.4 of the Sublease). Also, late payments will bear interest from the due date until paid at a rate equal to the lesser of the highest applicable legal rate for open account business credit, or 1.5% per month (Section 12.3 of the Sublease). Your breach of the Sublease and loss of possession of the Sublease premises is also a default under the Franchise Agreement and would permit us to terminate the Franchise Agreement (Section 13.1(f) of the Franchise Agreement). In Section 8.7 of the Sublease, we and you mutually waive our respective rights of recovery against each other and the "Related Parties" (as defined in Section 2.5(a) of the Sublease) for losses or damage insured against under the insurance required to be maintained under Article 8 of the Sublease, even if the loss or damage is caused by negligence. In Sections 12.5 and 12.6 of the Sublease, you waive any right to claim that certain actions by us, such as making payments on your behalf to cure a default, our waiver of a previous breach, or our course of conduct in accepting rental payments or partial rental payments during periods of default constitute a waiver of any of our legal rights. Even though you make a payment to us accompanied by a statement that acceptance of the payment will constitute an accord and satisfaction of the full amount due, we may accept the payment without the payment being deemed to be an accord and satisfaction and without waiving any of its rights to recover the balance of any amount due or to pursue other remedies for your breach of the Sublease. We have no past or present practice or intention to sell, assign or discount all or part of any financing arrangement to any third party. We do not receive any payments for the placement of financing. -31-

ITEM 11. FRANCHISOR'S OBLIGATIONS Except as set forth below, we need not provide any assistance to you. Our obligations relating to Pretzel Time Stores. ----------------------------------------------- Before Opening: -------------- Before you open your Store: 1. We will approve or disapprove a site proposed by you for your Store within a reasonable period of time determined solely by us. We are not obligated to approve or disapprove a site within any specified time period. If we cannot agree upon a site, you will forfeit your reservation fee of $1,000. You must have selected the site for your Store and obtained our approval for the site before execution of the Franchise Agreement. In evaluating a proposed site, we may inspect the site and may consider a variety of factors, including demographic characteristics, traffic patterns, parking, character of the neighborhood, competition from other dessert, snack food and bakery outlets in the area, the proximity to other businesses (including other Pretzel Time Retail Outlets, the nature of other businesses in proximity to the site and other commercial characteristics (including the purchase price, rental obligations and other lease terms for the proposed site), and the size, appearance and other physical characteristics of the proposed site. (Franchise Agreement, Section 4.1) Our approval of a site and any information given to you regarding proposed sites do not constitute an express or implied representation or warranty of any kind as to the suitability of the proposed sites for your Store or for any other purpose. Our approval indicates only that we believe that the particular site falls within our criteria as of the time period encompassing the evaluation. Application of site criteria that have been effective for other sites may not be predictive of the potential for any specific site and after our approval of a site, demographic and economic factors, including competition from other dessert, snack food and bakery businesses, included in or excluded from our site criteria could change, altering the potential of a site. The uncertainty and instability of the factors included in these criteria are beyond our control, and we will not be responsible for the failure of a site approved by us to meet expectations as to potential revenue or operational criteria. (Franchise Agreement, Section 4.1). 2. We may, on a case by case basis and in our sole discretion, sublease your Store site to you or assign an existing lease for the site to you. The terms of the sublease are explained in Item 6 of this Offering Circular, under Note 8, and in Item 10 of this Offering Circular. If we elect to assign an existing lease to you, you must obtain the release of us from obligations under the lease, and the lease must comply with the requirements in the Franchise Agreement for third party leases generally. (Franchise Agreement, Section 4.2(b)). If we are not currently leasing the site, you must negotiate an acceptable lease for the site from an independent third party and obtain our approval of the lease. (Franchise Agreement, Section 4.2(a)). Neither we nor any of our Affiliates own the sites of any existing Pretzel Time Stores. 3. If you are developing a new Pretzel Time Store, we will provide you with prototypical plans and specifications, including requirements for exterior and interior materials and finishes, dimensions, design, image, interior layout, decor, fixtures, furnishings, equipment, color schemes and signs. We will provide these materials to you following execution of the Franchise Agreement. (Franchise Agreement, Section 4.3(a) and Item 8 of this Offering Circular.) 4. We will provide you, through the Operations Manuals and other written materials to be furnished after you execute the Franchise Agreement, the standards and specifications for the fixtures, furnishings, equipment (which may in the future include computer hardware and software) and signs that -32-

we require and have approved as meeting our specifications and standards for quality, design, appearance, function and performance and which you must use. (Franchise Agreement, Sections 4.4 and 5.2 and also Item 8 of this Offering Circular). 5. If you are developing a new store, we will provide our standard grand opening marketing and public relations programs and media and advertising materials to you at least 10 days before store opening, upon your payment to us for those materials, as explained in Item 5 of this Offering Circular. (Franchise Agreement, Section 4.6). 6. We will provide an initial training program for you (or if you are an Entity, for one of your principal owners) and for your initial store manager (if different from you). You (or one of your principle owners) and any manager of your Store must successfully complete all phases of the training program. All training occurs at our corporate headquarters at 2855 East Cottonwood Parkway, Suite 400, Salt Lake City, Utah 84121, or any other location designated by us. The initial training program lasts 6 days and consists of 4 days of classroom instruction and 2 days of on-site job training. Training classes are offered once each month. In addition to the in-class and on-the-job training described below, a typical trainee will spend between 6 and 10 hours during the course on recommended homework. We distribute training materials, which include our Operations Manuals and laminated job aids, at various times during the training course. All of the training sessions are taught by full-time instructors with at least 7 years of experience with us or our Affiliates. The Pretzel Time training program will cover the following areas: <TABLE> <CAPTION> ================================================================================================== Subject Time Hours of Hours of Instruction Instructor Hours Classroom On-the job Materials Training Training <S> <C> <C> <C> <C> <C> -------------------------------------------------------------------------------------------------- Marketing 1 1 -- Selling Solutions, Marketing Communications Department & Packet Trainer -------------------------------------------------------------------------------------------------- Real Estate/Leasing 1/2 1/2 -- Reference Manual Real Estate Department & Trainers -------------------------------------------------------------------------------------------------- Accounting, 6 4 2 Profitlink Director of Waste Management Accounting System Training & Payroll Management Outside speaker -------------------------------------------------------------------------------------------------- Staffing/Human 4 4 -- Situational Director of Resources Leadership Training & Reference Manual Trainers -------------------------------------------------------------------------------------------------- Store Operations, 20 14 6 Operations Manuals, Trainers Customer Service, Product Procedures, Equipment Repair, Videos, Register Safety laboratory -------------------------------------------------------------------------------------------------- Product Preparation 16 8 8 Operations Manuals, Trainers Product Procedures -------------------------------------------------------------------------------------------------- Cleaning Procedures 2 1 1 ================================================================================================== </TABLE> -33-

=============================================================================== Subject Time Hours of Hours of Instruction Instructor Hours Classroom On-the job Materials Training Training ------------------------------------------------------------------------------- Purchasing 1/2 1/2 -- Handouts Purchasing Department ------------------------------------------------------------------------------- Total 50 33 17 ================================================ We provide training for you (or one of your principal owners, if you are an Entity) and the initial store manager (if different from you) free of charge; however, you are responsible for all travel and living expenses incurred during the training program. Store manager training is mandatory and must be completed before store opening. All training must be completed to our satisfaction and must be completed no more than 60 days before the opening of your Store. Replacement store managers must also complete the initial training; however, you will be required to pay the current fees for that training, as explained in Item 6 of this Offering Circular. (Franchise Agreement, Section 5.1). Replacement store managers are also responsible for living and travel expenses during training. Under no circumstances should you permit your Store to be managed by a person who has not completed all phases of your training program to our satisfaction (Franchise Agreement, Section 5.1). During Operation: ---------------- During the operation of your franchised business, we will: 1. Loan you one copy of our store operating standards manual and one copy of our product procedures manual (the "Operations Manuals"), as described in Section 5.2 of the Franchise Agreement, or make the Operations Manuals available to you electronically. The Operations Manuals will contain mandatory and suggested specifications, standards and operating procedures that we require for your Store and information about your other obligations. We may modify the Operations Manuals to reflect changes in the image, specifications, standards, procedures, Pretzel Time Products and "System Standards" (as defined in Section 1.2(n) of the Franchise Agreement and discussed in Section 7.1 of the Franchise Agreement). However, we will not make any addition or modification that will alter your fundamental status and rights as a franchisee. The Operations Manuals are confidential and will remain our property. You may not copy any part of the Operations Manuals, either physically or electronically. If your copy of the Operations Manuals is lost, destroyed or significantly damaged, we will provide you with a replacement copy, at our then applicable charge. (Franchise Agreement, Section 5.2). The Tables of Contents of the Operations Manuals and the number of pages devoted to each subject as of December 31, 1997, as well as the total number of pages in the Operations Manuals, are set forth at Schedule 5 to this Offering Circular. 2. Provide training for any replacement store managers, as explained above (Franchise Agreement, Section 5.1). 3. Furnish you guidance and operating assistance, at your request, about (a) methods, standards, specifications and operating procedures to be utilized in your Store; (b) purchasing required fixtures, furnishings, equipment, signs, materials, supplies, Pretzel Time Products; and (c) advertising and promotional programs. Although we do not have an obligation to do so, we may advise you of operating problems of your Store that come to our attention. We may furnish this guidance and assistance in the form of references to the Operations Manuals, bulletins and other written materials, telephonic conversations or consultations at our offices or at your Store. We will not be liable to you or -34-

any other person, and you waive all claims for liability or damages of any type (whether direct, indirect, incidental, consequential, or exemplary), on account of any guidance or operating assistance offered by us, except to the extent caused by our gross negligence or intentional misconduct. We will make no separate charge to you for the operating assistance and guidance we customarily provide to our franchisees generally. We may make special assistance programs available to you; however, you will be required to pay the daily fees and charges that we establish for the special assistance programs. (Franchise Agreement, Section 5.3). 4. Provide you with the System Standards referred to above. We may modify the System Standards periodically and the modifications may obligate you to invest additional capital in your Store and to incur higher operating costs. We will not obligate you to invest additional capital at a time when the investment cannot in our reasonable judgment be amortized during the remaining term of the Franchise Agreement. (Franchise Agreement, Section 7.1). We may furnish System Standards in the form of references to the Operations Manuals, bulletins and other written materials. 5. Provide advertising and marketing services to you as explained below. We and our Affiliates currently utilize point of purchase printed advertising for the sale of Pretzel Time Products, goods and services at Pretzel Time Retail Outlets. We do not currently utilize electronic media such as radio or television. Our advertising is done at the local store level, although the materials used are produced for national distribution at all Pretzel Time Retail Outlets including those owned and operated by our Affiliates. We may also conduct coupon promotions. We typically conduct these promotions on a regional basis. We currently use our in-house marketing staff and national advertising firms for to create, distribute and produce advertising materials. We are not required to spend any particular amount on advertising in the area in which your Store is located. You may use advertising materials prepared by you if the materials (a) comply with the requirements of Articles 8 and 10 of the Franchise Agreement, (b) are completely clear and factual and not misleading, and (c) conform to the highest standards of ethical marketing and promotion policies which we may require. Before use, you must submit to us for approval all press releases and policy statements and samples of all local advertising, marketing and related materials not prepared or previously approved by us. We will not unreasonably withhold our approval. You may only use pamphlets, brochures, cards or other promotional materials offering free Pretzel Time Products, if prepared by us, unless otherwise approved in advance by us. However, we will give favorable consideration to your use of free product cards developed by you, if the cards clearly state that they may only be redeemed at stores owned by you. If we do not give you written approval of any advertising or other promotional materials within 15 days from the date of receipt by us of the materials, we will be deemed to have disapproved the submission. You may not use any advertising, marketing or related materials that we have disapproved. You must list your Store in the principal telephone directories distributed in your metropolitan area. (Franchise Agreement, Section 9.2). You must pay to us a weekly marketing fee of 1% to 3% of your Store's Gross Revenues. The marketing fee for 1998 is 1% of Gross Revenues. Thereafter, we will notify you annually of the exact percentage you must pay as a marketing fee, except for any year in which the percentage is to remain unchanged from the preceding year. With the possible exception of 1 franchisee with 2 Pretzel Time Stores in New York who does not contribute marketing fees, you will not be required to pay more than other franchisees in your market area. You must pay marketing fees weekly by pre-authorized electronic bank transfer, at the same time that you pay continuing fees (Franchise Agreement, Sections 6.3, 6.4 and -35-

9.1(a)). Pretzel Time Stores owned by us or our Affiliates in the same market area as you will contribute marketing fees on the same basis as you (Franchise Agreement, Section 9.1(a)). As of the date of this Offering Circular, we do not organize, maintain or otherwise make use of advertising cooperatives, nor do we require you to join one, although we reserve the right to do so in the future. There is no advertising council composed of franchisees that advise us. We may, however, consult with some members of the franchise advisory group on marketing issues. We will administer the marketing fees we collect and direct all marketing programs financed by the marketing fees, with sole discretion over the creative concepts, materials and endorsements used and the geographic, market and media placement and allocation. We may use the marketing fees we collect to meet any and all costs of maintaining, administering directing and preparing advertising materials and marketing programs, including: purchasing direct mail and other media marketing; employing advertising, promotion and marketing agencies; supporting public relations; conducting market research; implementing and testing Trade Dress and design prototypes; and other advertising, promotion and marketing activities. At our sole discretion, we may use marketing fees to prepare, furnish and/or offer for sale to you advertising, marketing and promotional formats and materials, as further described below. We will account for the marketing fees we collect separately from our other funds, although we may not establish a separate marketing fund or bank account for such fees. We may use the marketing fees we collect to defray the salaries, employee benefits, administrative costs and overhead we may incur in activities related to our marketing programs, including conducting market research, preparing advertising, promotion and marketing materials and collecting and accounting for the marketing fees we collect. We will prepare an annual statement of moneys collected and costs incurred for our marketing programs and make this statement available to you upon your request. You will not, however, receive a periodic accounting of how marketing fees are spent. We may in the future create a marketing fund to be operated by us or through another form of entity separate from us. (Franchise Agreement, Section 9.1(c)). We intend to use the marketing fees we collect to maximize recognition of the Pretzel Time Trademarks as well as to increase patronage of Pretzel Time Stores. Although we will endeavor to utilize the marketing fees to develop advertising and marketing materials and programs and to place advertising that will benefit all Pretzel Time Stores, we cannot ensure you that our expenditure of marketing fees in or affecting any geographic area will be proportionate or equivalent to the marketing fees paid to us by Pretzel Time Stores operating in that geographic area or that any Pretzel Time Store will benefit directly or in proportion to the marketing fees it pays to us from the development of advertising and marketing materials or the placement of advertising. (Franchise Agreement, Section 9.1(d)). From time to time, we may provide you with copies of advertising, marketing and promotional formats and materials for use in your Store, which we or our advertising agencies have prepared. You are only required to pay the shipping and handling costs for these items. We may also offer you the option of purchasing other advertising, marketing and promotional formats and materials prepared by us or our advertising agencies that are suitable for use at local Pretzel Time Stores. If you elect to purchase such items from us, we will provide them to you at our cost plus a reasonable mark-up and any shipping, handling and storage charges. Finally, we may develop and market special mandatory promotional items for Pretzel Time Stores. You may be required to maintain a representative inventory of these promotional items to meet public demand. We will make these items available to you at our cost plus a reasonable mark-up and any shipping, handling and storage charges. You will have the right to purchase alternative promotional items if the alternative items conform to the specifications and quality standards we establish and you obtain our prior written approval. All payments to us for the items described in this paragraph are nonrefundable and cannot be applied against the weekly marketing fees that you are -36-

required to pay to us, as further described in Item 6 of this Offering Circular and above (Franchise Agreement, Section 9.3). In the past year, marketing fee contributions have been used as follows: (i) production: 28%; (ii) media placement: 0%; (iii) administrative expenses: 12%; (iv) franchise solicitation: 15%; and (v) other: 45%. The other category includes such materials as point of purchase materials, corporate communications, public relations, product shots, promotions, training materials, giveaways, research and sales tools. In addition to the marketing fees you pay to us, you must also spend on advertising any amount required under your lease or sublease. Those amounts typically vary from lease to lease, and therefore, franchisees are not obligated to spend the same amount on local advertising and marketing. (Franchise Agreement, Section 9.2). If you are developing a new Pretzel Time Store, you must also conduct a grand opening advertising and promotion program as explained above in this Item 11 and in Item 5 of this Offering Circular. In addition to the information provided in this Item 11 about advertising and marketing, you should review the material in Items 6, 8 and 9 of this Offering Circular. 6. In operating your Store, you must purchase and use the number of electronic cash registers necessary for the size of your store. Currently, we do not require that you purchase a particular brand or model of electronic cash register, although any electronic cash register you use must be capable collecting and generating sales data and category totals and transaction count totals. In the future, you will be responsible for any and all upgrades to your electronic cash registers, as we determine to be necessary. In addition, we reserve the right in the future to have independent access to the information and data you collect and gather. 7. As of the date of this Offering Circular, we do not require you to use any computer hardware or software in the operation of your Store. We reserve the right in the future, however, to require you to purchase, install and use computer hardware and software which meet our specifications and standards, as modified by us from time to time. If we require you to install and use any computer hardware and software in your Store, you will be allowed to purchase these items from any supplier who can satisfy our standards and specifications. You may, however, be required at your sole expense to upgrade these items from time to time to meet our then current standards and specifications. We reserve the right to have independent access to the information and data you collect and gather using any computer hardware and software we require. 8. If you are developing a new Pretzel Time Store, we estimate that there will be an interval of between 60 to 120 days between the execution of the Franchise Agreement and the opening of your Store. The interval may vary depending upon factors such as the weather, your ability to acquire a suitable site, the location and condition of the site, your ability to obtain any necessary financing and building, zoning or other permits and approvals, construction delays, and so forth. If you are acquiring the assets of an existing Store, the interval between execution of the Franchise Agreement and opening your Store is typically 30 to 120 days. Also, you may not open your Store for business until: (a) we approve the store; (b) pre-opening training of you and the store personnel has been completed to our satisfaction; (c) the initial franchise fee and all other amounts then due to us have been paid in full; (d) the lease documentation has been executed and all other documentation for development of your Store has been completed; and (e) we have been furnished with copies of all required insurance policies or other evidence of insurance coverage and payment of premiums as we may require. You must then -37-

open your Store for business within 5 days after we notify you that the conditions for opening outlined above have been satisfied. (Franchise Agreement, Section 4.5). Area Developer obligations relating to Pretzel Time Stores. ---------------------------------------------------------- If your Store is located in a shopping mall within an Area Developer's Territory, the Area Developer is contractually obligated, pursuant to the applicable Development Agreement with us, to provide certain services to you. Depending on the form of Area Development Agreement, these services may include assisting with site selection, providing store opening assistance, periodically visiting and evaluating the operations of each Store, providing additional training, marketing the Pretzel Time System in the Area Developer's Territory, providing System Standards and furnishing guidance and operating assistance. For providing these services to franchisees in shopping malls within their Territories, Area Developers receive a percentage of the initial franchise fee and the continuing fees paid to us by such franchisees. If an Area Developer fails to perform any of our obligations listed in this Item 11, however, we will perform such obligations. See Items 1 and 2 of this Offering Circular for a further description of our Area Developers and their respective Territories. Our obligations relating to the TCBY Concept. -------------------------------------------- If you are granted the right to add the TCBY Concept to the Premises of your Store: 1. We will furnish you prototypical plans and specifications for the addition of the TCBY Concept, including requirements for exterior and interior materials and finishes, dimensions, design, image, interior layout, decor, fixtures, equipment, signs, furnishings and color scheme. We will provide these materials to you following execution of the Yogurt Addendum. (Yogurt Addendum, Paragraph 11). 2. Either we or TCBY will provide an initial TCBY training program for you (or if you are an Entity, for one of your principal owners) and for your initial store manager (if different from you). You (or one of your principal owners) and any manager of your Store must successfully complete all phases of the TCBY training program. Although not obligated to do so, TCBY may agree to provide the initial TCBY training program to you. In such event, you are required to attend the TCBY training program conducted by TCBY. TCBY's training program consists of classes conducted at its offices in Little Rock, Arkansas or at other designated locations and on-the-job training at a TCBY Store. Classes are held periodically (more or less frequently as needed) and will last approximately 7 days. However, TCBY may require you to continue training for a longer period of time as TCBY may deem reasonably necessary, but not to exceed 20 days. TCBY's training program is conducted by experienced instructors who are employees of TCBY. TCBY's initial TCBY training program will cover the following areas: ================================================================================ Subject Time Hours of Hours of Instruction Instructor Hours Classroom On-the job Materials Training Training -------------------------------------------------------------------------------- Introduction to 1.5 1.5 -- Handout TCBY Franchise Training Instructors ================================================================================ -38-

<TABLE> <CAPTION> ============================================================================================================ Subject Time Hours of Hours of Instruction Instructor Hours Classroom On-the job Materials Training Training <S> <C> <C> <C> <C> <C> ------------------------------------------------------------------------------------------------------------ Introduction to .5 .5 -- Manuals TCBY Instructors Operating Manual ------------------------------------------------------------------------------------------------------------ Customer Service 3 3 -- Manuals TCBY Instructors ------------------------------------------------------------------------------------------------------------ Taylor Machine 6 6 -- Manuals TCBY Instructors ------------------------------------------------------------------------------------------------------------ Product Handling 1.25 1.25 -- Manuals TCBY Instructors ------------------------------------------------------------------------------------------------------------ Opening Procedures 1.5 1.5 -- Manuals TCBY Instructors ------------------------------------------------------------------------------------------------------------ Menu Item Preparation 4.25 4.25 -- Manuals TCBY Instructors ------------------------------------------------------------------------------------------------------------ Closing Procedures 1.5 1.5 -- Manuals TCBY Instructors ------------------------------------------------------------------------------------------------------------ Store Operations 15 -- 15 -- TCBY Instructors ------------------------------------------------------------------------------------------------------------ Forms/Paperwork 1 1 -- Manuals TCBY Instructors ------------------------------------------------------------------------------------------------------------ Pie & Cake Preparation 4 4 -- Manuals TCBY Instructors ------------------------------------------------------------------------------------------------------------ ProSource, Americana 1 1 -- Manuals TCBY Instructors ------------------------------------------------------------------------------------------------------------ Inventory/Flavor 1 1 -- Manuals TCBY Instructors Scheduling ------------------------------------------------------------------------------------------------------------ Practical Operational 2.25 2.25 -- Manuals TCBY Instructors Strategies ------------------------------------------------------------------------------------------------------------ Employee Selecting, 1 1 -- Handout TCBY Instructors Hiring, Interviewing ------------------------------------------------------------------------------------------------------------ Marketing 1.5 1.5 -- Manuals TCBY Instructors ------------------------------------------------------------------------------------------------------------ Total 46.25 31.25 15 ========================================================================= </TABLE> If TCBY provides the initial TCBY training program to you (or one of your principal owners, if you are an Entity) and your initial store manager (if different from you), it will do so free of charge. You are responsible, however, for all travel and living expenses incurred during the training program. If TCBY does not agree the provide the initial TCBY training program to you (or one of your principal owners, if you are an Entity) and your initial store manager (if different from you), we will provide a similar training program at our corporate headquarters in Salt Lake City, Utah or any other location designated by us. We will provide the training program free of charge; however, you are responsible for all travel and living expenses incurred during the training program. -39-

Regardless of whether the initial TCBY training program is provided by TCBY or us, the training program is mandatory and must be completed before you sell TCBY Yogurt Products from the Premises of your Store. All training must be completed to TCBY's and/or our satisfaction. Replacement store managers must also complete the initial TCBY training program; however, you will be required to pay the current fees for that training. (Yogurt Addendum, Paragraph 12). Replacement store managers are also responsible for living and travel expenses during training. Under no circumstances should you permit your Store to be managed by a person who has not completed all phases of the initial TCBY training program to TCBY's and/or our satisfaction. (Yogurt Addendum, Paragraph 12). 3. We or TCBY will loan you one copy of the TCBY Operations Manual, as described in Paragraph 13 of the Yogurt Addendum, or make the TCBY Operations Manual available to you electronically. The TCBY Operations Manual will contain mandatory and suggested specifications, standards and operating procedures that TCBY prescribes for TCBY Stores and contains information about your other obligations. TCBY may modify the TCBY Operations Manual to reflect changes in the image, specifications, standards, procedures, TCBY Yogurt Products and "System Standards" (as defined in Paragraph 4(d) of the Yogurt Addendum and discussed in Paragraph 16 of the Yogurt Addendum). However, with the exception of certain remodeling requirements described in Paragraph 35 of the Yogurt Addendum, we or TCBY will not make any addition or modification that will alter your fundamental status and rights as a franchisee. The TCBY Operations Manual is confidential and will remain TCBY's property. You may not copy any part of the TCBY Operations Manual, either physically or electronically. If your copy of the TCBY Operations Manual is lost, destroyed or significantly damaged, we or TCBY will provide you with a replacement copy, at TCBY's then applicable charge. (Yogurt Addendum, Paragraph 13). The Table of Contents of the TCBY Operations Manual and the number of pages devoted to each subject as of December 31, 1997, as well as the total number of pages in the TCBY Operations Manual, are set forth at Schedule 5 to this Offering Circular. 4. We will furnish you guidance and operating assistance, at your request, about (a) methods, standards, specifications and operating procedures to be utilized in your TCBY Concept; and (b) purchasing required fixtures, furnishings, equipment, signs, materials, supplies, TCBY Yogurt Products. 5. We or TCBY will provide you with the System Standards referred to above. We and/or TCBY may modify the System Standards periodically and the modifications may obligate you to invest additional capital in your TCBY Concept and to incur higher operating costs. Except for certain remodeling requirements described in Paragraph 35 of the Yogurt Addendum, neither we nor TCBY will obligate you to invest additional capital at a time when the investment cannot in our reasonable judgment be amortized during the remaining term of the Yogurt Addendum. (Yogurt Addendum, Paragraph 16). We or TCBY may furnish System Standards in the form of references to the TCBY Operations Manual, bulletins and other written materials. 6. If you are adding the TCBY Concept to the Premises of a Pretzel Time Store, we estimate that there will be an interval of between 30 to 120 days between the execution of the Yogurt Addendum and the opening of your TCBY Concept. The interval may vary depending upon factors such as the weather you are adding the TCBY Concept to the Premises of a new or existing Pretzel Time Store, the location and condition of the site, your ability to obtain any necessary financing and building, zoning or other permits and approvals, construction delays, and so forth. 7. As described in Item 6 of this Offering Circular, you are required to pay to us a marketing fee on the Gross Revenues for the sale of TCBY Yogurt Products from the Premises of your -40-

Store. All marketing fees we collect, however, will be used for advertising and marketing programs for the Pretzel Time System, and not the TCBY System. TCBY has a created a national advertising fund to be used by TCBY to develop national advertising programs and materials for the TCBY System. Currently, you are not required to directly contribute to the national advertising fund. You may, however, be required in the future to contribute up to 3% of your Gross Revenues each year (in addition the marketing fee) to a regional or local advertising cooperative created by TCBY and/or its franchisees for TCBY Stores. As of the date of this Offering Circular, you are not required to contribute to any advertising cooperative. ITEM 12. TERRITORY Pretzel Time Franchisees: ------------------------ Franchises are granted for a specific location and are NOT exclusive. You may not operate your Store at any other site without our prior written consent. Except for catering events or offering samples of products at or directly in front of your Store, you may not offer for sale or sell the products or services of your Store or any materials, supplies, or inventory bearing the Pretzel Time Trademarks at any site other than your Store premises without our prior written consent. You may not relocate your Store unless we require relocation in connection with the grant of a successor franchise agreement. If you lose the right to possess the premises where you are operating your Store, we have the right to terminate your Franchise Agreement. Also, as a franchisee, you do not have any right to acquire additional Pretzel Time Stores or franchises. We and our Affiliates retain the right to do the following: (1) sell and franchise and license others to sell Pretzel Time Products and other items and services offered by Pretzel Time Retail Outlets under the Trademarks and other trademarks and service marks through Pretzel Time Retail Outlets on any terms and conditions and at any location that we deem appropriate; (2) sell and license and franchise others to sell any other products or services under the Trademarks (including items such as refrigerated ready-to-bake cookie dough sold through various retail outlets); (3) own, operate and grant others the right to own or operate Pretzel Time Stores, other Pretzel Time Retail Outlets, or other dessert and snack food businesses at the locations and on the terms and conditions as we, in our sole discretion, deem appropriate. In addition, as discussed in Item 1, we or one of our Affiliates may acquire or actively seek to acquire businesses or franchise systems that are your competitors and such competitors may have locations near your Store, including locations within the same shopping mall. These activities may compete with you. These activities may compete with you. We enter into licensing and franchising arrangements with other individuals and entities, granting those individuals and entities exclusive territorial rights which may restrict your rights to locate your Store in certain locations. Any restrictions in effect will be explained to you as part of the site selection process for your Store. Pretzel Time Area Developers: ---------------------------- As further described in Items 1 and 2 of this Offering Circular, we have granted certain Area Developers the right to develop, own and operate a specified number of Pretzel Time Stores at approved shopping mall locations within a defined Territory. If an Area Developer has the rights to the Territory in which your Store is located or if an Area Developer's Territory is close to the location of your Store, the Stores developed in such Territory, either by the Area Developer, us or some other third-party, may compete with you. -41-

Rights of Pretzelmaker and Pretzelmaker-Canada: ---------------------------------------------- Pretzelmaker and Pretzelmaker-Canada grant geographic areas around each Pretzelmaker Store (usually limited to the shopping mall in which the Store is located) within which they will not, except in certain circumstances relating to alternative distribution licensees, establish and operate or franchise others to establish and operate Pretzelmaker Stores. Subject to the preceding sentence, our Affiliates, Pretzelmaker and Pretzelmaker-Canada, specifically retain the right to do the following: (1) sell and franchise and license others to sell Pretzelmaker products and other items and services offered by Pretzelmaker Stores under the Pretzelmaker trademarks and other trademarks and service marks through Pretzelmaker Stores on any terms and conditions and at any location that Pretzelmaker or Pretzelmaker-Canada deems appropriate; (2) sell and license and franchise others to sell any other products or services under the Pretzelmaker trademarks (including items such as refrigerated ready-to-bake dough sold through various retail outlets); and (3) own, operate and grant others the right to own or operate Pretzelmaker Stores or other dessert and snack food businesses at the locations and on the terms and conditions as Pretzelmaker or Pretzelmaker-Canada in its sole discretion, deems appropriate. These activities may compete with you. Rights of MFOCI: --------------- One of our Affiliates, MFOCI, specifically reserves the rights described in this paragraph. As described in Item 1 above, MFOCI currently owns and operates Hot Sam Pretzel and Bakery Stores, and grants licenses and franchises for the operation of and/or owns and operates Mrs. Fields Cookie Stores and Original Cookie Company Stores. In addition, MFOCI retains the right to do the following: (1) sell and franchise and license others to sell Hot Sam products and other items and services offered by Hot Sam Pretzel Bakery Stores under the Hot Sam trademarks and other trademarks and service marks through Hot Sam Pretzel Bakery Stores on any terms and conditions and at any location that MFOCI deems appropriate; (2) sell and license and franchise others to sell any other products or services under the Hot Sam trademarks; (3) own, operate and grant others the right to own or operate Hot Sam Pretzel Bakery Stores or other baked goods and snack food businesses at the locations and on the terms and conditions as MFOCI, in its sole discretion, deems appropriate; (4) sell and franchise and license others to sell Mrs. Fields products and other items and services offered by Mrs. Fields Retail Outlets under the Mrs. Fields trademarks and other trademarks and service marks through Mrs. Fields Retail Outlets on any terms and conditions and at any location that MFOCI deems appropriate; (5) sell and license and franchise others to sell any other products or services under the Mrs. Fields trademarks (including items such as refrigerated ready-to-bake cookie dough sold through various retail outlets); and (6) own, operate and grant others the right to own or operate Mrs. Fields Cookie Stores, or other dessert and snack food businesses at the locations and on the terms and conditions as MFOCI, in its sole discretion, deems appropriate. These activities may compete with you. Rights of GACC: -------------- One of our Affiliates, GACC, specifically reserves the rights described in this paragraph. As described in Item 1 above, GACC currently owns and operates and has granted licenses and franchises for the operation of Great American Cookie Company Stores. In addition, GACC retains the right to do the following: (1) sell and franchise and license others to sell Great American Cookie Company products and other items and services offered by Great American Cookie Company Stores under the Great American Cookie Company trademarks and other trademarks and service marks through Great American Cookie Company Stores on any terms and conditions and at any location that GACC deems appropriate; (2) sell and license and franchise others to sell any other products or services under the Great American Cookie Company trademarks (including items such as proprietary batter, dough and other ingredients for -42-

making cookies); and (3) own, operate and grant others the right to own or operate Great American Cookie Company Stores or other dessert and snack food businesses at the locations and on the terms and conditions as GACC, in its sole discretion, deems appropriate. These activities may compete with you. TCBY Concept: ------------ If you are granted the right to add the TCBY Concept to the Premises of your Store, you will NOT receive an exclusive territory or any territorial rights. We and our Affiliates reserve the right to: (1) add the TCBY Concept to any new or existing Pretzel Time Retail Outlet, whether franchised, licensed or owned by us or our Affiliates, at any location we deem appropriate; and (2) establish franchises, licenses or businesses owned by us our Affiliates at any locations we deem appropriate or distribute products or services through alternative channels of distribution selling products or services similar to the TCBY Yogurt Products under trade names, trademarks, service marks, trade dress or other commercial symbols other than the TCBY Trademarks. TCBY and its affiliates also reserve the right to: (1) operate or grant other persons the right to operate TCBY Stores at such locations and on such terms and conditions as TCBY deems appropriate; (2) sell the TCBY Yogurt Products and other products and services authorized for TCBY Stores under the TCBY Trademarks or other trademarks, service marks and commercial symbols through similar or dissimilar channels of distribution and pursuant to such terms and conditions as TCBY deems appropriate, such products and/or services may include, but shall not be limited to, soft serve frozen yogurt, hard pack pints, refrigerated yogurt, novelty frozen yogurt items, and other refrigerated and frozen yogurt items as TCBY or its affiliates may develop from time to time; and (3) establish franchises, licenses or businesses owned by TCBY or its affiliates at any locations TCBY deems appropriate or distribute products or services through alternative channels of distribution selling products or services similar to the TCBY Yogurt Products under trade names, trademarks, service marks, trade dress or other commercial symbols other than the TCBY Trademarks. An affiliate of TCBY produces frozen yogurt, frozen yogurt mix, premium ice cream and ice cream specialty products for sale to a variety of customers including hotels, restaurants, clubs, independent ice cream stores, department stores, supermarkets and grocery stores. The frozen yogurt and frozen yogurt mix sold by that affiliate are of a different quality than TCBY frozen yogurt mix. An affiliate of TCBY sells flavoring and other ingredients for dairy products, which eventually may be used to produce dairy products which could indirectly compete with frozen yogurt products generally. TCBY sells products bearing the TCBY Trademarks to large retail companies, which sales may compete with sales of identical products by you, but these sales are not deemed by TCBY to compete with sales of soft-serve products. Currently, neither -43-

TCBY nor any affiliate operates or franchises the operation of any business selling under different trademarks goods or services similar to, or competitive with, those to be offered for sale by you. ITEM 13. TRADEMARKS Pretzel Time Trademarks: ----------------------- Under the Franchise Agreement, we license you to use the Pretzel Time Trademarks in the operation of your Store. The following is a summary of the principal Pretzel Time Trademarks, all of which are registered on the Principal Register of the U.S. Patent and Trademark Office. No affidavits of use have been filed as of the date of this Offering Circular as none are required at this time. -43A-

MARK REGISTRATION NO. REGISTRATION DATE APPLICATION ---- ---------------- ----------------- BASED ON -------- Pretzel Time and 1,778,178 June 22, 1993 Intent to Use Design (Stylized) Pretzel Time 1,857,037 October 4, 1994 Actual Use Clock Design Pretzel Time 1,875,649 January 24, 1995 Actual Use Store Design FITNESS WITH 1,937,330 November 21, 1995 Actual Use A TWIST There are no currently effective material determinations of the U.S. Patent and Trademark Office, trademark trial and appeal board, the trademark administrator of any state, or any court, nor are there any pending interference, opposition or cancellation proceedings or any pending material litigation, involving any of the registered Pretzel Time Trademarks described above. There are no agreements currently in effect which significantly limit our rights to use or franchise the use of any of the Pretzel Time Trademarks. Your right to use the Pretzel Time Trademarks is derived solely from the Franchise Agreement and is limited to your conduct of business pursuant to and in compliance with the Franchise Agreement and all applicable standards, specifications, operating procedures and rules that we require. Your unauthorized use of the Pretzel Time Trademarks will constitute a breach of the Franchise Agreement and an infringement of our rights in the Pretzel Time Trademarks. Your use of the Pretzel Time Trademarks and any goodwill established by your use will benefit us exclusively. The Franchise Agreement does not confer any goodwill or other interests in the Pretzel Time Trademarks on you other than the right to operate your Store in compliance with the Franchise Agreement. All rights in and goodwill from the use of our trademarks accrue solely to us. All provisions of the Franchise Agreement applicable to the Pretzel Time Trademarks will apply to any additional proprietary trade and service marks and commercial symbols that we authorize for use by you in the future. You must use the applicable Pretzel Time Trademarks as the sole identification of your Store, and you must identify yourself as the independent owner in the manner we require. You may not use any Pretzel Time Trademark as part of any corporate or trade name or with any prefix, suffix or other modifying words, terms, designs or symbols (other than logos franchised to you under the Franchise Agreement), or in any modified form, nor may you use any Pretzel Time Trademark in performing or selling any unauthorized services or products or in any other manner not expressly authorized in writing by us. You must display the applicable Pretzel Time Trademarks prominently at your Store, on supplies or materials designated by us, and on packaging materials, forms, labels and advertising and marketing materials. You must display all applicable Pretzel Time Trademarks in the manner we require, and you must use the registration symbol "(R)" in using the registered Pretzel Time Trademarks. You must refrain from any business or marketing practice which may be injurious to our business and the good will associated with the Pretzel Time Trademarks or Pretzel Time Stores. If we decide that it is advisable at any time, in our sole discretion, for us or you to modify or discontinue use of any Pretzel Time Trademark or use one or more additional or substitute trade or -44-

service marks, you must comply with our directions to modify or discontinue the use of the Pretzel Time Trademark or use one or more additional or substitute trade or service marks within a reasonable time after notice from us. We will reimburse you for your reasonable direct expenses in modifying or discontinuing the use of a Pretzel Time Trademark and substituting a different trademark or service mark. However, we are not obligated to reimburse you for any loss of goodwill associated with any modified or discontinued Pretzel Time Trademark or for any expenditures made by you to promote a modified or substitute trademark or service mark. You must immediately notify us of any apparent infringement of or challenge to your use of any Pretzel Time Trademark or claim by any person of any rights in any Pretzel Time Trademark, and you must not communicate with any person other than us or our counsel about the infringement, challenge or claim. We have sole discretion to take the action we deem appropriate and the right to control exclusively any litigation, U.S. Patent and Trademark Office proceeding or any other administrative or court proceeding concerning any Pretzel Time Trademark. You must execute any instruments and documents, render assistance and do those things as, in the opinion of our legal counsel, may be necessary or advisable to protect and maintain our interests in any litigation or U.S. Patent and Trademark Office or other proceeding or otherwise to protect and maintain our interests in the Pretzel Time Trademarks. We will indemnify you against and reimburse you for all damages for which you are held liable in any proceeding arising out of your authorized use of any Pretzel Time Trademark and for all costs you reasonably incur in defending any claim brought against you or any proceeding in which you are named as a party, if you have timely notified us of the claim or proceeding and have otherwise complied with the requirements of the Franchise Agreement. At our option, we are entitled to defend and control the defense of any proceeding arising out of your authorized use of any Pretzel Time Trademark. To our actual knowledge, there are no superior prior rights or infringing uses which could materially affect your use of any Pretzel Time Trademark in any state. -45-

TCBY Trademarks: --------------- If you are granted the right to add the TCBY Concept to the Premises of your Store, you are authorized to operate your TCBY Concept under the name "TCBY" and may use the TCBY Trademarks in conjunction with the operation of your Store. The following TCBY Trademarks are registered by TCBY on the principal register of the United States Patent and Trademark Office: "TCBY" THE COUNTRY'S Registration No. 1,367,174 BEST YOGURT (logo form) Issued October 22, 1985 (Service Mark) "TCBY" THE COUNTRY'S Registration No. 1,415,194 BEST YOGURT Issued October 28, 1986 (Trademark) TCBY YOGURT Registration No. 1,338,536 (Service Mark) Issued May 28, 1985 TCBY Registration No. 1,415,353 (Service Mark) Issued October 28, 1986 TCBY Registration No. 1,463,784 (Trademark) Issued June 11, 1985 ALL THE PLEASURE Registration No. 1,341,713 NONE OF THE GUILT. Issued June 11, 1985 (Service Mark) TCBY and Cone with Design Registration No. 1,550,397 (Trademark) Issued August 1, 1989 TCBY and Cone with Design Registration No. 1,643,075 (Service Mark) Issued April 30, 1991 There are no presently effective determination of the United States Patent and Trademark Office, the trademark administrator of any state or any court, or pending interference, opposition or cancellation proceeding or pending material litigation involving the TCBY Trademarks. There are no agreements currently in effect that significantly limit the right of TCBY or us to use or license the use of the TCBY Trademarks in any material manner. You must follow certain rules when you use these TCBY Trademarks. You cannot use the TCBY Trademarks as part of a corporate name or with modified words, designs, or symbols unless the Yogurt Addendum specifically permits. You may not use any TCBY Trademarks in connection with the sale of an unauthorized product or service or in any manner not authorized in writing. You must notify us immediately when you learn about an infringement of or challenge to your use of a TCBY Trademark and must give TCBY and/or us or its or our designees complete control of the defense. TCBY and/or we will take the action TCBY thinks appropriate. The Yogurt Addendum does not require TCBY or us to participate in your defense and/or indemnify you for expenses or damages if you are a party to an administrative or judicial proceeding involving a TCBY Trademark licensed by us to you or if the proceeding is resolved unfavorably to you. -46-

You must modify or discontinue the use of a TCBY Trademark if TCBY modifies or discontinues it. If this happens, TCBY is required, pursuant to the TCBY Sale Agreement, to reimburse you for out-of-pocket costs of compliance. You are not permitted, directly or indirectly, to contest TCBY's right to its TCBY Trademarks, trade secrets, or business techniques that are part of its business. TCBY does not know of any infringing uses that could materially affect your use of the TCBY Trademarks. ITEM 14. PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION Pretzel Time Store: ------------------ Except as noted below, we and our Affiliates do not own any patents or copyrights which are material to the Franchise. We claim copyrights in the Operations Manuals, construction plans, specifications and materials, printed advertising, promotional, sales, training and management materials and in related items you will use in operating your Franchise. We have not registered these copyrights with the U.S. Registrar of Copyrights. You may use the Operations Manuals and other materials during the term of the Franchise Agreement. There are currently no effective determinations of the U.S. Copyright Office or any court regarding any of the copyrights. There are no agreements currently in effect which significantly limit our rights to use or franchise the copyrighted materials. Also, there are no superior prior rights or infringing uses actually known to us which could materially affect your use of the copyrighted materials in any state. Your right to use the copyrights is derived solely from the Franchise Agreement and is limited to your conduct of business in compliance with the Franchise Agreement and all applicable standards, specifications, operating procedures and rules that we require. Your unauthorized use of the copyrights will constitute a breach of the Franchise Agreement and an infringement of our rights in the copyrights. Your use of the copyrights and any goodwill established by your use will benefit us exclusively. The Franchise Agreement does not confer any goodwill or other interests in the copyrights upon you other than the right to operate your Store in compliance with the Franchise Agreement. All rights in and goodwill from the use of the copyrights will accrue solely to us. All provisions of the Franchise Agreement applicable to the copyrights will apply to any additional copyrighted materials that we authorize for use by you in the future. If we decide that it is advisable at any time in, our sole discretion, for us or you to modify or discontinue use of any of the materials in which we claim copyrights, you must comply with our directions to modify or discontinue the use of those materials within a reasonable time after notice from us. We will reimburse you for your reasonable direct expenses in modifying or discontinuing the use of those materials and in substituting different materials specified by us. However, we are not obligated to reimburse you for any loss of goodwill associated with the modification or discontinuation of any materials in which we claim copyrights or for any expenditures made by you in connection with your use of those materials. You must immediately notify us if you learn that any person may be using our copyrighted materials without our consent or authorization. You must also immediately notify us of any challenge to your use of any copyright or claim by any person of any rights in any copyright. You must not -47-

communicate with any person other than us or our counsel about any challenge or claim to any copyright. We have sole discretion to take the action we deem appropriate and the right to control exclusively any litigation, U.S. Copyright Office proceeding or any other administrative proceeding concerning any copyright. You must execute any instruments and documents, render assistance and do those things as, in the opinion of our legal counsel, may be necessary or advisable to protect and maintain our interests in any litigation or Copyright Office or other proceeding or otherwise to protect and maintain our interests in the copyrights. We will compensate and reimburse you for all damages for which you are held liable in any proceeding arising out of your authorized use of any copyright and for all costs you reasonably incur in defending any claim brought against you or any proceeding in which you are named as a party, if you have timely notified us of the claim or proceeding and have complied with your obligations under the Franchise Agreement. At our option, we are entitled to defend and control the defense of any proceeding arising out of your use of any copyright. We also own the Confidential Information and claim copyrights in the Confidential Information. The Confidential Information includes trade secrets and is our proprietary information. Portions of the Confidential Information required in the operation of your business will be communicated to you. However, you will not acquire any interest in any Confidential Information, other than the right to utilize Confidential Information disclosed to you in operating your Store during the term of the Franchise Agreement. The use or duplication of any Confidential Information in any other business will constitute an unfair method of competition and a violation of your Franchise Agreement. We only disclose the Confidential Information to you on the condition that you agree: (i) Not to use Confidential Information in any other business or capacity; (ii) To maintain the absolute confidentiality of Confidential Information during and after the term of the Franchise Agreement; (iii) Not to make unauthorized copies of any portion of Confidential Information disclosed in written or other tangible form; and (iv) To adopt and implement all reasonable procedures that we require to prevent unauthorized use or disclosure of Confidential Information, including restrictions on disclosure of Confidential Information to your employees and to comply with requirements that we may impose that certain key employees execute confidentiality agreements as a condition of employment. We and our Affiliates will own and have the perpetual right to use and authorize other Pretzel Time Stores to use, and you must fully and promptly disclose to us, all ideas, concepts, formulas, recipes, methods and techniques about the development or operation of a pretzel bakery, dessert or retail snack food business conceived or developed by you or your employees during the term of the Franchise Agreement. You must not, however, test, offer or sell any new products without our prior written consent. TCBY Concept: ------------ You do not receive the right to use an item covered by a patent or copyright if you are granted the right to add the TCBY Concept to the Premises of your Store. You may use the proprietary information in the TCBY Operations Manual, as described in Item 11 of the Offering Circular, if you meet the -48-

limitations outlined in the Pretzel Time Franchise Agreement and Yogurt Addendum. Although TCBY has not filed an application for a copyright registration for the TCBY Operations Manual, it claims a copyright, and the information is proprietary. You must promptly inform us when you learn about an unauthorized use of this proprietary information. Neither we nor TCBY are obligated to take any action but will respond to this information as we or TCBY thinks appropriate. ITEM 15. OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS Pretzel Time Store: ------------------ We recommend that you participate personally in the direct operation of your Store, although you are not specifically obligated to do so by the Franchise Agreement. However, you must manage your Store using a full time "on premises" manager. The manager need not have an ownership interest in a franchisee that is an Entity. The manager of your Store must complete all phases of our training program to our satisfaction and must participate in all other activities required to open your Store. We also require all replacement managers to satisfactorily complete all phases of our training program. If you are an Entity, each Entity Owner will be required to sign a Guaranty of Agreement in the form of Exhibit B guaranteeing your obligations under the Franchise Agreement. We may require each manager of a Pretzel Time Store to execute a confidentiality agreement in our favor as a condition of employment as a store manager. In addition, we may require each manager of a Pretzel Time Store to agree to the non-competition covenants described in Item 17.A. of this Offering Circular. You and each other Restricted Person will be bound by the non-competition covenants described in Item 17.A.q. and Item 17.A.r. of this Offering Circular. TCBY Concept: ------------ If you are granted the right to add the TCBY Concept to the Premises of your Store, the manager of your Store and any replacement managers must complete all phases of the initial TCBY training program to our and/or TCBY's satisfaction. In addition, we may require each manager to agree to the non- competition covenants described in Item 17.B. of this Offering Circular. Finally, you and each other Restricted Person will be bound by the non- competition covenants described in Item 17.B.q. and Item 17.B.r. of this Offering Circular. ITEM 16. RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL Pretzel Time Store: ------------------ In operating your Store, you may offer for sale only those Pretzel Time Products that we approve from time to time for you to sell at the Premises. The Operations Manuals explain the Pretzel Time Products that you initially are authorized to offer at your Store. In the future, we may change or add to the Pretzel Time Products that you are authorized to offer at the Premises. We typically base our determination of whether to allow you to offer an expanded line of Pretzel Time Products on our evaluation of your compliance, over time, with the System Standards described in Section 7.1 of the Franchise Agreement, with particular emphasis on those related to quality. We do not base our -49-

determinations on sales or marketing quotas, volumes or results. You should also refer to Item 8 of this Offering Circular for information with respect to required purchases of certain items. Your lease may also impose other obligations or restrictions with respect to the types of products that you may offer from your premises, and you must comply with those restrictions and obligations even if they would prevent you from offering certain Pretzel Time Products that we have approved for you to offer. You do not have to sell all the Pretzel Time Products we authorize. We designate some various pretzels and toppings as optional. The required Pretzel Time Products are: (1) the regular salted and buttered pretzel; (2) sweet mustard, cheddar cheese, cream cheese, honey glaze, cinnamon sugar, sour cream and onion and garlic toppings; (3) Coke; (4) Diet Coke; (5) a decaffeinated carbonated drink; (6) 2 other carbonated drinks (fruit and flavored); (7) fruit punch; and (8) lemonade. You are generally not restricted in the retail customers to whom you may sell products and services. However, without our prior written consent, you may not offer Pretzel Time Products approved for sale or services of your Store or any materials, supplies, or inventory bearing the Trademarks at any site other than your Store premises (other than catering events and the offering of Pretzel Time Product samples at or directly in front of your Store). In addition, you may not offer for sale any materials, supplies or inventory used in the preparation of any of the Pretzel Time Products. You may only sell finished Pretzel Time Products that have been approved for sale at your Store and only to retail customers, and you may not sell any Pretzel Time Products to any person or entity purchasing the Pretzel Time Products for resale. In addition, you may not use the site of your Store for any purpose other than the operation of a Pretzel Time Store. You may use only pamphlets, brochures, cards or other promotional materials offering free Pretzel Time Products that we have prepared, unless otherwise approved by us in advance. However, we will give favorable consideration to your use of free product cards developed by you, if the cards clearly state that they may only be redeemed at Pretzel Time Stores owned by you. We and our Affiliates will have the perpetual right to own and use and authorize other Pretzel Time Stores to use, and you will fully and promptly disclose to us, all ideas, concepts, formulas, recipes, methods and techniques about the development or operation of a bakery, dessert or snack food business conceived or developed by you or your employees during the term of your Franchise Agreement. You may not test, offer, or sell any new products without our prior written consent. TCBY Concept: ------------ If you are granted the right to add the TCBY Concept to the Premises of your Store, you may offer for sale only those TCBY Yogurt Products that TCBY approves from time to time for you to sell at the Premises. ITEM 17. RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION The following tables list important provisions of the franchise and related agreements pertaining to renewal, termination, transfer and dispute resolution. You should read these provisions in the agreements attached to this Offering Circular. -50-

A. Franchise Agreement ------------------- <TABLE> <CAPTION> Section in Provision Franchise Agreement Summary <S> <C> <C> a. Term of the Franchise Section 3.1 Initial term is 7 years. Unless Agreement renewed, the Franchise Agreement will terminate on expiration of initial term. b. Renewal or extension of the Sections 3.2 and 13.5 You may renew for 1 additional term 7-year term if you are not in default. You may also have the opportunity to obtain a successor Franchise Agreement as provided in Section 13.5. c. Requirements for you to Section 3.2 You give us at least 180 days extend or renew prior notice; you sign new agreement (which may include different or additional fees and performance criteria); at our request, you refurbish and remodel the premises; at our request, you execute a general release; you have complied with all agreements with us during the initial term; you have satisfied all monetary obligations; and you retain the premises for the renewal term. d. Termination by you Section 13.4 You may terminate if we are in default. e. Termination by us without Section 13.3 We may terminate if you fail to cause satisfactorily complete the required training or if you fail to begin your Store operations within 180 days after execution of the Franchise Agreement; see also "17.A.a." above. f. Termination by us with cause Sections 13.1 and 13.2 We can terminate if you are in default of the Franchise Agreement or any other agreement with us or our Affiliates; see also "17.A.o." below. </TABLE> -51-

<TABLE> <CAPTION> <S> <C> <C> g. "Cause" defined--defaults Sections 13.1 and 13.2 (1) Cleanliness and sanitation which can be cured violations may be cured within 48 hours of notice of violation; (2) payment defaults of the Franchise Agreement or any other agreement with us or our Affiliates may be cured within 10 days of notice of nonpayment; (3) involuntary bankruptcy or other involuntary insolvency events are defaults if not discharged within 60 days; and (4) any other default of the Franchise Agreement or any other agreement with us or our Affiliates not listed above or in "17.A.h." below may be cured within 30 days after written notice of default. h. "Cause" defined--defaults Sections 13.1 and 13.2 Non-curable defaults: which cannot be cured (1) voluntary bankruptcy or other voluntary insolvency events; (2) unauthorized transfers; (3) material misstatements or omissions; (4) you are convicted or plead no contest to a felony; (5) you engage in detrimental conduct; (6) unauthorized use of the Trademarks or Confidential Information; (7) abandonment of or failure to actively operate your Store; (8) you are in breach of your obligations under your lease or sublease of the Premises or you lose the right of possession of your Store premises; (9) you store or use "out-of-code" products in violation of the System Standards; (10) understatement of Gross Revenues by more than 2%; (11) failure to pay uncontested taxes; (12) failure to make payments after 10 days' written notice; (13) repeated defaults, even if cured; or (14) you default on any financing obligations. </TABLE> -52-

<TABLE> <CAPTION> <S> <C> <C> i. Your obligations on Sections 6.5, 7.8, 8.2, 8.3, 10.5, Payments of amounts due, late termination/nonrenewal 10.8, 12.3(l), 14.2, 14.3, 14.4, charges, and interest; 14.6, 15.6 and Article 18 of the continuation of releases and Franchise Agreement waivers; retain records and permit audits; not disclose Confidential Information; discontinue use of Trademarks; deliver to us all signs, equipment, supplies and materials displaying the Trademarks; cancel any fictitious or assumed name certificates; make required changes to premises; assign telephone listings; dispose of non-returnable supplies and materials; indemnification; and continuation of general provisions; see also "17.A.o." and "17.A.r." below. j. Assignment of contract by us Section 12.1 No restriction on our right to assign. k. "Transfer" by you-- definition Section 1.2(p) Includes transfer of agreement or ownership change. l. Our approval of transfer by Sections 12.2, 12.3 and 12.4 We must approve all transfers but you will not unreasonably withhold approval if specified requirements are met; transfers to a wholly-owned corporation do not require our consent. m. Conditions for our approval Section 12.3 Transferee qualifies; your of transfer obligations are paid and you are not in default; transferee agrees to complete training and assumes obligations under existing agreement; transfer fee paid; release signed by you; we approve terms of transfer; you subordinate any obligations of the transferee to you to the transferee's obligations to us; any required landlord consents are obtained; you agree not to use the Trademarks; see also "17.A.r." below. </TABLE> -53-

<TABLE> <CAPTION> <S> <C> <C> n. Our right of first refusal to Section 12.5 We can match any offer for your acquire your business business or for a Controlling Interest in you; see also "17.A.r." below. o. Our option to purchase your Section 14.5 and Article 16 We have an option to purchase your business Store upon termination of the agreement unless we are in default or you have entered into a successor Franchise Agreement. Under the security agreement contained in Article 16 of the Franchise Agreement, we can foreclose and acquire the assets of your Store if you default. p. Your death or disability Section 12.6 You must transfer your interest in the Franchise Agreement or your Controlling Interest in an Entity developer within 6 months, to a transferee approved by us. q. Non-competition covenants Sections 11.1, 11.3, 11.4 and 18.1 No interest in or services for a during the term of the Franchise Competitive Business within 1 mile Agreement of your Store or within 1 mile of any Pretzel Time Retail Outlet, as applicable; no solicitation of employees. r. Non-competition covenants Sections 11.2, 11.3, 11.4, No interest in or services for a after the Franchise Agreement is 12.3(j), 12.5(c) and 18.1 Competitive Business within 1 mile terminated or expires of your Store or 1 mile of any Pretzel Time Retail Outlet for 1 year, if we don't purchase your Store (see "17.A.o." above) or for 3 years, if we do purchase your Store (including after a transfer or exercise of your right of first refusal, for a 3 year period). s. Modification of the Franchise Sections 11.4, 18.1, 18.2 and 18.7 Subject to automatic modification Agreement to conform to mandatory provisions of applicable law. Other modifications require mutual consent. </TABLE> -54-

<TABLE> <CAPTION> <S> <C> <C> t. Integration/merger clause Section 18.14 Only the terms of the Franchise Agreement are binding (subject to state law). Any other promises may be unenforceable. u. Dispute resolution by Section 17.4 Except for certain claims not arbitration or mediation subject to arbitration, all disputes must be arbitrated in Salt Lake City, Utah. v. Choice of forum Section 17.6 Litigation must be in the State of Utah. w. Choice of law Section 17.5 Utah law applies unless governed by applicable federal law. </TABLE> B. Yogurt Addendum --------------- <TABLE> <CAPTION> Section in Yogurt Addendum (and Provision Franchise Agreement where Summary applicable) <S> <C> <C> a. Term of the Yogurt Addendum Paragraph 9 Initial term coincides with the initial term of the Franchise Agreement unless the TCBY Sales Agreement is terminated or the Franchise Agreement is terminated. b. Renewal or extension of the Paragraph 10 You may renew at the time you term renew the Franchise Agreement, if you are not in default and the Yogurt Addendum is still in effect at the time of renewal. The renewal term shall continue during the renewal term of the Franchise Agreement until the earliest of: the termination or expiration of the TCBY Sales Agreement, or the termination of the Franchise Agreement. </TABLE> -55-

<TABLE> <CAPTION> <S> <C> <C> c. Requirements for you to Paragraph 10 In addition to satisfying all of extend or renew the renewal requirements in the Franchise Agreement and renewing the Franchise Agreement, you are not in default under the Yogurt Addendum and sign our then current form of TCBY Yogurt Product Addendum (which may include different or additional fees and performance criteria). d. Termination by you Section 13.4 of the Franchise You may terminate if we are in Agreement default. e. Termination by us without Paragraph 26 We may terminate if you fail to cause satisfactorily complete the required TCBY training or if you fail to begin operation of your TCBY Concept within 180 days after execution of the Yogurt Addendum; see also "17.B.a" and "17.B.b" above. f. Termination by us with cause Paragraph 26; Sections 13.1 and We can terminate if you are in 13.2 of the Franchise Agreement default of the Yogurt Addendum, the Franchise Agreement or any other agreement with us or our Affiliates; see also "17.B.o." below. </TABLE> -56-

<TABLE> <CAPTION> <S> <C> <C> g. "Cause" defined--defaults Paragraph 25; Sections 13.1 and (1) Cleanliness and sanitation which can be cured 13.2 of the Franchise Agreement violations may be cured within 48 hours of notice of violation; (2) payment defaults of the Yogurt Addendum, Franchise Agreement or any other agreement with us or our Affiliates may be cured within 10 days of notice of nonpayment; (3) involuntary bankruptcy or other involuntary insolvency events are defaults if not discharged within 60 days; and (4) any other default of the Yogurt Addendum, Franchise Agreement or any other agreement with us or our Affiliates not listed above or in "17.B.h." below may be cured within 30 days after written notice of default. </TABLE> -57-

<TABLE> <CAPTION> <S> <C> <C> h. "Cause" defined--defaults Paragraph 26; Sections 13.1 and Non-curable defaults: which cannot be cured 13.2 of the Franchise Agreement (1) voluntary bankruptcy or other voluntary insolvency events; (2) unauthorized transfers; (3) material misstatements or omissions; (4) you are convicted or plead no contest to a felony; (5) you engage in detrimental conduct; (6) unauthorized use of the TCBY Trademarks or Confidential Information; (7) abandonment of or failure to actively operate your TCBY Concept; (8) you are in breach of your obligations under your lease or sublease of the Premises or you lose the right of possession of the Premises; (9) you store or use "out-of-code" products in violation of the System Standards; (10) understatement of Gross Revenues by more than 2%; (11) failure to pay uncontested taxes; (12) failure to make payments after 10 days' written notice; (13) repeated defaults, even if cured; or (14) you default on any financing obligations. i. Your obligations on Paragraphs 25, 27, 30 and 32; Payments of amounts due, late termination/nonrenewal Sections 6.5, 7.8, 8.2, 8.3, 10.5, charges, and interest; 10.8, 15.6 and Article 18 of the continuation of releases and Franchise Agreement waivers; retain records and permit audits; not disclose Confidential Information; discontinue use of TCBY Trademarks; deliver to us all signs, equipment, supplies and materials displaying the TCBY Trademarks; cancel any fictitious or assumed name certificates; make required changes to the Premises; dispose of non-returnable supplies and materials; indemnification; and continuation of general provisions; see also "17.A.o." </TABLE> -58-

<TABLE> <CAPTION> <S> <C> <C> j. Assignment of contract by us Paragraph 25 No restriction on our right to assign. k. "Transfer" by you-- definition Paragraph 4(f); Section 1.2(p) of Includes transfer of Yogurt the Franchise Agreement Addendum or ownership change. l. Our approval of transfer by Paragraph 25; and Sections 12.3 We must approve all transfers but you and 12.4 of the Franchise Agreement will not unreasonably withhold approval if specified requirements are met; transfers to a wholly-owned corporation do not require our consent. m. Conditions for our approval Paragraph 25; and Section 12.3 of Transfer is in conjunction with of transfer the Franchise Agreement the transfer of the Franchise Agreement, transferee qualifies; your obligations are paid and you are not in default; transferee agrees to complete TCBY training and assumes obligations under existing agreement; transfer fee paid; release signed by you; we approve terms of transfer; you subordinate any obligations of the transferee to you to the transferee's obligations to us; any required landlord consents are obtained; you agree not to use the TCBY Trademarks. n. Our right of first refusal to Section 12.5 of the Franchise We can match any offer for your acquire your business Agreement business or for a Controlling Interest in you; see also "17.B.r." below. o. Our option to purchase your Paragraph 29; Section 14.5 of the In addition to our option to business Franchise Agreement purchase your Store upon termination of the Franchise Agreement, we also have an option to purchase your TCBY Concept upon the termination of this Addendum. p. Your death or disability Paragraph 25; Section 12.6 of the You must transfer your interest in Franchise Agreement the Yogurt Addendum or your Controlling Interest in an Entity developer within 6 months, to a transferee approved by us. </TABLE> -59-

<TABLE> <CAPTION> <S> <C> <C> q. Non-competition covenants Paragraphs 4(a) and 23; Sections No interest in or services for a during the term of the Yogurt 11.1, 11.3, 11.4 and 18.1 of the Competitive Business and no Addendum Franchise Agreement solicitation of employees. r. Non-competition covenants Paragraphs 24; Sections 11.3, No interest in or services for a after the Yogurt Addendum is 11.4, 12.3(j), 12.5(c) and 18.1 of Competitive Business within 1 mile terminated the Franchise Agreement of the Premises your Store or 1 mile of the Premises of any Pretzel Time Retail Outlet which contains a TCBY Concept for 1 year, if we don't purchase your TCBY Concept (see "17.B.o." above) or for 3 years, if we do purchase your TCBY Concept (including after a transfer or exercise of your right of first refusal, for a 3 year period). s. Modification of the Yogurt Paragraph 36; Sections 11.4, 18.1, Subject to automatic modification Addendum 18.2 and 18.7 of the Franchise to conform to mandatory provisions Agreement of applicable law. Other modifications require mutual consent. t. Integration/merger clause Paragraph 36; Section 18.14 of the Only the terms of the Yogurt Franchise Agreement Addendum and the Franchise Agreement are binding (subject to state law). Any other promises may be unenforceable. u. Dispute resolution by Section 17.4 of the Franchise Except for certain claims not arbitration or mediation Agreement subject to arbitration, all disputes must be arbitrated in Salt Lake City, Utah. v. Choice of forum Section 17.6 of the Franchise Litigation must be in the State of Agreement Utah. w. Choice of law Section 17.5 of the Franchise Utah law applies unless governed Agreement by applicable federal law. </TABLE> -60-

C. Sublease -------- <TABLE> <CAPTION> Provision Section in Sublease Summary <S> <C> <C> a. Term of the agreement Sections 3.1, 3.2, and 3.4 On termination of Franchise Agreement or one day before termination of Master Lease. b. Renewal or extension of the Section 3.1(b) If you are not in default and the term Master Lease would expire before the Franchise Term ends and the Master Lease contains renewal options, we will exercise the renewal options at your request. c. Requirements for you to None Not Applicable extend or renew d. Termination by you None Not Applicable e. Termination by us without None Not Applicable cause f. Termination by us with cause Section 12.2 We can terminate if you are in default. g. "Cause" defined--defaults Section 12.1 (1) Monetary defaults may be cured which can be cured within 10 days of due date; (2) involuntary bankruptcy or other involuntary insolvency events are defaults if not discharged within 60 days; and (3) any other default not listed above or in "h." below may be cured within 15 days after written notice. h. "Cause" defined--defaults Section 12.1 Non-curable defaults: (1) which cannot be cured voluntary bankruptcy or other voluntary insolvency events; (2) unauthorized assignments or subleases; (3) abandonment of or failure to actively operate your Store; (4) breach of the Master Lease or the Franchise Agreement; or (5) repeated defaults, even if cured. </TABLE> -61-

<TABLE> <CAPTION> Provision Section in Sublease Summary <S> <C> <C> i. Your obligations on Sections 3.2 and 3.3 Surrender premises, repair damage termination/ nonrenewal caused by removal of personal property. j. Assignment of contract by us Section 11.3 No restriction on our right to assign. k. "Transfer" by you-- definition Sections 11.1 and 11.2 No assignments or subleases without our consent. l. Our approval of transfer by Sections 11.1 and 11.2 Our approval of proposed you assignments or subleases is at our sole discretion. m. Conditions for our approval None Not Applicable of transfer n. Our right of first refusal to None Not Applicable acquire your business o. Our option to purchase your None Not Applicable business p. Your death or disability None Not Applicable q. Non-competition covenants None Not Applicable during the term of the agreement r. Non-competition covenants None Not Applicable after the agreement is terminated or expires s. Modification of the agreement Section 13.13 Modifications must be in writing and signed by all parties. t. Integration/merger clause Section 13.13 Only the terms of the Sublease Agreement are binding (subject to state law). Any other promises may be unenforceable. u. Dispute resolution by None Not Applicable arbitration or mediation v. Choice of forum None Not Applicable w. Choice of law Section 13.9 The law of the state in which the premises are located governs. </TABLE> -62-

NOTE: SEE THE STATE SPECIFIC ADDENDUM TO THIS OFFERING CIRCULAR FOR MORE INFORMATION REGARDING ITEM 17. ITEM 18. PUBLIC FIGURES We do not use any public figure to promote our franchise. ITEM 19. EARNINGS CLAIMS We do not furnish or authorize our sales persons to furnish any oral or written information concerning the actual or potential sales, costs, income or profits of a Pretzel Time Store or a TCBY Concept. Actual results vary from store to store, and we cannot estimate the results of any particular franchise. -63-

ITEM 20. LIST OF OUTLETS PRETZEL TIME STORES - FRANCHISED STORES STATUS SUMMARY FOR YEARS 1995/1996/1997/1/ <TABLE> <CAPTION> Total Franchises Cancelled or Reacquired Left The From Left Operating at Year State Transfers Terminated Not Renewed By Us System Other Columns (2) End ---------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> <C> Alabama 0/1/0 0/1/0 1/3/3 ---------------------------------------------------------------------------------------------------------------------------------- Arizona/3/ 0/0/5 0/0/5 5/6/6 ---------------------------------------------------------------------------------------------------------------------------------- California/3/ 0/0/24 0/1/1 0/1/25 29/30/29 ---------------------------------------------------------------------------------------------------------------------------------- Colorado 0/0/2 0/2/0 0/1/0 0/3/2 3/0/2 ---------------------------------------------------------------------------------------------------------------------------------- Connecticut 3/0/1 3/0/1 8/9/11 ---------------------------------------------------------------------------------------------------------------------------------- Delaware 1/1/1 ---------------------------------------------------------------------------------------------------------------------------------- District of 0/1/0 0/1/0 0/0/0 Columbia ---------------------------------------------------------------------------------------------------------------------------------- Florida 0/1/0 0/1/0 0/2/0 9/13/14 ---------------------------------------------------------------------------------------------------------------------------------- Georgia 1/0/0 0/1/0 1/1/0 7/11/11 ---------------------------------------------------------------------------------------------------------------------------------- Idaho/3/ 0/0/3 0/0/3 3/3/3 ---------------------------------------------------------------------------------------------------------------------------------- Illinois/3/ 0/0/3 0/0/3 3/3/3 ---------------------------------------------------------------------------------------------------------------------------------- Indiana/3/ 0/0/4 0/0/4 4/4/4 ---------------------------------------------------------------------------------------------------------------------------------- Iowa/3/ 0/0/2 0/0/2 2/2/2 ---------------------------------------------------------------------------------------------------------------------------------- Kansas 2/2/2 ---------------------------------------------------------------------------------------------------------------------------------- Louisiana 1/1/0 1/1/0 0/0/0 ---------------------------------------------------------------------------------------------------------------------------------- Maine 1/1/1 ---------------------------------------------------------------------------------------------------------------------------------- Maryland 8/8/8 ---------------------------------------------------------------------------------------------------------------------------------- Massachusetts 0/1/0 0/1/0 2/0/0 2/0/0 4/2/0 5/5/5 ---------------------------------------------------------------------------------------------------------------------------------- Michigan/3/ 0/0/2 0/1/0 0/1/2 3/2/2 ---------------------------------------------------------------------------------------------------------------------------------- Minnesota/3/ 0/1/4 0/1/4 4/4/4 ---------------------------------------------------------------------------------------------------------------------------------- </TABLE> -64-

<TABLE> <CAPTION> ================================================================================================================================== Total Franchises Cancelled or Reacquired Left The From Left Operating at Year State Transfers Terminated Not Renewed By Us System Other Columns (2) End ---------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> <C> Missouri 0/1/1 0/1/1 11/14/16 ---------------------------------------------------------------------------------------------------------------------------------- Montana 0/0/2 0/0/2 2/2/0 ---------------------------------------------------------------------------------------------------------------------------------- Nebraska (3) 0/0/3 0/0/3 3/3/3 ---------------------------------------------------------------------------------------------------------------------------------- Nevada (3) 0/0/2 0/0/2 2/3/3 ---------------------------------------------------------------------------------------------------------------------------------- New Hampshire 2/2/3 ---------------------------------------------------------------------------------------------------------------------------------- New Jersey 3/3/4 ---------------------------------------------------------------------------------------------------------------------------------- New Mexico 2/2/2 ---------------------------------------------------------------------------------------------------------------------------------- New York 2/3/0 2/0/0 2/1/0 6/4/0 12/16/16 ---------------------------------------------------------------------------------------------------------------------------------- North Carolina 4/4/5 ---------------------------------------------------------------------------------------------------------------------------------- Ohio 1/0/0 1/0/0 2/2/4 ---------------------------------------------------------------------------------------------------------------------------------- Oklahoma 1/1/1 ---------------------------------------------------------------------------------------------------------------------------------- Oregon (3) 0/0/1 0/0/1 1/1/1 ---------------------------------------------------------------------------------------------------------------------------------- Pennsylvania 0/1/0 0/1/0 2/2/4 ---------------------------------------------------------------------------------------------------------------------------------- South Carolina 1/1/2 ---------------------------------------------------------------------------------------------------------------------------------- South Dakota (3) 0/0/1 0/0/1 1/1/1 ---------------------------------------------------------------------------------------------------------------------------------- Tennessee 2/1/0 2/1/0 3/3/3 ---------------------------------------------------------------------------------------------------------------------------------- Texas (3) 0/0/15 0/0/15 17/21/21 ---------------------------------------------------------------------------------------------------------------------------------- Utah (3) 0/0/4 0/0/4 6/6/6 ---------------------------------------------------------------------------------------------------------------------------------- Virginia (4) 0/4/5 ---------------------------------------------------------------------------------------------------------------------------------- Washington (3) 0/0/7 0/0/7 8/7/7 ---------------------------------------------------------------------------------------------------------------------------------- West Virginia (4) 0/1/1 ---------------------------------------------------------------------------------------------------------------------------------- Wisconsin (3) 0/0/2 0/0/2 2/2/2 ---------------------------------------------------------------------------------------------------------------------------------- Wyoming 0/0/1 0/1/0 0/1/1 1/0/1 ---------------------------------------------------------------------------------------------------------------------------------- </TABLE> -65-

<TABLE> <CAPTION> ================================================================================================================================== Total Franchises Cancelled or Reacquired Left The From Left Operating at Year State Transfers Terminated Not Renewed By Us System Other Columns (2) End ---------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> <C> Alberta (3) 0/0/2 0/0/2 2/2/2 ---------------------------------------------------------------------------------------------------------------------------------- Ontario 8/0/0 0/9/0 8/9/0 8/0/0 ---------------------------------------------------------------------------------------------------------------------------------- Totals 16/10/89 0/1/2 0/0/0 4/3/0 6/17/1 26/31/92 195/211/224 ================================================================================================================================== </TABLE> (1) All numbers are as of December 31 for each year. The numbers are for our directly-licensed Pretzel Time Stores. (2) The numbers in the "Total" column may exceed the number of stores affected because several events may have affected the same store. For example, a store may have been reacquired by us and the franchisee may have left the system. (3) In July 1997, MFPCI, a wholly-owned subsidiary of MFHCI, purchased a total of 79 Pretzel Time Stores located in the States of Arizona, California, Idaho, Illinois, Indiana, Iowa, Michigan, Minnesota, Nebraska, Nevada, Oregon, South Dakota, Texas, Utah, Washington and Wisconsin and the Province of Alberta from one of our Area Developers, H&M Concepts Ltd. Co. See Part 2 of Schedule 6 to this Offering Circular for a list of the Pretzel Time Stores that MFPCI purchased from H&M Concepts Ltd. Co. At the time of the purchase, MFPCI entered into an Area Development Agreement with us for all of the states listed above except Texas, and a franchise agreement with us for all of the Pretzel Time Stores. MFPCI operated the 79 Pretzel Time Stores as our franchisee until MFPCI merged into MFOCI on November 26, 1997. Since the merger, MFOCI has operated the 79 Pretzel Time Stores as our franchisee. (4) On June 12, 1998, MFOCI purchased a total of 5 Pretzel Time Stores located in the States of Virginia and West Virginia from one of our former Area Developers, Virginia Concepts, Inc. See Part 1 of Schedule 6 to this Offering Circular for a list of the Pretzel Time Stores that MFOCI purchased from Virginia Concepts, Inc. At the time of the purchase, Virginia Concepts, Inc. transferred to MFOCI the respective Area Development Agreement and 5 franchise agreements it had entered into with us. Since the purchase, MFOCI has operated the 5 Pretzel Time Stores as our franchisee. -66-

PRETZEL TIME STORES - COMPANY OWNED STATUS SUMMARY FOR YEARS 1995/1996/1997 <TABLE> <CAPTION> Company Stores Stores Reacquired Total Company Company Company Sold to from Stores Stores Closed Stores Opened Franchisees Franchisees Operating at State During Year During Year During Year During Year Year End ------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> Alabama 1/0/0 0/0/0 ------------------------------------------------------------------------------------------------------- Colorado 0/2/0 0/0/2 0/2/0 0/2/0 ------------------------------------------------------------------------------------------------------- Connecticut 3/0/0 0/0/0 ------------------------------------------------------------------------------------------------------- Louisiana 1/1/0 2/1/0 1/0/0 ------------------------------------------------------------------------------------------------------- Massachusetts 2/0/0 2/0/0 2/0/0 0/0/0 ------------------------------------------------------------------------------------------------------- New Mexico 2/0/0 0/0/0 ------------------------------------------------------------------------------------------------------- New York 2/0/0 3/0/0 2/0/0 0/0/0 ------------------------------------------------------------------------------------------------------- Ohio 1/0/0 2/1/0 0/0/1 1/1/0 ------------------------------------------------------------------------------------------------------- Pennsylvania 1/1/0 1/0/0 ------------------------------------------------------------------------------------------------------- South Carolina 1/1/0 0/0/1 1/1/0 ------------------------------------------------------------------------------------------------------- Tennessee 3/0/0 0/0/0 ------------------------------------------------------------------------------------------------------- Texas 2/1/0 0/1/0 1/0/0 ------------------------------------------------------------------------------------------------------- Virginia 4/4/0 0/4/0 4/0/0 ------------------------------------------------------------------------------------------------------- West Virginia 1/1/0 0/1/0 1/0/0 ------------------------------------------------------------------------------------------------------- Wyoming 0/1/0 0/0/1 0/1/0 0/1/0 ------------------------------------------------------------------------------------------------------- TOTALS 6/1/0 27/13/0 0/6/5 4/3/0 10/5/0 ------------------------------------------------------------------------------------------------------- </TABLE> As further described above, one of our Affiliates, MFOCI, operates a total of 85 Pretzel Time Stores as a franchisee of us. As of December 31, 1997, Franchise Agreements for 224 Pretzel Time Stores were in effect and all of those stores were operational. A list of these Pretzel Time Stores the franchisees, store addresses, and telephone numbers is disclosed in Part 1 of Schedule 6 to this Offering Circular. Attached as Part 2 of Schedule 6 to this Offering Circular is a list of every Pretzel Time franchisee who, during calendar year 1997, had an unit terminated, cancelled, not renewed, or otherwise voluntarily or involuntarily ceased to do business under the franchisee's franchise agreement or who has not communicated with us within 10 weeks of the date of this Offering Circular. -67-

PRETZEL TIME STORES PROJECTED OPENINGS For Year Ending December 31, 1998 (projections as of December 31, 1997) <TABLE> <CAPTION> Franchise Projected Projected Agreements Franchised New Company Owned Signed But Store Stores at Fiscal Openings at Fiscal State Not Opened(1) Year End(1) Year End(1) -------------------------- ------------------------------ ------------------------------ ------------------------------ -------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Alaska 0 1 0 -------------------------------------------------------------------------------------------------------------------------- Arizona 0 1 0 -------------------------------------------------------------------------------------------------------------------------- Arkansas 0 1 0 -------------------------------------------------------------------------------------------------------------------------- California 0 1 3 -------------------------------------------------------------------------------------------------------------------------- Connecticut 0 1 0 -------------------------------------------------------------------------------------------------------------------------- Florida 0 3 1 -------------------------------------------------------------------------------------------------------------------------- Georgia 0 1 0 -------------------------------------------------------------------------------------------------------------------------- Illinois 0 1 1 -------------------------------------------------------------------------------------------------------------------------- Indiana 0 2 0 -------------------------------------------------------------------------------------------------------------------------- Kentucky 0 1 0 -------------------------------------------------------------------------------------------------------------------------- Louisiana 0 1 0 -------------------------------------------------------------------------------------------------------------------------- Maine 0 1 0 -------------------------------------------------------------------------------------------------------------------------- Maryland 0 1 0 -------------------------------------------------------------------------------------------------------------------------- Michigan 0 1 0 -------------------------------------------------------------------------------------------------------------------------- Minnesota 0 1 0 -------------------------------------------------------------------------------------------------------------------------- Mississippi 0 2 0 -------------------------------------------------------------------------------------------------------------------------- Missouri 0 1 0 -------------------------------------------------------------------------------------------------------------------------- Nebraska 0 1 0 -------------------------------------------------------------------------------------------------------------------------- New Jersey 0 1 0 -------------------------------------------------------------------------------------------------------------------------- New York 0 1 1 -------------------------------------------------------------------------------------------------------------------------- Ohio 0 1 1 -------------------------------------------------------------------------------------------------------------------------- </TABLE> -68-

<TABLE> <CAPTION> -------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Pennsylvania 0 1 0 -------------------------------------------------------------------------------------------------------------------------- South Carolina 0 1 0 -------------------------------------------------------------------------------------------------------------------------- Tennessee 0 2 0 -------------------------------------------------------------------------------------------------------------------------- Virginia 0 1 0 -------------------------------------------------------------------------------------------------------------------------- Washington 0 2 1 -------------------------------------------------------------------------------------------------------------------------- Wisconsin 0 2 0 -------------------------------------------------------------------------------------------------------------------------- TOTALS 0 34 8 -------------------------------------------------------------------------------------------------------------------------- </TABLE> (1) The projected numbers are estimates only. The actual number of openings at the fiscal year ending December 31, 1998 may be more, less, or the same number as projected in this chart. We offer franchises in a wide geographical area. We cannot predict precisely how many franchises will be granted in any particular state. ITEM 21. FINANCIAL STATEMENTS Attached as part of Schedule 3 are the consolidated balance sheets of MFOCI and its subsidiaries as of January 3, 1998 and December 28, 1996, and the related consolidated statements of operations, stockholder's equity and cash flows for the year ended January 3, 1998 and the period from inception (September 18, 1996) to December 28, 1996, together with Report of Independent Public Accountants. Also attached as part of Schedule 3 is the condensed consolidated balance sheet (unaudited) of MFOCI and its subsidiaries as of April 4, 1998, and the related condensed consolidated statements of operations and cash flows for the fiscal quarters ended April 4, 1998 and March 29, 1997 (unaudited). The financial statements described above are the consolidated financial statements of MFOCI, an Affiliate of us. Our financial statements are not included in this Offering Circular. Should we fail to fulfill our obligations to our franchisees, however, MFOCI unconditionally guarantees to fulfill such obligations. In states where we have registered this franchise offering, a copy of the written guarantee may be on file in the office of the administrator of the state franchise law. ITEM 22. CONTRACTS The following agreements proposed for use regarding the offering of a Pretzel Time Franchise are attached to this Offering Circular: Exhibit A Franchise Agreement (with Acknowledgment Addendum, Ownership Addendum, Authorization Agreement For Prearranged Payments (Appendix A), TCBY Yogurt Product Addendum and Satellite Unit Addendum) Exhibit B Guaranty of Agreement Exhibit C Reservation Letter Exhibit D Sublease Agreement -69-

ITEM 23. RECEIPT The last page of this Offering Circular is a detachable document acknowledging your receipt of this Offering Circular. The Federal Trade Commission requires that you promptly sign and return one copy of the Receipt to us. This does not obligate you to purchase a franchise and it does not obligate us to sell you a franchise. -70-

SCHEDULE 1 DEFINITIONS 1. "Affiliate," as used in relation to us, means any person or entity that directly or indirectly owns or controls us, is directly or indirectly owned or controlled by us or is under common control with us, now or in the future. 2. "Competitive Business" means any business operating, or granting franchises or licenses to others to operate, a bakery, snack food or dessert restaurant or retail outlet or any similar food service business, except for an existing bakery, snack food or dessert restaurant or retail outlet or similar food service business owned and operated by you, which has been disclosed to us in writing prior to execution of this Agreement. If you enter into the Yogurt Addendum, Competitive Business will also mean: (i) any business operating, or granting franchises or licenses to others to operate a frozen yogurt or ice cream restaurant or retail outlet or any other restaurant or retail outlet serving principally frozen dairy products; and (ii) any business engaged in the sale, manufacture, processing, or distribution of frozen yogurt, ice cream, or other frozen dairy products, except for the ownership of securities listed on a stock exchange or traded on the over-the-counter market that represent one percent (1%) or less of that class of securities. 3. "Confidential Information" means any information relating to the Pretzel Time Products or the development or operation of Pretzel Time Stores, including site selection criteria; recipes and methods for the preparation of Pretzel Time Products; methods, techniques, formats, specifications, systems, procedures, sales and marketing techniques and knowledge of and experience in the development and operation of Pretzel Time Stores; marketing programs for Pretzel Time Stores; knowledge of specifications for and suppliers of certain Pretzel Time Products, materials, supplies, equipment, furnishings and fixtures. If you enter into the Yogurt Addendum, Confidential Information will also mean any information relating to the TCBY Yogurt Products or the development and operation of TCBY Stores. 4. "Controlling Interest" means an interest, the ownership of which empowers the holder to exercise a controlling influence over the management, policies or personnel of an Entity. Ownership of 10% or more of the equity or voting securities of a corporation, limited liability company or limited liability partnership or ownership of any general partnership interest in a partnership shall be deemed conclusively to constitute a Controlling Interest in the corporation, limited liability company, or partnership, as the case may be. 5. "Entity" means a corporation, general partnership, joint venture, limited partnership, limited liability partnership, limited liability company, trust, estate or other business entity. 6. "Entity Owner" means, with respect to an Entity, any shareholder owning directly or beneficially 10% or more of any class of securities of the Entity; any general partner or co-venturer in the Entity; any partner in a limited liability partnership or member in a limited liability company owning directly or beneficially 10% or more of the ownership interests in the limited liability partnership or limited liability company; the trustees or administrators of any trust or estate; and any beneficiary of a trust or estate owning, directly or beneficially, 10% or more of the interests in the trust or estate. If any Entity Owner within the scope of this definition is itself an Entity (including an Entity Owner that is an Entity Owner because of this sentence), the term "Entity Owner" also includes Entity Owners (as defined in the preceding sentence) in the Entity. It is the intent of this definition to "trace back" and include

within the definition of Entity Owner all natural persons owning the requisite interests to qualify as Entity Owners. 7. "Gross Revenues" means the aggregate amount of all sales of Pretzel Time Products, TCBY Yogurt Products (if you enter into the Yogurt Addendum), other items, and services made and rendered in connection with or in conjunction with the operation of the Licensed Store, including sales made at or away from the Premises of your Store, whether for cash or credit, but excluding all federal, state or municipal sales, use, or service taxes collected from customers and paid to the appropriate taxing authority. 8. "Pretzel Time Store" means a retail snack, dessert, and beverage outlet selling any Pretzel Time Products and other products for off-premises consumption and services specified by us. The term "Pretzel Time Store" includes carts and kiosks selling the Pretzel Time Products. We reserve the right to approve all carts and kiosks. 9. "Pretzel Time Retail Outlet" means any store or outlet, such as a Pretzel Time Store, a mail order outlet, or an in-store bakery outlet located in a retail grocery, fast food, convenience or other retail store, which sells any of the Pretzel Time Products under the Marks or other trademarks or service marks. A Pretzel Time Retail Outlet may be owned or operated by us or our Affiliates or by franchisees or licensees of us or our Affiliates. 10. "Pretzel Time Products" means products approved or required by us or our Affiliates from time to time in our sole discretion for sale at or from Pretzel Time Stores, including hand-rolled soft pretzels of various flavors, frozen pretzels and other pretzel-related products and toppings, beverages and other products approved by us or our Affiliates; provided that the foregoing products are subject to modification or discontinuance in our sole discretion from time to time and may include additional or substitute products. 11. "Pretzel Time System" means our business formats, signs, equipment, methods, procedures, designs, layouts, and specifications, including the use of the Marks and the Trade Dress, as we may modify them in the future. 12. "Pretzel Time Trademarks" means the trademarks, trade names, service marks, logos and other commercial symbols which we authorize franchisees to use to identify the products and/or services offered by Pretzel Time Stores, including the trademark and service mark PRETZEL TIME(R) and the Trade Dress (defined below) and the goodwill associated therewith; provided that such trademarks, trade names, service marks, logos and other commercial symbols and the Trade Dress are subject to modification and discontinuance at our sole discretion and additional or substitute trademarks, trade names, service marks, logos, commercial symbols or Trade Dress may be established by us in the future. 13. "Trade Dress" means the designs, color schemes, decor and images which we authorize and require our franchisees to use in connection with the operation of Pretzel Time Stores, as it may be revised and further developed by us or our Affiliates from time to time. If you enter into the Yogurt Addendum, Trade Dress will also mean the designs, color schemes, decor and images which we authorize and require our franchisees to use in connection with the operation of the TCBY Concept, as it may be revised and further developed by TCBY from time to time. 14. "Restricted Person" means you; each of your Entity Owners, if you are an Entity; and the spouses, natural and adopted children, and siblings of any of them.

15. "TCBY Concept" means the TCBY business a Pretzel Time franchisee is granted the right to operate from the Premises of its Pretzel Time Store using the TCBY Trademarks and TCBY System. 16. "TCBY Store" means any store or outlet, such as a Pretzel Time Store with a TCBY Concept, a mail order outlet, or an in-store outlet located in a retail grocery, fast food, convenience or other retail store, which sells any of the TCBY Yogurt Products under the TCBY Trademarks or other trademarks or service marks. A TCBY Store may be owned or operated by (i) TCBY or its affiliates or designees, (ii) us or our Affiliates, (iii) franchisees or licensees of TCBY or its affiliates, or (iv) us or our Affiliates. 17. "TCBY Yogurt Products" means those TCBY products approved or required by TCBY from time to time in its sole discretion for sale at or from authorized Pretzel Time Stores, including TCBY soft-serve frozen yogurt, and hand dipped frozen yogurt and ice cream products approved by TCBY; provided that the foregoing TCBY products are subject to modification or discontinuance in TCBY's sole discretion from time to time and may include additional or substitute products. 18. "TCBY System" means TCBY's business formats, signs, equipment, methods, procedures, designs, layouts, and specifications, including the use of the TCBY Trademarks and the Trade Dress, as TCBY may modify them in the future. 19. "TCBY Trademarks" means the trademarks, trade names, service marks, logos and other commercial symbols which TCBY authorizes franchisees to use to identify the products and/or services offered by TCBY Stores, including the trademarks and service marks TCBY(R) and THE COUNTRY'S BEST YOGURT(R) and the Trade Dress (defined above) and the goodwill associated therewith; provided that such trademarks, trade names, service marks, logos and other commercial symbols and the Trade Dress are subject to modification and discontinuance at the sole discretion of TCBY and additional or substitute trademarks, trade names, service marks, logos, commercial symbols or Trade Dress may be established by TCBY in the future. 20. "Premises" means the leasehold space of a Pretzel Time Store at a location approved by us. Premises may also mean the leasehold space shared between a Pretzel Time Store and a TCBY Concept at a location approved by us and TCBY, if the franchisee enters into a TCBY Yogurt Product Addendum with us.

SCHEDULE 2 AGENTS FOR SERVICE OF PROCESS UNITED STATES: <TABLE> <CAPTION> State Registered Agent Registered Office ------ ---------------- ----------------- <S> <C> <C> 1. California CT Corporation System 818 West 7th Street Los Angeles, CA 90017 2. Florida CT Corporation System 1200 South Pine Island Rd. Plantation, FL 33324 3. Illinois Attorney General State of 500 South Second Street Illinois Springfield, Illinois 62706 4. Indiana Indiana Sec. of State Indiana Securities Division 201 State House 302 W. Washington St. 200 West Washington St. Room E-111 Indianapolis, IN 46204 Indianapolis, IN 46204 5. Iowa CT Corporation System 2222 Grand Avenue Des Moines, IA 50312 6. Kansas The Corporation Company, Inc. 515 South Kansas Ave. Topeka, KS 66603 7. Maryland Maryland Securities Division of Securities Commissioner 200 St. Paul Place, 20th Floor Baltimore, MD 21202-2020 8. Michigan The Corporation Company 30600 Telegraph Road Bingham Farms, MI 48025 9. Montana CT Corporation System 406 Fuller Avenue Helena, MT 59601 10. New Jersey The Corporation Trust Co. 820 Bear Tavern Road West Trenton, NJ 08628 11. New Mexico CT Corporation System 217 West Manhattan Avenue Santa Fe, NM 87501 12. New York New York Secretary of State 120 Broadway, 23rd Floor New York State Dept. of Law New York, NY 10271 </TABLE>

<TABLE> <CAPTION> State Registered Agent Registered Office ----- ---------------- ----------------- <S> <C> <C> 13. North Dakota Office of the Securities State Capitol - 5th Floor Commissioner 600 East Boulevard Avenue Bismarck, ND 58505 14. Oregon CT Corporation System 800 Pacific Building Portland, OR 97204 15. South Carolina CT Corporation System 75 Beattie Place Two Insignia Financial Plaza Greenville, SC 29601 16. South Dakota CT Corporation System 319 South Coteau Street Pierre, SD 57501 </TABLE> CANADA: <TABLE> <CAPTION> Province Registered Agent Registered Office -------- ---------------- ----------------- <S> <C> <C> 1. Alberta J. Patrick Bond and 2600 Manulife Place alternatively J. Alan Bryan QC 10180 101st Street c/o Bryan and Company Edmonton, AB Canada 2. Ontario Head Office (Canada), LTD. 20 Queen Street West City of Toronto Ontario M5H 2V3 Ontario M5H 2V3 00000 </TABLE>

SCHEDULE 3 FINANCIAL STATEMENTS Schedule 3A Mrs. Fields' Original Cookies, Inc. and Subsidiaries consolidated balance sheets as of January 3, 1998 and December 28, 1996 and the related consolidated statements of operations, stockholder's equity and cash flows for the year ended January 3, 1998 and the period from inception (September 18, 1996) to December 28, 1996, together with Report of Independent Public Accountants. Schedule 3B Mrs. Fields' Original Cookies, Inc. and Subsidiaries condensed consolidated balance sheet (unaudited) as of April 4, 1998, and the related condensed consolidated statements of operations and cash flows for the fiscal quarters ended April 4, 1998 and March 29, 1997 (unaudited).

SCHEDULE 3A MRS. FIELDS' ORIGINAL COOKIES, INC. and SUBSIDIARIES Consolidated balance sheets as of January 3, 1998 and December 28, 1996 and the related consolidated statements of operations, stockholder's equity and cash flows for the year ended January 3, 1998 and the period from inception (September 18,1996) to December 28, 1996, together with Report of Independent Public Accountants

SCHEDULE 3B MRS. FIELDS' ORIGINAL COOKIES, INC. and SUBSIDIARIES Condensed consolidated balance sheet (unaudited) as of April 4, 1998, and the related condensed consolidated statements of operations and cash flows for the fiscal quarters ended April 4, 1998 and March 28, 1997 (unaudited) NOTE: THESE FINANCIAL STATEMENTS ARE PREPARED WITHOUT AN AUDIT. PROSPECTIVE FRANCHISEES OR SELLERS OR FRANCHISES SHOULD BE ADVISED THAT NO CERTIFIED PUBLIC ACCOUNTANT HAS AUDITED THESE FIGURES OR EXPRESSED AN OPINION WITH REGARD TO THEIR CONTENTS OR FORM.

SCHEDULE 4 LIST OF STATE ADMINISTRATORS

<TABLE> <CAPTION> <S> <C> California North Dakota ---------- ------------ Department of Corporations Franchise Examiner 1390 Market Street 600 East Blvd., Fifth Floor San Francisco, CA 94102-5389 Bismarck, ND 58505 Telephone: (415) 557-3787 Telephone: (701) 328-2910 Hawaii Rhode Island ------ ------------ Commissioner of Securities Associate Director and Superintendent 1010 Richards Street of Securities Honolulu, HI 96813 Division of Securities Telephone: (808) 548-6521 233 Richmond Street, Suite 232 Providence, RI 02903-4232 Telephone: (401) 277-3048 Illinois South Dakota -------- ------------ Illinois Attorney General Franchise Administrator Franchise Division Division of Securities 500 South Second Street 118 West Capitol Springfield, IL 62706 Pierre, SD 57501-5070 Telephone: (217) 782-4465 Telephone: (605) 773-4823 Indiana Virginia ------- -------- Chief Deputy Commissioner Chief Examiner/Investigator Indiana Securities Division State Corporation Commission 302 West Washington St., Room E-111 1300 East Main Street, 9th Floor Indianapolis, IN 46204 Richmond, VA 23219 Telephone: (317) 232-6685 Telephone: (804) 371-9051 Maryland Washington -------- ---------- Office of the Attorney General Department of Financial Institutions Division of Securities Securities Division 200 St. Paul Place, 20th Floor 405 Black Lake Blvd. S.W., 2nd Floor Baltimore, MD 21202-2020 Olympia, WA 98502 Telephone: (410) 576-6360 Telephone: (206) 753-6928 Minnesota Wisconsin --------- --------- Deputy Commissioner Wisconsin Commissioner of Securities Minnesota Department of Commerce 101 East Wilson Street, 4th Floor 133 East Seventh Street Madison, WI 53702 St. Paul, MN 55101 Telephone: (608) 266-3431 Telephone: (612) 296-6325 New York -------- New York State Department of Law 120 Broadway, 23rd Floor New York, NY 10271 Telephone: (212) 416-8211 </TABLE>

SCHEDULE 5 OPERATIONS MANUALS TABLES OF CONTENTS

SCHEDULE 6 - PART 1 PRETZEL TIME FRANCHISEES as of December 31, 1997

SCHEDULE 6 - PART 2 PRETZEL TIME FRANCHISEES WHOSE FRANCHISE HAS BEEN TERMINATED, CANCELLED, NOT RENEWED, OR WHO HAS CEASED TO DO BUSINESS PURSUANT TO THE FRANCHISE AGREEMENT DURING CALENDAR 1997 A. TERMINATED VOLUNTARILY BY MUTUAL CONSENT OF THE FRANCHISEE AND US: Franchisee: Franchise Agreements Terminated Voluntarily: ---------- ------------------------------------------- H&M CONCEPTS, LTD. CO. San Jacinto Mall Randy Hemmer 1566 San Jacinto Mall 10754 Executive Drive Baytown, TX 77521 Boise, ID 83704 800/342-7893 BIG SKY PRETZEL TIME, INC. Holiday Village Mall Judy Bizzle 1200 10th Avenue South 327 Hickory Drive Great Falls, MT 59405 Tahlequah, OK 74464 406/453-5710 ROCKY MOUNTAIN PRETZEL TIME, INC. Rimrock Mall Dr. Bernie Zeliger 300 South 24th Street West 1500 Smokehouse Lane Billings, MT 59102 Harrisburg, PA 17110 717/671-2663 B. TERMINATED VOLUNTARILY BY MUTUAL CONSENT OF THE FRANCHISEE AS PART OF A SALE OF PRETZEL TIME STORES TO ONE OF OUR AFFILIATES: <TABLE> <CAPTION> Franchisee: Franchise Agreements Terminated Voluntarily: ----------- -------------------------------------------- <S> <C> <C> <C> H&M CONCEPTS, LTD. CO. Arrowhead Towne Center Fiesta Mall MetroCenter Randy Hemmer 7700 W. Arrowhead Town Center 2104 Fiesta Mall 6920-A North Metro Parkway East 10754 Executive Drive Glendale, AZ 85308 Mesa, AZ 85202 Phoenix, AZ 96062 Boise, ID 83704 800/342-7893 Paradise Valley Scottsdale Fashion Arden Fair 4550-42 E. Cactus Rd. 7014 E. Camelback Rd. 1689 Arden Way Phoenix, AZ 85032 Scottsdale, AZ 85251 Sacramento, CA 95815 Bayshore Mall Buena Ventura Del Monte Shopping Center 3300 Broadway 363 South Mills Road 520 Del Monte Center Eureka, CA 95501 Ventura, CA 93003 Monterey, CA 93940 Downtown Plaza Eagle Rock Fox Hills 595 Downtown Plaza 2700 Colorado Blvd. 266 Fox Hills Mall Sacramento, CA 95814 Los Angeles, CA 90041 Culver City, CA 90230 </TABLE>

<TABLE> <S> <C> <C> Mission Valley Montclair Plaza New Park Mall 1640 Camino Del Rio North 5023 Montclair Plaza Lane 2086 New Park Drive San Diego, CA 92108 Montclair, CA 91763 Newark, CA 94560 Northridge Fashion Center Palm Desert Towne Center Parkway Plaza 9301 Tampa Avenue 72-840 Hwy 111 823 Parkway Plaza Northridge, CA 91324 Palm Desert, CA 92260 El Cajon, CA 92020 Plaza Bonita Santa Maria Town Center Stoneridge 3030 Plaza Bonita Road 239 Town Center East 2469 Stoneridge Mall National City, CA 91950-8033 Santa Maria, CA 93454 Pleasanton, CA 94566 Stonewood Center Sunvalley Topanga Plaza 251 Stonewood Street 292 Sunvalley Mall 6600 Topanga Canyon Road Downey, CA 90241 Concord, CA 94566 Canago Park, CA 91303 University Towne Center (UTC) Valenia Town Center Vallco Fashion Park 4545 LaJolla Village Dr. 24201 W. Valencia 10123 N. Wolfe Road San Diego, CA 92122 Valencia, CA 91355 Cupertino, CA 95014 West Covina Plaza Westside Pavillion Boise Town Square 1200 W. Covina Pkway 10800 West Pico Blvd. 350 North Milwaukee West Covina, CA 91790 Los Angeles, CA 90064 Space 2112 Boise, ID 83788 Karcher Mall Pineridge Mall Golf Mill Shopping Center 1509 Cladwell Blvd. 4155 North Yellowstone Highway 580 Golf Mill Shopping Center Nampa, ID 83651 Chubbock, ID 83202 Nile, IL 60714 Northwoods Mall Spring Hill Mall Castleton Square 4501 War Memorial Drive 1484 Spring Hill Mall 6020 East 82nd Street Peoria, IL 61613 West Dundee, IL 60118 Indianapolis, IN 46250 Honey Creek Shopping Center Washington Square Merle Hay Mall 3401 South US Highway 41 10202 East Washington Street 3800 Merle Hay Road Terre Haute, IN 47802 Indianapolis, IN 46229 Suite 948 Des Moines, IA 50310 Lakeside Twelve Oaks Mall Apache Plaza 14600 Lakeside Circle 27678 Novi Road 333 Apache Mall Sterling Heights, MI 48313 Novi, MI 48377 Rochester, MN 55902 Miller Hill Mall Oak View Mall Westroads Shopping Center 1600 Miller Trunk Highway 3001 South 144th Street 10000 California Street Duluth, MN 55811 Omaha, NE 68144 Omaha, NE 68114 The Boulevard Mall Meadows Mall Washington Square Mall 3680 S. Maryland Parkway 4300 Meadows Lane 9487 SE Washington Square Road Las Vegas, NV 89109 Las Vegas, NV 89107 Tigard, OR 97223 The Empire Barton Creek Square Mall Broadway Square Mall 720 Empire Mall 2901 Capital of Texas Parkway 4601 South Broadway Sioux Falls, SD 75106 Austin, TX 78746 Tyler, TX 75703 Dallas Galleria Mall Deerbrook Mall Ingram Park Mall 13350 Dallas Parkway 20131 Highway 59 North 6301 N.W. Loop 410 Dallas, TX 75240 Humble, TX 77338 San Antonio, TX 78238 </TABLE>

<TABLE> <S> <C> <C> Killeen Mall Longview Mall Mall Del Norte 2100 S.W.S. Young Drive 3500 McCann Road 5300 North San Dario Killeen, TX 76543 Longview, TX 75601 Laredo, TX 78041 Parkdale Mall Post Oak Mall Rolling Oaks Mall 6155 E. Tex Freeway 1500 Harvey Road 6909 N. Loop 1604 East Beaumont, TX 77706 College Station, TX 77840 San Antonio, TX 78233 San Marcos Factory Shops Sharpstown Center Town East Mall FC & 3939 I-35 South 7500 Bellaire Boulevard 2063 Town East Mall San Marcos, TX 78666 Houston, TX 77036 Mesquite, TX 75150 Valle Vista Mall University Mall University Mall #2 2000 East Expressway 83 J-179 University Mall F-106 University Mall Harlingen, TX 75/8552 Orem, UT 84058 Orem, UT 84058 Valley Fair Mall ZCMI Center Cascade 3601 South 2700 West 36 South State Street 765 Cascade Drive West Valley City, UT 84119 Salt Lake City, UT 84111 Burlington, WA 98233 Columbia Center Kitsap Mall Northtown Mall 438 Columbia Center Blvd. 10315 Silverdale Way North 4750 Division Street Kennewick, WA 99336 Silverdale, WA 98383 Spokane, WA 99207 Southcenter Tacoma Mall Vancouver Mall 981 South Center 4502 South Steele 5001 NE Thurston way Seattle, WA 98188 Tacoma, WA 98409 Vancouver, WA 98662 Oakwood Mall Valley View Mall Kingsway Garden Mall 4800 Golf Road 3800 Highway 16 109th Street Eau Claire, WI 54701 LaCrosse, WI 54601 Princess Elizabeth Avenue Edmonton, AB T5G 3B6 Canada West Edmonton Mall 1554-8770 170th Street Edmonton, AB T5T 3J7 </TABLE> C. TRANSFERRED FRANCHISE AGREEMENT AND CEASED TO DO BUSINESS: <TABLE> Franchisee: Franchise Agreements Transferred: ----------- --------------------------------- <S> <C> <C> <C> ROCKY MOUNTAIN PRETZEL TIME, INC. Aurora Mall Southwest Plaza Frontier Mall Dr. Bernie Zeliger 14200 E. Almeda Avenue 8501 W. Boles Avenue 1400 Dell Range Blvd. 1500 Smokehouse Lane Aurora, CO 80012 Littleton, CO 80123 Cheyenne, WY 82009 Harrisburg, PA 17110 717/671-2663 </TABLE> D. HAS NOT COMMUNICATED WITH US WITHIN THE LAST 10 WEEKS: None

SCHEDULE 7 PRETZEL TIME AREA DEVELOPERS As of June 12, 1998

PRETZEL TIME AREA DEVELOPERS <TABLE> <CAPTION> ========================================================================================================= CONTACT, ADDRESS AND TELEPHONE NUMBER AREA DEVELOPER TERRITORY --------------------------------------------------------------------------------------------------------- <C> <S> <C> DiNatale, Ed Pretzel Time of South Carolina, SC 5175 Highway 472 Inc. Conway, SC 29526-6352 (803) 365-6042 --------------------------------------------------------------------------------------------------------- Fleisher, Alan Pretzel Time of New York, Inc. Southern NY, NJ, RI, CT Valley Pretzel, Inc. P.O. Box 13 Smithtown, NY 11787 (516) 366-0208 --------------------------------------------------------------------------------------------------------- Gick, Alan Kal Enterprises Northern NY, OH, Western PA 5220 Maplewood Court Erie, PA 16506 (814) 833-2256 --------------------------------------------------------------------------------------------------------- Ward, Michael R. Mrs. Fields' Original Cookies, AK, AZ, CA, HI, ID, IL, IN, IA, 2855 East Cottonwood Parkway Inc. MI, MN, MT, NE, NV, ND, OR, SD, Suite 400 UT, VA, WA, WV, WI; Salt Lake City, UT 84121 CANADA-ALBERTA, BRITISH COLUMBIA, (801) 736-5600 MANITOBA, SASKATCHEWAN, MEXICO --------------------------------------------------------------------------------------------------------- Mazzoni, Bernard Mid Continent Enterprises, Inc. KS, MO 11613 West 118 Street Overland Park, KS 66210 (913) 338-3457 --------------------------------------------------------------------------------------------------------- Miller, Stuart Pretzel Time of North Carolina, NC 100 Ronsard Inc. Cary, NC 27511 (919) 319-7630 --------------------------------------------------------------------------------------------------------- Ritz, Sheri A. Pretzel Time of Maryland, Inc. MD 3919 Church Road Millers, MD 21107 (410) 374-5174 --------------------------------------------------------------------------------------------------------- Purcell, Corky Peachtree Pretzel Time, Inc. GA (with the exception of the Governor's Plaza South, Bldg. 2 SAVANNAH area) 2001 North Front Street, #226 Harrisburg, PA 17102 (717) 232-6560 --------------------------------------------------------------------------------------------------------- Purcell, Corky Sunshine Pretzel Time, Inc. AL, FL, GA (the SAVANNAH area Governor's Plaza South, Bldg. 2 only) 2001 North Front Street, #226 Harrisburg, PA 17102 (717) 232-6560 ========================================================================================================= </TABLE>

<TABLE> ========================================================================================================= <S> <C> <C> Smith, Bill New England Concepts, Inc. MA, ME, VT, NH, TX (the 141 South Main Street DALLAS/FORTH WORTH area only) Box 16 Beacon Falls, CT 06403 (208) 729-1826 ========================================================================================================= </TABLE>

RECEIPT THIS OFFERING CIRCULAR SUMMARIZES PROVISIONS OF THE FRANCHISE AGREEMENT AND OTHER INFORMATION IN PLAIN LANGUAGE. READ THIS OFFERING CIRCULAR AND ALL AGREEMENTS CAREFULLY. IF WE OFFER YOU A FRANCHISE, WE MUST PROVIDE THIS OFFERING CIRCULAR TO YOU BY THE EARLIEST OF: (1) THE FIRST PERSONAL MEETING TO DISCUSS OUR FRANCHISE; OR (2) 10 BUSINESS DAYS BEFORE SIGNING OF A BINDING AGREEMENT; OR (3) 10 BUSINESS DAYS BEFORE A PAYMENT TO US. YOU MUST ALSO RECEIVE A FRANCHISE AGREEMENT CONTAINING ALL MATERIAL TERMS AT LEAST 5 BUSINESS DAYS BEFORE YOU SIGN ANY FRANCHISE AGREEMENT. IF WE DO NOT DELIVER THIS OFFERING CIRCULAR ON TIME OR IF IT CONTAINS A FALSE OR MISLEADING STATEMENT, OR A MATERIAL OMISSION, A VIOLATION OF FEDERAL AND STATE LAW MAY HAVE OCCURRED AND SHOULD BE REPORTED TO THE FEDERAL TRADE COMMISSION, WASHINGTON, D.C. 20580. I have received a Uniform Franchise Offering Circular dated May 15, 1998, as amended November 24, 1998. This Offering Circular included the following exhibits and schedules: Schedule 1 Definitions Schedule 2 List of Agents for Service of Process Schedule 3 Financial Statements Schedule 4 State Administrators Schedule 5 Operations Manuals Table of Contents Schedule 6 Franchisee Information Part 1 - List of Pretzel Time Franchisees Part 2 - List of Pretzel Time Franchisees Terminated, Cancelled, Not Renewed, or That Have Ceased Doing Business Schedule 7 List of Pretzel Time Area Developers Exhibit A Franchise Agreement (with Acknowledgment Addendum, Ownership Addendum, Authorization Agreement For Prearranged Payments (Appendix A), TCBY Yogurt Product Addendum, and Satellite Unit Addendum) Exhibit B Guaranty of Agreement Exhibit C Reservation Letter Exhibit D Sublease Agreement Date: _________________, 199__.

FRANCHISEE (For an Individual) FRANCHISEE (For an Entity) ______________________________ ______________________________ , a Signature __________________________________ ______________________________ By _______________________________ Print Name Its ______________________________

RECEIPT THIS OFFERING CIRCULAR SUMMARIZES PROVISIONS OF THE FRANCHISE AGREEMENT AND OTHER INFORMATION IN PLAIN LANGUAGE. READ THIS OFFERING CIRCULAR AND ALL AGREEMENTS CAREFULLY. IF WE OFFER YOU A FRANCHISE, WE MUST PROVIDE THIS OFFERING CIRCULAR TO YOU BY THE EARLIEST OF: (1) THE FIRST PERSONAL MEETING TO DISCUSS OUR FRANCHISE; OR (2) 10 BUSINESS DAYS BEFORE SIGNING OF A BINDING AGREEMENT; OR (3) 10 BUSINESS DAYS BEFORE A PAYMENT TO US. YOU MUST ALSO RECEIVE A FRANCHISE AGREEMENT CONTAINING ALL MATERIAL TERMS AT LEAST 5 BUSINESS DAYS BEFORE YOU SIGN ANY FRANCHISE AGREEMENT. IF WE DO NOT DELIVER THIS OFFERING CIRCULAR ON TIME OR IF IT CONTAINS A FALSE OR MISLEADING STATEMENT, OR A MATERIAL OMISSION, A VIOLATION OF FEDERAL AND STATE LAW MAY HAVE OCCURRED AND SHOULD BE REPORTED TO THE FEDERAL TRADE COMMISSION, WASHINGTON, D.C. 20580. I have received a Uniform Franchise Offering Circular dated May 15, 1998, as amended November 24, 1998. This Offering Circular included the following exhibits and schedules: Schedule 1 Definitions Schedule 2 List of Agents for Service of Process Schedule 3 Financial Statements Schedule 4 State Administrators Schedule 5 Operations Manuals Table of Contents Schedule 6 Franchisee Information Part 1 - List of Pretzel Time Franchisees Part 2 - List of Pretzel Time Franchisees Terminated, Cancelled, Not Renewed, or That Have Ceased Doing Business Schedule 7 List of Pretzel Time Area Developers Exhibit A Franchise Agreement (with Acknowledgment Addendum, Ownership Addendum, Authorization Agreement For Prearranged Payments (Appendix A), TCBY Yogurt Product Addendum, and Satellite Unit Addendum) Exhibit B Guaranty of Agreement Exhibit C Reservation Letter Exhibit D Sublease Agreement Date: _________________, 199__.

FRANCHISEE (For an Individual) FRANCHISEE (For an Entity) ______________________________ _______________________ , a Signature ___________________________ ______________________________ By ________________________ Print Name Its _______________________

RECEIPT OF FRANCHISE-RELATED DOCUMENTS -------------------------------------- The undersigned, personally and/or as an officer or partner of the proposed Franchisee, does hereby acknowledge receipt of the following documents, in form for execution, relating to a Pretzel Time Franchise of PRETZEL TIME, INC.: [ ] 1. Franchise Agreement (with Addendum, Authorization (Appendix A), TCBY Addendum); Acknowledgment Addendum, Ownership Agreement For Prearranged Yogurt Product Payments Addendum, and Satellite Unit [ ] 2. Guaranty of Agreement; [ ] 3. Reservation Letter; [ ] 4. Sublease Agreement; and [ ] 5. Other (specify): ____________________. (Proposed franchisee must initial the box adjacent to the applicable document.) I further acknowledge my understanding that it is my responsibility, individually and/or as an officer or partner of the proposed franchisee, to review all such documents, so that I am fully familiar with the transaction contemplated thereby prior to the execution thereof. A FEDERAL TRADE COMMISSION RULE REQUIRES THAT WE PROVIDE YOU WITH THE FRANCHISE-RELATED DOCUMENTS NOTED ABOVE AT LEAST FIVE (5) BUSINESS DAYS PRIOR TO THE DATE THEY ARE TO BE EXECUTED. PLEASE DO NOT SIGN OR RETURN THESE DOCUMENTS UNTIL FIVE (5) BUSINESS DAYS HAVE ELAPSED FROM THE DATE OF THIS RECEIPT. DATED: ____________________ _________________________________________ _________________________________________

RECEIPT OF FRANCHISE-RELATED DOCUMENTS -------------------------------------- The undersigned, personally and/or as an officer or partner of the proposed Franchisee, does hereby acknowledge receipt of the following documents, in form for execution, relating to a Pretzel Time Franchise of PRETZEL TIME, INC.: [ ] 1. Franchise Agreement (with Addendum, Authorization (Appendix A), TCBY Addendum); Acknowledgment Addendum, Ownership Agreement For Prearranged Yogurt Product Payments Addendum, and Satellite Unit [ ] 2. Guaranty of Agreement; [ ] 3. Reservation Letter; [ ] 4. Sublease Agreement; and [ ] 5. Other (specify): ____________________. (Proposed franchisee must initial the box adjacent to the applicable document.) I further acknowledge my understanding that it is my responsibility, individually and/or as an officer or partner of the proposed franchisee, to review all such documents, so that I am fully familiar with the transaction contemplated thereby prior to the execution thereof. A FEDERAL TRADE COMMISSION RULE REQUIRES THAT WE PROVIDE YOU WITH THE FRANCHISE-RELATED DOCUMENTS NOTED ABOVE AT LEAST FIVE (5) BUSINESS DAYS PRIOR TO THE DATE THEY ARE TO BE EXECUTED. PLEASE DO NOT SIGN OR RETURN THESE DOCUMENTS UNTIL FIVE (5) BUSINESS DAYS HAVE ELAPSED FROM THE DATE OF THIS RECEIPT. DATED: ____________________ ____________________________________________ ____________________________________________

GREAT AMERICAN COOKIE COMPANY, INC. OCTOBER 12, 1998, AS AMENDED NOVEMBER 24, 1998 INFORMATION FOR PROSPECTIVE FRANCHISEES REQUIRED BY FEDERAL TRADE COMMISSION * * * * * * * * TO PROTECT YOU, WE'VE REQUIRED YOUR FRANCHISOR TO GIVE YOU THIS INFORMATION. WE HAVEN'T CHECKED IT, AND DON'T KNOW IF IT'S CORRECT. IT SHOULD HELP YOU MAKE ----------------------------------------------------- UP YOUR MIND. STUDY IT CAREFULLY. WHILE IT INCLUDES SOME INFORMATION ABOUT YOUR CONTRACT, DON'T RELY ON IT ALONE TO UNDERSTAND YOUR CONTRACT. READ ALL OF YOUR CONTRACT CAREFULLY. BUYING A FRANCHISE IS A COMPLICATED INVESTMENT. TAKE YOUR TIME TO DECIDE. IF POSSIBLE, SHOW YOUR CONTRACT AND THIS INFORMATION TO AN ADVISOR, LIKE A LAWYER OR AN ACCOUNTANT. IF YOU FIND ANYTHING YOU THINK MAY BE WRONG OR ANYTHING IMPORTANT THAT'S BEEN LEFT OUT, YOU SHOULD LET US KNOW ABOUT IT. IT MAY BE AGAINST THE LAW. THERE MAY ALSO BE LAWS ON FRANCHISING IN YOUR STATE. ASK YOUR STATE AGENCIES ABOUT THEM. FEDERAL TRADE COMMISSION ------------------------ WASHINGTON, D.C. 20580 ----------------

FRANCHISE OFFERING CIRCULAR Great American Cookie Company, Inc. A Delaware corporation 2855 East Cottonwood Parkway Suite 400 Salt Lake City, Utah 84121 (801) 736-5600 The license offered is to operate a Cookie System Facility, which sells cookies, brownies and beverages. The initial fee for a Cookie System Facility ranges from $50,500 to $444,500, including the $25,000 initial license fee for a Type I Cookie System Facility and $15,000 initial license fee for a Type II Cookie System Facility. The estimated initial investment required for a Type I or Type II Cookie System Facility ranges from $120,750 to $625,500. Risk Factors: 1. THE LICENSE AGREEMENT PERMITS THE LICENSEE TO SUE THE LICENSOR ONLY IN GEORGIA (UNLESS FRANCHISE STATUTES OR LANDLORD-TENANT EVICTION LAWS MANDATE ANOTHER COURT). OUT OF STATE LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST YOU MORE TO SUE THE LICENSOR IN GEORGIA THAN IN YOUR HOME STATE. 2. THE LICENSE AGREEMENT STATES THAT GEORGIA LAW GOVERNS THE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTION AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS. SOME STATE FRANCHISE LAWS PROVIDE THAT CHOICE OF LAW PROVISIONS ARE VOID OR SUPERSEDED. YOU MAY WANT TO INVESTIGATE WHETHER YOU ARE PROTECTED BY A STATE FRANCHISE LAW. YOU SHOULD REVIEW ANY ADDENDA OR RIDERS ATTACHED TO THIS OFFERING CIRCULAR FOR DISCLOSURES REGARDING STATE FRANCHISE LAWS. 3. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE. Information comparing franchisors is available. Call the state administrators listed in Exhibit L or your public library for sources of information. Registration of this franchise by a state does not mean that the state recommends it or has verified the information in this offering circular. If you learn that anything in the offering circular is untrue, contact the Federal Trade Commission and the appropriate state authority listed in Exhibit L. Effective Date: October 12, 1998, as amended November 24, 1998.

TABLE OF CONTENTS ----------------- ITEM PAGE ---- ---- 1 THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES.................... 1 2 BUSINESS EXPERIENCE................................................ 1 3 LITIGATION......................................................... 6 4 BANKRUPTCY......................................................... 7 5. INITIAL FRANCHISE FEE.............................................. 8 6 OTHER FEES......................................................... 9 7 INITIAL INVESTMENT................................................. 12 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES................... 15 9 FRANCHISEE'S OBLIGATIONS........................................... 18 10 FINANCING......................................................... 20 11 FRANCHISOR'S OBLIGATIONS.......................................... 21 12 TERRITORY......................................................... 25 13 TRADEMARKS........................................................ 29 14 PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION................... 30 15 OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS................................................ 31 16 RESTRICTIONS ON WHAT THE FRANCHISE OWNER MAY SELL................. 32 17 RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION............. 32 18 PUBLIC FIGURES.................................................... 37 19 EARNINGS CLAIMS................................................... 37 20 LIST OF OUTLETS................................................... 38 21 FINANCIAL STATEMENTS.............................................. 44

TABLE OF CONTENTS ----------------- ITEM PAGE ---- ---- 22 CONTRACTS................................................................45 23 RECEIPTS.....................................................Last Two Pages EXHIBITS -------- Exhibit A Financial Statements Exhibit B License Agreement Exhibit C Addendum to License Agreement For Non-Baking Facilities Exhibit D Sublease Exhibit E Construction Activity Assistance Agreement Exhibit F Equipment Order Exhibit G Agreement for Purchase and Sale of Assets Exhibit H Principal's Agreement Exhibit I List of Licensees and Their Cookie System Facilities Exhibit J List of Licensees Who Left System During Our Last Fiscal Year Or Have Not Communicated With Us Exhibit K Operations Manual Table of Contents Exhibit L List of State Agencies/Agents for Service of Process Exhibit M Collateral Assignment of Lease Exhibit N Addendum to License Agreement For Delivery Services APPLICABLE STATE LAW MAY REQUIRE ADDITIONAL DISCLOSURES RELATED TO THE INFORMATION CONTAINED IN THIS OFFERING CIRCULAR. THESE ADDITIONAL DISCLOSURES, IF ANY, APPEAR IN AN ADDENDUM. ii

Item 1 ------ THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES Description of the Licensor and its Affiliates. ---------------------------------------------- "We," "us" or "our" means Great American Cookie Company, Inc., the licensor; "MFHCI" means Mrs. Fields Holding Company, Inc., a Delaware corporation; "MFOCI" means Mrs. Fields' Original Cookies, Inc., a Delaware corporation; "MFBI" means The Mrs. Fields' Brand, Inc., a Delaware corporation; "PTI" means Pretzel Time, Inc., a Pennsylvania corporation; "Pretzelmaker" means Pretzelmaker, Inc., a Utah corporation; and "Pretzelmaker-Canada" means Pretzelmaker-Canada, Inc., an Ontario corporation. "You" means the person who buys a license from us. If you are a corporation, partnership or other entity, your owners must sign our "Guaranty and Assumption of Obligations," which means that all of the provisions of our License Agreement (Exhibit B) also will apply to your owners. (See Item 15) Our principal business address is 2855 East Cottonwood Parkway, Suite 400, Salt Lake City, Utah 84121, and our telephone number is 801-736-5600. The principal business address and telephone number of MFHCI, MFOCI, MFBI, PTI, Pretzelmaker and Pretzelmaker-Canada are the same as ours. If we have an agent in your state for service of process, we disclose that agent in Exhibit L. We operate under our corporate name and the trademarks, service marks and commercial symbols described in Item 13 (the "Marks"). We have no predecessors. We were incorporated in Delaware on June 10, 1977. We incorporated under the name "The Original Great American Chocolate Chip Cookie Company, Inc." and changed to our existing name as of December 10, 1993. Cookies USA, Inc. ("Cookies USA"), a Delaware corporation, acquired us on December 10, 1993 and we became a wholly-owned subsidiary of Cookies USA. On August 24, 1998, MFOCI acquired all of the stock of Cookies USA. Immediately thereafter, MFOCI merged Cookies USA with and into itself. As a result of the merger, we are now an indirect, wholly-owned subsidiary of MFOCI. Concurrent with MFOCI's acquisition of Cookies USA, MFOCI acquired 29 Cookie System Facilities (as defined below) through the acquisition of all of the stock of 2 corporate Cookie System Facility licensees (Deblan Corporation and Chocolate Chip Cookies of Texas, Inc.). Immediately thereafter, MFOCI merged the 2 Cookie System Facility licensees with and into us. As further described in Item 20 and Exhibit I of this offering circular, we now operate these 29 Cookie System Facilities for our own account. Concurrent with MFOCI's acquisition of Cookies USA, MFOCI also acquired 8 additional Cookie System Facilities through the acquisition of all of the assets of 6 corporate Cookie System Facility licensees all owned by the same entity. As further described in Item 20 and Exhibit I of this offering circular, since the acquisition, MFOCI has operated these 8 Cookie System Facilities as our licensee. Unless noted otherwise, for the purpose of the Great American Cookie Company System, the terms "license" and "franchise" both refer to the Cookie System Facilities we offer to franchisees under this offering circular. 1

MFOCI intends to continue to operate both the Mrs. Fields System and the Great American Cookie Company System as separate franchise systems. MFBI is a Delaware corporation incorporated in August 1996. MFBI is also a wholly-owned subsidiary of MFHCI and an affiliate of ours. MFBI has granted MFOCI a perpetual, fully paid license to use the Mrs. Fields trademarks in connection with all Mrs. Fields Cookie Stores. PTI is a Pennsylvania corporation incorporated in May 1991. PTI originally incorporated under the name Mr. Pretzel, Inc., but shortly thereafter changed its name to Pretzel Time, Inc. In September 1997, MFHCI, acquired 56% of the outstanding shares of PTI. At the same time, MFHCI and PTI entered into a Management Agreement under which MFHCI agreed to provide, either by itself or through one of its affiliates, management services to PTI. In November 1997, MFHCI assigned all of its interest in the outstanding shares of PTI to MFOCI. In January 1998, MFOCI acquired an additional 4% of the outstanding shares of PTI. Similarly, in June 1998, MFOCI acquired an additional 10% of the outstanding shares of PTI. Consequently, as of the date of this offering circular, MFOCI owns 70% of the outstanding shares of PTI. PTI is an affiliate of ours. Pretzelmaker is a Utah corporation incorporated on August 31, 1992 under the name Four Pretzels, Inc. Pretzelmaker changed its name to Pretzelvania, Inc. on September 23, 1992 and to its current name on December 17, 1992. Pretzelmaker- Canada is an Ontario corporation incorporated on September 26, 1996, and a wholly-owned subsidiary of Pretzelmaker. On November 19, 1998, MFOCI acquired all of the stock of Pretzelmaker Holdings, Inc. ("PHI"), a Colorado corporation incorporated on February 24, 1995 and the parent corporation of Pretzelmaker. As a result of the merger, Pretzelmaker-Canada remains a wholly-owned subsidiary of Pretzelmaker, Pretzelmaker remains a wholly-owned subsidiary of PHI, and PHI is now a wholly-owned subsidiary of MFOCI. PHI, Pretzelmaker and Pretzelmaker- Canada are affiliates of ours. MFOCI intends to continue to operate both the Pretzel Time System and the Pretzelmaker System as separate franchise systems. MFHCI, MFOCI, MFBI, PTI, Pretzelmaker and Pretzelmaker-Canada are separate corporations and are not liable to you for any actions taken or obligations incurred by us. The Business of the Licensor and its Affiliates. ----------------------------------------------- We have offered licenses for Cookie System Facilities since September 1977 and have operated at least one since June 1977. Following MFOCI's acquisition of Cookies USA and the 10 Great American Cookie Company franchisees, as described above, there were approximately 218 Great American Cookie Company Store licenses, and 106 Great American Cookie Company Stores owned and operated by us. (See Item 20) We produce proprietary batter, dough and other ingredients for making cookies ("Cookie Ingredients") that you must buy from us in operating your Facility. (See Item 8) 2

We or one of our affiliates may establish a new business or franchise system or acquire an existing business or franchise system (which may be one of your competitors) operating under trademarks, service marks and tradenames other than the Marks. The new or existing business or franchise system may compete with you. Since September 1996, MFOCI has been in the business of granting licenses and franchises for the operation of Mrs. Fields Cookie Stores and operating and owning Mrs. Fields Cookie Stores for its own account. A Mrs. Fields Cookie Store offers a variety of specially prepared food items, such as cookies, brownies, muffins and beverages. As of December 31, 1997, there were 165 Mrs. Fields Cookie Store franchises and 144 Mrs. Fields Cookie Stores owned and operated by MFOCI. Between September 1996 and November 1997, MFOCI was in the business of granting licenses and franchises for the operation of Hot Sam Pretzel and Bakery Stores. Currently, MFOCI is no longer granting Hot Sam Pretzel and Bakery Store licenses and franchises. Since September 1996, MFOCI has also been in the business of owning and operating Hot Sam Pretzel and Bakery Stores. A Hot Sam Pretzel and Bakery Store offers a variety of freshly prepared soft pretzels and pretzel products (including Bavarian and sweet dough pretzel sticks), various toppings and sauces, freshly squeezed lemonade and other food items and beverages which are similar to those offered at a Pretzel Time Store. As of December 31, 1997, there were no Hot Sam Pretzel and Bakery Store licenses or franchises, and 102 Hot Sam Pretzel and Bakery Stores owned and operated by MFOCI. Since September 1996, MFOCI has been in the business of operating and owning Original Cookie Company Stores for its own account. An Original Cookie Company Store offers a variety of specially prepared food items, such as cookies, brownies, muffins and beverages. As of December 31, 1997, there were 155 Original Cookie Company Stores owned and operated by MFOCI and no Original Cookie Company Store franchises. Since January 1992, PTI has been in the business of granting licenses and franchises for the operation of Pretzel Time Stores. Since October 1991, PTI has also been in the business of owning and operating Pretzel Time Stores. Pursuant to a national sales agreement between PTI and TCBY Systems, Inc., since February 1995, PTI has offered Pretzel Time Stores that may include the sale of TCBY frozen yogurt products. A Pretzel Time Store offers a variety of freshly baked soft pretzels, complimentary toppings, soft drinks and other food products and, if a franchisee or licensee qualifies, TCBY frozen yogurt products. In certain situations, a prospective Pretzel Time franchisee may be able to purchase an existing Hot Sam Pretzel and Bakery Store location and its physical assets from MFOCI and convert the location to a Pretzel Time Store. As of December 31, 1997, there were 221 Pretzel Time Store licenses or franchises, and 75 Pretzel Time Stores owned and operated by PTI. Between January 1992 and March 1998, PTI was in the business of granting area developer rights to certain qualified persons ("Area Developers") pursuant to a Pretzel Time Area Development Agreement (the "Development Agreement"). Under the Development 3

Agreement, Area Developers were granted the right to develop, own and operate a specified number of Pretzel Time Stores at approved shopping mall locations within a defined geographic area. Area Developers were also granted the right to market and service the Pretzel Time System at shopping mall locations within their geographic area, for which they receive a fee. Finally, under the Development Agreement, Area Developers were granted the right to receive compensation from PTI for finding Pretzel Time franchisees for shopping mall locations within their geographic area. Area Developers, however, were not given the authority to grant the rights to license or operate a Pretzel Time franchise or enter into a Pretzel Time franchise agreement with a potential franchisee. Currently, PTI is no longer entering into Development Agreements with new Area Developers. As of June 12, 1998, there were 10 Area Developers with whom PTI has entered into Development Agreements. In July 1997, Mrs. Fields' Pretzel Concepts, Inc. ("MFPCI"), a wholly-owned subsidiary of MFHCI, purchased 84 Pretzel Time Stores from one of PTI's Area Developers, H&M Concepts Ltd. Co. At the time of the purchase, MFPCI entered into an Area Development Agreement and a franchise agreement with PTI. MFPCI operated the 84 Pretzel Time Stores as a franchisee of PTI until MFPCI merged into MFOCI on November 26, 1997. Since the merger, MFOCI has operated the 84 Pretzel Time Stores as a franchisee of PTI. In June 1998, MFOCI purchased a total of 5 Pretzel Time Stores from one of PTI's Area Developers, Virginia Concepts, Inc. At the time of the purchase, Virginia Concepts, Inc. transferred to MFOCI the respective Area Development Agreement and 5 franchise agreements it had entered into with PTI. Since the purchase, MFOCI has operated the 5 Pretzel Time Stores a franchisee of PTI. Since September 1992, Pretzelmaker has been in the business of granting franchises for the operation of Pretzelmaker Stores in the United States. Since August 1995, Pretzelmaker has also been in the business of owning and operating Pretzelmaker Stores. In addition, since September 1996, Pretzelmaker-Canada has been in the business of granting franchises for the operation of Pretzelmaker Stores in Canada. A Pretzelmaker Store offers soft pretzels, pretzel products and other complementary food and beverages. In some circumstances, a Pretzelmaker Store may also offer branded frozen desserts and coffee products. Following our acquisition of PHI, there were approximately 215 Pretzelmaker Store franchises and licenses, 9 Pretzelmaker Store locations owned and operated by Pretzelmaker and no Pretzelmaker Stores owned and operated by Pretzelmaker- Canada. These are the only franchised businesses that have been offered by us and our affiliates. Description of the Licenses Offered. ----------------------------------- We operate and allow others to operate retail stores under the "Great American Cookie Company" name and other Marks. (We call these stores "Cookie System Facilities"; we call your Cookie System Facility the "Facility.") Cookie System Facilities sell different types of cookies, other baked products and beverages. Most Cookie System Facilities also feature "Cookie Cakes," which are large plate or pan-sized cookies with the customized personal messages of customers. 4

Cookie Cakes are ideal for parties or special occasions. Cookie System Facilities operate from leased premises normally located in enclosed shopping malls. You may sell authorized products and services only over-the-counter at the Facility's premises and may not conduct any mail order, delivery or other activities away from the premises. (See Item 12) If you own a Cookie System Facility license and want to buy another one, you must sign our then current license documents. We offer 2 types of Cookie System Facility licenses. A "Type I" Cookie System Facility has baking facilities and is in a major shopping mall generally having at least 300,000 square feet of space with at least 2 major department stores. A "Type II" Cookie System Facility has the same characteristics as a Type I Cookie System Facility but generally is not in a major shopping mall having at least 300,000 square feet of space with at least 2 major department stores. We also might let you operate a "Non-Baking Facility" in your shopping mall or center. A Non-Baking Facility is a stationary or mobile cart, wagon or similar unit that you would operate within your shopping mall or center but away from the Facility's actual premises. It would sell products that you actually produce at the Facility. We also might let you offer delivery services from your Facility. If you offer delivery services, you would sell and deliver products produced at your Facility away from the Facility's physical premises and within a limited geographic area. (See Item 12) We currently offer for sale as franchises Cookie System Facilities that we own and operate throughout the country. If you buy one of these Facilities, you will buy its assets, including goodwill. This offering circular discloses the payments you will make for these items. Whether you buy an operating Cookie System Facility from us or a newly-constructed Facility depends on where you want to operate and site availability. Unless noted otherwise, the disclosures in this offering circular apply to both. The Market. ---------- You will compete with other stores selling cookies and competitive food products like baked goods, ice cream, frozen yogurt and other dessert items. Some of these other stores are part of national or regional franchised and non- franchised chains. In addition, some of these other stores (including Mrs. Fields Cookie Stores and Original Cookie Company Stores) are or may be owned or licensed by us or our affiliates. You will offer your products and services to the general public. The market for your products and services generally is developed in most parts of the country, although we believe that our product quality distinguishes us from the competition. There are no regulations specific to the industry in which Cookie System Facilities operate, although you must comply with all local, state and federal health and sanitation laws that 5

apply to food operations and laws that apply generally to all businesses. You should investigate these laws. Item 2 ------ BUSINESS EXPERIENCE Director, President and Chief Executive Officer: Larry Hodges -------------------------------------------------------------- Mr. Hodges has been a member of our Board of Directors and our President and Chief Executive Officer since August 1998. Mr. Hodges also has been President and Chief Executive Officer and one of the directors of MFOCI since September 1996. Between April 1993 and September 1996, he had been President and Chief Executive Officer and a director of both Mrs. Fields, Inc. ("MFI") and Mrs. Fields Development Corporation ("MFDC"). From October 1991 to February 1994, Mr. Hodges was President and Chief Executive Officer of Food Bond Stores, Inc. in Kansas City, Missouri. Director, Chief Financial Officer and Secretary: L. Tim Pierce -------------------------------------------------------------- Mr. Pierce has been a member of our Board of Directors and our Chief Financial Officer and Secretary since August 1998. Mr. Pierce also has been Senior Vice President, Chief Financial Officer, and Corporate Secretary of MFOCI since September 1996. Prior to that, he held the same position at MFDC. He became Vice President, Finance at the time MFDC was incorporated, Senior Vice President in December 1991, Chief Financial Officer in August 1993 and Corporate Secretary in April 1995. Since December 1991, Mr. Pierce has also served as Senior Vice President of MFI. 5A

Director and Vice President/Assistant Secretary: Michael R. Ward ----------------------------------------------------------------- Mr. Ward has been a member of our Board of Directors and our Vice President/Assistant Secretary since August 1998. Mr. Ward has been Vice President of Administration for MFOCI since September 1996. Between 1991 and 1996, Mr. Ward oversaw the Legal Department and Human Resources Department for MFI. He is admitted to practice law in the State of Utah. Senior Vice President: Pat Knotts ---------------------------------- Mr. Knotts has been our Senior Vice President since August 1998. Mr. Knotts also has been Senior Vice President of MFI since October 1996. Between January 1992 and October 1996, Mr. Knotts served as Executive Vice President of Operations for MFI's affiliates Original Cookie Company and Hot Sam Franchise Development Corporation. Senior Vice President of Real Estate: Garry Remington ------------------------------------------------------ Mr. Remington has been our Senior Vice President of Real Estate since August 1998. Between October 1996 and July 1997, Mr. Remington served as Vice President of Real Estate for Sbarro, Inc. in Commack, New York. From 1994 to 1996, Mr. Remington held the position of Senior Vice President of Leasing for the Woolworth Corporation in Manhattan, New York, with responsibilities for Footlocker, Champ Sports, Northern Reflections, Afterthoughts, and seven other divisions, and from 1992 to 1994, Mr. Remington was Vice President and Director of Leasing for the Woolworth Corporation, which he joined in 1972. Item 3 LITIGATION 1. Robert and Sheila Goldberg et al. v. Great American Cookie Company, Inc., ------------------------------------------------------------------------- The Jordan Company, Mrs. Fields' Original Cookies, Inc. and Capricorn Investors, -------------------------------------------------------------------------------- IV, LP (Superior Court of New Jersey, Law Division, Mercer County, Case No. ------ L3502-97). On September 12, 1997, 9 of our current franchisees filed this lawsuit against us and the other defendants because of the possibility at that time that MFOCI would elect to acquire the stock of our parent company, Cookies USA, and, as a result, take over as the licensor of our system and operator of our company-owned Cookie System Facilities. The plaintiffs' primary allegations at that time were that MFOCI and the other defendants would fail to honor the existing contracts between us and our franchisees. Plaintiffs also alleged fraud, unlawful sale of Cookie System Facility licenses, tortious interference with contracts, violation of state unfair trade practices acts, and similar claims against various of the defendants, including MFOCI. The plaintiffs' pleadings in 1997 generally sought an injunction to stop the acquisition and the anticipated future violations, plus anticipated damages and costs. The action was later stayed by agreement when the acquisition of Cookies USA by MFOCI did not occur in 1997. As further described in Item 1 of this offering circular, MFOCI acquired Cookies USA on August 24, 1998. Contemporaneous with the acquisition, all plaintiffs agreed to release all claims and dismiss their Complaint in this action with prejudice and without costs, in return for certain contingent, future rights related to the ownership of their franchises. 6

2. Eugene W. Rice, Charles M. Rice, The Rice Family of Cookies of Pinellas ----------------------------------------------------------------------- Park, Inc. and The Rice Family of Cookies of Fort Pierce, Inc. v. The Original ------------------------------------------------------------------------------ Great American Chocolate Chip Cookie Company, Inc. (United States District Court -------------------------------------------------- for the Northern District of Georgia, Case No. C85-2130A). On March 22, 1985, the plaintiffs, former licensees, sued us alleging that we failed to supply batter which would produce a uniform cookie, violated the Georgia Business Opportunity Sales Act by not giving them certain disclosures that Georgia law required or filing the proper materials with the Georgia authorities, violated the Georgia Fair Business Practices Act by setting supposedly unobtainable performance standards and deceived the plaintiffs by not supplying historical sales information for one of the 3 Cookie System Facilities they had purchased. The complaint sought damages of $100,000 on the batter claim and $350,000 or rescission on the business opportunity law claim. We denied the allegations, asserted various defenses and filed a counterclaim for breach of contract in which we sought $1.2 million in damages. On March 11, 1988, the court granted us summary judgment and dismissed all of the plaintiffs' claims except for the breach of contract and business opportunity law claims. We and the plaintiffs settled the case on February 17, 1989. We paid no money on the breach of contract claim and $200,000 on the business opportunity law claim. The plaintiffs gave up their Cookie System Facilities. 3. The Original Great American Chocolate Chip Cookie Company, Inc. v. John V. -------------------------------------------------------------------------- Callia (United States District Court for the Northern District of Georgia, Case ------ No. 1:88CV749RHH). On April 6, 1988, we sued a former licensee for materially breaching the post-termination provisions of his 2 license agreements and failing to pay amounts due. We sought $50,000 in damages, attorneys' fees, costs, injunctive relief and punitive damages. After filing a petition under Chapter 11 of the U.S. Bankruptcy Code, the defendant filed an adversary proceeding against us (United States District Court for the Eastern District of Louisiana, Case No. 89-0076K), alleging that our termination of the license was a fraudulent conveyance under the Bankruptcy Code and that we breached the license agreement by unreasonably disapproving proposed sales of his Cookie System Facilities. Defendant requested that we return the license or pay $166,000. We filed a proof of claim for over $317,000 for our damages for the defendant's breach of contract, other past due charges and unauthorized use of our commercial symbols. After the defendant received a discharge of debts on February 26, 1992, the Bankruptcy Court granted us summary judgment on the defendant's original claims. The District Court affirmed the Bankruptcy Court's decision on April 13, 1994. Other than these 3 actions, no litigation is required to be disclosed in this offering circular. Item 4 BANKRUPTCY No person previously identified in Item 1, and no officer previously identified in Item 2, of this offering circular has been involved as a debtor in proceedings under the U.S. Bankruptcy Code required to be disclosed in this Item. 7

Item 5 ------ INITIAL FRANCHISE FEE We currently charge a uniform initial license fee of $25,000 for a Type I Cookie System Facility and $15,000 for a Type II Cookie System Facility. You must pay us $5,000 as a deposit when you formally request a license for a specific location. We will apply the deposit toward the initial license fee, which is due in full when you sign the License Agreement. We will not refund the deposit if you decide not to buy a license. The initial license fee is not refundable. Before your Facility begins operating, you must buy an initial inventory of Cookie Ingredients from us. This inventory costs from $4,500 to $7,500. You must buy Cookie Ingredients from us during the term of your license. (See Item 8) We are an approved (but not the only) source of various items you need to open and operate the Facility, like equipment, supplies and non-Cookie Ingredient inventory. (See Item 8) If you buy these items from or through us, although you need not do so, the cost will range from $28,000 to $40,000. You will sign our Equipment Order (Exhibit F) and pay us these amounts before the Facility opens. If you want us to help you construct the Facility after you buy the license, we and you will sign our Construction Activity Assistance Agreement (Exhibit E). You must pay us a 10% fee, calculated on the total costs and expenses of the construction activity (excluding monies paid for architects' fees, performance and payment bonds and insurance coverage). Each licensee's fee depends on the cost to construct its Facility. 50% of this fee is due when you accept the general contractor's bid to do the work, and the rest is due 15 days before your Facility's scheduled opening date. You must pay us this fee in full before opening the Facility. We did not receive a construction activity assistance fee during our last fiscal year. If you want to buy a Cookie System Facility that we operate, you must pay us for its improvements, equipment, product and supply inventories and goodwill. The amount you pay will depend on the condition of the Facility and its assets, the revenue the Facility has generated, inventory levels and similar factors, which vary widely for each Facility. The amounts we received from selling existing Cookie System Facilities during our last fiscal year ranged from $85,000 to $360,000. These amounts generally are due in full when you buy the license. We will reflect the Facility's sale in our Agreement for Purchase and Sale of Assets (Exhibit G). On most occasions, we will lease the Facility's premises directly from the landlord and then sublease them to you. (See Items 8 and 10) You must pay us for security deposits and initial rent when you sign our Sublease (Exhibit D). These amounts depend on the original charges under the main lease, which vary for each Facility. The amounts we received for these initial sublease payments during our last fiscal year ranged from $3,000 to $12,000. There is no initial license fee for a Non-Baking Facility. Except as provided above, no initial fees are refundable. 8

Item 6 ------ OTHER FEES <TABLE> <CAPTION> ================================================================================================= Name of Fee/1/ Amount Due Date Remarks ================================================================================================= <S> <C> <C> <C> Royalty 7% of Facility's 10th day of each "Gross Sales" mean all revenue you monthly Gross calendar month on receive from operating the Facility, Sales previous month's including the value of any property Gross Sales/2/ or services you receive; they do not include taxes collected from customers and customer refunds and credits/3/ ------------------------------------------------------------------------------------------------- Sublease As stated in First day of each You must pay us any amounts due under lease month for fixed the prime lease if you sublease the and/or scheduled Facility's premises from us, and we rent and 20 days will pay that amount to the landlord after notice for (see Items 8 and 10 for details about other payments the Sublease) ------------------------------------------------------------------------------------------------- Additional $200 per day When billed We train 2 people free (see Item 11) Training or (plus expenses) (typically before - we may charge you for others who Assistance services provided) attend initial training, for training newly-hired personnel, for periodic refresher training courses or for additional or special guidance, assistance or training you need or request ------------------------------------------------------------------------------------------------- Transfer $2,500 for When you request Due when the License Agreement or a transfer and transfer controlling interest in you additional transferred. No charge if License $2,500 if we Agreement transferred to an entity must train which you control (and request made transferee within 90 days of original license and/or its date) manager ------------------------------------------------------------------------------------------------- Renewal Our then current When you sign initial license successor license fee less license agreement fee you originally paid when you bought license ================================================================================================= </TABLE> 9

<TABLE> <CAPTION> ================================================================================================ Name of Fee/1/ Amount Due Date Remarks ================================================================================================ <S> <C> <C> <C> Audit Cost of 15 days after Due if you understate the Facility's inspection or billing gross sales by more than 2% or do not audit give us reports, supporting records or other required information ------------------------------------------------------------------------------------------------ Facility Cost of 15 days after You must reimburse our costs if we Development development billing develop the Facility after you fail to do so ------------------------------------------------------------------------------------------------ Liquidated Damages See footnote 4 When billed ------------------------------------------------------------------------------------------------ Construction 10% of due when you Due if we construct or remodel the Activity construction accept Facility for you (see Items 5, 8 and Assistance activity contractor's bid 11) ------------------------------------------------------------------------------------------------ Interest Lesser of 2% per 15 days after Due on all overdue amounts that are month or highest billing more than 7 days late (also due on contract rate of late rent payments). Interest begins interest law to accrue from the original due date. allows ------------------------------------------------------------------------------------------------ Service Charge $100 15 days after Due for each late Royalty or rent billing payment ------------------------------------------------------------------------------------------------ Continuing $2,500 - $7,500 15 days after You will incur these costs Inventory billing periodically for the products you must or choose to buy from us ------------------------------------------------------------------------------------------------ Other Product and See Item 8 See Item 8 You must buy certain products and Service Purchases services from us or according to our standards and specifications ------------------------------------------------------------------------------------------------ Operations Manual $250 15 days after Cost of replacement copy billing ------------------------------------------------------------------------------------------------ Management $250 per day As incurred Due for period during which we manage (plus direct Facility upon your death or costs and disability, default, termination or expenses) abandonment ------------------------------------------------------------------------------------------------ Costs and Will vary under As incurred Due when you do not comply with the Attorneys' Fees/5/ circumstances License Agreement or we defend an action you bring against us (unless you win your claims) ------------------------------------------------------------------------------------------------ Indemnification/5/ Will vary under As incurred You must reimburse us if we are held circumstances liable for claims from your Facility's operation ================================================================================================ </TABLE> 10

<TABLE> <CAPTION> ================================================================================================= <S> <C> <C> <C> Name of Fee/1/ Amount Due Date Remarks ------------------------------------------------------------------------------------------------- operation ------------------------------------------------------------------------------------------------- Testing Cost of Testing 15 days after This covers the costs of testing new billing products or inspecting new suppliers you propose ================================================================================================= </TABLE> -------------------- /1/ Except as noted in Item 8 for certain product and service purchases, all - fees are imposed and collected by and payable to us. All fees are non- refundable. /2/ We can make you pay the Royalty, amounts due for purchases from us, - interest and service charges by electronic funds transfer. If we do, you must sign the documents and follow the procedures we specify to allow us to withdraw these amounts directly from your bank account by debit entries. You must make sure that these amounts are in the account. /3/ You will add your Gross Sales from Non-Baking Facilities (see Item 12) to - your Facility's Gross Sales to compute the Royalty you must pay us. /4/ If we terminate the License Agreement with cause, or you terminate the - License Agreement without cause, you must pay us liquidated damages equal to the present value (using the then current 30 year Treasury Bond rate) of the Royalties you would have paid us on the product of your Facility's average monthly Gross Sales during its most recent 12 months of operation before the termination multiplied by the number of months remaining in the License Agreement had we or you not terminated it. If you pay us the required liquidated damages by the due date, we will refund (without interest) a portion of those liquidated damages if we grant a new license for a Cookie System Facility at the Facility's location during what would have been the remaining term of your License Agreement had we or you not terminated it. The portion of the paid liquidated damages that we will refund will be the amount that relates to the months in what would have been the remaining term of your License Agreement during which the new licensee actually operates a Cookie System Facility at your Facility's location. /5/ These fees also are due under the Sublease. - /6/ There are no advertising cooperatives in our system. - [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.] 11

ITEM 7 ------ INITIAL INVESTMENT The following chart is for a Type I and Type II Cookie System Facility*: <TABLE> <CAPTION> ============================================================================================================================== Estimated Amount Method or Estimated of Whether Expenditures Low-High Range When Due Payment Refundable To Whom Paid ------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> Initial License Fee (1) $ 15,000 - $25,000 $5,000 due at time of Lump Sum No Us offer; rest due when License Agreement signed ------------------------------------------------------------------------------------------------------------------------------ Three Months' Rent (2) $ 3,000 - $27,000 Monthly Lump Sum No Landlord or Us (as sublessor) ------------------------------------------------------------------------------------------------------------------------------ Security Deposit (2) $ 1,750 - $9,000 On signing lease or Lump Sum Yes Landlord or Us (as sublease sublessor) ------------------------------------------------------------------------------------------------------------------------------ Equipment (3) $ 28,000 - $40,000 As Incurred As Agreed No Outside Suppliers or Us ------------------------------------------------------------------------------------------------------------------------------ Construction/Remodeling (4) $ 50,000 - $130,000 As Incurred As Agreed No Outside Suppliers ------------------------------------------------------------------------------------------------------------------------------ Architects' Fees (4) $ 5,000 - $7,500 As Incurred As Agreed No Outside Suppliers or Us ------------------------------------------------------------------------------------------------------------------------------ Goodwill (5) $ 0 - $350,000 When you buy license Lump Sum No Us ------------------------------------------------------------------------------------------------------------------------------ Cookie Ingredients (6) $ 4,500 - $7,500 Before Opening Lump Sum No Us ------------------------------------------------------------------------------------------------------------------------------ Other Opening Inventory (7) $ 2,500 - $7,500 Before Opening Lump Sum No Outside Suppliers or Us ------------------------------------------------------------------------------------------------------------------------------ Training Expenses (for all attendees) $ 2,000 - $4,000 As Incurred As Incurred No Third Parties (8) ============================================================================================================================== </TABLE> 12

<TABLE> <CAPTION> ============================================================================================================================== Estimated Amount Method or Estimated of Whether Expenditures Low-High Range When Due Payment Refundable To Whom Paid ------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> Insurance(9) $4,000 - $8,000 As Incurred As Incurred No Insurance Carriers and Agents ------------------------------------------------------------------------------------------------------------------------------ Other Prepaid Expenses(10) Note 10 As Incurred As Incurred No Third Parties ------------------------------------------------------------------------------------------------------------------------------ Additional Funds - 3 months(11) $5,000 - $10,000 As Incurred As Incurred No Third Parties ------------------------------------------------------------------------------------------------------------------------------ TOTAL ESTIMATED INITIAL INVESTMENT(12) $120,750 - $625,500 ============================================================================================================================== </TABLE> * In addition to the Type I and Type II Cookie System Facilities, we also might let you operate a Non-Baking Facility in your shopping mall or center. If you choose, and we allow you, to operate a Non-Baking Facility, you must acquire the necessary equipment to do so. We estimate the cost for this additional equipment to range from $2,500 (for example, for a cookie display table) to $45,000 (for example, for a cookie cart). Your costs will depend on the type of Non-Baking Facility you operate and the equipment source. You would pay for this equipment according to the terms you work out with the supplier. Your purchase costs are not refundable. You also might have to pay a form of rent for the Non-Baking Facility, although not all landlords charge rent for the Non- Baking Facilities we and our licensees operate. The landlord makes this decision. Our experience shows that rent might range from $500 to $2,700 per month. 13

Explanatory Notes ----------------- 1. We describe the initial license fee in Item 5. 2. You will lease or sublease the Facility's premises. A typical Type I or Type II Cookie System Facility has between 200 and 1,000 square feet in an enclosed shopping mall. A typical Non-Baking Facility will use between 50 and 150 square feet. (See Items 8 and 10 for more details on the lease or sublease.) 3. The average cost to equip a newly constructed Type I or Type II Cookie System Facility is $28,000 to $40,000. If you buy the equipment at an existing Cookie System Facility, the type, amount and age of the equipment will determine its purchase price. If you buy equipment for a Cookie System Facility that you are remodeling, the equipment you replace will determine its purchase price. These amounts do not include sales tax or freight and delivery charges. 4. The approximate cost of constructing an average Type I or Type II Cookie System Facility is $90,000. Although you need not use us to help construct or remodel the Facility, you always must buy (before beginning construction or remodeling) payment and performance bonds acceptable to us. These bonds cost approximately 1-1/2% of the total construction or remodeling cost. If you buy an existing Cookie System Facility from us, you must pay us for the finished construction or remodeling activity. We will factor this into the asset purchase price. If we help you in the construction activity, we and you will sign our Construction Activity Assistance Agreement (see Item 5), and you will pay us a 10% fee based on the total costs and expenses of the construction activity. (See Item 6) We cannot estimate this fee because it depends on expenses that will vary among construction projects. 5. If we sell an existing Cookie System Facility to you, we may include an amount for the Facility's goodwill. We determine goodwill based on the Facility's age, sales volume and cost structure. Because of these various factors, we cannot estimate goodwill precisely. 6. If you purchase an existing Cookie System Facility, it normally includes an inventory of Cookie Ingredients (not included in the Facility's purchase price). We and you count the inventory and calculate the purchase price for these items when you take possession of the Facility. Because there might not be enough inventory to operate the Facility when you take it over, you might have to buy more shortly afterwards. If you are opening a newly constructed or remodeled Facility, you will pay approximately $6,000 for the initial inventory of Cookie Ingredients. 7. You must have a supply of flavorings, garnishments, food and beverage products, small kitchenwares, cleaning supplies, paper and packaging supplies, beverage cups and lids, report forms and marketing and point-of-sale materials during your operation of the Facility. You may buy these items from us or independent suppliers. We often sell new licensees an initial "care package" with several of these items for approximately $2,500 to $7,500. If you buy an existing Cookie System Facility, the Facility's current inventory already will include many of these items. However, you might have to buy more soon after taking over the Facility. 14

8. Factors affecting the exact cost are fuel or car rental expenses, hotel and food rates, compensation for you and your employee and airfare and other travel expenses. We estimate these expenses to be $1,000 to $2,000 for each person. (See Item 11) 9. We cannot estimate precisely the insurance premiums you will pay at your Facility. Numerous factors affect premiums, including the insurance company, a state's workers' compensation rates, the fire rating on the Facility's structure, the Facility's size and excess or extra coverages you choose. 10. These include utility, sales tax and state workers' compensation deposits, deposits with suppliers and vendors, business licenses and legal, accounting and organizational costs. 11. This item estimates your initial start up expenses (other than the items identified separately in the table). These expenses include payroll costs but not any draw or salary for you. These figures are estimates, and we cannot guarantee that you will not have additional expenses starting the business. Your costs will depend on how much you follow our methods and procedures; your management skill, experience and business acumen; local economic conditions; the local market for your products and services; the prevailing wage rate; competition; and the sales level reached during the initial period. 12. We relied on our 20 years of experience in operating and licensing Cookie System Facilities to compile these estimates. You should review these figures carefully with a business advisor before deciding to purchase the license. Except for the Sublease (and other occasional financing) described in Item 10, we do not offer financing directly or indirectly for any part of the initial investment. The availability and terms of financing depend on the availability of financing generally, your creditworthiness and collateral and lending policies of financial institutions from which you request a loan. Item 8 ------ RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES You must operate the Facility under our System Standards. System Standards may regulate, among other things, the types, models and brands of fixtures, furniture, furnishings, equipment, signs, materials and supplies you must use in operating the Facility, required or authorized products and services and product and service categories, product preparation, storage, handling and packaging procedures, product inventory requirements, and designated or approved suppliers of necessary items and services (which may be limited to or include us). Currently, you must purchase all Cookie Ingredients only from us. We are the exclusive source to protect the quality and uniformity of the products baked at Cookie System Facilities, which are critical to our system, and to preserve the trade secret status of our recipes. We make a profit on these direct sales. You also must buy a special type of oven that an unaffiliated company manufactures and purchase Coca-Cola products from Coca-Cola USA. Except for these items, there are no goods, services, supplies, fixtures, equipment, inventory, computer hardware and software, or real estate for the Facility that you must purchase or lease from us or a designated supplier. 15

However, to maintain the quality of the goods and services that Cookie System Facilities sell and the reputation of our system, you must buy or lease fixtures, furniture, equipment, supplies, furnishings, food products, and similar items that meet our minimum standards and specifications and, for some items, from suppliers that we approve. Our standards and specifications may impose minimum requirements for delivery, performance, reputation, design and appearance. We will notify you in our Operations Manual or other communications of our standards and specifications and/or names of approved suppliers. There might be situations where you may obtain items from any supplier who can satisfy our requirements and, therefore, would be an approved supplier. We are an approved but not the only supplier of equipment, flavorings, garnishments, food and beverage products, small kitchenwares, cleaning supplies, paper and packaging supplies, beverage cups and lids, report forms, and marketing and point-of-sale materials. We make a profit on any direct sales to you. If you want to use any item or service that we have not yet evaluated or to buy or lease from a supplier that we have not yet approved, you first must submit sufficient information, specifications and samples for us to determine whether the item or service complies with System Standards or the supplier meets approved supplier criteria. We may charge you a reasonable fee to cover our costs in making this decision (see Item 6) and will, within a reasonable time (typically 60 days), give you our decision. We periodically will establish procedures for submitting requests for approval of items, services and suppliers and may impose limits on the number of approved items, services and suppliers. Supplier approval might depend on product quality, frequency of delivery and standards of service and might be temporary, until we evaluate the supplier in more detail. We may inspect a proposed supplier's facilities during the approval process and after to make sure that the supplier continues to meet our standards. If it does not, we may revoke our approval by notifying the supplier and you in writing. Besides these purchases or leases, you must obtain and maintain, at your own expense, the insurance coverage that we and the Facility's lease periodically require and meet the other insurance-related obligations in the License Agreement. You currently must have the following coverages and policy limits: 1. Employer's liability and workers' compensation or similar insurance as the law requires. 2. Commercial general liability coverage to include premises/operations, products/completed operations, contractual and personal injury for at least $1 million each occurrence and $2 million aggregate or comprehensive general liability insurance for at least $1 million combined single limit for bodily injury and property damage with broad form comprehensive general liability endorsement. 3. Commercial umbrella policy with a limit of at least $3 million. 4. Standard "all-risk" policy covering the Facility and its contents at full replacement value, with co-insurance waived and one year's loss of income. 16

Cost of coverage depends on the insurance carrier's charges, terms of payment and your history. (See Item 7) All insurance policies must name us as an additional insured party. If you sublease the premises from us, we may be a co- payee of the check that the insurance company issues for any loss proceeds due to a loss at the Facility. Before you use them, you must send us for approval samples of all advertising, promotional and marketing materials which we have not prepared or previously approved. If you do not receive written disapproval within 15 days after we receive the materials, they are approved. You may not use any advertising, promotional or marketing materials that we have disapproved. Unless we help you construct the Facility or you buy an existing Facility, you must develop the Facility. We will give you mandatory and suggested specifications and layouts for a Cookie System Facility, including requirements for dimensions, design, image, interior layout, decor, fixtures, equipment, signs, furnishings and color scheme. You must prepare all required construction plans and specifications to suit the shape and dimensions of the premises and ensure that these plans and specifications comply with applicable ordinances, building codes, permit requirements, and lease requirements and restrictions. We must review and approve all plans and specifications before you begin constructing the Facility to make sure they meet our design requirements. You must submit all revised or "as built" plans and specifications during construction. You must use licensed architects and general contractors whom we approve to prepare plans, drawings and construction specifications and to develop the Facility. We may inspect the Facility during its development. The Facility must be at a site that we have accepted. We also must accept the lease or sublease for the premises. If you do not sublease the premises from us, you must, at our request, collaterally assign the lease or sublease to us as security for your timely performance of your obligations under the License Agreement and get the lessor's consent to the collateral assignment. This means that, if you do not fulfill your obligations, we may take over the premises. Our standard form of Collateral Assignment of Lease is Exhibit M. In most cases, though, you will sublease the premises from us, and we will be the prime tenant with the shopping center or other landlord. You will pay us all lease- related charges, and we will pass these amounts over to the landlord (without mark-up). We describe our Sublease in Item 10. We and our affiliates participate in a nationwide marketing program sponsored by Coca-Cola USA. You must participate in the program and purchase Coca-Cola products for use at your Facility. You may purchase Coca-Cola products from any authorized Coca-Cola distributor. Coca-Cola USA currently pays us and/or our parent corporation, MFOCI, amounts based upon purchases by each franchisee. These funds may be used to develop and implement marketing and promotional activities designed to benefit the entire Great American Cookie Company System, and to increase the sale of Coca-Cola products at all Cookie System Facilities. During the fiscal year ending June 28, 1998, however, neither we nor MFOCI received any direct payments from Coca-Cola USA for purchases of Coca-Cola products by Cookie System Facilities. Any amounts received by us or MFOCI from Coca-Cola USA will not reduce the payments you are required to make to us under the License Agreement. 17

In the fiscal year ending June 28, 1998, our revenue from all of the items described above that franchisees are required to purchase from us was $12,214,095, which is 32.7% of our total annual revenue of $37,346,860. We derived these amounts from our internally prepared financial statements. All of the required purchases and leases described above, whether from us or our affiliates or other third parties, represent 90% or more of your total purchases and leases in establishing and then operating the Facility. Except as described above, we currently do not derive revenue or other material consideration from required purchases or leases. There currently are no purchasing or distribution cooperatives. We currently negotiate purchase arrangements with suppliers (including price terms) for packaging materials, certain beverages, uniforms, advertising materials, and various equipment for the benefit of licensees. We do not provide material benefits to a licensee for using designated or approved sources. Item 9 ------ FRANCHISEE'S OBLIGATIONS THIS TABLE LISTS YOUR PRINCIPAL OBLIGATIONS UNDER THE LICENSE AND OTHER AGREEMENTS. IT WILL HELP YOU FIND MORE DETAILED INFORMATION ABOUT YOUR OBLIGATIONS IN THESE AGREEMENTS AND IN OTHER ITEMS OF THIS OFFERING CIRCULAR. <TABLE> <CAPTION> ================================================================================================ Item in Section Offering Obligation in Agreement Circular ------------------------------------------------------------------------------------------------ <S> <C> <C> (a) Site selection and Sections 1D and 2A and B of License Items 7, 8, 10, 11 acquisition/lease Agreement, Sublease and Collateral and 12 Assignment of Lease ------------------------------------------------------------------------------------------------ (b) Pre-opening purchases/leases Sections 2B, C, D and E and 8 of Items 5, 6, 7, 8 License Agreement, Equipment Order and 11 and Agreement for Purchase and Sale of Assets ------------------------------------------------------------------------------------------------ (c) Site development and other Sections 2C, D, E and F of License Items 7, 8 and 11 pre-opening requirements Agreement and Construction Activity Assistance Agreement ------------------------------------------------------------------------------------------------ (d) Initial and ongoing training Sections 4A and B of License Item 11 Agreement ------------------------------------------------------------------------------------------------ (e) Opening Section 2F of License Agreement Item 11 ================================================================================================ </TABLE> 18

<TABLE> <CAPTION> ================================================================================================ Item in Section Offering Obligation in Agreement Circular ------------------------------------------------------------------------------------------------ <S> <C> <C> (f) Fees Sections 1E(1), 2C and E, 3A, B and Items 5, 6 and 7 D, 4A, B and C, 10B, 11C(5) and (6), 11E(2), 12A, 13C, 14F and 16C of License Agreement; Section 4 of Construction Activity Assistance Agreement; Section 2 of Equipment Order; Section 1.1 of Agreement for Purchase and Sale of Assets and Section 3 of Sublease ------------------------------------------------------------------------------------------------ (g) Compliance with standards and Sections 4B and C and 8 of License Items 8 and 11 policies/Operating Manual Agreement ------------------------------------------------------------------------------------------------ (h) Trademarks and proprietary Sections 5 and 6 of License Items 13 and 14 information Agreement ------------------------------------------------------------------------------------------------ (i) Restrictions on Sections 1D and 8A of License Items 8, 11, 12 products/services offered Agreement and Delivery Addendum and 16 ------------------------------------------------------------------------------------------------ (j) Warranty and customer service None requirements ------------------------------------------------------------------------------------------------ (k) Territorial development and Section 1E(1) of License Agreement Item 12 sales quotas ------------------------------------------------------------------------------------------------ (l) On-going product/service Section 8 of License Agreement Items 6 and 8 purchases ------------------------------------------------------------------------------------------------ (m) Maintenance, appearance and Sections 8A and B and 12A of Items 11, 16 and remodeling requirements License Agreement 17 ------------------------------------------------------------------------------------------------ (n) Insurance Section 8A(13) of License Agreement Items 7 and 8 and Delivery Addendum ------------------------------------------------------------------------------------------------ (o) Advertising None ------------------------------------------------------------------------------------------------ (p) Indemnification Section 15D of License Agreement Item 6 and Section 9 of Sublease ------------------------------------------------------------------------------------------------ (q) Owner's participa- Sections 4A and 8A of License Items 11 and 15 tion/management/staffing Agreement ------------------------------------------------------------------------------------------------ (r) Records/reports Section 9 of License Agreement ------------------------------------------------------------------------------------------------ (s) Inspections/audits Section 10 of License Agreement Item 6 ------------------------------------------------------------------------------------------------ (t) Transfer Section 11 of License Agreement Item 17 ================================================================================================ </TABLE> 19

<TABLE> <CAPTION> ================================================================================================ Item in Section Offering Obligation in Agreement Circular ------------------------------------------------------------------------------------------------ <S> <C> <C> and Section 4 of Sublease ------------------------------------------------------------------------------------------------ (u) Renewal Section 12 of License Agreement Item 17 ------------------------------------------------------------------------------------------------ (v) Post-termination obligations Section 14 of License Agreement Item 17 ------------------------------------------------------------------------------------------------ (w) Non-competition covenants Sections 7 and 14D of License Item 17 Agreement ------------------------------------------------------------------------------------------------ (x) Dispute resolution Sections 17F and G of License Item 17 Agreement ------------------------------------------------------------------------------------------------ (y) Assumption of Management Section 13C of License Agreement Item 17 ================================================================================================ </TABLE> Item 10 ------- FINANCING Except as described below, we do not offer direct or indirect financing. We do not guarantee your note, lease or obligation. In many cases, landlords make us become the primary lessee of the Facility's premises and then let us sublease to licensees. This generally occurs when landlords question a licensee's creditworthiness or prefer to lease only to franchisors and not to franchisees. If we are the primary lessee, you must sign our standard Sublease (Exhibit D). Under our Sublease, there is a straight pass-through of all payments due under the primary lease. If you sublease from us, you must pay us the rent due under the primary lease by the first day of each month. You must make other payments, including adjustments or percentage rent, within 20 days after we or the landlord notifies you that it is due. (Section 3) When you sign the Sublease, you must deposit the estimated first month's rental and amenities due under the lease and pay a security deposit. You also might have to pay other one-time charges due under the lease for illustration and shopping center grand opening charges. When the License Agreement expires, we will return any Sublease deposit or credit remaining on your account if you are not in default. However, the lease might restrict the return of the security deposit or rent. The Sublease term begins when you sign it or when the lease begins, whichever is later. The Sublease term ends on the earlier of: (1) the date the License Agreement expires or terminates; (2) one day before the primary lease term expires; (3) the date the primary lease actually terminates; or (4) the date the Sublease terminates. (Section 1) If you do not comply with the primary lease or the License Agreement, you will be in default under the Sublease. (Section 11) If you do not make the monthly rent payments when due, they will bear interest at the highest contract interest rate the law allows or 2% per month, whichever is less. You also must pay us a service charge of $100 for each late monthly rent payment for our increased expense of 20

handling the late payment. (Section 3) You must make all rent payments when due and may not reduce them by any set-off, deduction, claim or other withholding against us. (Section 3) Your failure to cure a default under the Sublease is a default under the License Agreement. (Section 11) We also may recover our attorneys' fees and costs. (Section 9.6) You may not assign your Sublease. (Section 4) Even though you sublease the Facility's premises from us, we need not perform any landlord obligation. You may look only to the primary landlord for performance. (Section 7) Your owners must guarantee your performance under the Sublease. Our Sublease does not contain a waiver of defenses or similar provisions. The Sublease contains no provisions concerning our assignment rights. If you buy an existing Cookie System Facility from us, we might be willing to take a promissory note for 20% to 30% of the purchase price and the rest in cash. We also might provide a bridge loan for 90 days after you acquire the license to allow you to finalize your permanent financing. We do this very infrequently, and you should not expect us to do this for you. If we do, however, we and you will negotiate the note's terms. Item 11 ------- FRANCHISOR'S OBLIGATIONS Except as listed below, we need not provide any assistance to you. Before you open the Facility, we will: 1. Accept the site you propose for the Facility if it meets our criteria for demographic characteristics, traffic patterns, character of neighborhood, competition from, proximity to and the nature of other businesses, other commercial characteristics, and the site's size, appearance and other physical characteristics. (License Agreement - Section 2.A.) In most cases, however, you will sublease the premises from us under our Sublease. (See Items 1, 7, 8 and 10) If we and you do not agree on a site, you may not buy a license. 2. If you develop the Facility, give you mandatory and suggested specifications and layouts for a Cookie System Facility, including requirements for dimensions, design, image, interior layout, decor, fixtures, equipment, signs, furnishings and color scheme. (License Agreement - Section 2.C.) 3. At your request, help you develop the Facility. (License Agreement - Section 2.C.) We will help you in various types of construction activity, including finding an architect and a general contractor, taking general contractor bids, obtaining payment and performance bonds, licenses and permits, obtaining final lien waivers and advising your contractor on the Facility's construction. (Construction Activity Assistance Agreement - Schedule One) 4. As discussed in Item 8, identify the fixtures, furniture, furnishings, equipment (including computer hardware and software), signs, food products, materials and 21

supplies and services you need to develop and operate the Facility, the minimum standards and specifications you must satisfy and the designated or approved suppliers from whom you must or may buy or lease these items and services (including us and/or our affiliates). (License Agreement -Sections 2.D., 2.E. and 8.A.) 5. At your request, obtain the Facility's equipment for you. (Equipment Order) 6. Loan you one copy of the Operations Manual, the tables of contents of which are Exhibit K. (License Agreement - Section 4.C.) 7. Train you (or your managing owner) and one employee. (License Agreement -Section 4.A.) We describe this training later in this Item. During your operation of the Facility, we will: 1. Advise you regarding the Facility's operation based on reports you submit or inspections we make. We also will guide you on standards, specifications and operating procedures and methods that Cookie System Facilities use; purchasing required fixtures, furniture, furnishings, equipment, signs, products, materials and supplies; advertising and marketing programs; employee training; and administrative, bookkeeping and accounting procedures. We will guide you, at our discretion, in our Operations Manual, bulletins or other written materials, during telephone consultations and/or during consultations at our office or the Facility. (License Agreement - Section 4.B.) 2. Give you, at your request, additional or special guidance, assistance and training. (License Agreement - Section 4.B.) (See Item 6) 3. Loan you one copy of the Operations Manual, containing the materials (including audiotapes, videotapes, magnetic media, computer software and written materials) that we generally give licensees to operate Cookie System Facilities. The Operations Manual contains mandatory and suggested specifications, standards, operating procedures and rules ("System Standards") that we periodically require. We may modify the Operations Manual periodically to reflect changes in System Standards. (License Agreement - Section 4.C.) 4. Issue and modify System Standards for Cookie System Facilities. We periodically may modify System Standards, which may accommodate regional or local variations, and these modifications may require you to invest additional capital in the Facility and/or incur higher operating costs. (See Item 16) (License Agreement - Sections 8.A. and 8.B.) 5. Inspect the Facility's operation to help you comply with the License Agreement and all System Standards. (Franchise Agreement - Section 10.A.) 6. Let you use our confidential information. (License Agreement - Section 6) 22

7. Let you use our Marks. (License Agreement - Section 5) 8. Periodically offer refresher training courses. (License Agreement - Section 4.A.) Although we do not have a marketing or advertising fund to which you must contribute, we do advertise Cookie System Facilities with our own funds regionally and locally through direct mail and in print media and point-of-sale materials. An in-house advertising department develops the advertising. You may obtain samples of the items we have prepared. There currently is a marketing committee of our independent licensee association with which we consult on advertising policies. The association selects the committee's members. The committee serves in an advisory capacity only. We have no power to form, change or dissolve the committee. We have no advertising cooperatives. You currently need not buy or use electronic cash register or computer systems (although we may make you do so during the term of your license). (License Agreement - Section 2.E.) We estimate that it will be 2 to 9 months between the time you sign the License Agreement and open your Facility, but the interval depends on the site's location and condition, the Facility's construction schedule, the extent to which you must upgrade or remodel an existing location, the delivery schedule for equipment and supplies, delays in securing financing arrangements and completing training, and your compliance with local laws and regulations. If you buy an existing Facility, we estimate the interval to be one to 3 months. You may not open the Facility for business until: (1) we accept the Facility in writing; (2) pre-opening training is complete to our satisfaction; (3) you have paid the initial license fee and all other amounts then due to us; and (4) you give us copies of all required insurance policies or other evidence of insurance coverage and payment of premiums. Subject to these conditions, you must open the Facility for business within 365 days after signing the License Agreement or by the date the lease specifies, whichever is earlier. (License Agreement - Section 2.F.) Before the Facility opens, we will provide initial training on operating a Cookie System Facility to you (or your managing owner) and one managerial employee. Approximately 7 working days of training will occur at an operating Cookie System Facility and/or at our designated training facility in Georgia or some other location we designate. The two attendees must complete initial training to our satisfaction and participate in all other activities required to operate the Facility. Although we do not charge separately for this training (except when there is a transfer), you must pay all travel and living expenses which you and your employees incur. You must replace the manager if we determine that he or she is not qualified to hold this position. If you (or your managing owner) cannot complete initial training to our satisfaction, we may terminate the License Agreement. (License Agreement - Section 4.A.) We expect that training will occur after you sign the License Agreement and while you are developing the Facility. We plan to be flexible in scheduling training to accommodate our personnel, you and your personnel. We have monthly training schedules. You generally must complete training 14 days before the Facility opens. As of the date of this offering circular, we provided the following training: 23

<TABLE> <CAPTION> =========================================================================================================== Hours of Hours of On the Time Instructional Classroom Job Subject Begun Manual Training Training Instructor ----------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> OPERATIONS COURSE: Day 1 Ops. and 4.5 2.0 Note 1 ordering, approved Training Manuals product lines, and Videos storage, display, packaging, maintenance and equipment ----------------------------------------------------------------------------------------------------------- TECHNICAL SKILLS: Day 2 Ops. and 1.5 26 Note 1 store operations, Training Manuals baking, production, and Videos projections, decorating and scheduling ----------------------------------------------------------------------------------------------------------- MANAGEMENT SKILLS: Day 3 Ops. and 9 3 Note 1 hiring, discipline, Training Manuals documentation, and Videos administration, customer service and selling skills ----------------------------------------------------------------------------------------------------------- COMPANY CULTURE: Day 1 Ops. and 4.0 Note 1 welcome, safety and Training Manuals marketing and Videos ----------------------------------------------------------------------------------------------------------- Proficiency Test Day 5 Ops. and 2 Note 1 Training Manuals and Videos =========================================================================================================== </TABLE> /1/ Terri Earls, our Training Manager, will supervise training. Terri has 9 years of experience in human resource management and training. Cookie System Facility employees also will provide training in the areas in which they have experience. __________ You (or your managing owner) and/or previously trained and experienced managers must attend any periodic refresher training courses that we provide and pay the applicable fees (see Item 24

6) and travel and living expenses. You also must pay us for training new managers hired after the Facility opens. Item 12 ------- TERRITORY You will operate the Facility at a specific location that we first must approve. This is the only right we give you. You do not have any exclusive or protected area around the Facility, any other territorial rights, any options or rights of first refusal to acquire more licenses for Cookie System Facilities (except as noted below) or any similar rights or protection. You may not operate the Facility from another location without our written approval. Under the License Agreement, you generally may sell authorized and approved products and services only over-the-counter at your location and may not have any mail order, delivery or other activities where you sell or deliver products or services away from your location. However, if we and you sign the Addendum to License Agreement for Delivery Services, you may sell and deliver Products produced at your Facility away from the Facility's physical premises and within a limited geographic area. Because you have no territorial or similar rights, we (and our affiliates, if any) may do whatever we want whenever and wherever we want. For example, we may establish and allow other licensees to establish Cookie System Facilities at any location and on any terms and conditions we feel appropriate, including in other spaces and at other locations within your Facility's shopping mall or center. However, if we decide during the term of your License Agreement to establish or allow another licensee to establish a Cookie System Facility within your Facility's shopping mall or center, we first will notify you of our desire to do so. If you (and your owners) are fully complying with the License Agreement, you will have a right of first refusal to acquire a license for that Cookie System Facility on the terms of our then current license agreement. To exercise this right, you have 30 calendar days after we notify you of our plans to tell us that you want to acquire a license for that Cookie System Facility and to pay us a nonrefundable $10,000 deposit (which we will apply toward the initial license fee due for that Facility). If you do not exercise your right of first refusal, or you (or your owners) are not fully complying with the License Agreement, or you choose not to acquire a license for the Cookie System Facility after paying us the $10,000 nonrefundable deposit, we may establish or allow another licensee to establish a Cookie System Facility within your shopping mall or center on any terms and conditions we feel appropriate. We also may sell identical, similar or dissimilar products and services, whether identified by the Marks or other trademarks or service marks, through any distribution channels we feel appropriate, wherever located or operating. In addition, as discussed in Item 1, we or one of our affiliates may acquire or actively seek to acquire businesses or franchise systems that are your competitors and such competitors may have locations near your Facility, including locations within the same shopping mall. These activities may compete with you. One of our affiliates, MFOCI, specifically reserves the rights described in this paragraph. As set forth in Item 1 above, MFOCI currently owns and operates Hot Sam Pretzel and Bakery Stores, and grants licenses and franchises for the operation of and/or owns and operates Mrs. 25

Fields Cookie Stores and Original Cookie Company Stores. In addition, MFOCI retains the right to do the following: (1) sell and franchise and license others to sell Hot Sam products and other items and services offered by Hot Sam Pretzel Bakery Stores under the Hot Sam trademarks and other trademarks and service marks through Hot Sam Pretzel Bakery Stores on any terms and conditions and at any location that MFOCI deems appropriate; (2) sell and license and franchise others to sell any other products or services under the Hot Sam trademarks; (3) own, operate and grant others the right to own or operate Hot Sam Pretzel Bakery Stores or other baked goods and snack food businesses at the locations and on the terms and conditions as MFOCI, in its sole discretion, deems appropriate; (4) sell and franchise and license others to sell Mrs. Fields products and other items and services offered by Mrs. Fields Retail Outlets under the Mrs. Fields trademarks and other trademarks and service marks through Mrs. Fields Retail Outlets on any terms and conditions and at any location that MFOCI deems appropriate; (5) sell and license and franchise others to sell any other products or services under the Mrs. Fields trademarks (including items such as refrigerated ready-to-bake cookie dough sold through various retail outlets); and (6) own, operate and grant others the right to own or operate Mrs. Fields Cookie Stores, or other dessert and snack food businesses at the locations and on the terms and conditions as MFOCI, in its sole discretion, deems appropriate. These activities may compete with you. Similarly, another one of our affiliates, PTI, specifically reserves the rights described in this paragraph. As set forth in Item 1 above, PTI currently grants licenses and franchises for the operation of Pretzel Time Stores. In addition, PTI, specifically retains the right to do the following: (1) sell and franchise and license others to sell Pretzel Time products and other items and services offered by Pretzel Time Stores under the Pretzel Time trademarks and other trademarks and service marks through Pretzel Time Stores on any terms and conditions and at any location that PTI deems appropriate; (2) sell and license and franchise others to sell any other products or services under the PTI trademarks (including items such as refrigerated ready-to-bake cookie dough sold through various retail outlets); and (3) own, operate and grant others the right to own or operate Pretzel Time Stores or other dessert and snack food businesses at the locations and on the terms and conditions as PTI in its sole discretion, deems appropriate. These activities may compete with you. In addition, Pretzelmaker and Pretzelmaker-Canada grant geographic areas around each Pretzelmaker Store (usually limited to the shopping mall in which the Store is located) within which they will not, except in certain circumstances relating to alternative distribution licensees, establish and operate or franchise others to establish and operate Pretzelmaker Stores. Subject to the preceding sentence, our affiliates, Pretzelmaker and Pretzelmaker-Canada, specifically retain the right to do the following: (1) sell and franchise and license others to sell Pretzelmaker products and other items and services offered by Pretzelmaker Stores under the Pretzelmaker trademarks and other trademarks and service marks through Pretzelmaker Stores on any terms and conditions and at any location that Pretzelmaker or Pretzelmaker- Canada deems appropriate; (2) sell and license and franchise others to sell any other products or services under the Pretzelmaker trademarks (including items such as refrigerated ready-to-bake dough sold through various retail outlets); and (3) own, operate and grant others the right to own or operate Pretzelmaker Stores or other dessert and snack food 26

businesses at the locations and on the terms and conditions as Pretzelmaker or Pretzelmaker-Canada in its sole discretion, deems appropriate. These activities may compete with you. We periodically might allow you to sell some or all of the products that you produce at the Facility from one or more Non-Baking Facilities. You may do so only with our written approval and only in the manner we specify. You must sign our "Addendum to License Agreement for Non-Baking Facilities" (Exhibit C) (the "Addendum"). You may not operate any Non-Baking Facility unless it is specifically identified in the Addendum and operated exclusively in the shopping mall or center. Your right to operate Non-Baking Facilities, however, always will be subject to the primary landlord's consent and any conditions it imposes. If the landlord withdraws its consent, you must stop operating the Non-Baking Facility immediately. Except as provided in the Addendum, the License Agreement controls your operation of Non-Baking Facilities. You may not begin operating a Non-Baking Facility until we notify you in writing that it meets our standards and specifications. We may terminate the Addendum if we decide to establish or allow you or others to establish other Cookie System Facilities within your shopping mall or center. (See Item 17) 28A

Item 13 ------- TRADEMARKS You may use our Marks in operating the Facility. Our principal Marks are: <TABLE> <CAPTION> ====================================================================================================== Affidavits of Use and Registration (where applicable) Mark Number Date Issued Incontestability Filed? ------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> "Great American Cookie 1,657,698 09/17/91 N/A Co. & Design(R)" ------------------------------------------------------------------------------------------------------ "GREAT AMERICAN 74/574483 09/16/94 N/A COOKIES" (Serial No.) (Date filed) ------------------------------------------------------------------------------------------------------ "Great American Cookie N/A N/A N/A Company" and Design ====================================================================================================== </TABLE> All of these Marks cover retail cookie store services. The first Mark is registered on the Principal Register of the United States Patent and Trademark Office (PTO). The Mark is not yet due for renewal. We have filed an application to register the second Mark on the Principal Register based on actual use. We have not yet filed any papers for the third Mark. By not having a Principal Register federal registration for the second and third Marks, we do not have certain presumptive legal rights granted by a registration. You must follow our rules when you use the Marks. You may not use any Mark as part of your corporate or legal business name or with modifying words, terms, designs or symbols (except for those we license to you). You may not use any Mark in selling unauthorized products or services or in any other way we have not expressly authorized in writing. There are no currently effective material determinations of the PTO, the Trademark Trial and Appeal Board, the trademark administrator of any state or any court, and no pending infringement, opposition or cancellation proceedings or material litigation, involving the principal Marks. No agreements limit our right to use or license the Marks in a manner material to the license. You must notify us immediately of any apparent infringement or challenge to your use of any Mark, or of any claim by any person of any rights in any Mark, and you may not communicate with any person other than us and our attorneys, and your attorneys, in any infringement, challenge or claim. We may take the action we feel is best (or no action if we feel none is necessary) and control exclusively any litigation, PTO proceeding or any other administrative proceeding from the 29

infringement, challenge or claim or otherwise concerning any Mark. You must sign any documents and take any action that, in the opinion of our attorneys, are necessary or advisable to protect and maintain our interests in any litigation or PTO or other proceeding or otherwise to protect and maintain our interests in the Marks. We will reimburse you for all damages and costs you incur in any proceeding disputing your right to use the Marks if you have timely notified us of the claim or proceeding and complied with the License Agreement. We may defend and control the defense of any proceeding concerning your use of any Mark. If it becomes advisable at any time in our sole discretion for us and/or you to modify or discontinue using any Mark and/or use one or more additional or substitute trade or service marks, you must comply with our directions within a reasonable time after receiving notice. We will reimburse you for your reasonable direct expenses of changing your Facility's signs. However, we need not reimburse you for any loss of revenue due to any modified or discontinued Mark or for your expenses in promoting a modified or substitute trademark or service mark. We do not actually know of either superior prior rights or infringing uses that could materially affect your use of our principal Marks in any state. Item 14 ------- PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION There are no patents material to the license. We claim copyrights in our License Agreement forms, Operations Manuals, bulletins, memoranda, charts, advisories, cookie designs, promotional and advertising materials, plans and specifications for Cookie System Facilities, and similar items used in operating the Facility. We have not registered these copyrights with the United States Registrar of Copyrights. You may use these items only in the way we specify and only while operating your Facility. There currently are no effective determinations of the Copyright Office (Library of Congress) or any court regarding any of the copyrighted materials. There are no agreements currently in effect which significantly limit our right to use or allow others to use the copyrighted materials. We do not actually know of any infringing uses which could materially affect your use of the copyrighted materials in any state. We need not protect or defend copyrights, although we intend to do so when this action is in the best interests of our system. Our Operations Manuals and other materials contain our confidential information. This information includes site selection criteria; recipes; methods, formats, specifications, standards, systems, procedures, sales and marketing techniques, knowledge and experience in developing and operating Cookie System Facilities; marketing and advertising programs for Cookie System Facilities; knowledge of specifications for and suppliers of certain fixtures, furniture, furnishings, equipment, products, materials and supplies; and knowledge of the operating results and financial performance of Cookie System Facilities other than your Facility. 30

You must promptly disclose to us all ideas, concepts, techniques or materials concerning a Cookie System Facility, whether or not protectable intellectual property and whether created by or for you or your owners. These will be our exclusive property and part of the system and works made-for-hire for us. You and your owners must sign any documents we request to show our ownership of, or to help us obtain intellectual property rights in, these ideas, concepts, techniques or materials. You may not use our confidential information in an unauthorized manner and must take reasonable steps to prevent its disclosure to others. Item 15 ------- OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS You must at all times faithfully, honestly and diligently perform your obligations under the License Agreement, continuously exert your best efforts to promote and enhance the Facility and not engage in any other business or activity that conflicts with your obligations to operate the Facility properly. System Standards may regulate staffing levels and management, communicating the identities of Facility personnel and employee qualifications, training, dress and appearance (although you alone are responsible for selecting and promoting your employees, the hours they work, their rates of pay and other benefits, the work assigned to them and their working conditions). Although we recommend it, you (or your managing owner) need not participate personally in the Facility's direct operation. In that case, however, you must hire someone who will manage the Facility's day-to-day operations on site. You (or your managing owner) and your managerial employee must complete initial training satisfactorily. You must replace your managerial employee if he or she is not qualified to hold this position. The managerial employee need not have an equity interest in the Facility but must agree in writing to preserve any confidential information to which he or she has access and not to compete with Cookie System Facilities. Your managing owner must have at least a 25% ownership interest in your profits, losses and assets. If you are a corporation, limited liability company or partnership, your owners must personally guarantee your obligations under the License Agreement and also agree to be personally bound by, and personally liable for the breach of, every provision of the License Agreement, both monetary and non-monetary obligations, including the confidentiality and non-compete obligations. This "Guaranty and Assumption of Obligations" is part of the License Agreement. If we, in a given case, do not require one of your owners to sign the Guaranty, that owner still must agree to comply with all of the non-monetary obligations in the License Agreement as if he or she were the licensee, including the confidentiality and non-compete obligations. Your officers and directors also must comply with this requirement. Our standard "Principal's Agreement" is Exhibit H. 31

Item 16 ------- RESTRICTIONS ON WHAT THE FRANCHISE OWNER MAY SELL You must offer all products and services that we periodically require for Cookie System Facilities. You may not offer any products or services that we have not authorized. (See Item 8) Our System Standards may regulate required or authorized products and services, product and service categories and product inventory requirements. We periodically may change required and/or authorized products and services and product and service categories. There are no limits on our right to do so. You need not invest additional capital in the Facility during the first 2 years of the term of your License Agreement unless your lease or applicable laws require you to do so. You need not spend $10,000 or more on capital modifications during the last 2 years of the Agreement's term unless we then agree to grant you a successor license when the Agreement expires. Lastly, you need not spend $25,000 or more on capital modifications during any 3 year period (except for the last 2 years, during which there are no limits). Subject to these limitations, we will give you 60 days to comply with capital modifications that will cost up to $5,000, 120 days to comply with capital modifications that will cost between $5,000 and $10,000, and 180 days to comply with capital modifications that will cost over $10,000. (See Item 12 for certain territorial, customer and operating restrictions). Item 17 ------- RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION This table lists certain important provisions of the license and related agreements. You should read these provisions in the agreements attached to this offering circular. <TABLE> <CAPTION> ================================================================================================ Provision Section in License Summary Agreement ------------------------------------------------------------------------------------------------ <S> <C> <C> (a) Term of the franchise Section 1.D. (and Equal to current term of lease or Section 1 of Sublease) sublease for premises ------------------------------------------------------------------------------------------------ (b) Renewal or extension of Section 12 If you are in good standing, you the term may acquire a successor license on our then current terms ------------------------------------------------------------------------------------------------ (c) Requirements for you to Section 12 Maintain possession of premises or renew or extend find acceptable substitute premises, remodel Facility under our then current standards, sign new agreement and other documents and pay fee ================================================================================================ </TABLE> 32

<TABLE> <CAPTION> ================================================================================================ Provision Section in License Summary Agreement ------------------------------------------------------------------------------------------------ <S> <C> <C> (d) Termination by you Section 13.A. If we breach Agreement and do not cure default after notice from you ------------------------------------------------------------------------------------------------ (e) Termination by us without None We may not terminate you without cause cause ------------------------------------------------------------------------------------------------ (f) Termination by us with Section 13.B. (also We may terminate only if you or cause Delivery Addendum and your owners commit one of several Section 7.1 of Sublease) violations ------------------------------------------------------------------------------------------------ (g) "Cause" defined - defaults Section 13.B. (and You have 3 days to cure health, which can be cured Section 7.1 of Sublease) safety or sanitation law violations, 7 days to cure monetary defaults and 30 days to cure operational defaults and other defaults not listed in (h) below; you generally have 5 days to cure defaults under Sublease ================================================================================================ </TABLE> 33

<TABLE> <CAPTION> =============================================================================================== Provision Section in License Summary Agreement ----------------------------------------------------------------------------------------------- <S> <C> <C> (h) "Cause" defined - defaults Section 13.B. Non-curable defaults include which cannot be cured failure to complete training, interference with our completion of Facility's development, failure to open Facility by earlier of date in lease or 365 calendar days after Agreement signed, failure to operate Facility every day, unapproved transfers, material misrepresentations or omissions, conviction of a felony, failure to maintain insurance, interference with our inspection rights, any judgments, executions or liens against the Facility remain unsatisfied and unbonded of record for more than 15 days, failure to transfer on death or disability, we send notice of termination under another license agreement with you for failure to pay monies owed, dishonest or unethical conduct, uncured or uncurable default under lease, unauthorized use or disclosure of the Operations Manual or confidential information, failure to pay taxes, failure to comply with System Standard modifications within required time period, understating Facility's Gross Sales by more than 4%, repeated defaults (even if cured), an assignment for the benefit of creditors and an appointment of a trustee or receiver ----------------------------------------------------------------------------------------------- (i) Your obligations on Section 14 Obligations include payment of termination/nonrenewal outstanding amounts, complete deidentification and return of confidential information (also see (o) and (r) below) =============================================================================================== </TABLE> 34

<TABLE> <CAPTION> ================================================================================================= <S> <C> <C> Provision Section in License Summary Agreement ------------------------------------------------------------------------------------------------- (j) Assignment of contract by Section 11.A. No restriction on our right to us assign ------------------------------------------------------------------------------------------------- (k) "Transfer" by you Section 12.B. (and Includes transfer of License -definition Section 4 of Sublease) Agreement and Facility's assets and ownership change ------------------------------------------------------------------------------------------------- (l) Our approval of transfer Section 11.C. (and We must approve all transfers; no by you Section 4 of Sublease) transfer without our written consent ------------------------------------------------------------------------------------------------- (m) Conditions for our Section 11.C. New licensee qualifies, you pay us approval of transfer all amounts due and submit all reports, you have not defaulted during previous 90 days, new licensee (and its owners and affiliates) do not engage in a competitive business, lease transferred, transferee assumes your Agreement, training and transfer fees paid, we approve purchase price, you subordinate amounts due to you, you deidentify, you remain liable under Agreement during remaining term and you sign other documents we require (also see (r) below) ------------------------------------------------------------------------------------------------- (n) Our right of first refusal Section 11.G. We may match any offer for your to acquire your business Facility or an ownership interest in you ------------------------------------------------------------------------------------------------- (o) Our option to purchase Section 14.E. We may buy the Facility at fair your business market value after the Agreement terminates or expires (without renewal) ------------------------------------------------------------------------------------------------- (p) Your death or disability Section 11.E. Assignment of license or ownership interest in you to approved party within 12 months; we may manage Facility if qualified manager not present ================================================================================================= </TABLE> 35

<TABLE> <CAPTION> ================================================================================================ <S> <C> <C> Provision Section in License Summary Agreement ------------------------------------------------------------------------------------------------ (q) Non-competition covenants Section 7 No diverting business and no during the term of the controlling ownership interest in, franchise or performing services for, competitive business anywhere; no interference with our or a licensee's employees ------------------------------------------------------------------------------------------------ (r) Non-competition covenants Section 14.D. No direct or indirect ownership after the franchise is interest in, or performing terminated or expires services for, competing business for 1 year at Facility's premises or within 5 miles of premises (same restrictions apply after transfer but for 2 years) ------------------------------------------------------------------------------------------------ (s) Modification of the Section 16.I. No modifications generally but we agreement may change Operations Manual and System Standards ------------------------------------------------------------------------------------------------ (t) Integration/merger clause Section 16.K. Only the terms of the License Agreement (including the Operations Manual) and other documents you sign with us are binding (subject to state law). Any other promises might not be enforceable ------------------------------------------------------------------------------------------------ (u) Dispute resolution by None Our Agreement does not include arbitration or mediation this type of provision ------------------------------------------------------------------------------------------------ (v) Choice of forum Section 16.G. Litigation generally must be in Georgia (subject to state law) ------------------------------------------------------------------------------------------------ (w) Choice of law Section 16.F. Except for federal law and state non-competition law, Georgia law applies ================================================================================================ </TABLE> These states have statutes that may supersede the license agreement in your relationship with the licensor, including the areas of termination and renewal of your license: ARKANSAS [Stat. Section 70-807], CALIFORNIA [Bus. & Prof. Code Sections 20000-20043], CONNECTICUT [Gen. Stat. Section 42-133e et seq.], -- ---- DELAWARE [Code Sections 2551-2556], HAWAII [Rev. Stat. Section 482E-1], ILLINOIS [815 ILCS 705/19, 20], INDIANA [Stat. Sections 23-2-2.5-1 and 23-2-2.7], IOWA [Code Sections 523H.1-523H.17], MICHIGAN [Stat. Section 19.854(27)], MINNESOTA [Stat. Section 80C.14], MISSISSIPPI [Code Section 75-24- 36

51], MISSOURI [Stat. Section 407.400], NEBRASKA [Rev. Stat. Section 87-401], NEW JERSEY [Stat. Section 56:10-1], SOUTH DAKOTA [Codified Laws Section 37-5A-51], VIRGINIA [Code 13.1-557-574-13.1-564], WASHINGTON [Code Section 19.100.180], WISCONSIN [Stat. Section 135.03]. These and other states may have court decisions that may supersede the license agreement in your relationship with the licensor, including the areas of termination and renewal of your license. Item 18 ------- PUBLIC FIGURES We do not use any public figure to promote our license. Item 19 ------- EARNINGS CLAIMS Except for the actual operating results of an existing Cookie System Facility that we sell you, we do not furnish or authorize our salespersons to furnish any oral or written information concerning the actual or potential sales, costs, income or profits of a Cookie System Facility. Actual results vary from unit to unit, and we cannot estimate the results of any particular license. 37

Item 20 ------- LIST OF OUTLETS @@ SYSTEMWIDE FRANCHISED FACILITY STATUS SUMMARY FOR YEARS ENDING 1998/1997/1996/1/ <TABLE> <CAPTION> ==================================================================================================================================== State Transfers Canceled Or Not Reacquired Left The Total From Left Franchises Terminated Renewed By Franchisor System Other Columns/2/ Operating At Year End ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> <C> Alabama 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/1/0 12/14/13 ------------------------------------------------------------------------------------------------------------------------------------ Arizona 0/0/0 1/0/0 0/0/0 0/0/0 0/0/0 1/0/0 2/4/4 ------------------------------------------------------------------------------------------------------------------------------------ Arkansas 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 3/3/3 ------------------------------------------------------------------------------------------------------------------------------------ California 0/0/0 0/1/0 0/0/0 0/0/0 0/0/0 0/1/0 1/1/2 ------------------------------------------------------------------------------------------------------------------------------------ Colorado 3/0/0 1/0/0 0/0/1 0/0/0 0/0/0 4/0/1 3/4/4 ------------------------------------------------------------------------------------------------------------------------------------ Connecticut 0/0/0 0/1/0 0/0/0 0/0/0 0/0/0 0/1/0 0/0/1 ------------------------------------------------------------------------------------------------------------------------------------ Florida 1/1/1 0/7/0 0/0/2 0/4/0 0/0/0 1/12/3 22/25/28 ------------------------------------------------------------------------------------------------------------------------------------ Georgia 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 10/10/8 ------------------------------------------------------------------------------------------------------------------------------------ Illinois 1/0/0 1/1/0 0/0/0 0/0/0 0/0/0 2/1/0 8/9/8 ------------------------------------------------------------------------------------------------------------------------------------ Indiana 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 5/5/2 ------------------------------------------------------------------------------------------------------------------------------------ Iowa 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 9/2/2 ------------------------------------------------------------------------------------------------------------------------------------ Kansas 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 1/1/1 ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> /1/ Note: The numbers are as of our fiscal years ending June 28, 1998, June 29, 1997 and June 30, 1996. /2/ The numbers in the "Total" column may exceed the number of outlets affected because several events may have affected the same outlet. For example, the same outlet might have had multiple owners, or we might have reacquired a terminated outlet. 38

<TABLE> <CAPTION> ==================================================================================================================================== State Transfers Canceled Or Not Reacquired Left The Franchises Terminated Renewed By Franchisor System Other Total From Left Operating At Columns/2/ Year End <S> <C> <C> <C> <C> <C> <C> <C> ------------------------------------------------------------------------------------------------------------------------------------ Kentucky 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 6/6/6 ------------------------------------------------------------------------------------------------------------------------------------ Louisiana 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 13/13/13 ------------------------------------------------------------------------------------------------------------------------------------ Maryland 0/1/1 0/1/1 0/0/0 0/0/1 0/0/0 0/2/3 3/3/3 ------------------------------------------------------------------------------------------------------------------------------------ Michigan 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 1/1/1 ------------------------------------------------------------------------------------------------------------------------------------ Minnesota 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 3/1/1 ------------------------------------------------------------------------------------------------------------------------------------ Mississippi 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 3/2/2 ------------------------------------------------------------------------------------------------------------------------------------ Missouri 0/1/0 0/0/0 0/0/0 0/0/0 0/0/0 0/1/0 7/7/6 ------------------------------------------------------------------------------------------------------------------------------------ Nevada 0/0/0 0/0/0 0/0/1 0/0/0 0/0/0 0/0/1 3/3/2 ------------------------------------------------------------------------------------------------------------------------------------ New Jersey 0/2/0 2/0/0 0/0/0 0/0/0 0/0/0 2/2/0 6/8/7 ------------------------------------------------------------------------------------------------------------------------------------ New Mexico 0/0/0 0/1/0 0/0/0 0/1/0 0/0/0 0/2/0 1/1/1 ------------------------------------------------------------------------------------------------------------------------------------ New York 1/0/0 1/0/2 0/0/0 0/0/1 0/0/0 2/0/3 7/7/7 ------------------------------------------------------------------------------------------------------------------------------------ North Carolina 0/2/0 0/1/0 0/0/0 0/0/0 0/0/0 0/5/0 18/19/18 ------------------------------------------------------------------------------------------------------------------------------------ Ohio 0/0/0 0/0/1 0/0/0 0/0/1 0/0/0 0/0/2 4/4/4 ------------------------------------------------------------------------------------------------------------------------------------ Oklahoma 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 5/7/7 ------------------------------------------------------------------------------------------------------------------------------------ Pennsylvania 1/1/0 0/1/1 0/0/0 0/1/0 0/0/0 1/3/1 5/5/6 ------------------------------------------------------------------------------------------------------------------------------------ South Carolina 0/0/1 0/2/0 0/0/0 0/2/0 0/0/0 0/4/1 8/8/10 ------------------------------------------------------------------------------------------------------------------------------------ South Dakota 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 1/0/0 ==================================================================================================================================== </TABLE> /1/ Note: The numbers are as of our fiscal years ending June 28, 1998, June 29, 1997 and June 30, 1996. /2/ The numbers in the "Total" column may exceed the number of outlets affected because several events may have affected the same outlet. For example, the same outlet might have had multiple owners, or we might have reacquired a terminated outlet. 39

<TABLE> <CAPTION> ==================================================================================================================================== State Transfers Canceled Or Not Reacquired Left The Franchises Terminated Renewed By Franchisor System Other Total From Left Operating At Columns/2/ Year End ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> <C> Tennessee 1/0/0 1/0/0 0/0/2 0/0/0 0/0/0 2/0/2 13/16/15 ------------------------------------------------------------------------------------------------------------------------------------ Texas 0/1/2 0/0/0 0/0/0 0/0/0 0/0/0 0/1/2 47/54/51 ------------------------------------------------------------------------------------------------------------------------------------ Virginia 0/0/0 0/0/2 0/0/0 0/0/0 0/0/0 0/0/2 7/7/7 ------------------------------------------------------------------------------------------------------------------------------------ West Virginia 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 5/3/3 ------------------------------------------------------------------------------------------------------------------------------------ Wisconsin 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 3/3/2 ------------------------------------------------------------------------------------------------------------------------------------ Guam 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 2/2/2 ------------------------------------------------------------------------------------------------------------------------------------ Totals 8/30/5 7/15/7 0/0/6 0/8/3 0/0/0 15/56/21 247/258/250 ==================================================================================================================================== @@ </TABLE> As noted further below in this Item 20 and in Item 1 and Exhibit I of this offering circular, concurrent with MFOCI's acquisition of Cookies USA on August 24, 1998, we reacquired 29 licensed Cookie System Facilities which we now operate for our own account, and MFOCI acquired 8 licensed Cookie System Facilities which it now operates as our licensee. @@ /1/ Note: The numbers are as of our fiscal years ending June 28, 1998, June 29, 1997 and June 30, 1996. /2/ The numbers in the "Total" column may exceed the number of outlets affected because several events may have affected the same outlet. For example, the same outlet might have had multiple owners, or we might have reacquired a terminated outlet. 40

STATUS OF COMPANY OWNED FACILITIES FOR YEARS ENDING 1998/1997/1996/(1)/ <TABLE> <CAPTION> ============================================================================================================ State Facilities Closed Facilities Opened Total Facilities Operating During Year/2/ During Year At Year End ------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> Arkansas 0/0/0 0/0/0 1/1/1 ------------------------------------------------------------------------------------------------------------ California 0/3/4 0/0/0 1/1/4 ------------------------------------------------------------------------------------------------------------ Florida 1/2/0 1/4/0 2/2/0 ------------------------------------------------------------------------------------------------------------ Georgia 1/2/3 0/1/0 15/19/20 ------------------------------------------------------------------------------------------------------------ Illinois 0/1/1 0/0/0 1/1/2 ------------------------------------------------------------------------------------------------------------ Indiana 1/3/0 0/0/1 1/2/5 ------------------------------------------------------------------------------------------------------------ Iowa 7/0/0 0/0/1 0/7/7 ------------------------------------------------------------------------------------------------------------ Kansas 0/0/0 0/0/0 4/4/4 ------------------------------------------------------------------------------------------------------------ Kentucky 0/0/0 0/0/0 1/1/1 ------------------------------------------------------------------------------------------------------------ Louisiana 0/0/1 0/0/0 2/3/3 ------------------------------------------------------------------------------------------------------------ Maryland 0/1/0 0/0/1 1/1/2 ------------------------------------------------------------------------------------------------------------ Massachusetts 0/3/1 0/0/0 1/1/4 ------------------------------------------------------------------------------------------------------------ Michigan 0/0/0 0/0/1 6/6/6 ------------------------------------------------------------------------------------------------------------ Minnesota 2/0/1 0/0/0 1/3/3 ------------------------------------------------------------------------------------------------------------ Mississippi 0/1/0 0/0/0 0/0/1 ------------------------------------------------------------------------------------------------------------ Missouri 0/2/0 0/0/0 4/4/6 ------------------------------------------------------------------------------------------------------------ New Hampshire 0/0/0 0/0/0 1/1/1 ------------------------------------------------------------------------------------------------------------ New Jersey 0/1/2 0/1/0 1/1/2 ------------------------------------------------------------------------------------------------------------ New Mexico 0/0/0 0/1/0 1/1/0 ------------------------------------------------------------------------------------------------------------ New York 1/1/1 0/0/2 4/6/7 ------------------------------------------------------------------------------------------------------------ North Carolina 0/1/0 0/0/0 0/0/1 ------------------------------------------------------------------------------------------------------------ North Dakota 0/0/0 0/0/0 1/1/1 ------------------------------------------------------------------------------------------------------------ Ohio 0/1/1 0/0/2 7/7/8 ------------------------------------------------------------------------------------------------------------ Oklahoma 0/0/0 0/0/0 2/2/2 ------------------------------------------------------------------------------------------------------------ Oregon 0/0/0 0/0/0 1/1/1 ------------------------------------------------------------------------------------------------------------ Pennsylvania 0/0/1 0/1/0 4/4/3 ------------------------------------------------------------------------------------------------------------ South Carolina 0/0/0 0/2/0 3/3/1 ------------------------------------------------------------------------------------------------------------ South Dakota 1/0/0 0/0/0 0/1/1 ============================================================================================================ </TABLE> 41

<TABLE> <CAPTION> ============================================================================================================== State Facilities Closed Facilities Opened Total Facilities Operating During Year/2/ During Year At Year End -------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Tennessee 0/0/0 0/0/0 1/1/1 -------------------------------------------------------------------------------------------------------------- Texas 0/1/0 0/0/1 1/1/2 -------------------------------------------------------------------------------------------------------------- Virginia 1/0/1 0/0/1 7/8/8 -------------------------------------------------------------------------------------------------------------- Washington 0/0/1 0/0/1 1/1/1 -------------------------------------------------------------------------------------------------------------- West Virginia 2/0/0 0/0/0 0/2/2 -------------------------------------------------------------------------------------------------------------- Wisconsin 0/0/2 0/0/0 0/0/0 -------------------------------------------------------------------------------------------------------------- Totals 17/23/20 1/9/11 76/97/111 ============================================================================================================== @@ </TABLE> /1/ The numbers are as of our fiscal years ending June 28, 1998, June 29, 1997 and June 30, 1996. /2/ This chart includes the Cookie System Facilities that we and some of the individuals identified in Item 2 currently own and operate and/or have owned and operated. The "Facilities Closed" column includes Cookie System Facilities that we no longer operate because we sold them to licensees. Concurrent with MFOCI's acquisition of Cookies USA on August 24, 1998, MFOCI acquired 29 Cookie System Facilities through the acquisition of all of the stock of 2 corporate Cookie System Facility licensees. Immediately thereafter, MFOCI merged the 2 Cookie System Facility licensees with and into us. We now operate these 29 Cookie System Facilities for our own account. (See Exhibit I for more information on these Cookie System Facilities) Concurrent with MFOCI's acquisition of Cookies USA, MFOCI also acquired 8 additional Cookie System Facilities through the acquisition of all of the assets of 6 corporate Cookie System Facility licensees all owned by the same entity. Since the acquisition, MFOCI has operated these 8 Cookie System Facilities as our licensee. (See Exhibit I for more information on these Cookie System Facilities) @@ 42

PROJECTED SYSTEMWIDE OPENINGS AS OF JUNE 28, 1998 <TABLE> <CAPTION> ============================================================================================ State License Projected New Projected Agreements Franchised Company Owned Signed But Facilities In The Facility Openings Facilities Not Open Next Fiscal Year In The Next Fiscal Year ============================================================================================ <S> <C> <C> <C> Alabama 0 1 0 -------------------------------------------------------------------------------------------- Alaska 0 0 0 -------------------------------------------------------------------------------------------- Arizona 0 0 0 -------------------------------------------------------------------------------------------- Arkansas 0 0 0 -------------------------------------------------------------------------------------------- California 0 0 0 -------------------------------------------------------------------------------------------- Colorado 0 1 0 -------------------------------------------------------------------------------------------- Connecticut 0 0 0 -------------------------------------------------------------------------------------------- Delaware 0 0 0 -------------------------------------------------------------------------------------------- Florida 1 2 0 -------------------------------------------------------------------------------------------- Georgia 0 2 2 -------------------------------------------------------------------------------------------- Hawaii 0 0 0 -------------------------------------------------------------------------------------------- Idaho 0 0 0 -------------------------------------------------------------------------------------------- Illinois 0 0 0 -------------------------------------------------------------------------------------------- Indiana 0 0 0 -------------------------------------------------------------------------------------------- Iowa 0 1 0 -------------------------------------------------------------------------------------------- Kansas 0 0 0 -------------------------------------------------------------------------------------------- Kentucky 0 0 0 -------------------------------------------------------------------------------------------- Louisiana 0 0 1 -------------------------------------------------------------------------------------------- Maine 0 0 0 -------------------------------------------------------------------------------------------- Maryland 0 0 0 -------------------------------------------------------------------------------------------- Massachusetts 0 0 0 -------------------------------------------------------------------------------------------- Michigan 0 0 0 -------------------------------------------------------------------------------------------- Minnesota 0 0 0 -------------------------------------------------------------------------------------------- Mississippi 0 0 0 -------------------------------------------------------------------------------------------- Missouri 0 1 0 -------------------------------------------------------------------------------------------- Montana 0 0 0 -------------------------------------------------------------------------------------------- Nebraska 0 0 0 -------------------------------------------------------------------------------------------- Nevada 0 0 0 -------------------------------------------------------------------------------------------- New Hampshire 0 0 0 -------------------------------------------------------------------------------------------- New Jersey 0 0 0 -------------------------------------------------------------------------------------------- New Mexico 0 0 0 -------------------------------------------------------------------------------------------- New York 0 0 0 -------------------------------------------------------------------------------------------- North Carolina 0 1 0 -------------------------------------------------------------------------------------------- North Dakota 0 0 0 -------------------------------------------------------------------------------------------- Ohio 0 1 0 -------------------------------------------------------------------------------------------- Oklahoma 0 0 0 -------------------------------------------------------------------------------------------- Oregon 0 0 0 -------------------------------------------------------------------------------------------- Pennsylvania 0 1 0 ============================================================================================ </TABLE> 43

<TABLE> <CAPTION> ========================================================================================== <S> <C> <C> <C> Rhode Island 0 0 0 ------------------------------------------------------------------------------------------ South Carolina 0 0 0 ------------------------------------------------------------------------------------------ South Dakota 0 0 0 ------------------------------------------------------------------------------------------ Tennessee 0 0 0 ------------------------------------------------------------------------------------------ Texas 0 3 0 ------------------------------------------------------------------------------------------ Utah 0 0 0 ------------------------------------------------------------------------------------------ Vermont 0 0 0 ------------------------------------------------------------------------------------------ Virginia 0 1 0 ------------------------------------------------------------------------------------------ Washington 0 0 0 ------------------------------------------------------------------------------------------ West Virginia 0 0 0 ------------------------------------------------------------------------------------------ Wisconsin 0 1 0 ------------------------------------------------------------------------------------------ Wyoming 0 0 0 ------------------------------------------------------------------------------------------ Guam 0 1 0 ------------------------------------------------------------------------------------------ TOTAL 1 17 3 ========================================================================================== @@ </TABLE> Exhibit I is a list of the names of all Cookie System Facility licensees and the addresses and telephone numbers of their Cookie System Facilities. Exhibit J is the names and last known home addresses and home telephone numbers of the licensees who had outlets terminated, cancelled or not renewed or otherwise voluntarily or involuntarily ceased to do business under our License Agreement during the period beginning July 1, 1997 and ending June 28, 1998 or who have not communicated with us within 10 weeks of the application date. Item 21 ------- FINANCIAL STATEMENTS Attached as Exhibit A are the consolidated balance sheets of MFOCI and its subsidiaries as of January 3, 1998 and December 28, 1996, and the related consolidated statements of operations, stockholder's equity and cash flows for the year ended January 3, 1998 and the period from inception (September 18, 1996) to December 28, 1996, together with Report of Independent Public Accountants. Also attached as part of Exhibit A is the consolidated balance sheet (unaudited) of MFOCI and its subsidiaries as of October 3, 1998, and the related consolidated statement of operations for the period ended October 3, 1998 (unaudited). The financial statements described above are the consolidated financial statements of MFOCI, our parent company. Our financial statements are not included in this Offering Circular. Should we fail to fulfill our obligations to our franchisees, however, MFOCI unconditionally guarantees to fulfill such obligations. In states where we have registered this franchise offering, a copy of the written guarantee may be on file in the office of the administrator of the state franchise law. 44

Item 22 ------- CONTRACTS The following agreements are exhibits: (a) License Agreement -- Exhibit B (b) Addendum to License Agreement for Non-Baking Facilities -- Exhibit C (c) Sublease -- Exhibit D (d) Construction Activity Assistance Agreement -- Exhibit E (e) Equipment Order -- Exhibit F (f) Agreement for Purchase and Sale of Assets -- Exhibit G (g) Principal's Agreement -- Exhibit H (h) Collateral Assignment of Lease -- Exhibit M (i) Addendum to License Agreement for Delivery Services -- Exhibit N 45

EXHIBIT A --------- FINANCIAL STATEMENTS --------------------

ITEM 23 ------- RECEIPT THIS OFFERING CIRCULAR SUMMARIZES PROVISIONS OF THE FRANCHISE AGREEMENT AND OTHER INFORMATION IN PLAIN LANGUAGE. READ THIS OFFERING CIRCULAR AND ALL AGREEMENTS CAREFULLY. IF WE OFFER YOU A FRANCHISE, WE MUST PROVIDE THIS OFFERING CIRCULAR TO YOU BY THE EARLIEST OF: 1. THE FIRST PERSONAL MEETING TO DISCUSS OUR FRANCHISE; OR 2. TEN BUSINESS DAYS BEFORE SIGNING OF A BINDING AGREEMENT; OR 3. TEN BUSINESS DAYS BEFORE ANY PAYMENT TO US. YOU MUST ALSO RECEIVE A FRANCHISE AGREEMENT CONTAINING ALL MATERIAL TERMS AT LEAST FIVE BUSINESS DAYS BEFORE YOU SIGN ANY FRANCHISE AGREEMENT. IF WE DO NOT DELIVER THIS OFFERING CIRCULAR ON TIME OR IF IT CONTAINS A FALSE OR MISLEADING STATEMENT, OR A MATERIAL OMISSION, A VIOLATION OF FEDERAL AND STATE LAW MAY HAVE OCCURRED AND SHOULD BE REPORTED TO THE FEDERAL TRADE COMMISSION, WASHINGTON, D.C. 20580 AND THE APPROPRIATE STATE AGENCY IDENTIFIED ON EXHIBIT L. We authorize the respective state agencies identified on Exhibit L to receive service of process for us in the particular state. I have received a Uniform Franchise Offering Circular dated October 12, 1998, as amended November 24, 1998. This offering circular included the following Exhibits: A. Financial Statements B. License Agreement C. Addendum to License Agreement for Non-Baking Facilities D. Sublease E. Construction Activity Assistance Agreement F. Equipment Order G. Agreement for Purchase and Sale of Assets H. Principal's Agreement I. List of Licensees and Their Cookie System Facilities J. List of Licensees Who Left System During Our Last Fiscal Year or Have Not Communicated With us K. Operations Manual Table of Contents L. List of State Agencies/Agents for Service of Process M. Collateral Assignment of Lease N. Addendum to License Agreement For Delivery Services ________________________________ __________________________________ Date Licensee

ITEM 23 ------- RECEIPT THIS OFFERING CIRCULAR SUMMARIZES PROVISIONS OF THE FRANCHISE AGREEMENT AND OTHER INFORMATION IN PLAIN LANGUAGE. READ THIS OFFERING CIRCULAR AND ALL AGREEMENTS CAREFULLY. IF WE OFFER YOU A FRANCHISE, WE MUST PROVIDE THIS OFFERING CIRCULAR TO YOU BY THE EARLIEST OF: 1. THE FIRST PERSONAL MEETING TO DISCUSS OUR FRANCHISE; OR 2. TEN BUSINESS DAYS BEFORE SIGNING OF A BINDING AGREEMENT; OR 3. TEN BUSINESS DAYS BEFORE ANY PAYMENT TO US. YOU MUST ALSO RECEIVE A FRANCHISE AGREEMENT CONTAINING ALL MATERIAL TERMS AT LEAST FIVE BUSINESS DAYS BEFORE YOU SIGN ANY FRANCHISE AGREEMENT. IF WE DO NOT DELIVER THIS OFFERING CIRCULAR ON TIME OR IF IT CONTAINS A FALSE OR MISLEADING STATEMENT, OR A MATERIAL OMISSION, A VIOLATION OF FEDERAL AND STATE LAW MAY HAVE OCCURRED AND SHOULD BE REPORTED TO THE FEDERAL TRADE COMMISSION, WASHINGTON, D.C. 20580 AND THE APPROPRIATE STATE AGENCY IDENTIFIED ON EXHIBIT L. We authorize the respective state agencies identified on Exhibit L to receive service of process for us in the particular state. I have received a Uniform Franchise Offering Circular dated October 12, 1998, as amended November 24, 1998. This offering circular included the following Exhibits: A. Financial Statements B. License Agreement C. Addendum to License Agreement for Non-Baking Facilities D. Sublease E. Construction Activity Assistance Agreement F. Equipment Order G. Agreement for Purchase and Sale of Assets H. Principal's Agreement I. List of Licensees and Their Cookie System Facilities J. List of Licensees Who Left System During Our Last Fiscal Year or Have Not Communicated With us K. Operations Manual Table of Contents L. List of State Agencies/Agents for Service of Process M. Collateral Assignment of Lease N. Addendum to License Agreement For Delivery Services _______________________________ _______________________________ Date Licensee

RECEIPT OF FRANCHISE-RELATED DOCUMENTS -------------------------------------- The undersigned, personally and/or as an officer, managing member or partner of the proposed Licensee, does hereby acknowledge receipt of the following documents, in form for execution, relating to the license of Great American Cookie Company, Inc.: [ ] (1) License Agreement [ ] (2) Addendum to License Agreement for Non-Baking Facilities [ ] (3) Sublease [ ] (4) Construction Activity Assistance Agreement [ ] (5) Equipment Order [ ] (6) Agreement for Purchase and Sale of Assets [ ] (7) Principal's Agreement [ ] (8) Collateral Assignment of Lease [ ] (9) Addendum to License Agreement for Delivery Services [ ] (10) Other (specify):_______________________________________ (Proposed Licensee must initial the box adjacent to the applicable document.) I further acknowledge my understanding that it is my responsibility, individually and/or as an officer, managing member or partner of the proposed Licensee, to review all of these documents so that I am fully familiar with the transaction they contemplate before I sign them. DATED: __________________ A FEDERAL TRADE COMMISSION RULE REQUIRES THAT WE PROVIDE YOU WITH THE FRANCHISE- RELATED DOCUMENTS NOTED ABOVE AT LEAST FIVE (5) BUSINESS DAYS PRIOR TO THE DATE THEY ARE TO BE EXECUTED. PLEASE DO NOT SIGN OR RETURN THESE DOCUMENTS UNTIL FIVE (5) BUSINESS DAYS HAVE ELAPSED FROM THE DATE OF THIS RECEIPT. ____________________________________________________________________ _________________________________________________ individually and/or as an officer, managing member or partner of ____________________________________________________________________ a (____________________________________________ corporation) (______________________________________________ partnership) (____________________________________ limited liability company) NAME:_______________________________________________________________ ADDRESS:____________________________________________________________ ____________________________________________________________________

EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our reports (and to all references to our Firm) included in or made a part of this registration statement on Form S-4. /s/ ARTHUR ANDERSEN LLP Salt Lake City, Utah September 2, 1999

EXHIBIT 23.2 INDEPENDENT AUDITORS' CONSENT We consent to the use in this Amendment No. 2 to Registration Statement No. 333-67389 of Mrs. Fields' Original Cookies, Inc. of our report dated February 9, 1996, appearing in the Prospectus, which is a part of such Registration Statement, and to the reference to us under the heading "Experts" in such Prospectus. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Salt Lake City, Utah September 2, 1999

[LETTERHEAD OF WEINSTEIN SPIRA & COMPANY] Exhibit 23.3 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT We hereby consent to the use of our report dated August 17, 1998 on the financial statements of Deblan Corporation included in Mrs. Fields' Original Cookies, Inc. and Mrs Fields' Holding Company, Inc. Registration Statements on Forms S-4. WEINSTEIN SPIRA & COMPANY P.C. /s/ Weinstein Spira $ Company P.C. Houston, Texas Sept 2, 1999

EXHIBIT 23.4 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Amendment No. 2 to Form S-4 (No. 333-67389) of Mrs. Fields' Original Cookies, Inc. of our report dated August 24, 1998 relating to the financial statements of Cookies USA, Inc., which appears in such Prospectus. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ PRICEWATERHOUSECOOPERS LLP PRICEWATERHOUSECOOPERS LLP Atlanta, Georgia September 3, 1999

Exhibit 23.6 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-4 of Mrs. Fields' Original Cookies, Inc., and in the Prospectus constituting part of this registration Statement on Form S-4 of Mrs. Fields' Holding Company, Inc. of our report dated November 12, 1998 as amended on February 4, 1999 relating to the financial statements of Cookie Conglomerate, Inc. and its Affiliates, which appears in such documents. /s/ Habif, Arogeti & Wynne, LLP ---------------------------------- Habif, Arogeti & Wynne, LLP Atlanta, Georgia 30309-3837 September 3, 1999

EXHIBIT 23.7 INDEPENDENT AUDITORS' CONSENT Mrs. Fields' Original Cookie's, Inc. Salt Lake City, Utah We hereby consent to the use in the Prospectus constituting a part of this Registration Statement our report dated February 7, 1997, relating to the consolidated financial statement of Pretzelmaker Holdings, Inc., for the period from inception (February 24, 1995) to December 31, 1995 and for the year ended December 31, 1996. We also consent to the reference to us under the caption "Experts" in the Prospectus. /s/ BDO SEIDMAN, LLP Denver, Colorado September 3, 1999

EXHIBIT 23.8 AJ. ROBBINS PC CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS 3033 EAST FIRST AVENUE, SUITE 201 DENVER, COLORADO 80206 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Amendment #2 of Form S-4 of Mrs. Fields' Original Cookies, Inc. of our report dated December 11, 1998 relating to the consolidated financial statements of Pretzelmaker Holdings, Inc. and to the reference made to our firm under the caption "Experts" which appear in such documents. AJ. ROBBINS, P.C. CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS Denver, Colorado September 2, 1999

Exhibit 23.9 CONSENT The undersigned hereby consents to the reference to him in "Management's Discussion and Analysis--Consolidated Results of Operations of Cookies USA and its Wholly Owned Operating Subsidiaries" in the Prospectus constituting part of the Registration Statement on Form S-4 (File No. 333-67389) of Mrs. Fields' Original Cookies, Inc., The Mrs. Fields' Brand, Inc., Great American Cookie Company, Inc., Pretzelmaker Holdings, Inc. and Pretzel Time, Inc. As noted therein, references to the beliefs of "management" in the discussion under the above-referenced heading are to the beliefs of the undersigned prior to the acquisition of Great American Cookie Company, Inc. and Cookies USA, Inc. by Mrs. Fields' Original Cookies, Inc. and my review and input pertains only to the discussed in the above-referenced section of the Prospectus. /s/ David Barr Date: May 3, 1999

LETTER OF TRANSMITTAL MRS. FIELDS' ORIGINAL COOKIES, INC. Offer for all Outstanding 10 1/8% Series A Senior Notes due 2004 and 10 1/8% Series C Senior Notes due 2004 in Exchange for 10 1/8% Series B Senior Notes due 2004 which Have Been Registered Under the Securities Act of 1933, As Amended, Pursuant to the Prospectus, dated __________, 1999 ------------------------------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT MIDNIGHT NEW YORK CITY TIME, ON __________, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO MIDNIGHT, NEW YORK CITY TIME, ON THE EXPIRATION DATE. ------------------------------------------------------------------------------- Delivery To: The Bank of New York, Exchange Agent By Mail, By Hand or Overnight Courier: The Bank of New York 101 Barclay Street 7 East New York, New York 10286 Attention: Odell Romeo By Facsimile Transmission: (for Eligible Institutions Only) (212) 815-6339 Confirm by Telephone: (212) 815-6337 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY OF THIS LETTER OF TRANSMITTAL. The undersigned acknowledges that he or she has received and reviewed the Prospectus, dated ____, 1999 (the "Prospectus"), of Mrs. Fields' Original Cookies, Inc., a Delaware corporation (the "Issuer") and this Letter of Transmittal (the "Letter of Transmittal" or the "Letter"), which together constitute the Issuer's offer (the "Exchange Offer") to exchange an aggregate principal amount at maturity of up to $53,725,000 of the Issuer's 10 1/8% Series B Senior Notes due 2004 which have been registered under the Securities Act of 1933, as amended (the "New Notes"), for a like principal amount, in the aggregate, of the Issuer's issued and outstanding 10 1/8% Series A Senior Notes due 2004 (the "Series A Senior Notes") and 10 1/8% Series C Senior Notes due 2004 (the "Series C Senior Notes" and, together with the Series A Senior Notes, the "Old Notes") from the registered holders thereof. For each Old Note accepted for exchange, the Holder of such Old Note will receive a New Note having a principal amount equal to that of the surrendered Old Note. The New Notes will bear interest from the most recent date to which interest has been paid. Accordingly, registered holders of New Notes on the relevant record date for the first interest payment date following the consummation of the Exchange Offer will receive interest accruing from the most recent date to which interest has been paid. Old Notes accepted for exchange will cease to accrue interest from and after the date of consummation of the Exchange Offer. Holders of Old Notes whose Old Notes are accepted for exchange will not receive any payment in respect of accrued interest on such Old Notes otherwise payable on any interest payment date the record date for which occurs on or after consummation of the Exchange Offer. This Letter is to be completed by a Holder of Old Notes either if certificates for such Old Notes are to be forwarded herewith or if a tender is to be made by book-entry transfer to the account maintained by The Bank of New York, as Exchange Agent for the Exchange Offer (the "Exchange Agent"), at The

Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in "The Exchange Offer--Book-Entry Transfers" section of the Prospectus and an Agent's Message is not delivered. Tenders by book-entry transfer may also be made by delivering an Agent's Message in lieu of this Letter. The term "Agent's Message" means a message, transmitted by the Book- Entry Transfer Facility to and received by the Exchange Agent and forming a part of a Book-Entry Confirmation (as defined below), which states that the Book- Entry Transfer Facility has received an express acknowledg ment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by this Letter and that the Issuers may enforce this Letter against such participant. Holders of Old Notes whose certificates are not immediately available, or who are unable to deliver their certificates or confirmation of the book-entry tender of their Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other documents required by this Letter to the Exchange Agent on or prior to the Expiration Date, must tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer-- Guaranteed Delivery Procedures" section of the Prospectus. See Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent. The undersigned has completed the appropriate boxes below and signed this Letter to indicate the action the undersigned desires to take with respect to the Exchange Offer. List below the Old Notes to which this Letter relates. If the space provided below is inadequate, the certificate numbers and principal amount of Old Notes should be listed on a separate signed schedule affixed hereto. <TABLE> <CAPTION> ---------------------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF OLD NOTES 1 2 3 ---------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Aggregate Principal Principal Name(s) and Address(es) of Registered Holder(s) Certificate Amount of Amount (Please fill in, if blank) Number(s)* Old Note(s) Tendered** ---------------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Total ---------------------------------------------------------------------------------------------------------------------------------- * Need not be completed if Old Notes are being tendered by book-entry transfer. ** Unless otherwise indicated in this column, a Holder will be deemed to have tendered ALL of the Old Notes represented by the Old Notes indicated in column 2. See Instruction 2. Old Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. See Instruction 1 . ---------------------------------------------------------------------------------------------------------------------------------- </TABLE> [ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution ______________________________________ Account Number ______________ Transaction Code Number _____________ By crediting the Old Notes to the Exchange Agent's account at the Book-Entry Transfer Facility's Automated Tender Offer Program ("ATOP") and by complying with applicable ATOP procedures with respect to the Exchange Offer, including transmitting to the Exchange Agent a computer-generated Agent's Message in which the Holder of the Old Notes acknowledges and agrees to be bound by the terms of, and makes the representations and warranties contained in, the Letter, the participant in the Book-Entry Transfer Facility confirms on behalf of itself and the beneficial owners of such Old Notes all provisions of this Letter (including all representations and warranties) applicable to it and such beneficial owner as fully as if it had completed the information required herein and executed and transmitted this Letter to the Exchange Agent. 2

[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) ________________________________________ Window Ticket Number (if any) __________________________________________ Date of Execution of Notice of Guaranteed Delivery _____________________ Name of Institution Which Guaranteed Delivery __________________________ If Delivered by Book-Entry Transfer, Complete the Following: Account Number _________________________________________________________ Transaction Code Number ________________________________________________ Name of Tendering Institution __________________________________________ [ ] CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH. [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ________________________________________________________________________ Address: _____________________________________________________________________ _____________________________________________________________________ If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Notes. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act of 1933, as amended, in connection with any resale of such New Notes; however, by so acknowledging and by delivering such a prospectus the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933, as amended. If the undersigned is a broker-dealer that will receive New Notes, it represents that the Old Notes to be exchanged for the New Notes were acquired as a result of market-making activities or other trading activities. 3

PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Issuer the aggregate principal amount of Old Notes indicated above. Subject to, and effective upon, the acceptance for exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Issuer all right, title and interest in and to such Old Notes as are being tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the undersigned's true and lawful agent and attorney-in-fact with respect to such tendered Old Notes, with full power of substitution, among other things, to cause the Old Notes to be assigned, transferred and exchanged. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Old Notes, and to acquire New Notes issuable upon the exchange of such tendered Old Notes, and that, when the same are accepted for exchange, the Issuer will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by the Issuer. The undersigned hereby further represents that any New Notes acquired in exchange for Old Notes tendered hereby will have been acquired in the ordinary course of business of the person receiving such New Notes, whether or not such person is the undersigned, that neither the Holder of such Old Notes nor such other person has any arrangement or understanding with any person to participate in the distribution of such New Notes and that neither the Holder of such Old Notes nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"), of the Issuer. The undersigned acknowledges that this Exchange Offer is being made in reliance on interpretations by the staff of the Securities and Exchange Commission (the "SEC"), as set forth in no-action letters issued to third parties, that the New Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be offered for resale, resold and otherwise transferred by Holders or other persons receiving the New Notes thereof (other than any such Holder or other person that is an "affiliate" of the Issuer within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of business of the person receiving such New Notes, whether or not such person is the Holder, and neither the Holder nor such other person has any arrangement or understanding with any person to participate in the distribution of such New Notes. However, the SEC has not considered the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offer as in other circumstances. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Notes and has no arrangement or understanding to participate in a distribution of New Notes. If any Holder is an affiliate of the Issuer, is engaged in or intends to engage in or has any arrangement or understanding with respect to the distribution of the New Notes to be acquired pursuant to the Exchange Offer, such Holder (i) could not rely on the applicable interpretations of the staff of the SEC and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes, it represents that the Old Notes to be exchanged for the New Notes were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus meeting the requirements of the 4

Securities Act, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned will, upon request, execute and deliver any additional documents deemed by the Issuer to be necessary or desirable to complete the sale, assignment and transfer of the Old Notes tendered hereby. All authority conferred or agreed to be conferred in this Letter and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in "The Exchange Offer--Withdrawal Rights" section of the Prospectus. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, please deliver the New Notes (and, if applicable, substitute certificates representing Old Notes for any Old Notes not exchanged) in the name of the undersigned or, in the case of a book-entry delivery of Old Notes, please credit the account indicated above maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under the box entitled "Special Delivery Instructions" below, please send the New Notes (and, if applicable, substitute certificates representing Old Notes for any Old Notes not exchanged) to the undersigned at the address shown above in the box entitled "Description of Old Notes." THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS SET FORTH IN SUCH BOX ABOVE. -------------------------------------------------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS (See Instructions 3 and 4) -------------------------------------------------------------------------------- To be completed ONLY if certificates for Old Notes not exchanged and/or New Notes are to be issued in the name of someone other than the person or persons whose signature(s) appear(s) on this Letter above, or if Old Notes delivered by book-entry transfer which are not accepted for exchange are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above. Issue: New Notes and/or Old Notes to: Name(s)................................................ (Please Type or Print) ....................................................... (Please Type or Print) Address................................................ ....................................................... (Zip Code) (Complete Substitute Form W-9) [ ] Credit unexchanged Old Notes delivered by book-entry transfer to the Book- Entry Transfer Facility account set forth below. ------------------------------------------------------------------------------- (Book-Entry Transfer Facility Account Number, if applicable) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (See Instructions 3 and 4) -------------------------------------------------------------------------------- To be completed ONLY if certificates for Old Notes not exchanged and/or New Notes are to be sent to someone other than the person or persons whose signature(s) appear(s) on this Letter above or to such person or persons at an address other than shown in the box entitled "Description of Old Notes" on this Letter above. Mail: New Notes and/or Old Notes to: Name(s).............................................................. (Please Type or Print) ..................................................................... (Please Type or Print) Address.............................................................. ..................................................................... (Zip Code) -------------------------------------------------------------------------------- IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU THEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO MIDNIGHT, NEW YORK CITY TIME, ON THE EXPIRATION DATE. 5

PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX ABOVE. -------------------------------------------------------------------------------- PLEASE SIGN HERE (TO BE COMPLETED BY ALL TENDERING HOLDERS) (Complete Accompanying Substitute Form W-9 on reverse side) Dated:.........................................................., 1999 x ............................................................, 1999 x ............................................................, 1999 Signature(s) of Owner Date Area Code and Telephone Number...................................... This Letter must be signed by the registered Holder(s) as the name(s) appear(s) on the certificate(s) for the Old Notes hereby tendered or on a security position, on listing or by any person(s) authorized to become registered Holder(s) by endorse ments and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representa tive capacity, please set forth full title. See Instruction 3. Name(s):......................................................... ................................................................. (Please Type or Print) Capacity:........................................................ Address:......................................................... ................................................................. (Including Zip Code) SIGNATURE GUARANTEE (If required by Instruction 3) Signature(s) Guaranteed by an Eligible Institution:......................................... (Authorized Signature) ................................................................. (Title) ................................................................. (Name and Firm) Dated: ...................................................., 1999 -------------------------------------------------------------------------------- 6

INSTRUCTIONS Forming Part of the Terms and Conditions of the Exchange Offer for the 10 1/8% Series A Senior Notes due 2004 and 10 1/8% Series C Senior Notes due 2004 of Mrs. Fields' Original Cookies, Inc. in Exchange for the 10 1/8% Series B Senior Notes due 2004, which Have Been Registered Under the Securities Act of 1933, As Amended 1. Delivery of this Letter and Notes; Guaranteed Delivery Procedures. This letter is to be completed by Holders of Old Notes either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in "The Exchange Offer- -Book-Entry Transfers" section of the Prospectus and an Agent's Message is not delivered. Tenders by book-entry transfer may also be made by delivering an Agent's Message in lieu of this Letter. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to and received by the Exchange Agent and forming a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by the Letter of Transmittal and that the Issuer may enforce the Letter of Transmittal against such participant. Certificates for all physically tendered Old Notes, or Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed Letter (or manually signed facsimile hereof or Agent's Message in lieu thereof) and any other documents required by this Letter, must be received by the Exchange Agent at the address set forth herein on or prior to the Expiration Date, or the tendering Holder must comply with the guaranteed delivery procedures set forth below. Old Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. Holders whose certificates for Old Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Old Notes pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer- -Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to such procedures, (i) such tender must be made through an Eligible Institution, (ii) prior to midnight, New York City time, on the Expiration Date, the Exchange Agent must receive from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Issuer (by telegram, telex, facsimile transmission, mail or hand delivery), setting forth the name and address of the Holder of Old Notes and the amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that within five New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Old Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter (or facsimile thereof or Agent's Message in lieu thereof) with any required signature guarantees and any other documents required by this Letter will be deposited by the Eligible Institution with the Exchange Agent, and (iii) the certificates for all physically tendered Old Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter (or facsimile thereof or Agent's Message in lieu thereof) with any required signature guarantees and all other documents required by this Letter, are received by the Exchange Agent within five NYSE trading days after the Expiration Date. An "Eligible Institution" is a firm which is a financial institution (including most banks, savings and loan associations and brokerage houses) that is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion Program. 7

The method of delivery of this Letter, the Old Notes and all other required documents is at the election and risk of the tendering Holders, but the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. If Old Notes are sent by mail, it is suggested that the mailing be registered mail, properly insured, with return receipt requested, made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent prior to midnight, New York City time, on the Expiration Date. See "The Exchange Offer" section of the Prospectus. 2. Partial Tenders (not applicable to Holders who tender by book-entry transfer). If less than all of the Old Notes evidenced by a submitted certificate are to be tendered, the tendering Holder(s) should fill in the aggregate principal amount of Old Notes to be tendered in the box above entitled "Description of Old Notes--Principal Amount Tendered." A reissued certificate representing the balance of nontendered Old Notes will be sent to such tendering Holder, unless otherwise provided in the appropriate box on this Letter, promptly after the Expiration Date. All of the Old Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. 3. Signatures on this Letter; Bond Powers and Endorsements; Guarantee of Signatures. If this Letter is signed by the Holder of the Old Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates or on the Book-Entry Transfer Facility's security position listing as the Holder of such Old Notes without any change whatsoever. If any tendered Old Notes are owned of record by two or more joint owners, all of such owners must sign this Letter. If any tendered Old Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter as there are different registrations of certificates. When this Letter is signed by the registered Holder or Holders of the Old Notes specified herein and tendered hereby, no endorsements of certificates or written instrument or instruments of transfer or exchange are required. If, however, the Old Notes are registered in the name of a person other than a signer of the Letter, the Old Notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Issuer in its sole discretion, duly executed by the registered national securities exchange with the signature thereon guaranteed by an Eligible Institution. If this Letter is signed by a person or persons other than the registered Holder or Holders of Old Notes, such Old Notes must be endorsed or accompanied by powers of attorney, in either case signed exactly as the name or names of the registered Holder or Holders that appear on the Old Notes. If this Letter or any Old Notes or powers of attorneys are signed by trustees, executors, administra tors, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Issuer, proper evidence satisfactory to the Issuer of their authority to so act must be submitted with the Letter. 8

Endorsements on certificates for Old Notes or signatures on powers of attorneys required by this Instruction 3 must be guaranteed by an Eligible Institution. Signatures on this Letter need not be guaranteed by an Eligible Institution, provided the Old Notes are tendered: (i) by a registered Holder of Old Notes (which term, for purposes of the Exchange Offer, includes any participant in the Book-Entry Transfer Facility system whose name appears on a security position listing as the Holder of such Old Notes) who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this Letter, or (ii) for the account of an Eligible Institution. 4. Special Issuance and Delivery Instructions Tendering Holders of Old Notes should indicate in the applicable box the name and address to which New Notes issued pursuant to the Exchange Offer and or substitute certificates evidencing Old Notes not exchanged are to be issued or sent, if different from the name or address of the person signing this Letter. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated. Holders tendering Old Notes by book-entry transfer may request that Old Notes not exchanged be credited to such account maintained at the Book-Entry Transfer Facility as such Holder may designate hereon. If no such instructions are given, such Old Notes not exchanged will be returned to the name and address of the person signing this Letter. 5. Taxpayer Identification Number. Federal income tax law generally requires that a tendering Holder whose Old Notes are accepted for exchange must provide the Issuer (as payor) with such Holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 below, which in the case of a tendering Holder who is an individual, is his or her social security number. If the Issuer is not provided with the current TIN or an adequate basis for an exemption, such tendering Holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, delivery to such tendering Holder of New Notes may be subject to backup withholding in an amount equal to 31% of all reportable payments made after the exchange. If withholding results in an overpayment of taxes, a refund may be obtained. Exempt Holders of Old Notes (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. See the enclosed Guidelines of Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for additional instructions. To prevent backup withholding, each tendering Holder of Old Notes must provide its correct TIN by completing the Substitute Form W-9 set forth below, certifying that the TIN provided is correct (or that such Holder is awaiting a TIN) and that (i) the Holder is exempt from backup withholding, or (ii) the Holder has not been notified by the Internal Revenue Service that such Holder is subject to backup withholding as a result of a failure to report all interest or dividends or (iii) the Internal Revenue Service has notified the Holder that such Holder is no longer subject to backup withholding. If the tendering Holder of Old Notes is a nonresident alien or foreign entity not subject to backup withholding, such Holder must give the Exchange Agent a completed Form W-8, Certificate of Foreign Status. These forms may be obtained from the Exchange Agent. If the Old Notes are in more than one name or are not in the name of the actual owner, such Holder should consult the W-9 Guidelines for information on which TIN to report. If such Holder does not have a TIN, such Holder should consult the W-9 Guidelines for instructions on applying for a TIN, check the box in Part 2 of the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note: Checking this 9

box and writing "applied for" on the form means that such Holder has already applied for a TIN or that such Holder intends to apply for one in the near future. If such Holder does not provide its TIN to the Exchange Agent within 60 days, backup withholding will begin and continue until such Holder furnishes its TIN to the Exchange Agent. The information requested above should be directed to the Exchange Agent at the following address: Delivery To: The Bank of New York, Exchange Agent By mail, By Hand and Overnight Courier: The Bank of New York 101 Barclay Street 7 East New York, New York 10286 Attention: Odell Romeo By Facsimile (for Eligible Institutions Only): (212) 815-6339 Confirm by Telephone: (212) 815-6337 6. Transfer Taxes. Holders who tender their Old Notes for exchange will not be obligated to pay any transfer taxes in connection therewith. If, however, New Notes are to be delivered to, or are to be issued in the name of, any person other than the registered Holder of the Old Notes tendered, or if a transfer tax is imposed for any reason other than the exchange of Old Notes in connection with the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered Holder or any other persons) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with this Letter, the amount of such transfer taxes will be billed directly to such tendering Holder. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Old Notes specified in this Letter. 7. Waiver of Conditions. The Issuer reserves the absolute right to waive any defects or irregularities or conditions of the Exchange Offer as to any particular Old Note either before or after the Expiration Date (including the right to waive the ineligibility of any Holder who seeks to tender Old Notes in the Exchange Offer) 8. No Conditional Tenders. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering Holders of Old Notes, by execution of this Letter or an Agent's Message in lieu thereof, shall waive any right to receive notice of the acceptance of their Old Notes for exchange. 10

Neither the Issuer, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Old Notes nor shall any of them. 9. Mutilated, Lost, Stolen or Destroyed Old Notes. Any Holder whose Old Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. 10. Withdrawal Rights Tenders of Old Notes may be withdrawn at any time prior to midnight, New York City time, on the Expiration Date. For a withdrawal to be effective, a written notice of withdrawal must be received by the Exchange Agent at the address set forth above prior to midnight, New York City time, on the Expiration Date. Any such notice of withdrawal must: (i) specify the name of the person having tendered the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn (including the principal amount of such Old Notes), and (iii) (where certificates for Old Notes have been transmitted) specify the name in which such Old Notes are registered, if different from that of the Depositor. If certificates for Old Notes have been delivered or otherwise identified to the Exchange Agent, then prior to the release of such certificates the Depositor must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an Eligible Institution unless such Holder is an Eligible Institution. If Old Notes have been tendered pursuant to the procedure for book-entry transfer set forth in "The Exchange Offer--Book-Entry Transfers" section of the Prospectus, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Issuer, whose determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer and no New Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly retendered. Any Old Notes that have been tendered for exchange but which are not exchanged for any reason will be returned to the Holder thereof without cost to such Holder (or, in the case of Old Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures set forth in "The Exchange Offer--Book-Entry Transfers" section of the Prospectus, such Old Notes will be credited to an account maintained with the Book-Entry Transfer Facility for the Old Notes) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be retendered by following the procedures described above at any time on or prior to midnight, New York City time, on the Expiration Date. 11

11. Requests for Assistance or Additional Copies. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter, and requests for Notices of Guaranteed Delivery and other related documents may be directed to the Exchange Agent, at the address and telephone number indicated above. 12

TO BE COMPLETED BY ALL TENDERING HOLDERS (See Instruction 5) PAYOR'S NAME: THE BANK OF NEW YORK <TABLE> <CAPTION> ----------------------------------------------------------------------------------------------------------------------- Part 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT TIN: AND CERTIFY BY SIGNING ------------------------------ SUBSTITUTE AND DATING BELOW. Social Security Number or Employer Identification Number ---------------------------------------------------------------------------------------- Form W-9 Part 2--TIN Applied For [ ] ---------------------------------------------------------------------------------------- <S> <C> Department of the Payor's Request For Taxpayer Identification Number ("TIN") and Treasury Internal Revenue Certification Service CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT: Payor's Request for (1) the number shown on this form is my correct Taxpayer Identification Taxpayer Number (or I am waiting for a number to be issued to me). Identification Num- (2) I am not subject to backup withholding either because: (a) I am exempt ber from backup withholding, or (b) I have not been notified by the Internal ("TIN") and Revenue Service (the "IRS") that I am subject to backup withholding as Certification a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and (3) any other information provided on this form is true and correct. SIGNATURE........................... DATE................................ ---------------------------------------------------------------------------------------- You must cross out item (2) of the above certification if you have been notified by the IRS that you are subject to backup withholding because of underreporting of interest or dividends on your tax return and you have not been notified by the IRS that you are no longer subject to backup withholding. ----------------------------------------------------------------------------------------------------------------------- </TABLE> YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9 13

-------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of the exchange, 31 percent of all reportable payments made to me thereafter will be withheld until I provide a number. ------------------------------------------ -------------------------------- Signature Date -------------------------------------------------------------------------------- 14

EXHIBIT 99.3 ------------ REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements of Mrs. Fields' Original Cookies, Inc. and subsidiaries as of January 3, 1998 and January 2, 1999, and for the period from inception (September 18, 1996) to December 28, 1996, for the year ended January 3, 1998 and for the year ended January 2, 1999 beginning on page 26 and have issued our report thereon dated April 1, 1999. Our audits were made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. Schedule II, "Valuation and Qualifying Accounts", is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. /s/ARTHUR ANDERSEN LLP ---------------------- Arthur Andersen LLP Salt Lake City, Utah May 28, 1999

EXHIBIT 99.3 CONTINUED ---------------------- SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS MRS. FIELDS INC. AND SUBSIDIARIES <TABLE> <CAPTION> Balance at beginning Balance at Description of period Additions Deductions end of Period ----------------------------------------- ------------- ------------ ------------- ------------- <S> <C> <C> <C> <C> Allowance for Doubtful Accounts: Period from December 31, 1995 through September 17, 1996............. $ 251,000 $ 60,000 $ 42,000 $ 269,000 ============= ============ ============= ============ Store Closure Reserve: Period from December 31, 1995 through September 17, 1996............. $ 2,510,000 $ 1,000,000 $ 1,946,000 $ 1,564,000 ============= ============ ============= ============ </TABLE> THE ORIGINAL COOKIE COMPANY, INCORPORATED AND THE CARVED-OUT PORTION OF HOT SAM COMPANY, INC. <TABLE> <CAPTION> Balance at beginning Balance at Description of period Additions Deductions end of Period ----------------------------------------- ------------- ------------ ------------- ------------- <S> <C> <C> <C> <C> Store Closure Reserve: Period from December 31, 1995 through September 17, 1996............. $ 1,384,000 $ 382,000 $ 1,002,000 ============= ============ ============= ============ </TABLE>

EXHIBIT 99.3 CONTINUED ---------------------- SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES <TABLE> <CAPTION> Balance at beginning Balance at of period Additions Deductions end of period ------------------------------------------------------------------------------------------------------------ Allowance for Doubtful Accounts: Period from Inception (September <S> <C> <C> <C> <C> 18, 1996) through December 28, 1996 $ 269,000 $ 106,000 $ - $ 375,000 =========== =========== ========== =========== Year Ended January 3, 1998 $ 375,000 $ 494,000 $ 255,000 $ 614,000 =========== =========== ========== =========== Year Ended January 2, 1999 $ 614,000 $ 816,000 $ 278,000 $ 1,152,000 =========== =========== ========== =========== Six Months Ended July 3, 1999 (unaudited) $ 1,152,000 $ 21,000 $ 207,000 $ 966,000 =========== =========== ========== =========== Store Closure and Other Reserve: Store Closure Reserve $ 5,060,000 $ - $ 305,000 $ 4,755,000 Transaction Fee Accrual 2,400,000 - 2,173,000 227,000 Legal Accrual 1,250,000 - 53,000 1,197,000 Lease Obligation Accrual 1,200,000 - 174,000 1,026,000 Finders' Fee Accrual 735,000 - - 735,000 Severance and Related Costs Accrual 655,000 - 539,000 116,000 ----------- ----------- ---------- ----------- Period from Inception (September 18, 1996) through December 28, 1996 $11,300,000 $ - $3,244,000 $ 8,056,000 =========== =========== ========== =========== Store Closure Reserve $ 4,755,000 $ 3,395,000 $2,684,000 $ 5,466,000 Transaction Fee Accrual 227,000 - 227,000 - Legal Accrual 1,197,000 - 548,000 649,000 Lease Obligation Accrual 1,026,000 - 867,000 159,000 Finders' Fee Accrual 735,000 - 735,000 - Severance and Related Costs Accrual 116,000 - 116,000 - ----------- ----------- ---------- ----------- Year Ended January 3, 1998 $ 8,056,000 $ 3,395,000 $5,177,000 $ 6,274,000 =========== =========== ========== =========== Store Closure Reserve $ 5,466,000 $11,103,000 $1,858,000 $14,711,000 Transaction Fee Accrual - - - - Legal Accrual 649,000 - 267,000 382,000 Lease Obligation Accrual 159,000 - 159,000 - Finders' Fee Accrual - - - - Severance and Related Costs Accrual - - - - ----------- ----------- ---------- ----------- Year Ended January 2, 1999 $ 6,274,000 $11,103,000 $2,284,000 $15,093,000 =========== =========== ========== =========== Store Closure Reserve $14,711,000 - $1,715,000 $12,996,000 Legal Accrual 382,000 - 122,000 260,000 ----------- ----------- ---------- ----------- Six Months ended July 3, 1999 (unaudited) $15,093,000 $ - $1,837,000 $13,256,000 =========== =========== ========== =========== Impairment Reserve (1): Stores to be Closed $ 7,587,000 $ - $ 854,000 $ 6,733,000 Stores to be Franchised 3,334,000 - 215,000 3,119,000 ----------- ----------- ---------- ----------- Period from Inception (September 18, 1996) through December 28, 1996 $10,921,000 $ - $1,069,000 $ 9,852,000 =========== =========== ========== =========== Stores to be Closed $ 6,733,000 $ 1,423,000 $3,507,000 $ 4,649,000 Stores to be Franchised 3,119,000 1,077,000 492,000 3,704,000 ----------- ----------- ---------- ----------- Year Ended January 3, 1998 $ 9,852,000 $ 2,500,000 $3,999,000 $ 8,353,000 =========== =========== ========== =========== Stores to be Closed $ 4,649,000 $ 3,242,000 $2,121,000 $ 5,770,000 Stores to be Franchised 3,704,000 208,000 1,254,000 2,658,000 ----------- ----------- ---------- ----------- Year Ended January 2, 1999 $ 8,353,000 $ 3,450,000 $3,375,000 $ 8,428,000 =========== =========== ========== =========== Store to be Closed $ 5,770,000 $ - $ - $ - Stores to be Franchised 2,658,000 - - - ----------- ----------- ---------- ----------- Six Months ended July 3, 1999 (unaudited) $ 8,428,000 $ - $ - $ - =========== =========== ========== =========== (1) THE IMPAIRMENT RESERVE REDUCES THE CARRYING AMOUNTS OF PROPERTY AND EQUIPMENT AT STORES TO BE CLOSED TO ZERO AND THE CARRYING AMOUNTS OF PROPERTY AND EQUIPMENT AT STORES TO BE FRANCHISED TO NET REALIZABLE VALUE. </TABLE>