GREAT AMERICAN COOKIE CO INC, S-4/A, 1999-02-05

GREAT AMERICAN COOKIE CO INC
S-4/A, 1999-02-05
CONVENIENCE STORES

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 4, 1999

REGISTRATION NO. 333-67389
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 1

FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

<S> <C> <C> <C>
MRS. FIELDS' ORIGINAL COOKIES, INC. GREAT AMERICAN COOKIE THE MRS. FIELDS' BRAND, INC. PRETZELMAKER HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS COMPANY, INC. (EXACT NAME OF REGISTRANT AS (EXACT NAME OF REGISTRANT AS
SPECIFIED IN ITS CHARTER) (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) SPECIFIED IN ITS CHARTER)
SPECIFIED IN ITS CHARTER)
DELAWARE DELAWARE DELAWARE
(STATE OR OTHER JURISDICTION OF DELAWARE (STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION
INCORPORATION OR ORGANIZATION) (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) OF INCORPORATION OR ORGANIZATION)
INCORPORATION OR ORGANIZATION)

6749 6749 6749 6749
(PRIMARY STANDARD INDUSTRIAL (PRIMARY STANDARD INDUSTRIAL (PRIMARY STANDARD INDUSTRIAL (PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER CLASSIFICATION CODE NUMBER) CLASSIFICATION CODE NUMBER) CLASSIFICATION CODE NUMBER)

87-0563472 87-0552899 58-1295221 87-0563472
(I.R.S. EMPLOYER (I.R.S. EMPLOYER (I.R.S. EMPLOYER (I.R.S. EMPLOYER
IDENTIFICATION NO.) IDENTIFICATION NO.) IDENTIFICATION NO.) IDENTIFICATION NO.)

2855 EAST COTTONWOOD PARKWAY, 2855 EAST COTTONWOOD PARKWAY, 2855 EAST COTTONWOOD PARKWAY, 2855 EAST COTTONWOOD PARKWAY,
SUITE 400, SALT LAKE CITY, SUITE 400, SALT LAKE CITY, SUITE 400, SALT LAKE CITY, SUITE 400, SALT LAKE CITY,
UTAH 84121 UTAH 84121 UTAH 84121 UTAH 84121
(801) 736-5600 (801) 736-5600 (801) 736-5600 (801) 736-5600
(ADDRESS, INCLUDING ZIP CODE AND (ADDRESS, INCLUDING ZIP CODE AND (ADDRESS, INCLUDING ZIP CODE AND (ADDRESS, INCLUDING ZIP CODE AND
TELEPHONE NUMBER, INCLUDING AREA TELEPHONE NUMBER, INCLUDING AREA TELEPHONE NUMBER, INCLUDING AREA TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL CODE, OF REGISTRANT'S PRINCIPAL CODE, OF REGISTRANT'S PRINCIPAL CODE, OF REGISTRANT'S PRINCIPAL
EXECUTIVE OFFICES) EXECUTIVE OFFICES) EXECUTIVE OFFICES) EXECUTIVE OFFICES)

MICHAEL WARD, ESQ. MICHAEL WARD, ESQ. MICHAEL WARD, ESQ. MICHAEL WARD, ESQ.
VICE PRESIDENT OF ADMINISTRATION GREAT AMERICAN COOKIE COMPANY, THE MRS. FIELDS' BRAND, INC. PRETZELMAKER HOLDINGS, INC.
MRS. FIELDS' ORIGINAL COOKIES, INC. INC. 2855 EAST COTTONWOOD PARKWAY, 2855 EAST COTTONWOOD PARKWAY,
2855 EAST COTTONWOOD PARKWAY, 2855 EAST COTTONWOOD PARKWAY, SUITE 400, SALT LAKE CITY, SUITE 400, SALT LAKE CITY,
SUITE 400, SALT LAKE CITY, SUITE 400, SALT LAKE CITY, UTAH 84121 UTAH 84121
UTAH 84121 UTAH 84121 (801) 736-5600 (801) 736-5600
(801) 736-5600 (801) 736-5600
(NAME, ADDRESS, INCLUDING (NAME, ADDRESS, INCLUDING (NAME, ADDRESS, INCLUDING (NAME, ADDRESS, INCLUDING
ZIP CODE AND TELEPHONE NUMBER, ZIP CODE AND TELEPHONE NUMBER, ZIP CODE AND TELEPHONE NUMBER, ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENTS INCLUDING AREA CODE, OF AGENTS INCLUDING AREA CODE, OF AGENTS INCLUDING AREA CODE, OF AGENTS
FOR SERVICES) FOR SERVICES) FOR SERVICES) FOR SERVICES)
</TABLE>
----------------
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. [_]

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

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.
================================================================================
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+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)

FEBRUARY 4, 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. AND
PRETZELMAKER HOLDINGS, INC.

Terms of the Exchange Offer

. Expires 12:00 midnight, . The notes mature on
New York City time, December 1, 2004, and pay
, 1999, unless extended. interest on June 1 and
December 1 of each year,
beginning on June 1,
1999.

. Not subject to any
condition other than that
the Exchange Offer not
violate applicable law or
any interpretation of the
staff of the Securities
and Exchange Commission.

. We will not receive any
proceeds from the
Exchange Offer.

. The exchange of notes
will not be a taxable
exchange for U.S. income
tax purposes.

. We can amend or terminate
the Exchange Offer.

. The terms of the notes to
. We will exchange all be issued are identical
outstanding notes that to those of the
are validly tendered and outstanding notes, except
not validly withdrawn. for certain transfer
restrictions and
registration rights.

. You may withdraw tendered
outstanding notes any
time prior to the
expiration of the
Exchange Offer.

. The notes are senior
unsecured debt, fully and
unconditionally
guaranteed on a senior
basis. The guarantees are
general unsecured
obligations of the
guarantors.

For a discussion of certain factors that you should consider prior to tendering
your outstanding notes in the Exchange Offer, see "Risk Factors" beginning on
page 16.

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
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
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<S> <C>
Prospectus Summary....................................................... 4
Summary Historical and Pro Forma Financial and Store Data................ 13
Risk Factors............................................................. 16
Forward-Looking Information.............................................. 26
The Transactions......................................................... 27
Use of Proceeds.......................................................... 29
Capitalization........................................................... 30
The Exchange Offer....................................................... 31
Selected Historical Financial Data....................................... 39
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 42
Where You Can Find More Information...................................... 68
Business................................................................. 69
Management............................................................... 82
Beneficial Ownership of Capital Stock.................................... 87
Certain Relationships and Related Transactions........................... 88
Description of Notes..................................................... 91
Description of Certain Indebtedness...................................... 123
Plan of Distribution..................................................... 123
Certain United States Federal Tax Considerations......................... 124
Legal Matters............................................................ 124
Experts.................................................................. 125
Unaudited Pro Forma Condensed Combined Financial Statements.............. P-1
Index to Historical Financial Statements................................. F-1
</TABLE>

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

The registrants' 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 such an offer
or solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to anyone to whom it is unlawful to
make such offer or solicitation.

3
<PAGE>

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

Mrs. Fields' Original Cookies, Inc. completed on August 24, 1998, the private
offering of its 10 1/8% Series C Senior Notes due 2004. On November 27, 1997,
Mrs. Fields had completed a private offering of 10 1/8% Series A Senior Notes
due 2004. The notes are guaranteed by The Mrs. Fields' Brand, Inc. and Great
American Cookie Company, Inc. Pretzelmaker Holdings, Inc., also became a
guarantor of the notes when it became a wholly owned subsidiary of Mrs. Fields.

Mrs. Fields, Mrs. Fields' Brand and Great American entered into a
registration rights agreement with the placement agents in the private offering
in which they agreed, among other things, to deliver to you this prospectus and
to complete the Exchange Offer on or before March 5, 1999. You are entitled to
exchange in the Exchange Offer your outstanding notes for registered notes with
substantially identical terms. If the Exchange Offer is not completed on or
prior to March 5, 1999, the interest rate on the 10 1/8% Series C Senior Notes
due 2004 will be increased. The amount of the increase will be $.05 per $1,000
principal amount of notes per week for each 90-day period until we have
completed the Exchange Offer, up to a maximum amount of $.20 per week per
$1,000 of principal amount. The increase in interest rate does not apply to the
10 1/8% Series A Senior Notes due 2004, since the registration rights do not
apply to them. You should read the discussion under the heading "Summary
Description of Notes" and "Description of Notes" for further information
regarding the registered notes.

We believe that the notes issued in the Exchange Offer may be resold by you
without compliance with the registration and prospectus delivery provisions of
the Securities Act of 1933, subject to certain conditions. You should read the
discussion under the heading "Summary of the Exchange Offer" and "The Exchange
Offer" for further information regarding the Exchange Offer and resale of
notes.

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 fiscal year ended January 3, 1998 and the 39 weeks ended October 3,
1998, Mrs. Fields generated pro forma net revenue and EBITDA (as defined in
this prospectus) of $200.6 million and $32.1 million and $132.5 million and
$15.8 million, respectively. Our condensed pro forma combined statements of
operations data in this prospectus give effect to the offering of the 10 1/8%
Series C Senior Notes due 2004, the acquisitions of Great American and the
capital stock and stores of some Great American franchisees, 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, the acquisitions of 70%
of the capital stock of Pretzel Time, Inc. and assets of H&M Concepts Ltd. Co.,
pretzel retailers, and the related financings, as if all of these transactions
had occurred on December 29, 1996.
4
<PAGE>

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.

History of Our Operations

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, a new
management team was put 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 operating
margins,

(3) developing a marketing
strategy and
promotional calendar to
turn around sales from
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.

The savings from the improved store operations were reinvested in marketing
and other measures designed to improve sales from stores that have been open at
least two years.

Mrs. Fields was formed in September 1996 in connection with the acquisitions
of Mrs. Fields Inc., The Original Cookie Company, Incorporated, and Hot Sam
Company, Inc. by Mrs. Fields' Holding, a subsidiary of Capricorn Investors II,
L.P. As of January 3, 1999, Capricorn had invested more than $28 million in
Mrs. Fields through Mrs. Fields' Holding.

Mrs. Fields operates and franchises 1,021 retail cookie stores under the Mrs.
Fields, Original Cookie, and Great American brands. We have 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. We believe that Mrs. Fields
cookies are positioned in the premium quality, baked on-premises market of what
we believe to be the approximately $12 billion U.S. cookie industry.

Pretzels

Mrs. Fields operates and franchises 312 retail pretzel stores under the
Pretzel Time and Hot Sam names. We acquired Hot Sam in connection with the
acquisition of Original Cookie. In order to expand its presence in the retail
pretzel industry, we acquired the business of H&M and the common stock of
Pretzel Time. Our pretzel stores are located in shopping malls as well as in
airports, sports arenas, amusement parks and resort areas throughout the United
States and Canada.

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. We have targeted stores that
sell our various products to be either closed or

5
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franchised by the end of fiscal year 2000. We expect these measures to
result in enhanced operating margins, as unprofitable stores are closed
and certain other stores are converted into franchises, thereby increasing
royalty payments and eliminating overhead costs at the operating company
level associated with such stores.

. Improve Productivity of Continuing Company-Owned Stores. We have embarked
on a program to improve the performance of our continuing company-owned
stores in prime locations by:

(1) expanding product offerings,

(2) raising the average sale by tying sales of products together,

(3) promoting catering services by individual stores to corporate
customers,

(4) decreasing store expenses,

(5) improving merchandising, 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. We intend to continue
converting our continuing company-owned stores and to-be-franchised
Original Cookie stores to Mrs. Fields brand stores. We will also test the
success of converting selected Great American company-owned stores to
Mrs. Fields brand stores. We intend to further capitalize on the Mrs.
Fields brand name by:

(1) further developing and expanding new channels of distribution for our
products,

(2) increasing the emphasis on our mail order business, and

(3) developing and capitalizing on licensing opportunities.

. Develop Great American Brand. Management believes that the Great
American brand has high consumer awareness in the southeast United
States. Management intends to build on the Great American brand 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. We believe that there
are significant opportunities to improve our existing Hot Sam store
operations by continuing to convert our continuing company-owned and to-
be-franchised Hot Sam stores to Pretzel Time stores. In addition, we
believe there are significant new Pretzel Time franchising opportunities.

. Develop New Company-Owned and Franchised Stores, Including
Internationally. We plan to build and franchise new stores, as well as
carts and kiosks, in existing and new markets, including mall and non-
traditional locations, such as amusement parks and other entertainment
centers. In addition, we plan to grow internationally by expanding our
international franchise operations.

. Realize Purchasing and Overhead Cost Savings As a Result of Recent
Acquisitions. As a result of the acquisitions described in this
prospectus, 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.

. Pursue Further Strategic Acquisitions of Related Businesses. We intend to
selectively pursue strategic acquisitions, in addition to those described
in this prospectus, in order to expand our geographic presence and
achieve operating efficiencies.

6
<PAGE>

The Offering and the Transactions

The Offering. On August 24, 1998, Mrs. Fields consummated the offering of the
Series C 10 1/8% Senior Notes due 2004. We used the proceeds to help finance
the acquisitions described below.

The Mrs. Fields' Holding Transactions. On August 24, 1998, Mrs. Fields'
Holding consummated a separate offering of senior secured discount notes and
warrants. The Mrs. Fields' Holding notes are senior obligations of Mrs. Fields
and are secured by all of the issued and outstanding capital stock of Mrs.
Fields. We discuss potential risks of this pledge in the "Risk Factors" section
of this prospectus. Concurrently, Mrs. Fields' Holding made a capital
contribution to Mrs. Fields consisting of the entire net proceeds of its notes
and units, approximately $29.1 million.

The Great American Transactions. Mrs. Fields used the proceeds of its
offering in August 1998, together with cash from other sources, including the
capital contribution from Mrs. Fields' Holding and available cash of Great
American and Mrs. Fields,

(1) to finance the acquisition of Cookies USA, Inc., the parent of Great
American, and to pay certain liabilities of Great American,

(2) to finance the acquisition of the stock of two Great American
franchisees,

(3) to finance a tender offer and consent solicitation for all of the
outstanding $40 million in total principal amount of Great American's
10 7/8% Senior Secured Notes due 2001, and

(4) to finance other acquisitions that had not yet been completed as of the
date of the offering.

Cookies USA was merged with and into Mrs. Fields and the franchisees acquired
were merged with and into Great American.

Prior Transactions. Mrs. Fields made an offering of Series A 10 1/8% Senior
Notes due 2004 in November 1997. Proceeds of these notes were used to pay
various debt of Mrs. Fields, Mrs. Fields' Holding and Mrs. Fields' Brand, to
repay an advance to Mrs. Fields' Holding, and to pay a dividend to Mrs. Fields'
Holding.

Other Recent Transactions. Mrs. Fields has also recently acquired a number of
other pretzel and cookie stores, including Pretzel Time and Great American
stores, as part of its acquisition program.

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 an
aggregate purchase price of $2.8 million under an asset purchase agreement
dated as of October 5, 1998, by and 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 $5.4
million and Mrs. Fields assumed indebtedness, including severance payments, of
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 and $2.0 million of which is payable on or before December 30,
1999.

7
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SUMMARY OF THE EXCHANGE OFFER

Registration Rights Holders of 10 1/8% Series C Senior Notes due 2004 are
Agreement......... entitled to exchange their notes for 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 Series A 10 1/8% Senior Notes
due 2004 issued in November 1997 and Series C 10 1/8%
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 such liability.

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.

8
<PAGE>

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 a
certificateless depositary interest in those
outstanding notes, which represents a 100% interest
in such 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
means of 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 duly executed
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 set forth on the
cover page of the letter of transmittal;

and either:

. a timely confirmation of book-entry transfer of
your old notes into the Exchange Agent's account at
The Depository Trust Company, pursuant to 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 prior to 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.

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
duly executed 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."

9
<PAGE>

<TABLE>
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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 "Certain
United States Federal Income Tax Considerations."

Use of Proceeds......... We will not receive any proceeds from the issuance of
notes pursuant to the Exchange Offer.

Exchange Agent.......... The Bank of New York is serving as the Exchange Agent
for the Exchange Offer.

Shelf Registration
Statement.............. Under certain circumstances, certain holders of notes
may require us to register their notes under a shelf
registration statement.

</TABLE>

10
<PAGE>

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 are governed by the same indenture.

<TABLE>
<S> <C>
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 fully
and unconditionally guaranteed by our wholly owned
subsidiaries, Mrs. Fields' Brand, Great American and
Pretzelmaker, on a senior basis. The guarantees will
be identical in all material respects to the
guarantees on the outstanding notes. Under certain
circumstances, certain of our existing and future
subsidiaries will also become guarantors. 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

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 aggregate 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 certain exceptions, restrict our ability
to:

. pay dividends
</TABLE>

11
<PAGE>

. redeem capital stock

. make certain 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 DTC. 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."

Use of Proceeds.........
We will not receive any proceeds from the Exchange
Offer.

12
<PAGE>

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 30, 1995 and December 28, 1996 and for each of the two
52-week periods then ended;

(2) summary consolidated historical financial and store data for Mrs.
Fields as of January 3, 1998, September 27, 1997 and October 3, 1998 and
for the 53 weeks ended January 3, 1998, the 39 weeks ended September 27,
1997 and the 39 weeks ended October 3, 1998; 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 53 weeks ended January 3, 1998 and the 39 weeks ended
October 3, 1998 as if each of the Mrs. Field's offerings in November 1997
and 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, and the acquisitions of H&M, Pretzel Time, Cookie Conglomerate
and Pretzelmaker had occurred as of December 29, 1996. Except for data
presented with respect to the acquisition of eight Great American stores,
the summary combined pro forma data do not give effect to the purchase by
Mrs. Fields of a number of other pretzel and cookie stores, or the purchase
of the remaining 30.0% of common stock of Pretzel Time, because those
transactions were immaterial to the pro forma combined financial position
and results of operations. The historical results of operations for the 39
weeks ended October 3, 1998 are not indicative of the results to be
expected for the full fiscal year of Mrs. Fields. The summary combined pro
forma data do not purport to represent what Mrs. Field's results actually
would have been had the offerings in November 1997 and 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,
and the acquisitions of H&M, Pretzel Time, Cookie Conglomerate and
Pretzelmaker occurred as of December 29, 1996 nor do such 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 the related notes thereto,
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 30, 1995
reflects the combined results 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, certain
statements of operations data for the predecessors has been reclassified
to be consistent with the Mrs. Fields historical financial statement
presentation.

13
<PAGE>

<TABLE>
<CAPTION>
Mrs. Fields
and Predecessors Mrs. Fields Mrs. Fields Mrs. Fields Mrs. Fields
------------------- ------------ ----------- ------------------ -----------
Historical Historical Pro Forma Historical Pro Forma
Combined Consolidated Combined Consolidated Combined
------------------- ------------ ----------- ------------------ -----------
53 Weeks 53 Weeks
52 Weeks Ended Ended Ended 39 Weeks Ended
------------------- ------------ ----------- --------------------------------
December December January January September October October
30, 1995 28, 1996 3, 1998 3, 1998 27, 1997 3, 1998 3, 1998
-------- -------- ------------ ----------- --------- -------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net store and batter
sales.................. $145,537 $123,930 $123,987 $183,852 $83,759 $ 89,938 $121,217
Net store and batter
contribution(1)........ 19,654 19,133 25,087 36,683 13,214 11,804 19,671
Franchising, licensing
and other revenue,
net.................... 5,993 5,278 6,520 16,722 3,767 6,021 11,268
General and
administrative
expenses............... 24,828 20,557 16,730 28,335 10,803 12,621 19,762
Income (loss) from
operations............. (1,091) 1,135 8,415 12,738 2,378 (314) 518
Net loss................ (4,464) (5,988) (974) (3,638) (3,224) (9,690) (12,545)
Other Data:
Cash flows from
operating activities... (27) 6,784 919 4,658 791 676 214
Cash flows from
investing activities... 1,958 (22,716) (15,505) (16,214) (3,216) (34,315) (34,681)
Cash flows from
financing activities... (4,784) 18,793 24,164 23,555 (98) 22,498 21,422
Interest expense........ 4,407 4,842 7,830 16,097 5,070 8,981 12,798
Total depreciation and
amortization........... 10,427 9,192 10,403 19,405 6,596 9,707 15,325
Capital expenditures.... 4,714 3,892 4,678 N/A 3,216 5,616 N/A
EBITDA(2)............... 9,336 10,327 18,818 32,143 8,974 9,393 15,843
Store contribution for
stores in the process
of being closed or
franchised(1).......... $ (2,344) $ (1,933) $ (1,798) $ (2,839) $(1,999) $ (2,125) $ (2,786)
Ratio of earnings to
fixed charges(3)....... -- -- -- -- -- -- --
Store Data:
Percentage change in
comparable store
sales(4)............... (1.6)% (1.2)% 0.6% N/A 1.3% (0.9)% N/A
Total company-owned
stores open at end of
period................. 540 482 481 619 496 568 589
Total franchised or
licensed stores open at
end of period.......... 415 418 553 962 540 765 960
</TABLE>

<TABLE>
<CAPTION>
Mrs. Fields
Historical
Consolidated
October 3, 1998
----------------------
(Dollars in thousands)
<S> <C>
Balance Sheet Data:
Cash and cash equivalents.............................. $ 5,146
Total assets........................................... 222,657
Mandatorily redeemable cumulative preferred stock of
subsidiary............................................ 1,171
Total debt and capital lease obligations, including
current portion....................................... 140,156
Total stockholder's equity............................. 50,131
</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.

14
<PAGE>

(2) EBITDA consists of earnings before depreciation, amortization, interest,
income taxes, minority interest, preferred stock accretion and dividends of
subsidiaries and other income (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 herein 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 years 1995 and 1996, earnings were
insufficient to cover fixed charges by $3,960,000 and $3,985,000,
respectively. For the 53 weeks ended January 3, 1998, the 39 weeks ended
September 27, 1997 and the 39 weeks ended October 3, 1998, Mrs. Field's
earnings were insufficient to cover fixed charges by $319,000, $3,045,000
and $9,622,000, respectively. For the 53 weeks ended January 3, 1998 and
the 39 weeks ended October 3, 1998, pro forma combined earnings were
insufficient to cover pro forma combined fixed charges by $3,623,000 and
$12,879,000, respectively.

(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.

15
<PAGE>

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 two risk factors described below, the risks factors
generally apply to the outstanding notes as well as to the notes to be issued.
The risks described below are not the only ones that could affect us or our
securities.

You May Have Difficulty Selling the Notes Which You Do Not Exchange

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 such 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 of 1933 or state laws that
apply to them. See "The Exchange Offer--Consequence 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, the existing transfer
restrictions of the outstanding notes that are set forth 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
Not Be Entitled to an Increased Interest Rate

In addition, 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. 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

Certain holders may not be able to resell notes they 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 certain 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 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.

16
<PAGE>

All holders 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.

The following chart shows certain important credit statistics:

<TABLE>
<CAPTION>
At January 2, 1999
------------------
<S> <C>
Total indebtedness of Mrs. Fields and subsidiaries........ $149.2
By rank, this debt was:
Equal in right of payment to the notes.................. $ --
Subordinated to the notes............................... $ --
Senior to the notes..................................... $ 8.5
</TABLE>

The number is net of unamortized discount, and includes capital lease
obligations of $1.5 million and mandatorily redeemable preferred stock having a
book value of approximately $1.3 million outstanding, together representing
1.4% of our total book capitalization. Substantially all of our subsidiaries'
debt is effectively senior to the notes.

<TABLE>
<S> <C>
Stockholders' equity................................................... $55.7
Debt to equity ratio................................................... 27:1
</TABLE>

Moreover, in recent periods our earnings have not been sufficient to cover
our fixed charges.

<TABLE>
<CAPTION>
39 weeks ended 53 weeks ended
October 3, 1998 January 3, 1998
--------------- ----------------
<S> <C> <C>
Approximate deficiency in earnings to fixed
charges presented on a combined pro forma
basis..................................... $12.9 million $3.6 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
indebtedness, under certain circumstances, 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.

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 such covenants,
there could be an event of default, which, if not cured or waived, could
have a material adverse effect on us; and

17
<PAGE>

. 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."

Ability to Service Debt--to Service Our Indebtedness, 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. 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. 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 and Mrs. Fields' Brand. 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 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 certain restrictive
covenants similar to those in the indenture, requiring us to comply with
certain financial ratios. If we are not able to comply with these and other

18
<PAGE>

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 such
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 such indebtedness and
our other indebtedness, including the notes, or that we could continue to
operate our business as a result of such acceleration. Great American and Mrs.
Fields' Brand 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

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. Currently there are no
amounts outstanding under the agreement with LaSalle National Bank.

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 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 Provide the Desired
Economic Benefits

We have achieved growth through acquisitions such as the acquisition of Great
American and certain of its franchisees and their stores, the acquisitions of
Pretzel Time and Pretzelmaker, and the business of H&M 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
such acquisitions will provide such 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 such economic benefits from
prior acquisitions and/or any future acquisitions as well as our ability to

19
<PAGE>

integrate successfully our businesses with any acquired businesses.
Consequently, we cannot be sure that such acquisitions will result in the
economic benefits that management expects on a timely basis or at all. See
"Business--Business Strategy."

We May Not Be Able to Obtain Leases in the Future

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

We lease locations for all the stores we own and for most of our franchised
stores and sublease these locations to our franchisees. Accordingly, we are the
primary obligor for payments under such leases. If certain locations should
prove to be unprofitable, we would remain obligated for lease payments if we
determined to withdraw from these locations. See "Business--Properties."

A Decline in Mall Traffic Could Adversely Affect Our Business

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 such 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. We recently experienced a
substantial increase in the cost of butter. 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 (the "POS" system).
We are upgrading our back-office system to a Windows 95 environment and are
currently upgrading all Mrs. Fields stores to Pentium 333 machines, and we plan
to install our upgraded back-office system, along with the POS registers and
Pentium 333 machines, in our core Original Cookie stores, Hot Sam stores,
Pretzel Time stores and certain Great American stores by August 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 POS 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 Could Disrupt Our Operations

We are in the process of assessing 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 such vendors to
continue providing goods and services to us. Failure of our key suppliers to
remedy their own Year 2000 issues could delay shipments of essential products,
thereby disrupting our operations. Furthermore, we

20
<PAGE>

rely on various service providers, such as utility and telecommunication
service companies, which are beyond our control. This assessment is
approximately 20% complete with final completion anticipated by the end of the
first quarter of 1999. Based on the results of the assessment to date,
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, but we intend to develop such plans during the
first half of 1999. 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 January 2, 1999, 1,636 of our 6,614 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 $291,000 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
39 weeks ended October 3, 1998. For the same period, franchise revenues made up
4.1% 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 3 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 such 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, attract and retain personnel will be successful. See "Management." We
have entered into employment agreements with all of our senior managers.

21
<PAGE>

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 such as 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 such 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 be an adverse effect on our profitability. See "Business--
Competition."

Our Financial Condition And Results May Be Affected By Adverse Publicity

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. Consequently, we cannot be sure that such adverse publicity 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 such 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 FTC 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 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.

22
<PAGE>

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 such 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 Against Us Could Have An Adverse Effect On Our Business

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 such 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 such 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

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 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 such event. See "Description
of Notes--Repurchase at the Option of Holders--Change of Control."

23
<PAGE>

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." 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. 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 absolute
and matured.

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 such obligation incurred by the borrower 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 such
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:

(1) they were not insolvent when, or as a result of, the issuance of the
notes or the guarantees,

(2) that they will not engage in a business or transaction for which
their remaining assets would constitute unreasonably small capital, and

(3) 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 such debts as they mature.

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' total indebtedness (net of unamortized
discount) on a consolidated basis, including capital lease obligations and
mandatorily redeemable preferred stock, represents 73.8% of its total book
capitalization. In addition, Mrs. Fields' cash

24
<PAGE>

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. As a result, there can be no assurance that a court ruling
on these questions would agree with Mrs. Fields' analysis of its and the
guarantors' financial condition.

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 such a 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 certain 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
such a 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 Series A 10 1/8% Senior Notes due 2004 were issued on
November 26, 1997 and the outstanding Series C 10 1/8% Senior Notes due 2004
were issued on August 24, 1998, to institutional investors and certain
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.

25
<PAGE>

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. Such
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 certain cost savings and
other synergies related to such 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.

26
<PAGE>

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 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 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

Pursuant to a Securities Purchase Agreement, dated as of August 13, 1998, by
and 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 have 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, certain debt on
the balance sheet of one such corporation was retired with cash on hand, and
certain 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 certain 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 certain exceptions, all of their claims against
us, Great American, Capricorn and certain 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,

we will purchase all of the franchises of such 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 fiscal period
immediately preceding such period, or the number of months it has been
operating, if fewer than 12.

27
<PAGE>

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 such 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 margin 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.
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 an aggregate purchase price of $13.8 million, excluding the
assumption of certain 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 three cookie stores operating under other brand names,
which we intend to convert or develop into Mrs. Fields brand stores at purchase
prices aggregating $750,000. We intend to remodel the three cookie stores, at a
total estimated cost of $150,000. 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 certain securities of Cookies
USA that were sold pursuant to the agreement to purchase Great American and was
a party to that agreement.

28
<PAGE>

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 an
aggregate purchase price of $2,800,000 under an asset purchase agreement dated
as of October 5, 1998, by and 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 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 $5.4
million and Mrs. Fields assumed indebtedness, including severance payments,
totaling approximately $1.6 million.

USE OF PROCEEDS

Neither Mrs. Fields nor the guarantors will receive any cash proceeds
pursuant to 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, 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 acquisition 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 certain other recent
acquisitions and approximately $5.0 million of fees and expenses related to the
offering in August 1998 and certain transactions described in this prospectus.

29
<PAGE>

CAPITALIZATION

The following table sets forth the cash and cash equivalents and
capitalization of Mrs. Fields' Original Cookies, Inc. and subsidiaries at
October 3, 1998. 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."

<TABLE>
<CAPTION>
Mrs. Fields'
Original Cookies, Inc.
and Subsidiaries
At October 3, 1998
----------------------
(Dollars in thousands)
<S> <C>
Cash and Cash Equivalents.............................. $ 5,146
========
Credit Facility(1)..................................... $ --
--------
Debt and Capital Lease Obligations, including current
portions:
10 1/8% Series A, B and C Senior Notes due 2004(2)... 140,000
Original issue discount on Series C Senior Notes..... (591)
Pretzel Time Debt.................................... 440
Mrs. Fields' Original Cookies, Inc. Capital Lease
Obligations......................................... 276
Great American Capital Lease Obligations............. 31
--------
Total Debt and Capital Lease Obligations, including
current portion....................................... 140,156
--------
Mandatorily Redeemable Preferred Stock of Pretzel
Time(3)............................................... 1,171
--------
Stockholder's Equity:
Common Stock (pledged as collateral for parent
company debt)(4).................................... --
Additional Paid-in Capital(5)........................ 59,899
Accumulated Deficit.................................. (9,768)
--------
Total Stockholder's Equity........................... 50,131
--------
Total Capitalization................................... $191,458
========
</TABLE>
- --------

(1) Under the indenture, Mrs. Fields is permitted to have one or more credit
facilities pursuant to which it will be able to borrow up to a maximum
aggregate principal amount of $15.0 million on a secured basis. Mrs.
Fields' Amended and Restated Loan Agreement, dated as of February 28, 1998,
provides for a maximum commitment of up to $15.0 million secured by
essentially all of the assets of Mrs. Fields. As of October 3, 1998, Mrs.
Fields had $12.7 million of available borrowings under its credit facility.
See "Description of Certain Indebtedness--Credit Agreement."

(2) Includes $100.0 million of Series A and Series B 10 1/8% Senior Notes of
Mrs. Fields and $40.0 million of 10 1/8% Series C Senior Notes.
(3) Liquidation preference as of October 3, 1998 was approximately $1.5
million.
(4) Less than $1,000.

(5) Gives effect to the capital contribution of Mrs. Fields' Holding of $29.1
million.

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<PAGE>

THE EXCHANGE OFFER

Terms of the Exchange Offer; Period for Tendering Notes

Upon the terms and subject to the conditions set forth in this prospectus and
in the accompanying letter of transmittal (which together constitute the
Exchange Offer), we will accept for exchange outstanding notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used in this prospectus, the "Expiration Date" means 12:00
midnight, New York City time, on , 1999, or such later date and time to
which we, in our sole discretion, extend the Exchange Offer.

The form and terms of the notes being issued in the Exchange Offer are the
same as the form and terms of the outstanding notes except that:

(1) the notes being issued in the Exchange Offer will have been
registered under the Securities Act and thus will not bear restrictive
legends restricting their transfer pursuant to the Securities Act, and

(2) the notes being issued in the Exchange Offer will not contain the
registration rights and liquidated damages provisions contained in the
outstanding notes. However, the holders of outstanding 10 1/8% Series A
Senior Notes due 2004 do not currently have such rights.

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 are
governed by the same indenture.

As of the date of this prospectus, there is $53,725,000 in total principal
amount of notes outstanding that are eligible for exchange in the Exchange
Offer. Our obligation to accept outstanding notes for exchange pursuant to the
Exchange Offer is subject to certain conditions as set forth under "--Certain
Conditions to the Exchange Offer" below.

Notes tendered in the Exchange Offer must be in denominations of principal
amount of $1,000 and any integral multiple thereof.

We expressly reserve the right, in our sole discretion:

(1) to extend the Expiration Date,

(2) to delay accepting any outstanding notes,

(3) if any of the conditions set forth below under "--Conditions of the
Exchange Offer" have not been satisfied, to terminate the Exchange Offer
and not accept any notes for exchange, or

(4) to amend the Exchange Offer in any manner.

We will give oral or written notice of any extension, delay, non-acceptance,
termination or amendment as promptly as practicable by a public announcement,
and in the case of an extension, no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date. We
will also file a post-effective amendment with the Commission upon the
occurrence of any amendment to the terms of the Exchange Offer.

During an extension, all outstanding notes previously tendered will remain
subject to the Exchange Offer and may be accepted for exchange by us. Any
outstanding notes not accepted for exchange for any reason will be returned
without expense to the holder that tendered them as promptly as practicable
after the expiration or termination of the Exchange Offer.

Procedures for Tendering Notes

The tendering by a holder of outstanding notes, and our mutual acceptance of
the outstanding notes, will constitute a binding agreement between us and the
holder on the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal. Except as set forth below, to
tender in the Exchange Offer, a holder must:

31
<PAGE>

(1) transmit a properly completed and duly executed letter of
transmittal, including all other documents required by such letter of
transmittal, or

(2) if notes are tendered pursuant to the book-entry transfer procedures
set forth below, the holder must transmit an agent's message to the
Exchange Agent on or prior to 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, prior to the Expiration Date, a
timely confirmation of a book-entry transfer of the notes being tendered
into the Exchange Agent's account at The Depository Trust Company ("DTC"),
along with the letter of transmittal or a computer-generated message
transmitted by means of an agent's message, or

(3) the holder must comply with the guaranteed delivery procedures
described below.

The term "agent's message" means a computer-generated message, transmitted by
DTC by means of DTC's Automated Tender Offer Program ("ATOP") and received by
the Exchange Agent and forming a part of a book-entry transfer (a "book-entry
confirmation"), which states that the DTC has received an express
acknowledgment that the holder has received and agrees to be bound by the
letter of transmittal and that we may enforce such letter of transmittal
against such holder.

The method of delivery of outstanding notes, letters of transmittal and all
other required documents is at the election and risk of the holders. If such
delivery is by mail, we recommend that registered mail, properly insured, with
return receipt requested, be used. In all cases, sufficient time should be
allowed to assure timely delivery. Do not send letters of transmittal or notes
to Mrs. Fields.

Signatures on a letter of transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the notes surrendered for exchange are
tendered:

(1) by a holder of outstanding notes who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions"
on the letter of transmittal, or

(2) for the account of an eligible institution.

An eligible institution is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc. or
a commercial bank or trust company having an office or correspondent in the
United States.

If signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, such guarantees must be by an eligible institution.
If notes are registered in the name of a person other than a signer of the
letter of transmittal, the 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 us in our sole discretion, duly
executed by the registered holder with the holder's signature guaranteed by an
eligible institution.

We will determine all questions as to the validity, form, eligibility
(including time of receipt) and acceptance of notes tendered for exchange in
our sole discretion. Our determination will be final and binding. We reserve
the absolute right to:

(1) reject any and all tenders of any particular note not properly
tendered,

(2) refuse acceptance of any particular note if, in our judgment or the
judgment of our counsel, acceptance of the note may be deemed unlawful, and

32
<PAGE>

(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 as to
any particular notes either before or after the Expiration Date, including the
letter of transmittal and the instructions to it, will be final and binding on
all parties. Holders must cure any defects or irregularities in connection with
tenders of notes for exchange within such reasonable period of time as we will
determine, unless we waive such defects or irregularities. Neither we, the
Exchange Agent nor any other person shall be under any duty to give
notification of any defect or irregularity with respect to any tender of notes
for exchange, nor shall any of them incur any liability for failure to give
such notification.

If the letter of transmittal is signed by a person or persons other than the
registered holder or holders of outstanding notes, such 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 any power of attorney,
such persons should so indicate when signing, and you must submit proper
evidence satisfactory to us of such person's authority to so act unless we
waive this requirement.

By tendering, each holder will represent to us that, among other things, the
person receiving the notes in the Exchange Offer is obtaining them in the
ordinary course of its business, whether or not such person is the holder, and
that neither the holder nor such other person has any arrangement or
understanding with any person to participate in the distribution of the notes
issued in the Exchange Offer. If any holder or any such other person is an
"affiliate," as defined under Rule 405 of the Securities Act, of Mrs. Fields',
is engaged in or intends to engage in or has an arrangement or understanding
with any person to participate in a distribution of such notes to be acquired
pursuant to the Exchange Offer, such holder or any such other 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 in connection with any resale
transaction.

Each broker-dealer who acquired its outstanding notes as a result of market-
making activities or other trading activities and thereafter receives notes
issued for its own account in the Exchange Offer, must acknowledge that it will
deliver a prospectus in connection with any resale of such notes issued in the
Exchange Offer. See "Plan of Distribution." The letter of transmittal states
that by so acknowledging 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.

Acceptance of Outstanding Notes for Exchange; Delivery of Notes Issued in the
Exchange Offer

Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
we will accept, promptly after the Expiration Date, all outstanding notes
properly tendered and will issue notes registered under the Securities Act
promptly after acceptance of the outstanding notes. See "--Certain Conditions
to the Exchange Offer" below. For purposes of the Exchange Offer, we will be
deemed to have accepted properly tendered outstanding notes for exchange when,
as and if we have given oral or written notice thereof to the Exchange Agent,
with written confirmation of any oral notice given promptly thereafter.

For each outstanding note accepted for exchange, the holder of such
outstanding note will receive a note registered under the Securities Act having
a principal amount equal to that of the surrendered outstanding note.
Accordingly, registered holders of notes issued in the Exchange Offer on the
relevant record date for the first

33
<PAGE>

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. Outstanding notes that we accept for exchange will cease to accrue
interest from and after the date of consummation of the Exchange Offer. Under
the registration rights agreement, we are required to make certain additional
payments to holders of outstanding notes under certain circumstances relating
to the timing of the Exchange Offer. However, holders of outstanding 10 1/8%
Series A Senior Notes due 2004 are not entitled to such additional payments
under the registration rights agreement.

In all cases, we will issue notes in the Exchange Offer for outstanding notes
that are accepted for exchange only after timely receipt by the Exchange Agent
of:

(1) certificates for such outstanding notes or a timely book-entry
confirmation of such outstanding notes into the Exchange Agent's account at
DTC,

(2) a properly completed and duly executed letter of transmittal or an
agent's message, and

(3) all other required documents.

If tendered outstanding notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if a holder submits
outstanding notes for a greater principal amount than the holder desires to
exchange, we will return such unaccepted or non-exchanged notes without expense
to the tendering holder. In the case of notes tendered by book-entry transfer
into the Exchange Agent's account at DTC, such non-exchanged notes will be
credited to an account maintained with DTC. We will return the notes or have
them credited to the DTC account as promptly as practicable after the
expiration or termination of the Exchange Offer.

Book-Entry Transfers

The Exchange Agent will make a request to establish an account with respect
to the outstanding notes at DTC for purposes of the Exchange Offer within two
business days after the date of this prospectus. Any financial institution that
is a participant in DTC systems must make book-entry delivery of outstanding
notes by causing DTC to transfer such outstanding notes in the Exchange Agent's
account at DTC in accordance with DTC's ATOP procedures. Such participant
should transmit its acceptance to DTC on or prior to the Expiration Date or
comply with the guaranteed delivery procedures described below. DTC will verify
such acceptance, execute a book-entry transfer of the tendered outstanding
notes into the Exchange Agent's account at DTC and then send to the Exchange
Agent confirmation of such book-entry transfer. The confirmation of such book-
entry transfer will include an agent's message confirming that DTC has received
an express acknowledgment from such participant that such participant has
received and agrees to be bound by the letter of transmittal and that we may
enforce the letter of transmittal against such participant. Delivery of notes
issued in the Exchange Offer may be effected through book-entry transfer at
DTC. However, the letter of transmittal or facsimile thereof 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
set forth below under "Exchange Agent" on or prior to the Expiration Date,
or

(2) the guaranteed delivery procedures described below must be complied
with.

Guaranteed Delivery Procedures

If a holder of outstanding notes desires to tender such notes and the
holder's notes are not immediately available, or time will not permit such
holder's 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, a tender may be effected if:

(1) the holder tenders the notes through an eligible institution,

34
<PAGE>

(2) prior to the Expiration Date, the Exchange Agent received from such
eligible institution a notice of guaranteed delivery, substantially in the
form we have provided (by telegram, telex, facsimile transmission, mail or
hand delivery), setting forth the name and address of the holder of the
notes being tendered and the amount of notes being tendered. The notice of
guaranteed delivery shall state that the tender is being made and guarantee
that within five New York Stock Exchange trading days after the date of
execution of the notice of guaranteed delivery, the certificates for all
physically tendered notes, in proper form for transfer, or a book-entry
confirmation, as the case may be, together with a properly completed and
duly executed appropriate letter of transmittal (or facsimile of the letter
of transmittal or agent's message) 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, as the case may be,
together with a properly completed and duly executed appropriate letter of
transmittal (or facsimile of the letter of transmittal or agent's message)
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.

Withdrawal Rights

Tenders of outstanding notes may be withdrawn at any time prior to 12:00
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 one of the addresses set forth below under "--Exchange Agent." Any
such 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 such notes) and

(3) if you have transmitted certificates for outstanding notes, specify
the name in which such notes are registered, if different from that of the
withdrawing holder.

If certificates for outstanding notes have been delivered or otherwise
identified to the Exchange Agent, then prior to the release of such
certificates the withdrawing holder 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 notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn notes
and otherwise comply with the procedures of such facility. We will determine
all questions as to the validity, form and eligibility (including time of
receipt) of such notices and our determination will be final and binding on all
parties. Any tendered notes so withdrawn will be deemed not to have been
validly tendered for exchange for purposes of the Exchange Offer. Any
outstanding notes which 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. In the case of notes tendered by book-entry transfer into the
Exchange Agent's account at DTC, the notes withdrawn will be credited to an
account maintained with DTC for the outstanding notes. The notes will be
returned or credited to the DTC account as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn notes may be retendered by following one of the procedures described
under "--Procedures for Tendering Notes" above at any time on or prior to 12:00
midnight, New York City time, on 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 such outstanding notes:

35
<PAGE>

(1) any federal law, statute, rule or regulation shall have 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 shall be threatened or in effect with respect to
the Registration Statement of which this prospectus constitutes a part or
the qualification of the indenture under the Trust Indenture Act of 1939,
as amended; or

(3) there shall occur a change in the current interpretation by the staff
of the Commission which permits the notes issued pursuant to the Exchange
Offer in exchange for outstanding notes to be offered for resale, resold
and otherwise transferred by such holders (other than broker-dealers and
any such holder which is an "affiliate" of Mrs. Fields 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 notes acquired in the Exchange Offer are acquired in the
ordinary course of such holder's business and such holder has no
arrangement or understanding with any person to participate in the
distribution of such notes issued in the Exchange Offer.

The preceding conditions are for our sole benefit and we may assert them
regardless of the circumstances giving rise to any such condition. We may waive
the preceding conditions in whole or in part at any time and from time to time
in our sole discretion. If we do so, 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 shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time.

Exchange Agent

The Bank of New York has been appointed as the Exchange Agent for the
Exchange Offer. You should direct all executed letters of transmittal to the
Exchange Agent at the address set forth below. You should direct questions and
requests for assistance, requests for additional copies of this prospectus or
of the letter of transmittal and requests for notices of guaranteed delivery to
the Exchange Agent addressed as follows:

Main Delivery to: The Bank of New York,

As Exchange Agent

By Mail, By Hand and Overnight Courier: By Facsimile:
(For Eligible Institutions Only)
The Bank of New York (212) 815-6339
101 Barclay Street 7 East
New York, New York 10286 Confirm by telephone:
Attention: Odell Romeo (212) 815-6337

Delivery of the letter of transmittal to an address other than as set forth
above or transmission of such letter of transmittal via facsimile other than as
set forth above does not constitute a valid delivery of such 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 to be incurred in connection with the
Exchange Offer. The expenses are estimated in the aggregate to be approximately
$250,000.

36
<PAGE>

Transfer Taxes

Holders who tender their outstanding notes for exchange will not be obligated
to pay transfer taxes in connection therewith. If, however, notes issued in the
Exchange Offer are to be delivered to, or are to be issued in the name of, any
person other than the registered holder of the outstanding notes tendered, or
if a transfer tax is imposed for any reason other than the exchange of
outstanding notes in connection with the Exchange Offer, then the holder must
pay the amount of any such transfer taxes, whether they are imposed on the
registered holder or any other persons. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the letter of
transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.

Consequences of Failure to Exchange Notes

Holders who desire to tender their outstanding notes in exchange for notes
registered under the Securities Act should allow sufficient time to ensure
timely delivery. Neither the Exchange Agent nor Mrs. Fields is under any duty
to give notification of defects or irregularities with respect to the tenders
of outstanding notes for exchange. Outstanding notes that are not tendered or
are tendered but not accepted will, following the consummation of the Exchange
Offer, continue to be subject to the provisions of the indenture regarding
transfer and exchange of the outstanding notes and the existing restrictions
upon transfer of the notes set forth in the legend on the outstanding notes and
in the offering circulars, relating to the outstanding notes. Except in certain
limited circumstances with respect to certain types of holders of outstanding
notes, we will have no further obligation to provide for the registration under
the Securities Act of such outstanding notes. See "Description of Notes--
Exchange Offer; Registration Rights." In general, outstanding notes, unless
registered under the Securities Act, may not be offered or sold except pursuant
to an exemption from, or in a transaction not subject to, the Securities Act
and applicable state securities laws. We do not currently expect to take any
action to register the outstanding notes under the Securities Act or blue sky
laws.

If outstanding notes are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered outstanding notes could be adversely
affected.

Upon completion of the Exchange Offer, holders of the outstanding notes will
not be entitled to any increase in the interest rate on the notes or any
further registration rights under the registration rights agreement, except
under limited circumstances. Holders of Series A 10 1/8 Senior Notes due 2004
are not entitled to any registration rights regardless of whether the Exchange
Offer is completed. See "Description of Notes--Exchange Offer; Registration
Rights."

Holders of the notes issued in the Exchange Offer and any outstanding notes
which remain outstanding after consummation of the Exchange Offer will vote
together as a single class for purposes of determining whether holders of the
requisite percentage of the class have taken certain actions or exercised
certain rights under the indenture.

Consequences of Exchanging Notes

Based on interpretations by the staff of the Commission, as set forth in no-
action letters issued to third parties, we believe that notes issued in the
Exchange Offer in exchange for outstanding notes may be offered for resale,
resold or otherwise transferred by the holders of such notes, other than by any
holder which is an "affiliate" of Mrs. Fields within the meaning of Rule 405
under the Securities Act. Such notes may be offered for resale, resold, or
otherwise transferred without compliance with the registration and prospectus
delivery requirements of the Securities Act, if:

(1) such notes issued in the Exchange Offer are acquired in the ordinary
course of such holder's business, and

(2) such holder, other than broker-dealers, has no arrangement with any
person to participate in the distribution of such notes issued in the
Exchange Offer.

37
<PAGE>

However, the Commission 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
Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Each holder, other than a broker-dealer,
must furnish a written representation, at our request, that:

(1) it is not an affiliate of Mrs. Fields,

(2) it is not engaged in, and does not intend to engage in, a
distribution of such notes issued in the Exchange Offer and has no
arrangement or understanding to participate in a distribution of notes
issued in the Exchange Offer, and

(3) it is acquiring the notes issued in the Exchange Offer in its
ordinary course of business.

Each broker-dealer that receives notes issued in the Exchange Offer for its
own account in exchange for outstanding notes must acknowledge that such
outstanding notes were acquired by such broker-dealer as a result of market-
making activities or other trading activities and that it will deliver a
prospectus in connection with any resale of such notes issued in the Exchange
Offer. See "Plan of Distribution."

In addition, to comply with the securities laws of certain jurisdictions, it
may be necessary to qualify for sale or register thereunder the notes issued in
the Exchange Offer prior to offering or selling such notes. We have agreed,
pursuant to the registration rights agreement, subject to certain limitations
in such agreement, prior to any public offering of transfer restricted
securities, to register or qualify the transfer restricted securities for offer
or sale under the securities laws of such jurisdictions as any holder requests.
"Transfer restricted securities" means each note until:

(1) the date on which such note has been exchanged by a person other than
a broker-dealer for a note in the Exchange Offer,

(2) following the exchange by a broker-dealer in the Exchange Offer of a
note for a note issued in the Exchange Offer, the date on which the note
issued in the Exchange Offer is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Registration Statement,

(3) the date on which such note has been effectively registered under the
Securities Act and disposed of in accordance with a shelf registration
statement that we file in accordance with the registration rights
agreement, or

(4) the date on which such note is distributed to the public pursuant to
Rule 144 under the Securities Act.

Unless a holder so requests, we do not intend to register or qualify the sale
of the notes issued in the Exchange Offer in any such jurisdiction.

38
<PAGE>

SELECTED HISTORICAL FINANCIAL DATA

The following table presents historical financial data for Mrs. Fields'
Original Cookies, Inc. and subsidiaries ("Mrs. Fields") and its predecessors;
namely, Mrs. Fields Inc. and subsidiaries ("Mrs. Fields Inc."), The Original
Cookie Company, Incorporated ("Original Cookie") and the pretzel business of
Hot Sam Company, Inc. ("Hot Sam") 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 and the 39
weeks ended September 27, 1997 and October 3, 1998 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, certain statement of operations
information for the predecessors has been reclassified to be consistent with
the Mrs. Fields historical financial statement presentation. 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 the related notes thereto, 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(1) Sam Company, Inc. (Combined)(1)
---------------------------------------- --------------------------------------------------
December December
52 Weeks Ended(2) 31, 1995 52 Weeks Ended(2) 31, 1995
---------------------------- through ------------------------------------ through
December December December September December December December September
31, 1993 31, 1994 30, 1995 17,1996(2) 31, 1993 31, 1994 30, 1995 17,1996(2)
-------- -------- -------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net store sales......... $ 98,601 $ 87,863 $59,956 $ 29,674 $ 87,956 $ 89,648 $ 85,581 $ 54,366
Net store
contribution(3)........ 17,005 8,083 6,591 3,797 16,081 13,912 13,063 5,854
Franchising, licensing
and other revenue,
net.................... 3,993 7,241 5,993 3,786 -- -- -- --
General and
administrative
expenses............... 21,521 16,379 15,612 8,984 8,536 12,546 9,216 7,538
Income (loss) from
operations............. (1,251) (1,691) (3,526) (1,742) 4,004 (750) 2,435 (2,772)
Net loss................ (2,243) (5,320) (2,368) (2,304) (333) (5,355) (2,096) (5,645)
Other Data:
Cash flows from
operating activities... 5,839 1,728 (4,478) (447) (1,041) 3,699 4,451 (378)
Cash flows from
investing activities... (2,962) (2,030) 2,526 (385) (9,019) (3,779) (568) (1,200)
Cash flows from
financing activities... (2,496) (732) (185) (58) 7,052 3,134 (4,599) (1,380)
Interest expense........ 1,088 2,155 51 80 4,172 4,381 4,356 2,895
Total depreciation and
amortization........... 4,728 4,415 3,525 1,911 6,668 7,423 6,902 4,937
Capital expenditures.... 3,856 4,895 4,146 1,054 8,791 3,779 568 1,200
EBITDA(4)............... 3,477 2,724 (1) 169 10,672 6,673 9,337 2,165
Store contribution for
stores in the process
of being closed or
franchised(3).......... $ 6,424 $ 319 $ (802) $ (695) $ 933 $ (542) $ (1,542) $ (1,751)
Ratio of earnings to
fixed charges(5)....... -- -- -- -- -- -- -- --
Balance Sheet Data:
Working capital
(deficit).............. $ (2,673) $ (1,067) $(3,114) $(21,704) $ (2,023) $ (46) $ 128 $ (3,640)
Total assets............ 36,838 30,128 23,033 19,144 75,777 74,490 66,282 59,024
Debt and capital lease
obligations, including
current portion........ 87,549 22,850 21,226 21,224 33,822 36,956 32,357 30,977
Total stockholders'
equity (deficit)....... (66,645) (25,419) (28,017) (30,318) 30,038 24,684 22,588 16,943
</TABLE>

39
<PAGE>

<TABLE>
<CAPTION>
Mrs. Fields(1)
-------------------------------------------------
September 18, 53 Weeks 39 Weeks 39 Weeks
1996 through Ended Ended Ended
December 28, January 3, September 27, October 3,
1996(2) 1998(2) 1997(2) 1998(2)
------------- ---------- ------------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Statement of Operations
Data:
Net store and batter sales.. $ 39,890 $123,987 $ 83,759 $ 89,938
Net store contribution(3)... 9,482 25,087 13,214 11,804
Franchising, licensing and
other revenue, net......... 1,492 6,520 3,767 6,021
General and administrative
expenses................... 4,035 16,730 10,803 12,621
Income (loss) from
operations................. 5,649 8,415 2,378 (314)
Net income (loss)........... 1,961 (974) (3,224) (9,690)
Other Data:
Cash flows from operating
activities................. 7,609 919 791 676
Cash flows from investing
activities................. (21,131) (15,505) (3,216) (34,315)
Cash flows from financing
activities................. 20,231 24,164 (98) 22,498
Interest expense............ 1,867 7,830 5,070 8,981
Total depreciation and
amortization............... 2,344 10,403 6,596 9,707
Capital expenditures........ 1,638 4,678 3,216 5,616
EBITDA(4)................... 7,993 18,818 8,974 9,393
Store contribution for
stores in the process of
being closed or
franchised(3).............. $ 513 $ (1,798) $ (1,999) $ (2,125)
Ratio of earnings to fixed
charges(5)................. 2.85x -- -- --
Balance Sheet Data:
Working capital (deficit)... $ (2,889) $ 13,133 $(16,966) $ (2,276)
Total assets................ 110,055 149,684 125,470 222,657
Mandatorily redeemable
cumulative preferred stock
of subsidiaries............ 3,597 902 4,589 1,171
Debt and capital lease
obligations, including
current portion............ 67,563 101,081 78,084 140,156
Total stockholder's equity.. 16,961 30,765 27,664 50,131
</TABLE>
- --------

(1) On September 17, 1996, Mrs. Fields completed the acquisitions of
substantially all of the assets and assumed certain liabilities of the
predecessors. As a result of purchase accounting adjustments related to the
acquisitions, the Mrs. Fields' financial statements are not directly
comparable to the predecessors' financial statements.

(2) Mrs. Fields and its predecessors operate using a 52/53-week year ending
near December 31.
(3) 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.
(4) EBITDA consists of earnings before depreciation, amortization, interest,
income taxes, minority interest, preferred stock accretion and dividends of
subsidiaries and other income (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 herein because it is one
of the indicators upon which Mrs. Fields assesses its financial performance
and its capacity to service its debt (see footnote 5 below). EBITDA may not
be comparable to similarly titled measures reported by other companies.

<TABLE>
<CAPTION>
Predecessors
---------------------------------------------------------------------------------------
The Original Cookie Company, Incorporated
and the Carved-out Portion of Hot
Mrs. Fields Inc. and Subsidiaries(1) Sam Company, Inc. (Combined)(1)
---------------------------------------- ----------------------------------------------
December December
52 Weeks Ended(2) 31, 1995 52 Weeks Ended(2) 31, 1995
---------------------------- through --------------------------------- through
December December December September December December December September
31, 1993 31, 1994 30, 1995 17,1996(2) 31, 1993 31, 1994 30, 1995 17,1996(2)
-------- -------- -------- ---------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) from
operations............. $(1,251) $(1,691) $(3,526) $(1,742) $ 4,004 $ (750) $ 2,435 $ (2,772)
ADD:
Depreciation and
amortization.......... 4,728 4,415 3,525 1,911 6,668 7,423 6,902 4,937
------- ------- ------- ------- ---------- --------- --------- ----------
EBITDA................. $ 3,477 $ 2,724 $ (1) $ 169 $ 10,672 $ 6,673 $ 9,337 $ 2,165
======= ======= ======= ======= ========== ========= ========= ==========
</TABLE>

(see notes continued on page 41)

40
<PAGE>

(5) 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 1993, 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
$2,028,000, $5,129,000, $2,127,000 and $2,099,000, respectively. For fiscal
years 1993, 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 $120,000, $5,131,000, $1,833,000 and
$5,645,000, respectively. For the 53 weeks ended January 3, 1998, the 39
weeks ended September 27, 1997 and the 39 weeks ended October 3, 1998, Mrs.
Fields' earnings were insufficient to cover fixed charges by $319,000,
$3,045,000 and $9,397,000, respectively.

41
<PAGE>

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 for franchise or closure as "core" stores, meaning
continuing company-owned stores. Continuing company-owned stores will continue
to 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, 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 are
included in Note 5 to the 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 certain 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, the business of Mrs. Fields' Pretzel Concepts and 56% of the
shares of common stock of Pretzel Time. On that same date Mrs. Fields received
as a contribution from Mrs. Fields' Holding, all of the common stock of The
Mrs. Fields' Brand, Inc. 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 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.
Concurrently, Cookies USA was merged with and 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 with and into Great
American at that time. On

42
<PAGE>

September 9, 1998, Mrs. Fields acquired eight Great American franchise stores
from a Great American franchisee, 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 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 $5,739,000, 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.

There have not been any changes, modifications or amendments made to the
outstanding notes.

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:

(1) systems used for collecting and communicating sales data from retail
locations, and

(2) internally developed plant production and distribution software.

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 10% of our stores.
We project 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' 1998 and 1999 budgets. Funding for this project is being provided
by internal cash flow and by a lease finance company.

Replacement of the plant production and distribution software will take place
in the first quarter of 1999 at an estimated cost of $50,000. To date, there
has not been any work done on the software, however due to the limited changes
that are required, we are confident that this time table will be met. No
information technology projects have been deferred as a result of Mrs. Fields'
Year 2000 efforts.

Mrs. Fields is neither dependent on the proper operation of the sales
collection systems nor the plant production and distribution software 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 our results of operations.

Management is in the process of assessing 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 Mrs. Fields' control.
This assessment is approximately 20% complete with final completion anticipated
by the end of the second quarter of 1999. Based upon the results of the
assessment to date, management 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 intends to develop such a plan
during the first half of 1999. These contingency plans are expected to address
issues related to significant vendors and financial institutions.

43
<PAGE>

Results of Operations of Mrs. Fields and its Predecessors

The following table sets forth, for the periods indicated, certain
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
fiscal year 1995, 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), the consolidated results of Mrs.
Fields for the 53 weeks ended January 3, 1998 ("fiscal year 1997"), the 39
weeks ended September 27, 1997 and October 3, 1998. In order for the
presentations to be comparable, certain 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 52 % of For the 53 % of
Weeks Ended Change Weeks Change
------------------------- from Ended from
December 30, December 28, 1995 to January 3, 1996 to
1995 1996 1996 1998 1997
------------ ------------ ------- ---------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues:
Net store and batter
sales................. $145,537 $123,930 (14.8)% $123,987 -- %
Franchising revenues... 1,870 2,414 29.1 3,574 48.1
Licensing revenues..... 2,031 1,656 (18.5) 2,028 22.5
Other revenue, net..... 2,092 1,208 (42.3) 918 (24.0)
-------- -------- --------
Total revenues......... 151,530 129,208 (14.7) 130,507 1.0
-------- -------- --------
Operating costs and
expenses:
Selling and store
occupancy costs....... 83,997 69,209 (17.6) 66,832 (3.4)
Food cost of sales..... 33,369 29,115 (12.7) 28,127 (3.4)
General and
administrative
expenses.............. 24,828 20,557 (17.2) 16,730 (18.6)
Depreciation and
amortization.......... 10,427 9,192 (11.8) 10,403 13.2
-------- -------- --------
Total operating costs
and expenses.......... 152,621 128,073 (16.1) 122,092 (4.7)
Interest expense........ (4,407) (4,842) 9.9 (7,830) 61.7
Interest income......... 88 141 60.2 246 74.4
Other income (expense).. 946 (2,422) (356.0) (1,805) (25.5)
-------- -------- --------
Net loss................ $ (4,464) $ (5,988) 34.1 % $ (974) (83.7)%
======== ======== ========
Supplemental
Information:
Core Stores:
Net store and batter
sales................. $ 93,775 $ 93,235 (0.6)% $104,316 11.9 %
-------- -------- --------
Operating costs and
expenses:
Selling and store
occupancy costs....... 44,495 44,963 1.1 50,858 13.1
Food cost of sales..... 21,703 22,274 2.6 22,677 1.8
Depreciation and
amortization.......... 5,579 4,932 (11.6) 3,896 (21.0)
-------- -------- --------
Total operating costs
and expenses.......... 71,777 72,169 0.5 77,431 7.3
-------- -------- --------
Core store
contribution........... $ 21,998 $ 21,066 (4.2)% $ 26,885 27.6 %
======== ======== ========
Stores in the Process of
Being Closed or
Franchised:
Net store sales......... $ 51,762 $ 30,695 (40.7)% $ 19,671 (35.9)%
-------- -------- --------
Operating costs and
expenses:
Selling and store
occupancy costs....... 39,502 24,246 (38.6) 15,974 (34.1)
Food cost of sales..... 11,666 6,841 (41.4) 5,450 (20.3)
Depreciation and
amortization.......... 2,938 1,541 (47.5) 45 (97.1)
-------- -------- --------
Total operating costs
and expenses.......... 54,106 32,628 (39.7) 21,469 (34.2)
-------- -------- --------
Stores in the process of
being closed or
franchised
contribution........... $ (2,344) $ (1,933) (17.5) $ (1,798) (7.0)
======== ======== ========
EBITDA(1) .............. $ 9,336 $ 10,327 10.6 % $ 18,818 82.2 %
======== ======== ========
</TABLE>

44
<PAGE>

<TABLE>
<CAPTION>
For the 39 % of
Weeks Ended Change
------------------------ from
September 27, October 3, 1997 to
1997 1998 1998
------------- ---------- -------
<S> <C> <C> <C>
Statement of Operations Data:
Revenues:
Net store and batter sales.................. $83,759 $89,938 7.4 %
Franchising revenues........................ 2,201 3,884 76.5
Licensing revenues.......................... 1,215 1,081 (11.0)
Other revenue, net.......................... 351 1,056 200.9
------- -------
Total revenues.............................. 87,526 95,959 9.6
------- -------
Operating costs and expenses:
Selling and store occupancy costs........... 48,200 52,357 8.6
Food cost of sales.......................... 19,549 21,588 10.4
General and administrative expenses......... 10,803 12,621 16.8
Depreciation and amortization............... 6,596 9,707 47.2
------- -------
Total operating costs and expenses.......... 85,148 96,273 13.1
Interest expense............................. (5,070) (8,981) 77.1
Interest income.............................. 153 530 246.4
Other income (expense)....................... (685) (925) 35.0
------- -------
Net loss..................................... $(3,224) $(9,690) 200.6 %
======= =======
Supplemental Information:
Core stores:
Net store and batter sales................... $69,713 $79,094 13.5 %
Operating costs and expenses:
Selling and store occupancy costs........... 36,222 42,826 18.2
Food cost of sales.......................... 15,536 18,500 19.1
Depreciation and amortization............... 2,742 3,839 40.0
------- -------
Total operating costs and expenses.......... 54,500 65,165 19.6
------- -------
Core store contribution...................... $15,213 $13,929 (8.4)%
======= =======
Stores in the Process of Being Closed or
Franchised:
Net store sales.............................. $14,046 $10,844 (22.8)%
------- -------
Operating costs and expenses:
Selling and store occupancy costs........... 11,978 9,531 (20.4)
Food cost of sales.......................... 4,013 3,088 (23.1)
Depreciation and amortization............... 54 350 548.1
------- -------
Total operating costs and expenses.......... 16,045 12,969 (19.2)
------- -------
Stores in the process of being closed or
franchised contribution..................... $(1,999) $(2,125) 6.3 %
======= =======
EBITDA(1).................................... $ 8,974 $ 9,393 4.7 %
======= =======
</TABLE>

(1) EBITDA consists of earnings before depreciation, amortization, interest,
income taxes, minority interests, preferred stock accretion and dividends
of subsidiaries and other income (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 herein because it is one
of the indicators by which Mrs. Fields assesses its financial performance
and its capacity to service its debt.

45
<PAGE>

39 Weeks Ended October 3, 1998 Compared to the 39 Weeks Ended September 27,
1997

Company-owned and Franchised or Licensed Store Activity

As of October 3, 1998, there were 568 company-owned stores and 765 franchised
or licensed stores in operation. The store activity for the 39 weeks ended
September 27, 1997 and October 3, 1998 is summarized as follows:

<TABLE>
<CAPTION>
1997 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)................... 84 205 116 278
Stores closed (including
relocations)........................ (4) (86) (9) (65)
Non-continuing company-owned (exit
plan) stores closed
(September 18, 1996 forward)........ (63) -- (21) --
Stores sold to franchisees........... (3) 3 (4) 4
Non-continuing company-owned (exit
plan) stores franchised
(September 18, 1996 forward)........ (4) 4 (13) 13
Stores acquired from franchisees..... 4 (4) 18 (18)
--- --- --- ---
Stores open as of the end of the
period.............................. 496 540 568 765
=== === === ===
</TABLE>

Revenues

Net Stores Sales. Total net store sales increased $6,179,000, or 7.4%, from
$83,759,000 to $89,938,000 for the 39 weeks ended October 3, 1998 compared to
the 39 weeks ended September 27, 1997.

Net store sales from continuing company-owned stores and batter sales
increased $9,381,000, or 13.5%, from $69,713,000 to $79,094,000 for the 39
weeks ended October 3, 1998 compared to the 39 weeks ended September 27, 1997.
The increase in net store sales from continuing company-owned stores was
primarily attributable to:

(1) the operation of 69 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 52 Great American stores acquired in connection with
the acquisitions of Great American, Deblan and Chocolate Chip, and eight
additional Great American franchised stores in August and September 1998
and

(3) batter sales to Great American franchisees.

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 1997 and again in the fourth
quarter of 1997. The first quarter of 1998 did not benefit from the New Year's
holiday sales. Had this holiday been in the first quarter of 1998, net store
sales from continuing company-owned stores would have been approximately
$800,000 greater or $79,894,000.

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
1.0% during the 39 weeks ended October 3, 1998 compared to the same period in
1997.

Net store sales from stores in the process of being closed or franchised
decreased $3,202,000, or 22.8%, from $14,046,000 to $10,844,000 for the 39
weeks ended October 3, 1998 compared to the 39 weeks ended September 27, 1997.
This decrease results from closing 21 stores and franchising 13 stores during
the 39 weeks ended October 3, 1998 and the effect of closing or franchising 79
stores subsequent to December 28, 1996 and prior to the 39 week period ended
October 3, 1998.

46
<PAGE>

Franchising Revenues. Franchising revenues increased $1,683,000, or 76.5%,
from $2,201,000 to $3,884,000 for the 39 weeks ended October 3, 1998 compared
to the 39 weeks ended September 27, 1997. 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 and the 211 Great American franchised stores obtained in connection with
the acquisitions of Great American, Deblan and Chocolate Chip, and eight
additional Great American franchised stores in August and September 1998.

Licensing Revenues. Licensing revenues decreased $134,000, or 11.0%, from
$1,215,000 to $1,081,000 for the 39 weeks ended October 3, 1998 compared to the
39 weeks ended September 27, 1997. The decrease in licensing revenues was
primarily attributable to a dry mix license fee earned during the 39 weeks
ended September 27, 1997 that did not recur in the 39 weeks ended October 3,
1998.

Other Revenue, net. Other revenue, net, increased $705,000, or 200.9%, from
$351,000 to $1,056,000 for the 39 weeks ended October 3, 1998 compared to the
39 weeks ended September 27, 1997. The increase in other revenue, net, was
primarily attributable to area development fees earned from certain franchised
stores obtained in 1997, an increase in contribution from Mrs. Fields' mail
order division and miscellaneous other income.

Total Revenues. Total revenues increased by $8,433,000, or 9.6%, from
$87,526,000 to $95,959,000 for the 39 weeks ended October 3, 1998 compared to
the 39 weeks ended September 27, 1997 due to the reasons discussed above.

Operating Costs and Expenses

Selling and Store Occupancy Costs. Total selling and store occupancy costs
increased $4,157,000, or 8.6%, from $48,200,000 to $52,357,000 for the 39 weeks
ended October 3, 1998 compared to the 39 weeks ended September 27, 1997.

Selling and store occupancy costs for continuing company-owned stores
increased by $6,604,000, or 18.2%, from $36,222,000 to $42,826,000 for the 39
weeks ended October 3, 1998 compared to the 39 weeks ended September 27, 1997.
Within this overall increase, selling expenses for continuing company-owned
stores increased by $4,158,000, or 20.0%, from $20,804,000 to $24,962,000 for
the 39 weeks ended October 3, 1998 compared to the 39 weeks ended September 27,
1997. The increase in selling expenses was primarily attributable to the 69
Pretzel Time continuing company-owned stores acquired in connection with the
acquisitions of H&M and Pretzel Time in 1997, the 52 Great American continuing
company-owned stores acquired in connection with the acquisitions of Great
American, Deblan and Chocolate Chip, and eight additional Great American
franchised stores in August and September 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 $2,446,000, or 15.9%, from
$15,418,000 to $17,864,000 for the 39 weeks ended October 3, 1998 compared to
the 39 weeks ended September 27, 1997. The increase in store occupancy costs
was primarily attributable to the increase in the number of stores discussed
above, Mrs. Fields' reacquiring 18 continuing company-owned stores from
franchisees during the 39 weeks ended October 3, 1998 and lease renewal
increases.

Selling and store occupancy costs for stores in the process of being closed
or franchised decreased $2,447,000, or 20.4%, from $11,978,000 to $9,531,000
for the 39 weeks ended October 3, 1998 compared to the 39 weeks ended September
27, 1997. This decrease was primarily the result of closing 21 stores and
franchising 13 stores during the 39 weeks ended October 3, 1998 and the effect
of closing or franchising 79 stores subsequent to December 28, 1996 and prior
to the 39 week period ended October 3, 1998.

Food Cost of Sales. Total food cost of sales increased $2,039,000, or 10.4%,
from $19,549,000 to $21,588,000 for the 39 weeks ended October 3, 1998 compared
to the 39 weeks ended September 27, 1997.

Food cost of sales for continuing company-owned stores increased $2,964,000,
or 19.1%, from $15,536,000 to $18,500,000 for the 39 weeks ended October 3,
1998. This increase was primarily the result of

47
<PAGE>

the addition of 69 Pretzel Time continuing company-owned stores in July 1997
and 52 Great American continuing company-owned stores acquired in connection
with the acquisitions of Great American, Deblan and Chocolate Chip, and eight
additional Great American franchised stores in August 1998. Food 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 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 1997 to a peak of $2.92/lb. in
September 1998.

The market for butter has been in a highly volatile state. During the last
week of September 1998, the price of butter increased to $2.92/lb. from
$2.05/lb. Management believes that the increased butter costs will continue to
negatively impact food cost of sales for the remainder of 1998. Additionally,
distribution costs increased during the 13 weeks ended October 3, 1998 as Mrs.
Fields' changed distributors to improve product availability and the
reliability of service to the stores.

Food cost of sales for stores in the process of being closed or franchised
decreased $925,000, or 23.1%, from $4,013,000 to $3,088,000 for the 39 weeks
ended October 3, 1998 compared to the 39 weeks ended September 27, 1997. This
decrease was primarily the result of closing 21 stores and franchising 13
stores during the 39 weeks ended October 3, 1998 and the effect of closing or
franchising 79 stores subsequent to December 28, 1996 and prior to the 39 week
period ended October 3, 1998.

General and Administrative Expenses. General and administrative expenses
related to overhead at the operating company level increased $1,818,000, or
16.8%, from $10,803,000 to $12,621,000 for the 39 weeks ended October 3, 1998
compared to the 39 weeks ended September 27, 1997. The increase in expenses
related to overhead at the operating company level was primarily attributable
to the acquisitions of H&M and Pretzel Time in 1997 and the acquisitions of
Great American, Deblan and Chocolate Chip in 1998.

Depreciation and Amortization Expense. Total depreciation and amortization
expense increased by $3,111,000, or 47.2%, from $6,596,000 to $9,707,000 for
the 39 weeks ended October 3, 1998 compared to the 39 weeks ended September 27,
1997. This increase was primarily attributable to increased goodwill from the
acquisitions of H&M and Pretzel Time in 1997 and the acquisitions of Great
American, Deblan and Chocolate Chip in 1998.

Depreciation and amortization expense for continuing company-owned stores
increased $1,097,000, or 40.0%, from $2,742,000 to $3,839,000 for the 39 weeks
ended October 3, 1998 compared to the 39 weeks ended September 27, 1997. This
increase in depreciation and amortization expense was primarily attributable to
the addition of 69 Pretzel Time continuing company-owned stores in July 1997
and 52 Great American continuing company-owned stores in August and September
1998.

Total Operating Costs and Expenses. Total operating costs and expenses
increased by $11,125,000, or 13.1%, from $85,148,000 to $96,273,000 for the 39
weeks ended October 3, 1998 compared to the 39 weeks ended September 27, 1997,
for the reasons discussed above.

Interest Expense. Interest expense increased $3,911,000, or 77.1%, from
$5,070,000 to $8,981,000 for the 39 weeks ended October 3, 1998 compared to the
39 weeks ended September 27, 1997. This increase was primarily attributable to
interest expense on the $100,000,000 high yield notes that were placed in
November 1997 and the $40,000,000 high yield notes placed in August 1998.

Interest Income. Interest income increased $377,000, or 246.4%, from $153,000
to $530,000 for the 39 weeks ended October 3, 1998 compared to the 39 weeks
ended September 27, 1997. This increase was primarily the result of interest
earned on excess cash provided by the $100,000,000 high yield notes that were
placed in November 1997 and the $40,000,000 high yield notes placed in August
1998.

Other Expenses. Other expenses increased $240,000, or 35.0%, from $685,000 to
$925,000 for the 39 weeks ended October 3, 1998 compared to the 39 weeks ended
September 27, 1997. This increase was primarily attributable to minority
interest from the acquisitions of H&M and Pretzel Time in 1997 and acquisition
expenses incurred during the 39 weeks ended October 3, 1998.

48
<PAGE>

Net Loss. The net loss increased by $6,466,000, or 200.6%, from $3,224,000 to
$9,690,000 for the 39 weeks ended October 3, 1998 compared to the 39 weeks
ended September 27, 1997 due to the combination of factors described above.

Income from Continuing Company-Owned Stores. Income from continuing company-
owned stores decreased by $1,284,000, or 8.4%, from $15,213,000 to $13,929,000
for the 39 weeks ended October 3, 1998 compared to the 39 weeks ended September
27, 1997. Income from continuing company-owned stores was negatively impacted
by a 1.0% 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 1996 and January 3, 1998 for 1997. As
a result, the New Year's holiday week fell in the first quarter of 1997 and
again in the fourth quarter 1997. The first quarter of 1998 did not benefit
from the New Year's holiday sales. Had this holiday been in the first quarter
of 1998, income from continuing company-owned stores would have been
approximately $600,000 greater or $14,529,000.

Negative Income from Stores in the Process of Being Closed or Franchised. The
negative income from stores in the process of being closed or franchised
increased by $126,000, or 6.3%, from $1,999,000 to $2,125,000 for the 39 weeks
ended October 3, 1998 compared to the 39 weeks ended September 27, 1997. The
increase in negative income was primarily attributable to the addition of 52
stores from the acquisitions of Great American, Deblan and Chocolate Chip, and
eight additional Great American franchised stores in August and September 1998,
offset in part by closing 21 stores and franchising 13 stores during the 13
weeks ended October 3, 1998. In addition, 79 stores were closed or franchised
subsequent to December 28, 1996 and prior to the 39 week period ended October
3, 1998.

EBITDA. Earnings before interest, taxes, depreciation and amortization,
preferred stock accretion and dividends of subsidiaries, minority interest and
other income (expense) ("EBITDA") is presented as management believes that
certain investors find it to be a useful tool for measuring the ability to
service debt. EBITDA does not represent net income or cash flows from
operations as these terms are defined by generally accepted accounting
principles and does not necessarily indicate whether cash flows have been or
will be sufficient to fund cash needs. EBITDA increased by $419,000, or 4.7%,
from $8,974,000 to $9,393,000 for the 39 weeks ended October 3, 1998 compared
to the 39 weeks ended September 27, 1997 for the reasons discussed above. Had
the New Year's holiday week been in the first quarter of 1998, EBITDA would
have been approximately $600,000 greater, or $9,993,000.

Mrs. Fields generated $676,000 of cash from operating activities during the
39 weeks ended October 3, 1998, primarily from store sales and franchising and
licensing revenues less costs and expenses incurred to generate the store sales
and franchising and licensing revenues and less interest paid on the
$100,000,000 high yield notes. Mrs. Fields utilized $34,315,000 of cash from
investing activities during the 39 weeks ended October 3, 1998, primarily for
the acquisitions of Great American, Deblan and Chocolate Chip, capital
expenditures relating to store remodels and for renovations. Mrs. Fields
generated $22,498,000 of cash from financing activities during the 39 weeks
ended October 3, 1998, primarily from the issuance of new high yield notes and
an equity infusion from Mrs. Fields' Holding net of principal payments to
retire Great American long-term debt and payment of acquisition costs.

49
<PAGE>

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>
1996 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>

The activity reflected above resulted in 26,572 and 25,520 company-owned
equivalent store weeks and 21,658 and 25,732 franchisee/licensee equivalent
store weeks during the 52 weeks ended December 28, 1996 and the 53 weeks ended
January 3, 1998, respectively.

Revenues

Net Store Sales. Total net store sales increased $57,000, or less than 1.0%,
from $123,930,000 to $123,987,000 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 increased $11,081,000,
or 11.9%, from $93,235,000 to $104,316,000 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 certain concepts. 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 seven (net) stores during fiscal 1997 and the full year effect of
closing 56 stores and franchising seven (net) stores during fiscal year 1996.

50
<PAGE>

Franchising Revenues. Franchising revenues increased $1,160,000, or 48.1%,
from $2,414,000 to $3,574,000 for the 53 weeks ended January 3, 1998 compared
to the 52 weeks ended December 28, 1996. The 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.

Other Revenue, Net. Other revenue, net decreased $290,000, or 24.0%, from
$1,208,000 to $918,000 for the 53 weeks ended January 3, 1998 compared to the
52 weeks ended December 28, 1996. The decrease in other revenue, net is
primarily attributable to a favorable adjustment resulting from Mrs. Fields re-
negotiating a contract with one of its vendors during the 52 weeks ended
December 28, 1996 that did not recur during the 53 weeks ended January 3, 1998.

Total Revenues. Total revenues increased by $1,299,000, or 1.0%, from
$129,208,000 to $130,507,000 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.

Food Cost of Sales. Total food cost of sales decreased $988,000, or 3.4%,
from $29,115,000 to $28,127,000 for the 53 weeks ended January 3, 1998 compared
to the 52 weeks ended December 28, 1996.

Food cost of sales for continuing company-owned stores increased $403,000, or
1.8%, from $22,274,000 to $22,677,000 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, which stores have a lower food cost of
sales than cookie 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.

51
<PAGE>

Food 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
related to overhead costs at the operating company level decreased $3,827,000,
or 18.6%, from $20,557,000 to $16,730,000 for the 53 weeks ended January 3,
1998 compared to the 52 weeks ended December 28, 1996. The decrease in expenses
related to overhead costs at the operating company level was primarily
attributable to the cost savings achieved by combining the operations of Mrs.
Fields Inc. and subsidiaries, Original Cookie and 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 $5,981,000, or 4.7%, from $128,073,000 to $122,092,000 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.

52
<PAGE>

Income from Continuing Company-Owned Stores. The income from continuing
company-owned stores increased by $5,819,000, or 27.6%, from $21,066,000 to
$26,885,000 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.

Negative Income from Stores in the Process of Being Closed or Franchised. The
negative income 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 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.

EBITDA. EBITDA is presented as management believes that certain investors
find it to be a useful tool for measuring the ability to service debt. EBITDA
does not represent net income or cash flows from operations as these terms are
defined by generally accepted accounting principles and does not necessarily
indicate whether cash flows have been or will be sufficient to fund cash needs.
EBITDA increased by $8,491,000, or 82.2%, from $10,327,000 to $18,818,000 for
the 53 weeks ended January 3, 1998 compared to the 52 weeks ended December 28,
1996, for the reasons described above.

Mrs. Fields generated $919,000 of cash from operating activities during the
53 weeks ended January 3, 1998, primarily from store sales and franchising and
licensing revenues less costs and expenses incurred to generate the store sales
and franchising and licensing revenues. Mrs. Fields utilized $15,505,000 of
cash from investing activities during the 53 weeks ended January 3, 1998,
primarily for the contributions by Mrs. Fields' Holding to Mrs. Fields of the
business of Mrs. Fields' Pretzel Concepts and 54% of the shares of common stock
of Pretzel Time and for capital expenditures relating to store remodels and for
renovations. Mrs. Fields generated $24,164,000 of cash from financing
activities during the 53 weeks ended January 3, 1998, primarily from the
issuance of $108,250,000 in new long term debt, the proceeds of which were used
in part to repay long term debt, accrued interest, debt financing costs and a
cash dividend to Mrs. Fields' Holding.

Fiscal Year Ended December 28, 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) Compared to the 52 Weeks Ended December 30,
1995 ("Fiscal Year 1995")

Company-owned and Franchised or Licensed Store Activity

As of December 28, 1996, there were 482 company-owned stores and 418
franchised or licensed stores in operation. The store activity for the 52 weeks
ended December 30, 1995 and the 52 weeks ended December 28, 1996 is summarized
as follows:

<TABLE>
<CAPTION>
1995 1996
-------------------- --------------------
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..................... 669 324 540 415
Stores opened (including
relocations)........................ 4 69 5 118
Stores closed (including
relocations)........................ (51) (60) (39) (122)
Non-continuing company-owned (exit
plan) stores closed (September 18,
1996 forward)....................... -- -- (17) --
Stores sold to franchisees........... (83) 83 (9) 9
Non-continuing company-owned (exit
plan) stores franchised (September
18, 1996 forward)................... -- -- (3) 3
Stores acquired from franchisees..... 1 (1) 5 (5)
--- --- --- ----
Stores open as of the end of the
fiscal year......................... 540 415 482 418
=== === === ====
</TABLE>

53
<PAGE>

The activity reflected above resulted in 31,434 and 26,572 company-owned
equivalent store weeks and 19,214 and 21,658 franchisee/licensee equivalent
store weeks during the fiscal years 1995 and 1996, respectively.

Revenues

Net Store Sales. Total net store sales decreased $21,607,000, or 14.8%, from
$145,537,000 to $123,930,000 for fiscal year 1996 compared to fiscal year 1995.

Net store sales from continuing company-owned stores decreased $540,000, or
0.6%, from $93,775,000 to $93,235,000 for fiscal year 1996 compared to fiscal
year 1995. The decrease in net store sales from continuing company-owned stores
was primarily attributable to a decline in customer counts from fiscal year
1995 to fiscal year 1996, partially offset by an increase in the average sales
price resulting from retail pricing increases and aggressive marketing
initiatives.

Based on stores that have been open at least two years, system-wide
continuing company-owned store sales were down 0.7% for fiscal year 1996
compared to fiscal year 1995.

Net store sales from stores in the process of being closed or franchised
decreased $21,067,000, or 40.7%, from $51,762,000 to $30,695,000 for fiscal
year 1996 compared to fiscal year 1995. This decrease is primarily the result
of closing 56 stores and franchising seven (net) stores during the year.

Franchising Revenues. Franchising revenues increased $544,000, or 29.1%, from
$1,870,000 to $2,414,000 for fiscal year 1996 compared to fiscal year 1995. The
increase in franchising revenues was primarily attributable to a full year of
royalty revenues from the 83 stores franchised in 1995, royalties earned from
new franchised stores in 1996 and development fees for new franchised
locations.

Licensing Revenues. Licensing revenues decreased $375,000, or 18.5%, from
$2,031,000 to $1,656,000 for fiscal year 1996 compared to fiscal year 1995. The
decrease in licensing revenue is primarily attributable to licensing fees
earned in fiscal year 1995 that did not recur in fiscal year 1996.

Other Revenue, net. Other revenue, net decreased $884,000, or 42.3%, from
$2,092,000 to $1,208,000 for fiscal year 1996 compared to fiscal year 1995. The
decrease in other revenue, net is primarily attributable to favorable insurance
adjustments in fiscal year 1995 that did not recur in fiscal year 1996.

Total Revenues. Total revenues decreased $22,322,000, or 14.7%, from
$151,530,000 to $129,208,000 for fiscal year 1996 compared to fiscal year 1995,
for the reasons discussed above.

Operating Costs and Expenses

Selling and Store Occupancy Costs. Total selling and store occupancy costs
decreased $14,788,000, or 17.6%, from $83,997,000 during fiscal year 1995 to
$69,209,000 during fiscal year 1996.

Selling and store occupancy costs for continuing company-owned stores
increased by $468,000, or 1.1%, from $44,495,000 during fiscal year 1995 to
$44,963,000 during fiscal year 1996. Within this overall increase, selling
expenses decreased by $330,000, or 1.3%, from $25,980,000 to $25,650,000 for
fiscal year 1996 compared to fiscal year 1995. Store occupancy costs increased
$792,000, or 4.3%, from $18,521,000 to $19,313,000 for fiscal year 1996
compared to fiscal year 1995. The increase in store occupancy costs was
primarily attributable to the opening of five continuing company-owned stores
and acquiring five stores from franchisees during fiscal year 1996 and renewed
lease rent increases.

Selling and store occupancy costs for stores in the process of being closed
or franchised decreased $15,256,000, or 38.6%, from $39,502,000 to $24,246,000
for fiscal year 1996 compared to fiscal year 1995. This decrease is primarily
the result of closing 56 stores and franchising seven (net) stores during the
period.

54
<PAGE>

Food Cost of Sales. Total food cost of sales decreased $4,254,000, or 12.7%,
from $33,369,000 during fiscal year 1995 to $29,115,000 during fiscal year
1996.

Food cost of sales for continuing company-owned stores increased $571,000, or
2.6%, from $21,703,000 during fiscal year 1995 to $22,274,000 during fiscal
year 1996. The increase was primarily attributable to an increase in the costs
of butter of 40.8% over 1995, and an increase in distribution costs as a result
of Mrs. Fields changing its distribution channels for its Mrs. Fields brand
stores. Additionally, management introduced several product line extensions,
some with higher food costs, in an effort to offset the decline in customer
counts.

Food cost of sales for stores in the process of being closed or franchised
decreased $4,825,000, or 41.4%, from $11,666,000 to $6,841,000 for fiscal year
1996 compared to fiscal year 1995. This decrease is primarily the result of
closing 56 stores and franchising seven (net) stores during the period.

General and Administrative Expenses. General and administrative expenses
decreased $4,271,000, or 17.2%, from $24,828,000 to $20,557,000 for fiscal year
1996 compared to fiscal year 1995. The decrease in general and administrative
expenses was primarily attributable to the cost savings achieved by combining
the operations of Mrs. Fields Inc. and subsidiaries, Original Cookie and Hot
Sam which resulted in:

(1) reduced personnel 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 building in Cleveland, Ohio.

Depreciation and Amortization Expense. Total depreciation and amortization
expense decreased $1,235,000, or 11.8%, from $10,427,000 during fiscal year
1995 to $9,192,000 during fiscal year 1996.

Depreciation and amortization expense for continuing company-owned stores
decreased $647,000, or 11.6%, from $5,579,000 to $4,932,000 for fiscal year
1996 compared to fiscal year 1995. 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, in accordance with purchase accounting, resulting in
an overall reduction to the store asset base.

Total Operating Costs and Expenses. Total operating costs and expenses
decreased $24,548,000, or 16.1%, from $152,621,000 during fiscal year 1995 to
$128,073,000 during fiscal year 1996, for the reasons described above.

Interest Expense. Interest expense increased $435,000, or 9.9%, from
$4,407,000 to $4,842,000 for fiscal year 1996 compared to fiscal year 1995.
This increase was primarily attributable to an increase in interest expense due
to increased borrowings as a result of the purchase of the assets of Mrs.
Fields Inc. and subsidiaries, Original Cookie and Hot Sam on September 17,
1996.

Other Income (Expenses). Other income (expenses) decreased $3,368,000, or
356.0%, from $946,000 to $(2,422,000) for fiscal year 1996 compared to fiscal
year 1995. This decrease is primarily attributable to the Company recognizing a
loss on the sale of existing company-owned stores to franchisees during the 52
weeks ended December 28, 1996 compared to gain recognized on the sale of
existing company-owned stores to franchisees during 52 weeks ended December 30,
1995. Additionally, the income tax provision increased during the 52 weeks
ended December 28, 1996 primarily due to Mrs. Fields' profitability from the
date Mrs. Fields initiated operations (September 18, 1996) through December 28,
1996.

Net Loss. The net loss increased by $1,524,000, or 34.1%, from $4,464,000 to
$5,988,000 for fiscal year 1996 compared to fiscal year 1995. The net loss
equaled 4.6% of total revenues during 1996 compared to 2.9%

55
<PAGE>

of total revenues during fiscal year 1995. The increase in net loss is in part
due to an increase in interest expense as a result of the increased borrowings
to facilitate the purchase of Mrs. Fields Inc. and subsidiaries, Original
Cookie and Hot Sam, net of a reduction in the income tax provision.

Income from Continuing Company-Owned Stores. The income from continuing
company-owned stores decreased by $932,000, or 4.2%, from $21,998,000 to
$21,066,000 for fiscal year 1996 compared to fiscal year 1995 due to the
combination of the factors described above.

Negative Income from Stores in the Process of Being Closed or Franchised. The
negative income from stores in the process of being closed or franchised
decreased by $411,000, or 17.5%, from $2,344,000 to $1,933,000 for fiscal year
1996 compared to fiscal year 1995. The decrease in negative income was
primarily attributable to closing 56 stores and franchising seven (net) stores
during the year.

EBITDA. EBITDA is presented as management believes that certain investors
find it to be a useful tool for measuring the ability to service debt. EBITDA
does not represent net income or cash flows from operations as these terms are
defined by generally accepted accounting principles and does not indicate
whether cash flows have been or will be sufficient to fund cash needs. EBITDA
increased by $991,000, or 10.6%, from $9,336,000 to $10,327,000 for fiscal year
1996 compared to fiscal year 1995, for the reasons described above.

Mrs. Fields generated $6,784,000 of cash from operating activities during the
53 weeks ended December 28, 1996, primarily from store sales and franchising
and licensing revenues less costs and expenses incurred to generate the store
sales and franchising and licensing revenues.

Mrs. Fields utilized $22,716,000 of cash from investing activities during the
53 weeks ended December 28, 1996, primarily for the acquisition of the
predecessors and capital expenditures relating to store remodels and for
renovations.

Mrs. Fields generated $18,793,000 of cash from financing activities during
the 53 weeks ended December 28, 1996, primarily from the issuance of common and
preferred stock related to the formation of Mrs. Fields on September 17, 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 revolving
credit facilities. At October 3, 1998, Mrs. Fields had $5.1 million of cash and
$12.7 million of available borrowings under its credit facility. It is expected
that Mrs. Fields' principal uses of cash will be to provide working capital,
finance capital expenditures, including acquisitions and store closure costs,
meet debt service requirements and other general corporate purposes. Mrs.
Fields is highly leveraged. 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,
including acquisitions and store closure costs, 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.

October 3, 1998 Compared to January 3, 1998

As of October 3, 1998, Mrs. Fields had liquid assets (cash and cash
equivalents and accounts receivable) of $12,658,000, a decrease of 36.7%, or
$7,340,000, from January 3, 1998 when liquid assets were $19,998,000. Cash
decreased $11,141,000, or 68.4%, to $5,146,000 at October 3, 1998 from
$16,287,000 at January 3, 1998. This decrease was primarily the result of cash
used for the acquisition of Great American, Deblan and Chocolate Chip, and
eight additional Great American franchised stores in August and September

56
<PAGE>

1998, capital expenditures of $5,616,000 relating to store remodels and
renovations and interest payments of $6,291,000 primarily relating to the
$100,000,000 high yield notes which were put into place in November 1997,
offset in part, by $530,000 in interest income earned during the period on
excess cash.

Current assets decreased by $4,298,000, or 14.9%, to $24,525,000 at October
3, 1998 from $28,823,000 at January 3, 1998. This decrease was primarily the
result of a decrease in cash of $11,141,000, offset by an increase in accounts
receivable of $3,801,000 and an increase in inventories of $1,690,000.

Long-term assets increased $77,271,000, or 63.9%, to $198,132,000 at October
3, 1998 from $120,861,000 at January 3, 1998. This increase was primarily the
result of an increase in property and equipment and goodwill related to the
acquisition of Great American, Deblan and Chocolate Chip.

Current liabilities increased by $11,111,000, or 70.8%, to $26,801,000 at
October 3, 1998 from $15,690,000 at January 3, 1998. This increase is due to an
increase in accounts payable, accrued interest payable, accrued salaries, wages
and benefits, and accrued liabilities offset by a decrease in store closure
reserves, deferred income and sales taxes payable.

Mrs. Fields' working capital decreased by $15,409,000, or 117.3%, to
($2,276,000) at October 3, 1998 from $13,133,000 at January 3, 1998, for the
reasons described above.

Mrs. Fields utilized $34,315,000 of cash from investing activities during the
39 weeks ended October 3, 1998, primarily for the acquisition of Great
American, Deblan and Chocolate Chip and capital expenditures relating to store
remodels and for renovations.

Mrs. Fields generated $22,498,000 of cash from financing activities during
the 39 weeks ended October 3, 1998, primarily from the issuance of new high
yield notes and a capital contribution from Mrs. Fields Holding net of
principal payments to retire Great American long-term debt and payment of
acquisition costs.

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 39 weeks ended October 3, 1998 and September 27,
1997, Mrs. Fields expended $5,616,000 and $3,216,000, respectively for capital
assets and expects to expend approximately $7,800,000 for all of 1998.
Management anticipates that these expenditures will be funded with cash
generated from operations and short-term borrowings under its credit facility
as needed.

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. In addition, 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.

57
<PAGE>

Seasonality

Mrs. Fields' sales and income from store operations are highly seasonal
given the significant impact of its mall-based locations. Mrs. Fields' sales
tend to mirror customer traffic flow trends in malls which increase
significantly during the fourth quarter, primarily between Thanksgiving and the
end of the calendar year. Holiday gift purchases are also a significant factor
in increased sales in the fourth quarter.

The seasonality effect on income from store operations is even more
significant than on sales. The impact on income from store operations is more
significant due to the fixed nature of certain store level costs, such as
occupancy costs and store manager salaries. Once these fixed costs are covered
by store sales, the flow through of sales to income from store operations
becomes greater. Accordingly, the fourth quarter is a key determinant to
overall profitability for the year.

The following table presents certain unaudited historical quarterly financial
data for Mrs. Fields for fiscal years 1995, 1996 and 1997, and through the
third fiscal quarter of 1998.

<TABLE>
<CAPTION>
First Second Third
Quarter Quarter Quarter Fourth
(13 Weeks) (13 Weeks) (13 Weeks) Quarter(1) Total Year
---------- ---------- ---------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Total sales
1997.................. $27,642 $26,198 $29,920 (2) $40,227 (2) $123,987
1996.................. $29,361 $28,640 $29,598 $ 36,331 $123,930
1995.................. $36,819 $34,723 $34,053 $ 39,942 $145,537
% of total store sales
1997.................. 22.3% 21.1% 24.1%(2) 32.5%(2) 100.0%
1996.................. 23.7% 23.1% 23.9% 29.3% 100.0%
1995.................. 25.3% 23.9% 23.4% 27.4% 100.0%
Total store cash
contribution(3)
1997.................. $ 4,854 $ 4,694 $ 6,699 (2) $ 12,781 (2) $ 29,028
1996.................. $ 4,355 $ 4,484 $ 6,830 $ 9,937 $ 25,606
1995.................. $ 5,349 $ 5,692 $ 5,839 $ 11,291 $ 28,171
% of total store
contribution
1997.................. 16.7% 16.2% 23.1%(2) 44.0%(2) 100.0%
1996.................. 17.0% 17.5% 26.7% 38.8% 100.0%
1995.................. 19.0% 20.2% 20.7% 40.1% 100.0%
</TABLE>
- --------
(1) Fourth quarter 1995, 1996 and 1997 consists of 13 weeks, 13 weeks and 14
weeks, respectively.

(2) Includes the acquisitions of H&M and Pretzel Time.

(3) Total income from store operations before store depreciation and
amortization.

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. The factors cited in the following

58
<PAGE>

discussion as contributing to changes in operating results are listed in order
of importance; however, unless otherwise indicated in such 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 aggregate,
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 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.

59
<PAGE>

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%.

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

60
<PAGE>

(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

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.

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 certain computer equipment from five to three years decreasing pre-tax
income by $111,000. Management believes that this revision better reflects the
equipments' 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:

61
<PAGE>

(a) a 12.7% increase in operating income,

(b) a 1.7% decrease in other expenses, net, offset by

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>

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.

62
<PAGE>

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>

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

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.

63
<PAGE>

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

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:

.an increase in professional service fees,

.an increase in point-of-sale marketing expenses on behalf of franchisee-
owned stores, and

.an increase in salaries, offset by

.a decrease in travel expense, and

.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.

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

64
<PAGE>

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.

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.

65
<PAGE>

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

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.

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.

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<PAGE>

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

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

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<PAGE>

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 and Pretzelmaker, 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 hereby. This prospectus, which forms a
part of the Registration Statement, does not contain all of the information in
the Registration Statement and the exhibits to it, certain 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
certain documents, we refer you to the copy of such document filed as an
exhibit to the Registration Statement otherwise filed with the Commission.

Great American and Pretzelmaker 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 here. If the Commission
grants these requests, Great American, Mrs. Fields' Brand and Pretzelmaker
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 and
Pretzelmaker 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 and Pretzelmaker would be required to file with
the Commission such 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. Such information may also be
accessed 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 such 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 thereon 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 such 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.

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<PAGE>

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 and H&M, which was formerly
the largest Pretzel Time franchisee, and the common stock of Pretzel Time. As
of October 3, 1998, our retail network consisted of 1,333 locations, of which
1,021 were cookie stores and 312 were pretzel stores. Of the total 1,333
stores, 568 were company-owned and 765 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 100 company-owned cookie stores and 33 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 certain of its franchises. For the year
ended January 3, 1998 and the 39 weeks ended October 3, 1998, Mrs. Fields
generated pro forma net revenue and EBITDA of $200.6 million and $32.1 million,
and $132.5 million and $15.8 million, respectively.

We operate and franchise 1,021 retail cookie stores: 573 under the Mrs.
Fields brand, 128 under the Original Cookie brand and 320 under the Great
American brand. As a result of the acquisition of Great American, Mrs. Fields
has cookie stores in 46 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 31 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
operating margins,

(3) developing a marketing strategy and promotional calendar to turn
around sales of stores that have been open at least two years, and

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<PAGE>

(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 October 3, 1998,
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. Management believes that Mrs. Fields has a more well-recognized
brand name than Original Cookie and that Mrs. Fields stores have, during fiscal
year 1997 and the 39 weeks ended October 3, 1998, achieved higher average
revenue per continuing company-owned store than Original Cookie stores
($351,000 versus $301,000). 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. We believe this 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.

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 October 3, 1998,
Great American had 320 in-line stores including 109 Great American-operated and
211 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 312 retail pretzel stores: 226 under the Pretzel
Time brand and 86 under the Hot Sam 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 1997 and the 39 weeks ended October 3, 1998, achieved higher
average revenue for the continuing company-owned stores than Hot Sam stores
($275,000 versus $240,000). As a result, Mrs. Fields

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<PAGE>

intends to continue converting 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 Mrs. Fields in connection with the
acquisition of Original Cookie. In order to expand its presence in the retail
pretzel industry, Mrs. Fields recently acquired the business of H&M and the
common stock of Pretzel Time. Pretzel Time is a franchisor of 226 hand-rolled
soft pretzel retail outlets, which are located in shopping malls as well as in
airports, sports arenas, amusement parks and resort areas throughout the United
States and Canada. We operate 95 of Pretzel Time's stores as franchisee and
have rights as developing agent to develop Pretzel Time stores in 18 states,
Mexico, and four provinces in Canada.

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 (0.9)% for the 39 weeks ended
October 3, 1998 compared to 0.6% for the fiscal year ended January 3, 1998 from
a negative 1.2% for the fiscal year ended December 28, 1996. In addition,
franchising, licensing and other revenues increased by 23.5% for the fiscal
year ended January 3, 1998 over the fiscal year ended December 28, 1996 and by
59.8% for the 39 weeks ended October 3, 1998 compared to the 39 weeks ended
September 27, 1997. 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 October 3, 1998, Mrs.
Fields closed 171 Mrs. Fields brand stores and franchised an additional
135 Mrs. Fields brand stores. We have targeted 135 additional stores that
sell our various products to be either closed or franchised by the end of
2000. Such measures are expected to result in enhanced operating margins,
as unprofitable stores are closed and certain other stores are converted
into franchises, thereby increasing royalty payments and eliminating
overhead costs at the operating company level associated with such
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 1997 and the 39 weeks ended October 3,
1998, achieved higher average revenue for the continuing company-owned
stores than Original Cookie stores. As a result, we intend to continue
selectively converting our continuing company-owned and to-be-franchised
Original

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<PAGE>

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 33% and Great American stores
represent 28% of all company-owned cookie stores. In addition, we intend
to further capitalize on the Mrs. Fields brand name by:

(1) further developing and expanding new channels of distribution
for 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. Management believes that the Great American
brand has high consumer awareness in the southeast United States. We
intend to build on the Great American brand 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 1997, achieved
higher average revenue per continuing company-owned store and store
contribution than Hot Sam stores ($275,000 vs. $240,000). Hot Sam stores
represent 48% 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 37 existing cookie and 14
existing pretzel stores. Beginning in fiscal year 1999, we intend to add
approximately 15 new company-owned cookie and 10 new company-owned
pretzel stores per year and to franchise approximately 25 new cookie and
25 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 October 3,
1998, there were 82 franchised Mrs. Fields 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 certain 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 3, 1998.
The savings include $2.2 million of savings on overhead at the operating
company level and $1.9 million of cost savings related to one-time
expenses of eliminating multiple headquarter facilities.

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. 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 certain of its
franchises and other recent acquisitions, in order to expand our
geographic presence and to achieve operating efficiencies. 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.

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 1997, pro forma for the acquisitions of Great American
and the stock and stores of certain of its franchises, our revenue by product
category consisted of the following:

<TABLE>
<S> <C>
Cookies and Brownies................................................... 60%
Pretzels............................................................... 20%
Beverages.............................................................. 18%
Other.................................................................. 2%
</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 cookies
("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 cakes 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

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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.

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 October 3, 1998, Mrs. Fields' store portfolio consisted of
568 company-owned stores, 523 domestic franchised locations, 82 international
franchised locations and 160 licensed locations. By concept, 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............. 137 6 7 181 82 160 573
Original Cookie......... 98 12 18 -- -- -- 128
Great American.......... 52 46 11 211 -- -- 320
--- --- --- --- --- --- -----
Cookie Subtotal......... 287 64 36 392 82 160 1,021
--- --- --- --- --- --- -----
Pretzel Time............ 85 10 -- 131 -- -- 226
Hot Sam................. 63 9 14 -- -- -- 86
--- --- --- --- --- --- -----
Pretzel Subtotal........ 148 19 14 131 -- -- 312
--- --- --- --- --- --- -----
Totals................ 435 83 50 523 82 160 1,333
=== === === === === === =====
</TABLE>

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<PAGE>

As of October 3, 1998, 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..................... 83 54 16 153 12.25%
Texas.......................... 48 44 5 97 7.77%
Florida........................ 30 40 14 84 6.75%
New York....................... 39 21 16 76 6.08%
Ohio........................... 53 8 10 71 5.68%
Illinois....................... 33 18 9 60 4.80%
Michigan....................... 35 11 3 49 3.92%
Georgia........................ 17 22 3 42 3.36%
Missouri....................... 8 33 1 42 3.37%
Pennsylvania................... 18 11 12 41 3.28%
Virginia....................... 20 14 3 37 2.96%
New Jersey..................... 12 13 8 33 2.64%
North Carolina................. 3 25 3 31 2.48%
Indiana........................ 14 9 4 27 2.16%
Tennessee...................... 4 20 3 27 2.16%
Arizona........................ 14 9 3 26 2.08%
Colorado....................... 4 12 8 24 1.92%
Connecticut.................... 6 12 5 23 1.84%
Maryland....................... 10 9 4 23 1.84%
Massachusetts.................. 12 6 5 23 1.84%
Wisconsin...................... 20 3 -- 23 1.84%
Louisiana...................... 9 9 2 20 1.60%
Washington..................... 11 9 -- 20 1.60%
Alabama........................ -- 15 3 18 1.44%
South Carolina................. 4 12 2 18 1.44%
Utah........................... 7 9 1 17 1.36%
Minnesota...................... 4 10 -- 14 1.12%
Nevada......................... 3 4 7 14 1.12%
Iowa........................... 4 9 -- 13 1.04%
Oklahoma....................... 5 5 2 12 0.96%
Kansas......................... 5 4 1 10 0.80%
Kentucky....................... 3 6 1 10 0.80%
West Virginia.................. 4 5 1 10 0.80%
</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

75
<PAGE>

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 certain 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 in
certain locations.

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 concept'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 October 3,
1998, 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 emphase product sampling, local store marketing and
brand name identification.

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We advertise at the 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
recent 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 $3.8
million in revenues during fiscal year 1997. We believe that there is
significant potential in the mail order business and is 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 1997 have increased approximately 61% 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 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,

77
<PAGE>

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 ("POS")
system, which gathers information transmitted daily to corporate headquarters
from most of our Mrs. Fields brand continuing company-owned stores. We plan to
install our upgraded back-office system, along with the POS registers and
Pentium 333 machines, in our continuing company-owned Original Cookie stores,
Hot Sam stores, Pretzel Time stores and certain Great American stores by August
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 will take place in the first quarter of 1999 at an
estimated cost of $50,000. For more information on our information technology,
see "Management's Discussion and Analysis of Financial Conditions and Results
of Operations--Year 2000."

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

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managers and to increase retention rates. New store managers 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 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 October 3, 1998, the five largest Mrs. Fields
franchisees operated 61 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
94 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.

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<PAGE>

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
alternative channels of distribution. 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 and their respective distribution channels include
Host Marriott in airports and travel plazas, ARAMark in stadiums and
convention centers and Holiday Inn Worldwide 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 Legacy
Brands, which has the exclusive North American rights to retail frozen
dough and offers Mrs. Fields Cookies frozen dough throughout the
supermarket industry. 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 channel of 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 October 3, 1998, we leased 1,029 retail stores, of which 445 were
subleased to franchisees under terms which cover all obligations of Mrs. Fields
thereunder. Under our franchise agreements, we have certain 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" and "--We
Have Continuing Obligations Under Real Estate Leases."

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<PAGE>

We have a lease for 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 its 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.

Employees

As of January 3, 1999, we had approximately 6,614 employees in company-owned
stores, of whom approximately 943 were store managers and assistant store
managers, 58 were full-time sales assistants and 5,613 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 January 3, 1999, 1,636 of our 6,614 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 $219,000 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.

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 certain Great American
franchisees, such franchisees released all claims with respect to this
litigation. It was a condition of the acquisition of Great 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.

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MANAGEMENT

Directors and Executive Officers

The following table sets forth certain information regarding the executive
officers and directors of Mrs. Fields as of January 3, 1999. The directors are
also directors of Mrs. Fields' Holding.

<TABLE>
<CAPTION>
Name Age Title
- ---- --- -----
<S> <C> <C>
Larry A. Hodges......... 49 Director, President and Chief Executive Officer
L. Tim Pierce........... 47 Senior Vice President, Chief Financial Officer and Secretary
Pat W. Knotts........... 43 Senior Vice President of Operations
Garry Remington......... 47 Senior Vice President of Real Estate
Michael R. Ward......... 40 Vice President of Administration and Legal Department
Herbert S. Winokur, Jr.. 54 Chairman of the Board of Directors
Richard Ferry........... 61 Director
Debbi Fields............ 42 Director
Nat Gregory............. 50 Director
Walker Lewis............ 54 Director
Peter Mullin............ 57 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. Pierce has been Senior Vice President of Mrs. Fields Inc. and Mrs. Fields
since December 1991, and Chief Financial Officer since August 1993. He was
appointed Corporate Secretary in April 1995. Since joining Mrs. Fields Inc. in
1988 and prior to becoming Senior Vice President, Mr. Pierce had served as Vice
President of Finance. He was also an Audit Manager and a Senior Audit Manager
with Price Waterhouse in Salt Lake City, Utah, and New York, New York. Mr.
Pierce is a certified public accountant and has also served on the Board of
Directors of Mountain America Credit Union and currently serves as a Director
of Pretzel Time.

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. Ward has been Vice President of Administration for Mrs. Fields since
September 1996. Mr. Ward's responsibilities include management of the Human
Resources Department, Benefits and the Legal Department.

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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. 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., Mrs. Fields Holding, 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. Prior to that he served
as Managing Director of Smith Barney from 1991 to 1993. 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. and Dunham's Athleisure Corp.

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, the four other most highly compensated executive

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<PAGE>

officers of Mrs. Fields other than the CEO who were serving as executive
officers at the end of the last completed fiscal year and one additional
individual for whom disclosure would have been provided, but for the fact that
the individual was not serving as an executive officer at the end of the last
completed fiscal year. Information set forth in the table reflects compensation
earned by such 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 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 vest 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.

Option Grants and Exercises

The Board of Directors of Mrs. Fields' Holding recently 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 aggregate 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

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<PAGE>

fully diluted basis, after giving effect to the issuance of stock pursuant to
the warrants to purchase common stock of Mrs. Fields' Holding and to issuances
of stock pursuant to 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,
pursuant to the Director Stock Option Plan.

The Board of Directors of Mrs. Fields' Holding recently 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 pursuant to a director stock purchase plan
(the "Director Stock Purchase Plan"). Such 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 such
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.

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<PAGE>

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 such employment agreements, and their base
salaries, are: Larry Hodges, President and Chief Executive Officer, $350,000,
L. Tim Pierce, Senior Vice President, Chief Financial Officer and Secretary,
$200,000, Pat Knotts, Senior Vice President of Operations, $215,000, Michael
Ward, Vice President of Administration and Assistant Secretary, $140,000 and
Garry Remington, Senior Vice President of Real Estate, $190,000.

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<PAGE>

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 sets forth certain
information, as of January 2, 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 January 2,
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
set forth below include shares of common stock which were outstanding or
issuable within 60 days upon the exercise of options outstanding as of January
2, 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 January 2, 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).................. 3,080,094 86.6%
value $0.001 per share, Larry Hodges(2)(3)............. 75,998 2.1%
of Mrs. Fields' Holding Peter Mullin(2)(3)............. 17,323 0.5%
Richard Ferry(2)(3)............ 12,323 0.3%
Walker Lewis(2)(3)............. 9,823 0.3%
Gilbert Osnos(2)(3)............ 9,823 0.3%
L. Tim Pierce(3)............... 11,500 0.3%
Pat Knotts(3).................. 11,500 0.3%
Michael Ward(3)................ 9,857 0.3%
Garry Remington(3)............. 4,792 0.1%
All executive officers and
directors
as a group (11
persons)(2)(3)(4)............. 3,243,033 91.2%
</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
January 2, 1999, as follows: Capricorn, 4,246 shares; Mr. Hodges, 45,998
shares; Mr. Mullin, 2,323 shares; Mr. Ferry, 2,323 shares; Mr. Lewis, 2,323
shares; Mr. Osnos, 2,323 shares; Mr. Pierce, 11,500 shares; Mr. Knotts,
11,500 shares; Mr. Ward, 9,857 shares; and Mr. Remington, 4,792 shares; all
executive officers and directors as a group, 97,185.

(4) Includes shares beneficially owned by Capricorn.

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<PAGE>

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, such as 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 period from
inception (September 18, 1996) to December 28, 1996, the fiscal year ended
January 3, 1998 and the 39 weeks ended September 27, 1997 and October 3, 1998
totaled approximately $60,000, $274,000, $204,000 and $0, respectively, of
which approximately $29,000, $23,000 and $0 is included in accounts receivable
as of December 28, 1996, January 3, 1998 and October 3, 1998, 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. In early 1997, Mrs. Fields paid to
Dillon Read a fee of approximately $707,000 in connection with the
restructuring of Mrs. Fields in September 1996. In addition, Mr. Lewis'
company, Devon Value Advisers, received a fee of $250,000, plus expenses, from
Mrs. Fields in the first quarter of 1998 pursuant to 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 $47,000,
$157,000, $147,000 and $47,000 during the period ended December 28, 1996, the
year ended January 3, 1998 and the 39 weeks ended September 27, 1997 and
October 3, 1998, 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 December 28, 1996, January 3, 1998 and October 3, 1998, Mrs. Fields had
receivables of approximately $39,000, $89,000 and $478,000 due from Mrs.
Fields' Holding and payables of $98,000, $105,000 and $0 due to Mrs. Fields'
Holding, respectively. 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.

At the time of the offering of notes in November 1997, Mrs. Fields' Holding,
which is majority owned by Capricorn, was the holder of a $4,643,000 principal
amount subordinated note of Mrs. Fields. Mrs. Fields

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<PAGE>

accrued interest of $130,000 in fiscal year 1996 and $441,000 through November
26, 1997. All accrued interest was paid in fiscal year 1997. The principal
amount of this note was converted into common equity of Mrs. Fields in
connection with the refinancing of certain debt of Mrs. Fields and Mrs. Fields'
Brand. Messrs. Winokur and Gregory, directors of Mrs. Fields' Brand, are,
respectively, the manager and managing director of Capricorn Holdings, the
General Partner of Capricorn.

Arrangements with MIDIAL. At the time of the offering of notes in 1997, a
subsidiary of MIDIAL was the holder of $27,000,000 in total principal amount of
senior notes of Mrs. Fields and $8,400,000 in aggregate principal amount of
subordinated notes of Mrs. Fields as to which Mrs. Fields had accrued or paid
interest of $683,000 in 1996 and of $3,177,000 through November 26, 1997. In
connection with the refinancing of certain debt of Mrs. Fields and Mrs. Fields'
Brand, Mrs. Fields repaid all such notes and related interest. Mr. de
Carbonnel, a former director of Mrs. Fields, serves as Chairman and Chief
Executive Officer of MIDIAL. See "The Transactions."

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.

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 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 such fiscal year over net debt at the end of such 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 such option and a change of control, in accordance with
certain 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
certain adjustments),

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<PAGE>

(2) if the relevant date is the date of a change of control, the value
paid pursuant to 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.

An 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 aggregate 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 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 such
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.

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<PAGE>

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 10 1/8% Series B Senior Notes due 2004 (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, as amended (the "Trust Indenture
Act"). The term "old notes" refers to the Series A 10 1/8% Senior Notes due
2004 (the "Series A Notes") and Series C 10 1/8% Senior Notes due 2004 (the
"Series C Notes"). The term "notes" refers to outstanding notes previously
issued under the indenture, including the old notes, and the new notes.

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 January 2, 1999, Mrs. Fields had approximately $8.5 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 such
Person or one or more of the other Subsidiaries of that Person (or
a combination thereof) and

(2) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or
of one or more Subsidiaries of such Person (or any combination
thereof).

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<PAGE>

These notes are guaranteed by the following subsidiaries of Mrs. Fields:

The Mrs. Fields' Brand, Inc.

Great American Cookie Company, Inc.

Pretzelmaker Holdings, Inc.

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 January 2, 1999, Mrs. Fields' subsidiaries had approximately $900,000
in indebtedness and had preferred stock with a value upon liquidation of $1.3
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 Series C 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 consummated.

. 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 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 set forth 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.

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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 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 any such consolidation or merger
assumes all the obligations of that Guarantor pursuant to a
supplemental indenture satisfactory to the Trustee; or

(2) immediately after giving effect to that transaction, no Default or
Event of Default exists;

(3) such guarantor, or any Person formed by or surviving any such
consolidation or merger, would have Consolidated Net Worth
immediately after giving effect to such transaction equal to or
greater than the Consolidated net Worth of such 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
such transaction, to incur at lest $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth 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; or

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 aggregate principal amount of notes ever issued under the
indenture at a redemption price of 110.125% of the principal amount of such
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 aggregate principal amount of notes ever
issued under the Indenture remains outstanding immediately after
the occurrence of such redemption; and

(2) the redemption must occur within 60 days of the date of the closing
of such Public Equity Offering.

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Except pursuant to the preceding paragraph, the notes will not be redeemable
at Mrs. Fields' option prior to December 1, 2001.

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) set forth below plus accrued and
unpaid interest and liquidated damages, if any, thereon, 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>

Mandatory Redemption

Except as set forth below under the caption "Repurchase at the Option of
Holders," Mrs. Fields is not required to make mandatory redemption or sinking
fund payments with respect to the notes.

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 thereof) of that holder's notes pursuant to 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 thereon, 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 such
notice, pursuant to the procedures required by the indenture and described in
such notice. Mrs. Fields will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to
the extent such 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
pursuant to 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 thereof 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 thereof being purchased by
Mrs. Fields.

The Paying Agent will promptly mail to each holder of notes so tendered the
Change of Control Payment for such 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 such new note will be in a principal
amount of $1,000 or an integral multiple thereof. 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

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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, certain events that would
constitute a Change of Control. In addition, the exercise by the holders of
notes of their right to require Mrs. Fields to repurchase the notes, could
cause a default under such Indebtedness, even if the Change of Control itself
does not, due to the financial effect of such 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 set
forth in the indenture applicable to a Change of Control Offer made by Mrs.
Fields and purchases all notes validly tendered and not withdrawn under such
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 such 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 such Asset Sale at least equal to the
fair market value of the assets or Equity Interests issued or sold
or otherwise disposed of;

(2) such 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 set forth 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 such 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 such 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 the
notes) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases Mrs.
Fields or such Subsidiary from further liability; and

(b) any securities, notes or other obligations received by Mrs.
Fields or any such Subsidiary from such transferee that are
immediately converted by Mrs. Fields or such 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).

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Within 270 days after the receipt of any Net Proceeds from an Asset Sale,
Mrs. Fields may apply such Net Proceeds at its option:

(1) to repay senior Indebtedness of Mrs. Fields or any guarantor;

(2) to make a Permitted Investment;

(3) to make a capital expenditure in a Permitted Business; or

(4) to acquire long-term assets in a Permitted Business.

Pending the final application of any such Net Proceeds, Mrs. Fields may
temporarily reduce Indebtedness under a Credit Facility, including the credit
agreement with La Salle National Bank, or otherwise invest such 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
aggregate 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 consummation of an Asset Sale Offer, Mrs. Fields may use such Excess
Proceeds for general corporate purposes. If the aggregate principal amount of
notes tendered into such 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
such 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 thereof 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

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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 such 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 thereof; or

(4) make any Restricted Investment (all such 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 such Restricted Payment:

(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof, and

(2) Mrs. Fields would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such 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 pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of the covenant described below under
the caption "Incurrence of Indebtedness and Issuance of Preferred
Stock"; and

(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by Mrs. Fields and its Subsidiaries
after the Issue Date (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 the Issue Date to the end of
Mrs. Fields' most recently ended fiscal quarter for which
internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit), plus

(b) 100% of the aggregate 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 the
Issue Date 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
such 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 Restricted Investment that was made
after the Issue Date is sold for cash or otherwise liquidated or
repaid for cash, the lesser of

(1) the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any) and

(2) the initial amount of such Restricted Investment.

"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person,
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.

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The preceding provisions will not prohibit:

(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such 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 such net cash
proceeds that are utilized for any such 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 pursuant to any management equity
subscription agreement or stock option agreement; provided that the
aggregate price paid for all such 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 aggregate amount shall in no event exceed
$500,000 in any such period, and no Default or Event of Default
shall have occurred and be continuing immediately after such
transaction;

(6) payments to Mrs. Fields Holding pursuant to the Tax Sharing
Agreement;

(7) payments pursuance to the Pretzel Time Employment Agreement and the
Pretzel Time Management Agreement; and

(8) the redemption or repurchase of preferred stock of Pretzel Time
outstanding on the Issue Date.

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 such
Subsidiary, as the case may be, pursuant to 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 thereto 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 such 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 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

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such additional Indebtedness is incurred or such 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 such four-quarter
period; and

(2) the Weighted Average Life to Maturity of such 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 the Issue
Date of Indebtedness represented by the notes in an aggregate
principal amount not to exceed $100.0 million and the guarantees of
such 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 such Subsidiary, in an aggregate
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 Restricted Subsidiaries; provided, that:

(a) if Mrs. Fields is the obligor on such Indebtedness, such
Indebtedness must be expressly subordinated to the prior payment
in full in cash of all Obligations with respect to the notes;
and

(b) (i) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other
than Mrs. Fields or a Wholly Owned Subsidiary thereof and (ii)
any sale or other transfer of any such 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 such Indebtedness by Mrs. Fields or such
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 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 a Permitted
Business and

(b) the extension of credit represented by such 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
aggregate amount of all Indebtedness incurred pursuant to this
clause (7) shall not exceed $5.0 million at any time outstanding;

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(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 such business, assets or
Subsidiary for the purpose of financing such acquisition), provided
that the maximum aggregate liability of all such Indebtedness shall
at no time exceed 50% of the gross proceeds actually received by
Mrs. Fields or such Subsidiary in connection with such 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 aggregate 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 such incurrence, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to 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 an aggregate
principal amount (or accreted value, as applicable), including all
Permitted Refinancing Indebtedness incurred to refund, refinance
or replace any other Indebtedness incurred pursuant to 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 an aggregate 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 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

(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 such
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 pursuant to the first paragraph of this covenant, Mrs.
Fields will be permitted to classify such 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 on
any asset now owned or hereafter acquired, or any income or profits therefrom
or assign or convey any right to receive income therefrom, except Permitted
Liens.

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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 otherwise cause 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 the Issue Date

(2) this 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 such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of
such 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,
such 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 such Permitted Refinancing
Indebtedness are no more restrictive, than those contained in the
agreements governing the Indebtedness being refinanced;

(8) customary restrictions imposed on the transfer of copyrighted or
patented materials and customary provisions in agreements that
restrict the assignees of such agreements or any rights thereunder;
or

(9) restrictions with respect to a Subsidiary of Mrs. Fields imposed
pursuant to a binding agreement relating to the sale or disposition
of all or substantially all of the Capital Stock or assets of such
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: (i) Mrs. Fields is the surviving corporation; or (ii)
the Person formed by or surviving any such consolidation or
merger (if other than Mrs. Fields) or the entity to which such
sale,

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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 thereof or the District of
Columbia;

(b) the entity or Person formed by or surviving any such
consolidation or merger (if other than Mrs. Fields) or the
entity or Person to which such sale, assignment, transfer,
conveyance or other disposition shall have been made assumes all
the obligations of Mrs. Fields under the notes and the indenture
pursuant to a supplemental indenture reasonably satisfactory to
the Trustee;

(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 any such consolidation or merger
(if other than Mrs. Fields), or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been
made:

(i) 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

(ii) will, on the date of such transaction after giving pro
forma effect thereto 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 pursuant to the
Fixed Charge Coverage Ratio test set forth 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) such Affiliate Transaction is on terms that are no less favorable
to Mrs. Fields or such Subsidiary than those that would have been
obtained in a comparable transaction by Mrs. Fields or such
Subsidiary with an unrelated Person; and

(2) Mrs. Fields delivers to the Trustee:

(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $1.0 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with this covenant and that such
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 aggregate consideration in
excess of $5.0 million, an opinion as to the fairness to the
Holders of such 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 pursuant to 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 such Subsidiary;

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(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
such 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 such 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) such transfer, conveyance, sale, lease or other disposition is of
all the Capital Stock of such Wholly Owned Subsidiary; and

(2) the cash Net Proceeds from such 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 unless such
Subsidiary simultaneously executes and delivers a supplemental indenture
providing for the guarantee of the payment of the notes by such Subsidiary,
which guarantee shall be senior to or pari passu with such Subsidiary's
guarantee of or pledge to secure such 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 upon any sale, exchange or transfer, to
any Person not an Affiliate of Mrs. Fields, of all of Mrs. Fields' stock in, or
all or substantially all of the assets of, such Subsidiary, which sale,
exchange or transfer is made in compliance with the applicable provisions of
the indenture. The form of the guarantee will be attached as an exhibit to the
indenture.

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Business Activities

Mrs. Fields will not, and will not permit any Subsidiary to, engage in any
business other than Permitted Businesses, except to such 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).

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 such 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 set forth in
the solicitation documents relating to such 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 such 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 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 such
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 such a filing) and make such 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 pursuant to 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;

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(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 such Indebtedness or guarantee now
exists, or is created after the Issue Date, if that default

(a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such default (a
Payment Default); or

(b) results in the acceleration of such Indebtedness prior to its
express maturity,

and, in each case, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there has been
a Payment Default or the maturity of which has been so accelerated, aggregates
$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) certain 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 certain events of bankruptcy
or insolvency, with respect to Mrs. Fields, any Significant Subsidiary or any
group of Subsidiaries that, taken together, would constitute a 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 aggregate 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 pursuant to 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 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 the 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 such Default or Event of Default.

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No Personal Liability of Directors, Officers, Employees and Stockholders

No director, officer, employee, incorporator or stockholder of Mrs. Fields,
as such, shall have any liability for any obligations of Mrs. Fields under the
notes, the indenture, or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each holder of notes by accepting a
note waives and releases all such liability. 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 and it is the view of the
Commission that such a waiver is against public policy.

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 such notes when such 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;

(3) the rights, powers, trusts, duties and immunities of the Trustee,
and Mrs. Fields' obligations in connection therewith; 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,
certain 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
such amounts as 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 the Issue Date, there has been a change in the applicable
federal income tax law, in either case to the effect that, and
based thereon such 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
such 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 such Legal Defeasance had not
occurred;

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(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 such 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 such Covenant Defeasance had not occurred;

(4) no Default or Event of Default shall have occurred and be
continuing either:

(a) on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to
such deposit); or

(b) or 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) such 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;

(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

Except as provided in the next two succeeding paragraphs, the indenture or
the notes may be amended or supplemented with the consent of the holders of at
least a majority in principal amount of the notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, notes), and any existing default or
compliance with any provision of the indenture or the notes may be waived with
the consent of the holders of a majority in principal amount of the then
outstanding notes (including consents obtained in connection with a tender
offer or exchange offer for notes).

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 aggregate principal amount of the notes and a waiver of the
payment default that resulted from such acceleration);

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(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. The
Trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest it must eliminate such 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 (which shall not be cured), 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 such 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 such 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
aggregate 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 (the Depository),
pursuant to a FAST Balance Certificate Agreement between the Trustee and DTC
and registered in the name of Cede & Co., as nominee of the Depository (such
nominee being referred to as the Global Holder).

New notes exchanged for old notes which are in the form of registered
definitive certificates (the "Certificated Notes") will be issued in the form
of Certificated Notes. Such 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.

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The Depository has advised us that it is a limited-purchase trust company
that was created to hold securities for its participating organizations
(collectively, the Participants or the Depository's Participants) and to
facilitate the clearance and settlement of transactions in such securities
between Participants through electronic book-entry changes in accounts of its
Participants. The Depository's 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's system is also available to the other entities such as banks,
brokers, dealers and trust companies (collectively, the Indirect Participants
or the Depository's 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 only through the Depository's Participants or the
Depository's Indirect Participants.

We expect that pursuant to procedures established by the Depository:

(1) upon deposit of the New Global Note, the Depository 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, the Depository's Participants and
the Depository's 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 such new notes
represented by such 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 such 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 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 such interest to persons or entities that do not participate in the
Depository's system or to otherwise take actions in respect of such interest,
may be affected by the lack of physical certificate evidencing such interest.
Accordingly, each person owning a beneficial interest in a New Global Note must
rely on the procedures of the Depository and, if such person is not a
Participant or an Indirect Participant, on the procedures of the Participant
through which such person owns its interest, to exercise any rights of a holder
under such 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, or for maintaining, supervising or reviewing any
records of the Depository relating to such 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 Trustees
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 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. Neither Mrs. Fields nor the Trustee has any responsibility or
liability for such payments. Payments by the Depository's Participants and the

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Depository's Indirect Participants to the beneficial owners of new notes will
be governed by standing instructions and customary practice. Such payments will
be the responsibility of the Depository's Participants or the Depository's
Indirect Participants.

Certificated Securities

If:

(1) Mrs. Fields notifies the Trustee in writing that the Depository 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 such form will be
issued to each person that such Global Holder and the Depository
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 such
beneficial interest for Certificated Notes. Upon any such issuance, the Trustee
is required to register such new notes in the name of, and cause the same to be
delivered to, such person or persons (or the nominee of any thereof). Such 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 Series C Notes 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 Series C
Notes for the new notes, which will have terms substantially similar in all
material respects to the old notes. Upon the effectiveness of the Registration
Statement, Mrs. Fields will offer to the holders of Transfer Restricted
Securities pursuant to the Exchange Offer who are able to make certain
representations the opportunity to exchange their Transfer Restricted
Securities 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 Transfer Restricted Securities 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 such resales or

(c) that it is a broker-dealer and owns Series C Notes 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 Series C Notes by the holders
thereof who satisfy certain conditions relating to the provision of

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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. For purposes of the preceding, Transfer Restricted Securities means
each note until:

(1) the date on which such note has been exchanged by a person other
than a broker-dealer for a new note in the Exchange Offer,

(2) following the exchange by a broker-dealer in the Exchange Offer of
an old note for a new note, the date on which such new note is sold
to a purchaser who receives from such broker-dealer on or prior to
the date of such sale a copy of the prospectus contained in the
Registration Statement,

(3) the date on which such note has been effectively registered under
the Securities Act and disposed of in accordance with the Shelf
Registration Statement or

(4) the date on which such note is distributed to the public pursuant
to Rule 144 under 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 the Closing Date,

(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 the Closing Date,

(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 thereto 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 such filing obligation arises and to cause the Shelf
Registration to be declared effective by the Commission on or prior
to 150 days after such obligation arises.

(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 such filing,

(2) any of such Registration Statements is not declared effective by
the Commission on or prior to the date specified for such
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 Transfer Restricted Securities
during the periods specified in the Registration Rights Agreement
(each such 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 Series C Notes held by such holder. The
amount of the liquidated damages will increase by an additional $.05 per week
per $1,000 principal amount of Series C 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 $.20 per week per $1,000 principal amount of
Series C Notes.

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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 such 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 currently owes liquidated damages of $ to the holders of Series C
Notes.

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 set forth 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 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 such terms, as well as any
other capitalized terms used herein 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 such other
Person is merged with or into or became a Subsidiary of such
specified Person, excluding, however, Indebtedness incurred in
connection with, or in contemplation of, such other Person merging
with or into or becoming a Subsidiary of such specified Person; and

(2) Indebtedness secured by a Lien encumbering any asset acquired by
such 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 such 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 such Person, whether through the ownership of 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 (including, without limitation, by way of a sale and
leaseback), 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.

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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 such 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 such term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial
ownership of all securities that such "person" has the right to acquire,
whether such 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 GAAP.

"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.

"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
thereof 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
thereof rated (at the time of the acquisition of such 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 such 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 of six months or less and
overnight bank

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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
such term is used in Section 13(d)(3) of the Exchange Act) other
than the Principals 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 the Principals and 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 such portion of such Voting Stock as
corresponds to the portion of such equity of such entity that has been so
transferred.

"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus:

(1) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale, to the extent such
losses were deducted in computing such Consolidated Net Income;
plus

(2) provision for taxes based on income or profits of such Person and
its Subsidiaries for such period, to the extent that such provision
for taxes was deducted in computing such Consolidated Net Income;
plus

(3) consolidated interest expense of such Person and its Subsidiaries
for such 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, pursuant to
Hedging Obligations), to the extent that any such expense was
deducted in computing such Consolidated Net Income; plus

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(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 any such 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 such Person and its Subsidiaries for such period
to the extent that such depreciation, amortization and other non-
cash expenses were deducted in computing such Consolidated Net
Income; minus

(5) non-cash items increasing such Consolidated Net Income for such
period, in each case, on a consolidated basis and determined in
accordance with GAAP.

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 such 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 such Subsidiary
without prior governmental approval (that has not been obtained), and without
direct or indirect restriction pursuant to 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 aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
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 thereof 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 such acquisition
shall be excluded; and

(4) the cumulative effect of a change in accounting principles shall be
excluded.

"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 such Person
and its consolidated Subsidiaries as of such date plus

(2) the respective amounts reported on such Persons balance sheet as of
such 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 such dividends may be declared and paid
only out of net earnings in respect of the year of such declaration
and payment, but only to the extent of any cash received by such
Person upon issuance of such 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 the Issue Date
in the book value of any asset owned by such Person or a
consolidated Subsidiary of such Person,

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(b) all investments as of such 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 such date, all of the foregoing
determined in accordance with GAAP.

"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 such Board of Directors on the date of the
indenture; or

(2) was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who
were members of such Board at the time of such nomination or
election.

"Credit Facility" means, with respect to Mrs. Fields, one or more debt
facilities or commercial paper facilities with banks or other institutional
lenders (including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith) providing for
revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed
to borrow from such lenders against such receivables) or letters of credit up
to a maximum aggregate amount of not more than $15.0 million, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.

"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, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the notes mature, provided that a
class of Capital Stock shall not be Disqualified Stock solely as a result of
any maturity or redemption that is conditioned upon, and subject to, compliance
with the covenant described 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 the
Issue Date but excluding any Indebtedness of Mrs. Fields or any of its
Subsidiaries under any Credit Facility existing on the Issue Date) in existence
on the Issue Date, until such 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 such Person and its
Subsidiaries for such 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) pursuant to Hedging
Obligations);

(2) the consolidated interest expense of such Person and its
Subsidiaries that was capitalized during such period;

(3) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or one of its Subsidiaries or secured by
a Lien on assets of such Person or one of its Subsidiaries (whether
or not such 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 such 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

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local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.

"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such 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 such incurrence, assumption, guarantee or redemption
of Indebtedness, or such 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 such 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 such reference period shall be
calculated without giving effect to clause (3) of the proviso set
forth in the definition of Consolidated Net Income;

(2) the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, 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 GAAP, 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 such 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 the Issue Date may be
adjusted to eliminate certain historical expenses that are not
expected to recur after the consummation of the Pretzel
Contributions so long as such 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 a Permitted 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 such acquisition, so long as such 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.

"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.

"guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, letters of credit or
reimbursement agreements in respect thereof, of all or any part of any
Indebtedness.

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"Hedging Obligations" means, with respect to any Person, the obligations of
such 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 such Person
against fluctuations in interest or foreign currency exchange
rates.

"Indebtedness" means, with respect to any specified Person, any indebtedness
of such 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 thereof);

(3) banker's acceptances;

(4) representing Capital Lease Obligations;

(5) the balance deferred and unpaid of the purchase price of any
property, except any such 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 GAAP. 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 such Person of any Indebtedness of any other Person.

The amount of any Indebtedness outstanding as of any date shall be:

(1) the accreted value thereof, in the case of any Indebtedness that
does not require current payments of interest; and

(2) the principal amount thereof, together with any interest thereon
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 such
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 GAAP,
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 any such
sale or disposition, such 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 such
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".

"Issue Date" means November 26, 1997.

"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such 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,

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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 such 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 pursuant to 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 such
Person, determined in accordance with GAAP 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 such gain (but not loss), realized in connection with (a)
any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions) or (b) the disposition
of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its
Subsidiaries; and

(2) any extraordinary or nonrecurring gain (but not loss), together
with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).

"Net Proceeds" means the aggregate 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 such 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 such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.

"Non-Core Stores" means the stores listed in Exhibit B to the Indenture.

"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.

"Permitted Business" means the same or a similar line of business as Mrs.
Fields and its Subsidiaries were engaged in on the Issue Date, including,
without limitation, the specialty retail snack-food business.

"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 in a Permitted
Business;

(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 such Investment (a) such Person becomes a
Wholly Owned Subsidiary of Mrs. Fields and a guarantor that is
engaged in a Permitted Business or (b) such 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 a Permitted Business;

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(4) any Restricted Investment made as a result of the receipt of non-
cash consideration from an Asset Sale that was made pursuant to 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 the Issue Date (including, without
limitation, a $500,000 loan to Martin E. Lisiewski outstanding as
of the Issue Date); 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 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 such Person is
merged into or consolidated with Mrs. Fields or any Subsidiary of
Mrs. Fields, provided that such Liens were in existence prior to
the contemplation of such 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 such
Liens were in existence prior to the contemplation of such
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 such clause (3), covering only the assets acquired
with such Indebtedness;

(7) Liens existing on the Issue Date;

(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 GAAP 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 aggregate materially detract from
the value of the property or materially impair the use thereof in
the operation of business by Mrs. Fields or such Subsidiary.

120
<PAGE>

"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 such
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) such 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, such 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) such 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.

"Pretzel Time Employment Agreement" means that certain Employment Agreement,
dated as of September 2, 1997, between Pretzel Time and Martin E. Lisiewski.

"Pretzel Time Management Agreement" means that certain Management Agreement,
dated as of September 2, 1997, between Mrs. Fields and Pretzel Time.

"Principals" means Herbert S. Winokur, Jr. and Capricorn Investors II, L.P.

"Public Equity Offering" means a public offering registered under the
Securities Act (except for any registration pursuant to 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 aggregate proceeds from any such public offering shall in no
event be less than $20.0 million.

"Related Party" with respect to any Principal means:

(1) any greater than 50% owned Subsidiary, or spouse or immediate
family member (in the case of an individual) of such Principal 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 the Principals and/or such other Persons
referred to in the immediately preceding clause (1).

"Restricted Investment" means an Investment other than a Permitted
Investment.

"Significant Subsidiary" means any Subsidiary that would be a significant
subsidiary as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the Issue
Date.

121
<PAGE>

"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such 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 amounts payable from time to time by Mrs. Fields or any such
Subsidiary under any such agreement do not exceed the corresponding tax
payments that Mrs. Fields or such Subsidiary would have been required to make
to any relevant taxing authority had Mrs. Fields or such Subsidiary not joined
in such consolidated or combined returns, but instead had filed returns
including only Mrs. Fields and its Subsidiaries.

"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.

"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
such date and the making of such payment; by

(2) the then outstanding principal amount of such Indebtedness.

122
<PAGE>

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
an aggregate amount not to exceed $500,000. The aggregate amount of letters of
credit issued plus the aggregate 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. 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. Currently there are no amounts outstanding under the agreement.
Mrs. Fields is limited to borrowing $12.7 million in accordance with
restrictions of the indenture.

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 such 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 such
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 such 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 pursuant to 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 such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or though brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer or the purchasers of any such 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 such notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any such resale of notes issued
in the Exchange Offer and any commission or concessions received by any such
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.

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 such
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
certain liabilities, including liabilities under the Securities Act.

123
<PAGE>

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following is a general summary of certain 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 offered in this prospectus will
be passed upon by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York,
counsel for Mrs. Fields. A partner in Skadden, Arps, Slate, Meagher & Flom LLP
is an investor in Capricorn.

124
<PAGE>

EXPERTS

The historical consolidated financial statements of Mrs. Fields' Original
Cookies, Inc. and subsidiaries as of December 28, 1996 and January 3, 1998 and
for the period from inception (September 18, 1996) to December 28, 1996 and for
the year ended January 3, 1998; 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
thereto, and are included herein 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 herein, and is included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.

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 herein.

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 herein.

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 herein.

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 herein. The financial statements of
Pretzelmaker Holdings, Inc. as of December 31, 1996 and for the years ended
December 31, 1995 and 1996 included in this prospectus, have been audited by
BDO Siedman, LLP, independent public accountants, as stated in their report
appearing herein.

125
<PAGE>

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On August 24, 1998, Mrs. Fields sold $40,000,000 in aggregate 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
aggregate 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 aggregate 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 aggregate 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 aggregate
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.

The unaudited pro forma condensed combined statements of operations for the
53 weeks ended January 3, 1998 and the 39 weeks ended October 3, 1998 are based
upon the historical financial statements of Mrs. Fields, H&M, Pretzel Time,
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, including the notes thereto, 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, as well as the previous acquisitions of H&M and Pretzel Time.
Mrs. Fields, H&M and Pretzel Time operate 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 53 weeks ended
January 3, 1998 and the 39 weeks ended October 3, 1998. 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
53 weeks ended January 3, 1998 and the 39 weeks ended October 3, 1998 assume
that the above transactions occurred as of December 29, 1996 (the first day of
the most recently completed fiscal year) and combine the historical results of
operations of the entities for those periods with pro forma adjustments to give
effect to Mrs. Field's offerings in November 1997 and 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.
Except for data presented with respect to the Combined Karp Entities, the
unaudited pro forma condensed combined financial

P-1
<PAGE>

statements do not give effect to the purchase by Mrs. Fields of a number of
other pretzel and cookie stores, or the purchase of the remaining 30.0% of
common stock of Pretzel Time because those transactions were immaterial to the
pro forma presentation.

The pro forma condensed combined statement of operations for the 53 weeks
ended January 3, 1998 includes data labeled "Mrs. Fields Pre-Acquisition" and
"Mrs. Fields Post-Acquisition". The data included in the section labeled Mrs.
Fields Pre-Acquisition includes the operating results of Mrs. Fields, H&M and
Pretzel Time, including pro forma adjustments that give effect to the
acquisitions of H&M and Pretzel Time that occurred during fiscal year 1997.
This data is subtotaled under the column heading "Pre-Acquisition Pro Forma
Combined" in order to differentiate the effects of the acquisitions that
occurred during fiscal years 1997 and 1998. The data included in the section
labeled Mrs. Fields Post-Acquisition includes the operating results of Great
American, Deblan, Chocolate Chip, Cookie Conglomerate, the Combined Karp
Entities and Pretzelmaker, including pro forma adjustments that give effect to
the acquisitions of those entities during fiscal year 1998. All data for the
pro forma condensed combined statement of operations for the 53 weeks ended
January 3, 1998 is totaled under the column heading "Post-Acquisition Pro Forma
Combined".

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-2
<PAGE>

MRS. FIELDS

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the 53 Weeks Ended January 3, 1998
(unaudited)

<TABLE>
<CAPTION>
Mrs. Fields
Mrs. Fields Pre-Acquisition Post-Acquisition
---------------------------------------------------------------- -------------------------
Pre-
Pretzel Pro Forma Acquisition Great
H&M Time Adjustments Pro Forma American Deblan
Mrs. Fields (See Note 2) (See Note 3) (See Note 1) Combined (See Note 4) (See Note 5)
----------- ------------ ------------ ------------ ----------- ------------ ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Net store and batter
sales................. $123,987 $9,328 $ 302 $ -- $133,617 $32,307 $9,503
Franchising, net....... 3,574 -- 2,142 (653)(a) 5,063 5,391 --
Licensing, net......... 2,028 -- -- -- 2,028 -- --
Other, net............. 918 36 181 -- 1,135 167 21
-------- ------ ------ ------- -------- ------- ------
Total revenues......... 130,507 9,364 2,625 (653) 141,843 37,865 9,524
-------- ------ ------ ------- -------- ------- ------
OPERATING COSTS AND
EXPENSES:
Selling and store
occupancy costs....... 66,832 6,120 284 (653)(a) 72,583 13,548 5,891
Food cost of sales..... 28,127 1,366 63 -- 29,556 10,578 1,675
General and
administrative........ 16,730 1,326 1,617 (750)(b) 18,923 6,664 1,169
Depreciation and
amortization.......... 10,403 690 118 525(c) 11,736 2,725 255
-------- ------ ------ ------- -------- ------- ------
Total operating costs
and expenses.......... 122,092 9,502 2,082 (878) 132,798 33,515 8,990
-------- ------ ------ ------- -------- ------- ------
Income (loss) from
operations........... 8,415 (138) 543 225 9,045 4,350 534
INTEREST EXPENSE........ (7,830) (370) (120) (2,857)(d) (11,177) (6,219) (73)
INTEREST INCOME......... 246 -- -- -- 246 307 26
OTHER INCOME (EXPENSE),
net.................... (368) -- -- -- (368) 1,264 --
-------- ------ ------ ------- -------- ------- ------
Income (loss) before
provision for income
taxes................. 463 (508) 423 (2,632) (2,254) (298) 487
PROVISION FOR INCOME
TAXES.................. 655 -- -- -- 655 223 195
-------- ------ ------ ------- -------- ------- ------
Income (loss) before
preferred stock
accretion and
dividends of
subsidiaries and
minority interest..... (192) (508) 423 (2,632) (2,909) (521) 292
PREFERRED STOCK
ACCRETION AND DIVIDENDS
OF SUBSIDIARIES........ (644) -- -- -- (644) -- --
MINORITY INTEREST....... (138) -- -- (169)(e) (307) -- --
-------- ------ ------ ------- -------- ------- ------
Net income (loss)...... $ (974) $ (508) $ 423 $(2,801) $ (3,860) $ (521) $ 292
======== ====== ====== ======= ======== ======= ======
</TABLE>

See accompanying notes to pro forma condensed combined financial statements.

P-3
<PAGE>

MRS. FIELDS

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (Continued)
For the 53 Weeks Ended January 3, 1998
(unaudited)

<TABLE>
<CAPTION>
Mrs. Fields Post-Acquisition
------------------------------------------------------------------------------
Combined Post-
Chocolate Karp Cookie Pro Forma Acquisition
Chip Entities Conglomerate Pretzelmaker Adjustments Pro Forma
(See Note 6) (See Note 7) (See Note 8) (See Note 9) (See Note 1) Combined
------------ ------------ ------------ ------------ ------------ -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Net store and batter
sales................. $2,789 $2,500 $4,203 $1,819 $(2,886)(g) $183,852
Franchising, net....... -- -- -- 2,804 (1,329)(f) 11,929
Licensing, net......... -- -- -- -- -- 2,028
Other, net............. -- -- -- 1,442 -- 2,765
------ ------ ------ ------ ------- --------
Total revenues......... 2,789 2,500 4,203 6,065 (4,215) 200,574
------ ------ ------ ------ ------- --------
OPERATING COSTS AND
EXPENSES:
Selling and store
occupancy costs....... 1,396 1,635 2,278 1,816 (1,329)(f) 97,818
Food cost of sales..... 654 683 1,097 921 (2,886)(g) 42,278
General and
administrative........ 510 238 326 3,175 (2,670)(h) 28,335
Depreciation and
amortization.......... 51 121 183 403 3,931 (i) 19,405
------ ------ ------ ------ ------- --------
Total operating costs
and expenses.......... 2,611 2,677 3,884 6,315 (2,954) 187,836
------ ------ ------ ------ ------- --------
Income (loss) from
operations........... 178 (177) 319 (250) (1,261) 12,738
INTEREST EXPENSE........ (5) (18) (40) (224) 1,659 (j) (16,097)
INTEREST INCOME......... 5 -- -- -- -- 584
OTHER INCOME (EXPENSE),
net.................... -- -- -- -- -- 896
------ ------ ------ ------ ------- --------
Income (loss) before
provision for income
taxes................. 178 (195) 279 (474) 398 (1,879)
PROVISION FOR INCOME
TAXES.................. 43 15 -- -- (323)(k) 808
------ ------ ------ ------ ------- --------
Income (loss) before
preferred stock
accretion and
dividends of
subsidiaries and
minority interest..... 135 (210) 279 (474) 721 (2,687)
PREFERRED STOCK
ACCRETION AND DIVIDENDS
OF SUBSIDIARIES........ -- -- -- -- -- (644)
MINORITY INTEREST....... -- -- -- -- -- (307)
------ ------ ------ ------ ------- --------
Net income (loss) ..... $ 135 $ (210) $ 279 $ (474) $ 721 $ (3,638)
====== ====== ====== ====== ======= ========
</TABLE>

See accompanying notes to pro forma condensed combined financial statements.

P-4
<PAGE>

MRS. FIELDS

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the 39 Weeks Ended October 3, 1998
(unaudited)

<TABLE>
<CAPTION>
Combined
Great Chocolate Karp
American Deblan Chip Entities
Mrs. Fields (See Note 4) (See Note 5) (See Note 6) (See Note 7)
----------- ------------ ------------ ------------ ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
REVENUES:
Net store and batter
sales................ $89,938 $18,932 $6,370 $1,873 $1,489
Franchising, net...... 3,884 3,449 -- -- --
Licensing, net........ 1,081 -- -- -- --
Other, net............ 1,056 82 -- -- --
------- ------- ------ ------ ------
Total revenues...... 95,959 22,463 6,370 1,873 1,489
------- ------- ------ ------ ------
OPERATING COSTS AND
EXPENSES:
Selling and store
occupancy costs...... 52,357 7,645 3,523 1,000 914
Food cost of sales.... 21,588 6,428 1,108 454 373
General and
administrative....... 12,621 5,288 1,067 421 141
Depreciation and
amortization......... 9,707 1,510 182 22 82
------- ------- ------ ------ ------
Total operating
costs and
expenses........... 96,273 20,871 5,880 1,897 1,510
------- ------- ------ ------ ------
Income (loss) from
operations....... (314) 1,592 490 (24) (21)
INTEREST EXPENSE, net... (8,981) (4,077) (43) (2) (8)
INTEREST INCOME......... 530 258 24 4 --
OTHER INCOME (EXPENSE),
net.................... (256) (149) 40 11 --
------- ------- ------ ------ ------
Income (loss) before
provision for income
taxes................ (9,021) (2,376) 511 (11) (29)
PROVISION (BENEFIT) FOR
INCOME TAXES........... 68 (38) 115 27 6
------- ------- ------ ------ ------
Income (loss) before
preferred stock
accretion and
dividends of
subsidiaries and
minority interest.... (9,089) (2,338) 396 (38) (35)
PREFERRED STOCK
ACCRETION AND DIVIDENDS
OF SUBSIDIARIES........ (333) -- -- -- --
MINORITY INTEREST....... (268) -- -- -- --
------- ------- ------ ------ ------
Net income (loss)..... $(9,690) $(2,338) $ 396 $ (38) $ (35)
======= ======= ====== ====== ======
</TABLE>

See accompanying notes to pro forma condensed combined financial statements.

P-5
<PAGE>

MRS. FIELDS

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (Continued)
For the 39 Weeks Ended October 3, 1998
(unaudited)

<TABLE>
<CAPTION>
Pro Forma
Cookie Conglomerate Pretzelmaker Adjustments Pro Forma
(See Note 8) (See Note 9) (See Note 1) Combined
------------------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
REVENUES:
Net store and batter
sales................ $2,906 $1,039 $(1,330)(g) $121,217
Franchising, net...... -- 1,724 (606)(f) 8,451
Licensing, net........ -- -- -- 1,081
Other, net............ -- 598 -- 1,736
------ ------ ------- --------
Total revenues...... 2,906 3,361 (1,936) 132,485
------ ------ ------- --------
OPERATING COSTS AND
EXPENSES:
Selling and store
occupancy costs...... 1,580 992 (606)(f) 67,405
Food cost of sales.... 733 121 (1,330)(g) 29,475
General and
administrative....... 303 1,656 (1,735)(h) 19,762
Depreciation and
amortization......... 118 627 3,077 (i) 15,325
------ ------ ------- --------
Total operating
costs and
expenses........... 2,734 3,396 (594) 131,967
------ ------ ------- --------
Income (loss) from
operations....... 172 (35) (1,342) 518
INTEREST EXPENSE, net... (17) (152) 502 (j) (12,798)
INTEREST INCOME......... -- -- -- 836
OTHER INCOME (EXPENSE),
net.................... 32 -- -- (322)
------ ------ ------- --------
Income (loss) before
provision for income
taxes................ 187 (187) (840) (11,766)
PROVISION (BENEFIT) FOR
INCOME TAXES........... -- -- -- 178
------ ------ ------- --------
Income (loss) before
preferred stock
accretion and
dividends of
subsidiaries and
minority interest.... 187 (187) (840) (11,944)
PREFERRED STOCK
ACCRETION AND DIVIDENDS
OF SUBSIDIARIES........ -- -- -- (333)
MINORITY INTEREST....... -- -- -- (268)
------ ------ ------- --------
Net income (loss)..... $ 187 $ (187) $ (840) $(12,545)
====== ====== ======= ========
</TABLE>

See accompanying notes to pro forma condensed combined financial statements.

P-6
<PAGE>

MRS. FIELDS

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(unaudited)

1. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS

Pre-Acquisition

(a) Adjustment to reflect the elimination of franchise fees and related costs
as a result of consolidating H&M and Pretzel Time.

(b) Adjustment to reflect the impact of the reduction in salaries and payroll
expenses related to employees of H&M and Pretzel Time terminated at the date of
the acquisitions assuming that the acquisitions were consummated as of December
29, 1996. The terminations 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.

(c) Adjustment to reflect amortization of goodwill, which goodwill totaling
$15,500,000, was recorded in connection with the purchase of the net assets of
H&M and the majority ownership of Pretzel Time. Goodwill is being amortized
over a 15-year period. Also includes adjustment to reflect a reduction in
depreciation expense as a result of reducing H&M's property and equipment to
estimated fair market value in connection with the acquisition. The average
estimated depreciable lives for these assets is seven years.

(d) Adjustment to reflect additional interest expense that would have been
incurred on the $100,000,000 Series A/B Senior Notes. Adjustment also reflects
a reduction in interest expense related to: (i) the retirement of $64,098,000
of Mrs. Fields debt with interest rates ranging from 8.78% to 10.0%; (ii) the
retirement of $8,250,000 of H&M debt with interest rates ranging from 8.0% to
16.0%; (iii) the assumed conversion of $4,643,000 of a Mrs. Fields note payable
with an interest rate of 9.78%; (iv) the additional amortization related to
approximately $5,976,000 of deferred loan costs assumed to be amortized over a
seven-year period; and (v) net of interest income on a $500,000 loan to a
minority stockholder of Pretzel Time with an interest rate of 10.0%.

(e) Adjustment to reflect the recording of the minority interest in Pretzel
Time's income from continuing operations.

Post-Acquisition

(f) 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.

(g) 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.

(h) 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 consummated at
December 29, 1996. 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.

P-7
<PAGE>

(i) Adjustment to reflect amortization of goodwill, which goodwill totaling
$77,717,000 (including acquisition costs of $1,003,000), 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.

(j) 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) net of the additional
interest expense related to approximately $5,007,000 of new deferred loan costs
amortized over a seven-year period; and (vi) net of the additional interest
expense on the $40,000,000 of Series C Senior Notes and amortization of
$600,000 of assumed discount; (vii) net interest expense on $2,800,000 of
financing related to the acquisition of Cookie Conglomerate, and (viii) net
interest expense on $4,682,000 of financing related to the acquisition of
Pretzelmaker.

(k) Adjustment to reflect the change in provision for income taxes due to the
consolidated results of operations of the entities before provision for income
taxes.

2. H&M ACQUISITION

Mrs. Fields Holding acquired the net assets and certain debt of H&M on July
25, 1997, and concurrent with the completion of Mrs. Field's offering in
November 1997 contributed the net assets of H&M and related debt to Mrs.
Fields'. Accordingly, in the accompanying unaudited pro forma condensed
combined statement of operations for the 53 weeks ended January 3, 1998, H&M's
results of operations from December 29, 1996 to July 24, 1997 are included
under the "H&M" column heading. Also, in the accompanying unaudited pro forma
condensed combined statement of operations for the 39 weeks ended October 3,
1998, H&M's results of operations are included under the "Mrs. Fields" column
heading. The purchase price of $13,750,000 paid by Mrs. Fields Holding was
allocated based on the estimated fair values of the net assets acquired, as
presented below:

<TABLE>
<S> <C>
Current assets acquired............................................ $ 496,000
Fixed assets acquired.............................................. 4,151,000
Other assets acquired.............................................. 1,212,000
Current liabilities acquired....................................... (727,000)
Other liabilities acquired......................................... (1,000,000)
Goodwill acquired.................................................. 9,618,000
-----------
Total purchase price............................................. $13,750,000
===========
</TABLE>

3. PRETZEL TIME ACQUISITION

Mrs. Fields Holding acquired 56.0% of the common stock of Pretzel Time, a
$500,000 note receivable from Pretzel Time's founder and contract rights on
September 2, 1997. Concurrent with the completion of Mrs. Field's offering in
November 1997, Mrs. Fields Holding contributed its 56.0% interest to Mrs.
Fields. Accordingly, in the accompanying unaudited pro forma condensed combined
statements of operations for the 53 weeks ended January 3, 1998, Pretzel Time's
results of operations from December 29, 1996 to September 1, 1997 are included
under the "Pretzel Time" column heading. Also, in the accompanying unaudited
pro forma condensed combined statement of operations for the 39 weeks ended
October 3, 1998, Pretzel Time's results of operations are included under the
"Mrs. Fields" column heading.

P-8
<PAGE>

Mrs. Fields Holding paid $4,200,000 in cash to acquire 56.0% of the common
stock of Pretzel Time and made a $500,000, five-year maturity loan, with an
interest rate of 10.0%, to a minority stockholder and founder of Pretzel Time.
Of the $4,200,000 paid by Mrs. Fields Holding, $750,000 was paid to Pretzel
Time to be used for working capital purposes. Pretzel Time's stockholders'
deficit of $425,000 at the date of acquisition was eliminated and goodwill of
$5,882,000 was recorded.

4. GREAT AMERICAN ACQUISITION

On August 24, 1998, Mrs. Fields acquired all of the outstanding capital stock
and subordinated indebtedness of Great American for an aggregate 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............................................ $11,798,652
Fixed assets acquired.............................................. 3,021,124
Other assets acquired.............................................. 5,244,371
Current liabilities acquired....................................... (8,352,982)
Other liabilities acquired......................................... (48,944,165)
Goodwill acquired.................................................. 55,633,000
-----------
Total purchase price............................................. $18,400,000
===========
</TABLE>

Because Great American operates using a 52/53-week year ending near June 30,
its results of operations for the 52 weeks ended December 28, 1997, which are
included in the accompanying pro forma condensed combined statements of
operations for the 53 weeks ended January 3, 1998, do not agree with Great
American's historical results of operations for either the 52 weeks ended June
29, 1997 or June 28, 1998. Additionally, in the accompanying pro forma
condensed combined statement of operations for the 39 weeks ended October 3,
1998, 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 October 3, 1998 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 53 weeks
ended January 3, 1998 and the 39 weeks ended October 3, 1998.

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 53 weeks ended January 3, 1998 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 26 Weeks Ended 52 Weeks Ended
June 28, 1998 June 28, 1998 June 29, 1997 December 28, 1997
-------------- --------------- --------------- -----------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net store sales......... $18,854 $8,472 $10,181 $20,563
Batter sales to fran-
chises................. 12,214 6,074 5,604 11,744
Franchising, net........ 5,770 2,886 2,507 5,391
Other, net.............. 139 67 95 167
Operating costs and ex-
penses................. 31,133 15,089 17,471 33,515
Income (loss) from oper-
ations................. 5,844 2,106 612 4,350
Net income (loss)....... (202) (1,384) (1,703) (521)
</TABLE>

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 39 weeks ended October 3, 1998 with the key components of Great American's
results of operations in its historical financial statements for the 52 weeks
ended June 28, 1998:

P-9
<PAGE>

<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 franchi-
sees................... 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 ex-
penses................. 31,133 16,044 5,782 20,871
Income (loss) from oper-
ations................. 5,844 3,738 (514) 1,592
Net income (loss)....... (202) 1,182 (954) (2,338)
</TABLE>

5. DEBLAN ACQUISITION

On August 24, 1998, Mrs. Fields acquired all of the outstanding capital stock
of Deblan for an aggregate purchase price of $10,465,000. Accordingly, in the
accompanying pro forma condensed combined statement of operations for the 39
weeks ended October 3, 1998, 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 October 3, 1998 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.............................................. 247,000
Current liabilities acquired....................................... (333,000)
Other liabilities acquired......................................... (565,000)
Goodwill acquired.................................................. 8,226,000
-----------
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
39 weeks ended October 3, 1998 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 ex-
penses................... 4,418 1,462 5,880
Income from operations.... 350 140 490
Net income................ 232 164 396
</TABLE>

6. CHOCOLATE CHIP ACQUISITION

On August 24, 1998, Mrs. Fields acquired all of the outstanding capital stock
of Chocolate Chip for an aggregate 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>

P-10
<PAGE>

Because Chocolate Chip operates using a year ending September 30, its results
of operations for the year ended December 31, 1997, which are included in the
accompanying pro forma condensed combined statement of operations for the 53
weeks ended January 3, 1998, do not agree with Chocolate Chip's historical
results of operations for the year ended September 30, 1997. Additionally, in
the accompanying pro forma condensed combined statement of operations for the
39 weeks ended October 3, 1998, 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
October 3, 1998 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
53 weeks ended January 3, 1998 and the 39 weeks ended October 3, 1998.

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 53 weeks ended January 3, 1998 with the key components of Chocolate Chip's
results of operations in its historical financial statements for the year ended
September 30, 1997:

<TABLE>
<CAPTION>
Less Add
Year Ended Three Months Ended Three Months Ended Year Ended
September 30, 1997 December 31, 1996 December 31, 1997 December 31, 1997
------------------ ------------------- ------------------- ------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net store sales......... $2,650 $663 $802 $2,789
Operating costs and ex-
penses................. 2,632 728 707 2,611
Income (loss) from oper-
ations................. 18 (65) 95 178
Net income (loss)....... 11 (67) 57 135

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 39 weeks ended October 3, 1998 with the key components of Chocolate Chip's
results of operations in its historical financial statements for the nine
months ended June 30, 1998:

<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>

7. COMBINED KARP ENTITIES ACQUISITION

On September 9, 1998, Mrs. Fields acquired the Combined Karp Entities for an
aggregate purchase price of $1,750,000. Accordingly, in the accompanying pro
forma condensed combined statement of operations for the 39 weeks ended October
3, 1998, 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 October 3, 1998 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............................................. $ 64,000
Fixed assets acquired, net.......................................... 1,054,000
Goodwill acquired................................................... 780,000
----------
Total purchase price.............................................. $1,898,000
==========
</TABLE>

P-11
<PAGE>

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 39 weeks ended October 3, 1998 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>

8. COOKIE CONGLOMERATE ACQUISITION

On October 5, 1998, Mrs. Fields acquired Cookie Conglomerate for an aggregate
purchase price of $2,800,000. Accordingly, in the accompanying pro forma
condensed combined statement of operations for the 39 weeks ended October 3,
1998, Cookie Conglomerate's results of operations from Januay 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................................................ $ 801,000
Goodwill acquired.................................................... 1,999,000
----------
Total purchase price............................................... $2,800,000
==========
</TABLE>

9. PRETZELMAKER ACQUISITION

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. Mrs. Fields paid $1,100,000 in cash upon closing of
the acquisition and signed a promissory note for the remaining $4,639,000,
which was paid in three installments through January 4, 1999. Accordingly, in
the accompanying pro forma condensed combined financial statements of
operations for the 39 weeks ended October 3, 1998, Pretzelmaker's results of
operations from January 1, 1998 to September 30, 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............................................ $ 822,000
Fixed assets acquired.............................................. 566,000
Other assets acquired.............................................. 184,000
Current liabilities acquired....................................... (1,430,000)
Other liabilities acquired......................................... (901,000)
Goodwill acquired.................................................. 6,498,000
-----------
Total purchase price............................................. $ 5,739,000
===========
</TABLE>

P-12
<PAGE>

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 December 28, 1996, January 3, 1998 and
October 3, 1998 (unaudited).............................................. F-5
Consolidated Statements of Operations for the period from inception
(September 18, 1996) to December 28, 1996, for the year ended January 3,
1998 and for the 39 weeks ended September 27, 1997 (unaudited) and
October 3, 1998 (unaudited).............................................. F-7
Consolidated Statements of Stockholder's Equity for the period from
inception (September 18, 1996) to December 28, 1996, for the year ended
January 3, 1998 and for the 39 weeks ended October 3, 1998 (unaudited)... F-8
Consolidated Statements of Cash Flows for the period from inception
(September 18, 1996) to December 28, 1996, for the year ended January 3,
1998 and for the 39 weeks ended September 27, 1997 (unaudited) and
October 3, 1998 (unaudited).............................................. F-9
Notes to Consolidated Financial Statements................................ F-13
Mrs. Fields Inc. and Subsidiaries
Report of Independent Public Accountants (Arthur Andersen LLP)............ F-49
Independent Auditors' Report (Deloitte & Touche LLP)...................... F-50
Consolidated Balance Sheet as of September 17, 1996....................... F-51
Consolidated Statements of Operations for the year ended December 30, 1995
and for the period ended September 17, 1996.............................. F-53
Consolidated Statements of Stockholders' Deficit for the year ended
December 30, 1995 and for the period ended September 17, 1996............ F-54
Consolidated Statements of Cash Flows for the year ended December 30, 1995
and for the period ended September 17, 1996.............................. F-55
Notes to Consolidated Financial Statements................................ F-57
The Original Cookie Company, Incorporated and the Carved-out Portion of
Hot Sam Company, Inc. (Combined)
Report of Independent Public Accountants.................................. F-65
Combined Balance Sheet as of September 17, 1996........................... F-66
Combined Statements of Operations for the year ended December 30, 1995 and
for the period ended September 17, 1996.................................. F-68
Combined Statements of Stockholders' Equity for the year ended December
30, 1995 and for the period ended September 17, 1996..................... F-69
Combined Statements of Cash Flows for the year ended December 30, 1995 and
for the period ended September 17, 1996.................................. F-70
Notes to Combined Financial Statements.................................... F-71
Cookies USA, Inc. and Subsidiary
Report of Independent Accountants......................................... F-75
Consolidated Balance Sheets as of June 29, 1997 and June 28, 1998......... F-76
Consolidated Statements of Operations for the fifty-two week periods ended
June 30, 1996, June 29, 1997 and June 28, 1998........................... F-78
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-79
Consolidated Statements of Cash Flows for the fifty-two week periods ended
June 30, 1996, June 29, 1997 and June 28, 1998........................... F-80
Notes to Consolidated Financial Statements................................ F-82
</TABLE>

F-1
<PAGE>

INDEX TO HISTORICAL FINANCIAL STATEMENTS--(Continued)

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Deblan Corporation
Independent Auditors' Report............................................ F-94
Balance Sheets as of December 31, 1996 and 1997 and June 30, 1998
(unaudited)............................................................ F-95
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-97
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-98
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-99
Notes to Financial Statements........................................... F-101
Chocolate Chip Cookies of Texas, Inc.
Report of Independent Public Accountants................................ F-107
Balance Sheets as of September 30, 1996 and 1997 and June 30, 1998
(unaudited)............................................................ F-108
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-110
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-111
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-112
Notes to Financial Statements........................................... F-114
The Combined Karp Entities
Report of Independent Public Accountants................................ F-119
Combined Balance Sheets as of December 31, 1996 and 1997 and June 30,
1998 (unaudited)....................................................... F-120
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-122
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-123
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-124
Notes to Combined Financial Statements.................................. F-126
The Cookie Conglomerate
Independent Auditors' Report............................................ F-133
Combined Balance Sheets as of December 31, 1997 and 1996................ F-134
Combined Statements of Operations for the years ended December 31, 1997
and 1996............................................................... F-136
Combined Statements of Changes in Stockholders' Deficit and Partners'
Capital (Deficit)...................................................... F-137
Combined Statements of Cash Flows for the years ended December 31, 1997
and 1996............................................................... F-138
Notes to the Consolidated Financial Statements.......................... F-139
Combined Balance Sheet as of September 30, 1998 (unaudited)............. F-143
Combined Statements of Operations for the nine month periods ended
September 30, 1998 and 1997 (unaudited)................................ F-144
Combined Statements of Cash Flows for the nine month periods ended
September 30, 1998 and 1997 (unaudited)................................ F-145
Notes to the Consolidated Financial Statements.......................... F-146
Pretzelmaker Holdings, Inc.
Report of Independent Certified Public Accountants (AJ. Robbins, PC).... F-147
Report of Independent Certified Public Accountants (BDO Seidman, LLP)... F-148
Consolidated Balance Sheets as of December 31, 1996 and 1997 and
September 30, 1998 (unaudited)......................................... F-149
</TABLE>

F-2
<PAGE>

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-151
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-152
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-153
Notes to the Consolidated Financial Statements........................... F-154
</TABLE>

F-3
<PAGE>

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 December
28, 1996 and January 3, 1998, 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 the year ended January 3,
1998. 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 December 28, 1996
and January 3, 1998, 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 the year ended January 3, 1998 in conformity with generally
accepted accounting principles.

Arthur Andersen LLP

Salt Lake City, Utah
June 10, 1998

F-4
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)

ASSETS

<TABLE>
<CAPTION>
January
December 28, 3, October 3,
1996 1998 1998
------------ -------- -----------
(Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................. $ 6,709 $ 16,287 $ 5,146
Accounts receivable, net of allowance for
doubtful accounts
of $55, $32 and $40, respectively........ 1,200 1,535 1,896
Amounts due from franchisees and
licensees, net of allowance for doubtful
accounts of $320, $582 and $979,
respectively............................. 1,524 2,176 5,616
Inventories............................... 3,043 3,100 4,790
Prepaid rent and other.................... 1,324 2,960 4,312
Deferred income tax assets................ 2,092 2,765 2,765
-------- -------- --------
Total current assets.................... 15,892 28,823 24,525
-------- -------- --------
PROPERTY AND EQUIPMENT, at cost:
Leasehold improvements.................... 16,704 21,099 32,856
Equipment and fixtures.................... 10,427 14,100 18,143
Land...................................... 128 128 368
-------- -------- --------
27,259 35,327 51,367
Less accumulated depreciation and
amortization............................. (1,054) (6,125) (16,364)
-------- -------- --------
Net property and equipment.............. 26,205 29,202 35,003
-------- -------- --------
DEFERRED INCOME TAX ASSETS.................. 917 734 734
-------- -------- --------
GOODWILL, net of accumulated amortization of
$966, $4,980 and $9,233, respectively...... 50,005 68,501 134,531
-------- -------- --------
TRADEMARKS AND OTHER INTANGIBLES, net of
accumulated amortization of $324, $1,409
and $2,027, respectively................... 16,327 15,193 14,625
-------- -------- --------
DEFERRED LOAN COSTS, net of accumulated
amortization of
$0, $70 and $720, respectively............. -- 5,906 10,263
-------- -------- --------
OTHER ASSETS................................ 709 1,325 2,976
-------- -------- --------
$110,055 $149,684 $222,657
======== ======== ========
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.

F-5
<PAGE>

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
December 28, 3, October 3,
1996 1998 1998
------------ -------- -----------
(Unaudited)
<S> <C> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt......... $ 2,450 $ 472 $ 384
Current portion of capital lease
obligations.............................. -- 142 174
Accounts payable.......................... 6,201 3,805 8,669
Current portion of accrued liabilities.... 3,202 2,826 6,365
Current portion of store closure reserve.. 2,450 3,664 2,475
Accrued salaries, wages and benefits...... 1,811 1,891 3,045
Accrued interest payable.................. 1,668 1,082 4,859
Sales taxes payable....................... 676 937 512
Current portion of deferred credits....... 323 871 318
-------- -------- --------
Total current liabilities............... 18,781 15,690 26,801
LONG-TERM DEBT, net of current portion and
discount................................... 65,113 100,284 139,465
STORE CLOSURE RESERVE, net of current
portion.................................... 2,305 1,802 4,648
CAPITAL LEASE OBLIGATIONS, net of current
portion.................................... -- 183 133
ACCRUED LIABILITIES, net of current
portion.................................... 2,207 -- --
DEFERRED CREDITS, net of current portion.... 1,091 -- --
-------- -------- --------
Total liabilities....................... 89,497 117,959 171,047
-------- -------- --------
COMMITMENTS AND CONTINGENCIES (Notes 3, 7, 8
and 10)
MANDATORILY REDEEMABLE CUMULATIVE PREFERRED
STOCK of PTI (a majority owned subsidiary),
aggregate liquidation preference of $0,
$1,437 and $1,481, respectively............ -- 902 1,171
-------- -------- --------
MANDATORILY REDEEMABLE CUMULATIVE PREFERRED
STOCK of MFB (a wholly owned subsidiary),
aggregate liquidation preference of $3,597
in 1996.................................... 3,597 -- --
-------- -------- --------
MINORITY INTEREST........................... -- 58 308
-------- -------- --------
STOCKHOLDER'S EQUITY:
Common stock, $.01 par value; 1,000 shares
authorized and 400 shares outstanding
(pledged as collateral for parent company
debt).................................... -- -- --
Additional paid-in capital................ 15,000 30,843 59,899
Retained earnings (accumulated deficit)... 1,961 (78) (9,768)
-------- -------- --------
Total stockholder's equity.............. 16,961 30,765 50,131
-------- -------- --------
$110,055 $149,684 $222,657
======== ======== ========
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.

F-6
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)

<TABLE>
<CAPTION>
Inception 39 39
(September 18, Weeks Weeks
1996) to Year Ended Ended Ended
December 28, January 3, September 27, October 3,
1996 1998 1997 1998
-------------- ---------- ------------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Net store and batter
sales................... $39,890 $123,987 $83,759 $89,938
Franchising, net......... 621 3,574 2,201 3,884
Licensing, net........... 764 2,028 1,215 1,081
Other, net............... 107 918 351 1,056
------- -------- ------- -------
Total revenues......... 41,382 130,507 87,526 95,959
------- -------- ------- -------
OPERATING COSTS AND
EXPENSES:
Selling and store
occupancy costs......... 19,492 66,832 48,200 52,357
Food cost of sales....... 9,862 28,127 19,549 21,588
General and
administrative.......... 4,035 16,730 10,803 12,621
Depreciation and
amortization............ 2,344 10,403 6,596 9,707
------- -------- ------- -------
Total operating costs
and expenses.......... 35,733 122,092 85,148 96,273
------- -------- ------- -------
Income (loss) from
operations.......... 5,649 8,415 2,378 (314)
------- -------- ------- -------
OTHER INCOME (EXPENSE),
net:
Interest expense......... (1,867) (7,830) (5,070) (8,981)
Interest income.......... 74 246 153 530
Other expense............ -- (368) (228) (256)
------- -------- ------- -------
Total other expense,
net................... (1,793) (7,952) (5,145) (8,707)
------- -------- ------- -------
Income (loss) before
provision for income
taxes, preferred stock
accretion and dividends
of subsidiaries and
minority interest....... 3,856 463 (2,767) (9,021)
PROVISION FOR INCOME
TAXES..................... (1,798) (655) (179) (68)
------- -------- ------- -------
Income (loss) before
preferred stock
accretion and dividends
of subsidiaries and
minority interest....... 2,058 (192) (2,946) (9,089)
PREFERRED STOCK ACCRETION
AND DIVIDENDS OF
SUBSIDIARIES.............. (97) (644) (276) (333)
MINORITY INTEREST.......... -- (138) (2) (268)
------- -------- ------- -------
Net income (loss)...... $ 1,961 $ (974) $(3,224) $(9,690)
======= ======== ======= =======
</TABLE>

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

F-7
<PAGE>

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 PTI............ -- -- 4,200 -- 4,200
Parent contribution of note
receivable due from PTI's
minority stockholder and
founder...................... -- -- 500 -- 500
Parent contribution of
investment in MFB............ -- -- 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
(unaudited).................. -- -- 29,056 -- 29,056
Net loss (unaudited).......... -- -- -- (9,690) (9,690)
--- ----- ------- ------- -------
BALANCE, October 3, 1998
(unaudited).................... 400 $ -- $59,899 $(9,768) $50,131
=== ===== ======= ======= =======
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of these statements

F-8
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

<TABLE>
<CAPTION>
Inception
(September 18, 39 Weeks 39 Weeks
1996) to Year Ended Ended Ended
December 28, January 3, September 27, October 3,
1996 1998 1997 1998
-------------- ---------- ------------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)......... $ 1,961 $ (974) $(3,224) $(9,690)
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 6,596 9,707
Amortization of discount
on notes................. -- -- -- 8
Amortization of deferred
loan costs............... -- -- -- 650
Loss on sale of assets.... -- 368 228 256
Deferred income taxes..... 1,511 210 -- --
In-kind interest expense
on note payable to
stockholder.............. 97 338 276 --
Preferred stock accretion
and dividends of
subsidiaries............. 97 644 276 333
Minority interest......... -- 234 2 268
Changes in assets and
liabilities, net of
effects from
acquisitions:
Accounts receivable...... (294) (353) -- (361)
Amounts due from
franchisees and
licensees............... (339) (514) 371 (1,624)
Inventories.............. (159) 136 (23) (127)
Prepaid rent and other... (31) (895) 512 1,306
Other assets............. 39 427 -- (207)
Accounts payable and
accrued liabilities..... 239 (6,651) (773) 356
Store closure reserve.... (305) (1,666) (1,927) (1,892)
Accrued salaries, wages
and benefits............ 212 80 (841) (110)
Accrued interest
payable................. 1,668 (586) (67) 2,886
Sales taxes payable...... 542 261 (297) (530)
Deferred credits......... 27 (543) (318) (553)
------- ------- ------- -------
Net cash provided by
operating activities... 7,609 919 791 676
------- ------- ------- -------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net cash paid for
acquisitions and related
expenses................. (19,508) (10,949) -- (28,699)
Purchase of property and
equipment, net of effects
from acquisitions........ (1,638) (4,678) (3,216) (5,616)
Proceeds from the sale of
assets................... 15 122 -- --
------- ------- ------- -------
Net cash used in
investing activities... (21,131) (15,505) (3,216) (34,315)
------- ------- ------- -------
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) (98) (40,838)
Payment of debt financing
costs.................... -- (5,976) -- (5,007)
Cash advance from MFH..... -- 1,500 -- --
Repayment of cash advance
to MFH................... -- (1,500) -- --
Payment of cash dividend
to MFH................... -- (1,065) -- --
Equity infusion from MFH.. -- -- -- 29,056
Principal payments on
capital lease
obligations.............. -- (36) -- (49)
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 PTI............. -- -- -- (64)
Proceeds from the issuance
of note payable to
related party............ 3,500 -- -- --
------- ------- ------- -------
Net cash provided by
(used in) financing
activities............. 20,231 24,164 (98) 22,498
------- ------- ------- -------
NET INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS............... 6,709 9,578 (2,523) (11,141)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF THE
PERIOD.................... -- 6,709 6,709 16,287
------- ------- ------- -------
CASH AND CASH EQUIVALENTS
AT END OF THE PERIOD...... $ 6,709 $16,287 $ 4,186 $ 5,146
======= ======= ======= =======
</TABLE>

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

F-9
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest was approximately $28, $8,416, $3,890 (unaudited) and
$6,291 (unaudited) for the period ended December 28, 1996, the year ended
January 3, 1998 and the 39 weeks ended September 27, 1997 and October 3, 1998,
respectively.

Cash paid for income taxes was approximately $0, $217, $80 (unaudited) and
$42 (unaudited) for the period ended December 28, 1996, the year ended January
3, 1998 and the 39 weeks ended September 27, 1997 and October 3, 1998,
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, net liabilities were
assumed as follows:

<TABLE>
<S> <C>
Fair value of assets acquired...................................... $ 93,494
Net cash paid...................................................... (19,508)
Notes payable issued............................................... (65,735)
--------
Liabilities assumed.............................................. $ 8,251
========
</TABLE>

In connection with the purchase accounting, the Company recorded certain
other accruals totaling $11,300 and provided reserves totaling $10,900 for
impaired property and equipment at Company-owned stores the Company intends to
exit through closing or franchising. The accruals consisted of $5,060 for
obligations incident to store closures, $2,450 for contingent legal and lease
obligations that were firmed up before year end, $3,135 for transaction and
finders' fees and $655 for severance and related costs. In connection with
these accruals and impairment reserves, the Company recorded an additional
$17,680 of goodwill and established deferred income tax assets (net of
valuation allowances) totaling $4,520.

In October 1996, the Company received property in payment of $128 in accounts
receivable due from a customer.

On March 18, 1997, a certain convertible subordinated note issued in
connection with the previously described business combination was not repaid as
scheduled. The noteholder exercised its option to receive an additional note of
$1,000 due to the delayed payment. At the time of the consummation of the
business combination, management assessed the likelihood of this contingency of
delayed payment being reasonably possible, therefore the Company recorded the
note and additional goodwill as a subsequent component of the business
combination accounting.

During the period ended December 28, 1996 and the year ended January 3, 1998,
The Mrs. Fields' Brand, Inc. ("MFB") increased its mandatorily redeemable
cumulative preferred stock liquidation preference by approximately $97 and
$338, respectively, in lieu of paying cash dividends. On November 26, 1997,
Mrs. Fields' Holding Company, Inc. ("MFH") converted to common equity of the
Company $4,643 aggregate principal amount of convertible subordinated notes and
contributed to the Company all of the common equity of MFB after converting its
preferred stock interests totaling $3,935 to common equity (see Note 6).

F-10
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
(Dollars in thousands)

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.
("MFPC") as follows (see Note 1):

<TABLE>
<S> <C>
Fair value of assets acquired....................................... $15,780
Net cash paid....................................................... (5,750)
Notes payable issued................................................ (8,000)
-------
Liabilities assumed............................................... $ 2,030
=======
</TABLE>

In connection with the purchase accounting for this acquisition, MFPC accrued
$1,000 for estimated obligations incident to certain store closures. The
Company also recorded a reserve totaling approximately $2,500 for impaired
property and equipment at stores the Company intends to close. In connection
with these accruals and reserves, the Company recorded $2,800 of goodwill and
established deferred income tax assets (net of valuation allowances) totaling
$700.

On September 2, 1997, 56 percent of the shares of common stock of Pretzel
Time, Inc. ("PTI") were acquired by MFH as follows (see Note 1):

<TABLE>
<S> <C>
Fair value of assets acquired....................................... $ 8,311
Net cash paid....................................................... (4,200)
-------
Liabilities assumed............................................... $ 4,111
=======
</TABLE>

In connection with the purchase accounting for this acquisition, MFH accrued
$500 for estimated obligations incident to certain store closures. In
connection with these accruals, MFH recorded $400 of goodwill and established
deferred income tax assets (net of valuation allowances) totaling $100.

On November 26, 1997, MFH contributed all of the assets and liabilities of
MFPC, MFH's 56 percent of the shares of common stock of PTI and the $500 note
receivable from PTI's founder and minority stockholder to the Company.
Additionally, on November 26, 1997, MFH contributed all of the common stock of
MFB to the Company.

During the period from the acquisition of the majority ownership of PTI
(September 2, 1997) to January 3, 1998 and for the 39 weeks ended October 3,
1998, PTI increased its mandatorily redeemable cumulative preferred stock
liquidation preference by approximately $68 and $108 (unaudited), respectively,
in lieu of paying cash dividends. In addition, for the same periods, PTI's
mandatorily redeemable cumulative preferred stock was increased by
approximately $238 and $225 (unaudited), respectively, 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 an aggregate
purchase price of approximately $18,400 (unaudited). During August and
September 1998, the Company also entered into agreements with three franchisees
of Cookies USA (the "Great American Franchisees") pursuant to which the Company
purchased a total of 37 Great American Cookies franchises for an aggregate
purchase price of $16,328 (unaudited). The aggregate purchase price for all of
these acquisitions of $34,728 (unaudited) was allocated, on a preliminary
basis, as follows (see Note 1):

<TABLE>
<S> <C>
Fair value of assets acquired (unaudited).......................... $ 79,865
Net cash paid (unaudited).......................................... (27,771)
--------
Liabilities assumed (unaudited).................................. $ 52,094
========
</TABLE>

F-11
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
(Dollars in thousands)

The Company has formulated a plan to exit certain acquired stores that do not
meet management's established financial and geographical criteria. In
connection with the purchase accounting for these acquisitions, the Company
accrued $3,548 (unaudited) for estimated obligations incident to certain store
closures. The Company also recorded a reserve totaling approximately $2,150
(unaudited) for impaired property and equipment at stores the Company intends
to close. In connection with these accruals and reserves, the Company recorded
$5,698 (unaudited) of goodwill. Valuation allowances were recorded for all
deferred tax assets established during purchase accounting.

F-12
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at October 3, 1998 and for the 39 Weeks ended

September 27, 1997 and October 3, 1998 is Unaudited)

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. ("MFH" or
the "Parent"). MFH is a majority owned subsidiary of Capricorn Investors II,
L.P. ("Capricorn'). The Company has five wholly owned operating subsidiaries;
namely, Great American Cookie Company, Inc. ("GACC"), The Mrs. Fields' Brand,
Inc. ("MFB"), Mrs. Fields' Cookies Australia, Mrs. Fields' Cookies (Canada)
Ltd. and H & M Canada; and four partially owned subsidiaries, the largest of
which is Pretzel Time, Inc. ("PTI") of which the Company owned 60 percent of
the common stock as of January 3, 1998. In June 1998, the Company purchased an
additional ten percent of the common stock of PTI, increasing the Company's
ownership interest to 70 percent. GACC was acquired by the Company in August
1998.

The Company primarily operates retail stores which sell freshly baked
cookies, brownies, pretzels and other food products through four specialty
retail chains. As of October 3, 1998, the Company owned and operated 150 "Mrs.
Fields Cookies" stores, 128 "Original Cookie Company" stores, 86 "Hot Sam
Pretzels' stores, 93 "Pretzel Time" stores, 109 "Great American Cookies" stores
in the United States and two "Pretzel Time" stores in Canada. Additionally, the
Company has franchised or licensed 683 stores in the United States and 82
stores in several other countries. As of October 3, 1998, the Company owned and
operated 435 core stores and 133 stores which are in the process of being sold
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 also 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

MFI and Affiliates and OCC 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

F-13
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

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 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 OCC and Affiliates corporate employees as planned.

As of January 3, 1998 and October 3, 1998, approximately $1,643,000 and
$2,053,000, respectively, of the $2,450,000 accrual for legal and lease
obligations has been utilized. The remaining amount as of October 3, 1998 of
approximately $397,000 is expected to be utilized by the end of 1999. As of
January 3, 1998, 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.

H & M Concepts Ltd. Co.

On July 25, 1997, Mrs. Fields' Pretzel Concepts, Inc. ("MFPC"), a wholly
owned subsidiary of MFH, 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. ("PTI"). The
aggregate consideration of $13,750,000 consisted of (i) $5,750,000 of cash,
financed through an advance from MFH of $1,500,000 and a $4,250,000 bank loan
to MFPC, (ii) a $4,000,000 principal amount bridge note of MFPC and (iii) a
$4,000,000 principal amount subordinated note of MFH 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, MFH contributed all of the assets and
liabilities of MFPC to the Company and, in consideration thereof, the Company
assumed the H & M Debt, including all accrued but unpaid interest. MFPC 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 MFPC's
assets or liabilities. Beginning with July 25, 1997, the Company is including
MFPC's results of operations in the Company's consolidated results of
operations.

Pretzel Time, Inc.

On September 2, 1997, MFH acquired 56 percent of the shares of common stock
of PTI for an aggregate cash purchase price of $4,200,000, $750,000 of which
was paid to PTI for working capital purposes, and the balance of which was paid
to the selling shareholders. In connection with the acquisition, MFH extended a
$500,000 loan to the founder of PTI who continued to own 44 percent of the
shares of common stock of PTI. The note bears interest at an annual rate of ten
percent (see Note 8). PTI 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

F-14
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

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.

Effective November 26, 1997, MFH contributed its 56 percent of the shares of
common stock of PTI to the Company. MFH also contributed to the Company the
$500,000 note due from PTI'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 PTI's assets or
liabilities. The Company has included 56 percent of PTI's results of operations
with the Company's consolidated results of operations from September 2, 1997 to
January 2, 1998.

On January 2, 1998, the Company purchased an additional four percent of the
shares of common stock of PTI 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. Beginning with January 2, 1998, the Company
included 60 percent of PTI's results of operations in the Company's
consolidated results of operations. In June 1998, the Company acquired an
additional ten percent of the shares of common stock of PTI from the founder
for $875,000 in cash.

The Mrs. Fields' Brand, Inc.

Prior to November 26, 1997, MFH owned 50.1 percent of the shares of the
common stock of MFB. MFB 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, MFB 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, MFH acquired the remaining 49.9 percent of the shares
of the common stock of MFB 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 MFH. MFH'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 MFH'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, MFH contributed all of the common stock of MFB
to the Company. As a result of such capital contribution, MFB 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 MFB's assets or liabilities. Although the Company owned 50.1
percent of MFB until November 25, 1997, the Company has included 100 percent of
MFB's results of operations with the Company's consolidated results of
operations for all periods presented as a result of MFB incurring net losses
for these periods.

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

F-15
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

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.

Subsequent Acquisitions (Unaudited)

On August 24, 1998, the Company acquired all of the outstanding capital stock
and subordinated indebtedness of Cookies USA, Inc. ("Cookies USA"), the sole
stockholder of Great American Cookie Company, Inc. ("GACC"), for an aggregate
purchase price of $18,400,000. GACC is an operator and franchisor of mall-based
specialty retail cookie outlets and manufacturer of cookie batter which is
distributed to GACC-operated retail stores and sold to franchised retail
stores. Concurrently with the acquisition of Cookies USA, the Company entered
into agreements with two GACC franchisees pursuant to which the Company
purchased a total of 29 GACC franchises for an aggregate 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
franchisees operated. On September 9, 1998, the Company acquired eight
additional GACC franchised retail stores from a GACC franchisee, pursuant to an
asset purchase agreement, for an aggregate 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 GACC. GACC 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 $29,000,000 of an MFH offering to the Company (the
"MFH Equity Infusion"); and (iii) existing cash of the Company.

Pro Forma Acquisition Information (Unaudited)

The following unaudited pro forma information for the period from inception
(September 18, 1996) to December 28, 1996, the year ended January 3, 1998 and
the 39 weeks ended September 27, 1997 and October 3, 1998, presents the results
of operations of the Company assuming the H & M, PTI and MFB acquisitions and
the Refinancing, as defined in Note 3, had occurred at the date of inception
(September 18, 1996) and that the Great American Acquisitions 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, 39 Weeks 39 Weeks
1996) to Year Ended Ended Ended
December 28, January 3, September 27, October 3,
Unaudited 1996 1998 1997 1998
- --------- -------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Total revenues.......... $48,090,000 $191,264,000 $134,018,000 $126,937,000
Income from operations.. 6,718,000 12,722,000 3,285,000 463,000
Net income (loss)....... 1,029,000 (3,120,000) (8,448,000) (12,236,000)
</TABLE>

F-16
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Periods

The Company operates using a 52/53-week year ending near December 31.

Unaudited Information

The accompanying consolidated financial statements as of October 3, 1998 and
for the 39 weeks ended September 27, 1997 and October 3, 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 October 3, 1998 for the interim
periods presented herein.

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 October
3, 1998, 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 consist of food, beverages and supplies and are stated at the
lower of cost (first-in, first-out method) or market value.

Pre-Opening and Organization 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.

F-17
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

The Company expensed all previously capitalized organization costs (which
were not material to the fair presentation of the accompanying consolidated
financial statements taken as a whole) in accordance with Statement of Position
No. 98-5, "Reporting on the Costs of Start-up Activities," during the 39 weeks
ended October 3, 1998.

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 three to five years.

Deferred Loan Costs

Deferred loan costs totaling $10,983,000 resulted from the sale of
$100,000,000 aggregate 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
aggregate principal amount of 10 1/8 percent Series C Senior Notes (the "Series
C Senior Notes") on August 24, 1998, and 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 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 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 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. The Company has reserved for those long-lived assets
that are considered to be impaired.

F-18
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

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 majority of the costs accrued relate to estimated lease termination costs.

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.

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 aggregate fair market value of its Series A/B
Senior Notes and Series C Senior Notes (see Note 3) was approximately
$101,250,000 and $122,500,000 as of January 3, 1998 and October 3, 1998,
respectively. These estimates are based on quoted market prices. The book
values of the Company's other financial instruments, including cash, accounts
receivable, accounts payable, accrued liabilities and other long-term debt
obligations, approximate fair values at the respective balance sheet dates.

Recent Accounting Pronouncement

During the 39 weeks ended October 3, 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

F-19
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

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.

In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information."
SFAS No. 131 requires that public business enterprises report certain
information about operating segments in complete sets of financial statements.
The statement specifies disclosure requirements about the products and services
of a company, the geographic areas in which it operates, and their major
customers. Although the Company has not yet completed its assessment of the
impacts of adopting SFAS No. 131, it will adopt the statement for the year
ending January 2, 1999.

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 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 in the prior period consolidated
financial statements to conform with the current period presentation.

F-20
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

3. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

Long-Term Debt

Long-term debt consists of the following:

<TABLE>
<CAPTION>
December 28, January 3, October 3,
1996 1998 1998
------------ ------------ ------------
(Unaudited)
<S> <C> <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, $0 and $9,000,
respectively....................... -- -- (591,000)
Notes payable to individuals or
corporations with interest terms
ranging from non-interest bearing
to 15 percent, due at various dates
from 1998 through 2001, requiring
monthly payments................... -- 756,000 440,000
Senior notes, interest at six-month
LIBOR rate (5 3/4 percent at
December 28, 1996) plus an interest
margin (three percent at December
28, 1996) payable semi-annually,
secured by essentially all assets
of the Company, repaid in November
1997............................... 41,966,000 -- --
Senior notes, interest at ten
percent payable semi-annually,
secured by essentially all assets
of MFB, principal due quarterly in
varying installments, repaid in
November 1997...................... 10,000,000 -- --
Convertible subordinated notes,
interest at an escalating rate (9
3/4 percent at December 28, 1996)
payable semi-annually, secured by
essentially all assets of the
Company, repaid in November 1997... 7,357,000 -- --
Convertible subordinated note to
stockholder, interest at an
escalating rate (9 3/4 percent at
December 28, 1996) payable semi-
annually, secured by essentially
all assets of the Company,
converted to equity in November
1997............................... 4,643,000 -- --
Senior subordinated note to MFB
minority stockholder, interest at
ten percent compounded quarterly
beginning December 15, 1996,
secured by essentially all assets
of MFB, repaid in November 1997.... 3,597,000 -- --
----------- ------------ ------------
67,563,000 100,756,000 139,849,000
Less current portion................ (2,450,000) (472,000) (384,000)
----------- ------------ ------------
$65,113,000 $100,284,000 $139,465,000
=========== ============ ============
</TABLE>

F-21
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

On November 26, 1997, the Company refinanced its existing debt (the
"Refinancing") by issuing $100,000,000 aggregate principal amount of Series A
Senior Notes due December 1, 2004 pursuant to an Indenture, dated as of
November 26, 1997 (the "Indenture"), between the Company and the Bank of New
York. 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 (the "Securities Act"). On June 12, 1998, a majority of the Series A
Senior Notes were exchanged for 10 1/8% Series B Senior Notes (the "Series B
Senior Notes") due December 1, 2004, which were registered under the Securities
Act (the "Exchange Offer"). The terms of the Series A Senior Notes and the
Series B Senior Notes (collectively, the "Series A/B Senior Notes") are
identical in all material respects except (i) that the Series B Senior Notes
have been registered under the Securities Act, (ii) for certain transfer
restrictions and registration rights relating to the Series A Senior Notes and
(iii) that the Series B Senior Notes do not contain certain provisions relating
to additional payments to the prior holders of the Series A Senior Notes under
certain circumstances relating to the timing of the Exchange Offer.

On August 24, 1998, the Company issued $40,000,000 aggregate 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 pursuant to 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.

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 an aggregate of 35
percent of the principal amount at a redemption price equal to 110.125 percent
of the principal amount thereof, 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.

Pursuant to the Refinancing, the Company repaid approximately $79,096,000
aggregate principal amount of indebtedness and accrued but unpaid interest.
Such indebtedness consisted of (i) approximately $66,402,000 principal amount
of indebtedness and accrued but unpaid interest of the Company incurred in
connection with

F-22
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

the MFI and affiliates and OCC and affiliates business combinations, (ii)
approximately $12,374,000 principal amount of indebtedness and accrued but
unpaid interest of the H & M Debt, and (iii) $320,000 of prepayment penalties
associated with retiring the existing debt.

As part of the Refinancing, MFH converted to common equity of the Company
$4,643,000 aggregate principal amount of convertible subordinated notes and
contributed to the Company all of the common equity of MFB after converting its
preferred stock interests totaling $3,935,000 to common equity (see Notes 1 and
6). Also as part of the Refinancing, the Company paid a dividend to MFH in the
amount of approximately $1,065,000 and returned a $1,500,000 advance to MFH,
which was a portion of the cash provided by MFH in connection with the
acquisitions of H & M and PTI.

The aggregate amount of principal maturities of debt at January 3, 1998 are
as follows:

<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
1998............................................................ $ 472,000
1999............................................................ 168,000
2000............................................................ 105,000
2001............................................................ 11,000
2002............................................................ --
Thereafter...................................................... 100,000,000
------------
$100,756,000
============
</TABLE>

On December 29, 1997, the Company amended its revolving credit agreement (the
"Agreement") with a commercial bank which provided for a maximum commitment of
up to $3,000,000 secured by essentially all of the assets of the Company. The
Agreement, which was extended through February 28, 1998 was terminated. On
February 28, 1998, the Company entered into a new revolving credit agreement
(the "1998 Agreement") with a commercial bank (the "Bank") which provides for a
maximum commitment of up to $15,000,000 secured by essentially all of the
assets of the Company. Borrowings under the 1998 Agreement bear interest, at
the Company's option, at either the Bank's prime rate plus one fourth of one
percent or the one-month LIBOR rate plus three percent, with interest payable
monthly in arrears. As of October 3, 1998, the Company had no outstanding
borrowings under the 1998 Agreement.

Capital Lease Obligations

Future minimum lease payments for equipment held under capital lease
arrangements as of January 3, 1998 are as follows:

<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
1998............................................................ $ 163,000
1999............................................................ 123,000
2000............................................................ 46,000
2001............................................................ 41,000
---------
Total future minimum lease payments............................... 373,000
Less amount representing interest................................. (48,000)
---------
325,000
Less current portion.............................................. (142,000)
---------
$ 183,000
=========
</TABLE>

F-23
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

As of December 28, 1996, January 3, 1998 and October 3, 1998, total assets
held under capital lease arrangements were approximately $0, $376,000 and
$376,000 (unaudited) with accumulated amortization of approximately $0, $59,000
and $99,000 (unaudited), respectively.

4. INCOME TAXES

The components of the provision for income taxes for the period ended
December 28, 1996 and the year ended January 3, 1998 are as follows:

<TABLE>
<CAPTION>
December 28, January 3,
1996 1998
------------ ----------
<S> <C> <C>
Current:
Federal........................................... $ 207,000 $ 70,000
State............................................. 75,000 228,000
Foreign........................................... 5,000 57,000
Deferred:
Federal........................................... 1,112,000 367,000
State............................................. 277,000 55,000
Change in valuation allowance..................... 122,000 (122,000)
---------- ---------
Total provision for income taxes................ $1,798,000 $ 655,000
========== =========
</TABLE>

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 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>

F-24
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

The significant components of the Company's deferred income tax assets and
liabilities at December 28, 1996 and January 3, 1998 are as follows:

<TABLE>
<CAPTION>
December 28, January 3,
1996 1998
------------ -----------
<S> <C> <C>
Deferred income tax assets:
Property and equipment reserve..................... $3,501,000 $ 2,014,000
Store closure reserve.............................. 1,868,000 2,202,000
Transaction cost accrual........................... 789,000 565,000
Net operating loss carryforward.................... 782,000 4,875,000
Legal reserve...................................... 470,000 302,000
Lease accrual...................................... 403,000 92,000
Other reserves..................................... -- 81,000
Accrued expenses................................... 334,000 230,000
Alternative minimum tax credit carryforward........ 207,000 207,000
----------- -----------
Total deferred income tax assets................. 8,354,000 10,568,000
Valuation allowance................................ (4,482,000) (5,160,000)
----------- -----------
Deferred income tax assets net of valuation
allowance....................................... 3,872,000 5,408,000
----------- -----------
Deferred income tax liabilities:
Accumulated depreciation and amortization.......... (850,000) (1,548,000)
Other.............................................. (13,000) (361,000)
----------- -----------
Total deferred income tax liabilities............ (863,000) (1,909,000)
----------- -----------
Net deferred income tax assets................... $3,009,000 $ 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 accordance with purchase accounting are not
recorded through the provision for income taxes, but rather, as an increase to
goodwill. During the period ended December 28, 1996 and the year ended January
3, 1998, valuation allowances of $4,360,000 and $800,000, respectively, were
recorded in connection with accounting for the business combinations. As of
January 3, 1998, the Company had net operating loss carryforwards for tax
reporting purposes totaling $12,414,000. Of these net operating loss
carryforwards, $1,814,000 expire in 2011 and $10,600,000 expire in 2012.

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 property investment or targeted closing. The Company's
policy is to recognize a loss for that portion of the net property investment
determined to be impaired in accordance with SFAS No. 121 criteria.
Additionally, 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 termination costs. 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.

MFI and Affiliates and OCC and Affiliates

In connection with the MFI and OCC acquisitions (see Note 1), the Company
formulated a plan to exit certain stores that did not meet certain financial
and geographical criteria. The plan entailed closing all stores

F-25
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

that were not profitable and franchising stores that were profitable but
contributed less than $50,000 in store cash contribution for cookie stores and
less than $35,000 in 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 October 3, 1998, there were 27 stores remaining to be exited,
all of which are expected to be exited by the end of the first quarter of
fiscal 1999. 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, 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 provisions of purchase accounting. The increase in the reserve
related solely to the 138 stores originally identified to be closed. The store
closure reserve was also increased by approximately $538,000 for ten core
operating stores that have been closed or targeted for closure due primarily to
leases not being renewed by the lessor. 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
in the Company's store closure plan. These ten core operating stores are
included in the 80 MFI and OCC stores closed in the year ended January 3, 1998.
During the 39 weeks ended October 3, 1998, the Company closed 30 stores (nine
of which were core operating stores).

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. As of October 3, 1998, management has identified 50 existing
stores for sale to franchisees. Management believes that the net proceeds from
the sale of stores to franchisees will exceed the total carrying value of the
store assets as of January 3, 1998 and October 3, 1998.

H&M Concepts Ltd. Co.

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
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 Emerging Issues Task Force
Issue 95-3, the Company established a store closure reserve of $1,000,000 for
the 11 stores the Company intended to close. The reserve

F-26
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information at October 3, 1998 and for the 39 Weeks ended

September 27, 1998 and October 3, 1998 is Unaudited)

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, Inc.

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 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 Emerging Issues Task Force
Issue 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 2000. 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, 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.

F-27
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information at October 3, 1998 and for the 39 Weeks ended

September 27, 1998 and October 3, 1998 is Unaudited)

Consolidated Analysis

The following tables present a summary of changes in the store closure
reserve for the periods indicated in amount and number of stores to be closed
and franchised:
<TABLE>
<CAPTION>
MFI and
Affiliates
and
OCC and Pretzel Great
Affiliates H&M Time American Consolidated
---------- --------- -------- ---------- ------------
<S> <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 ten core
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
Utilization for the 39
weeks ended October 3,
1998 (unaudited)....... (1,752,000) (13,000) (2,000) (124,000) (1,891,000)
---------- --------- -------- ---------- -----------
Balance, October 3, 1998
(unaudited)............ $2,215,000 $ 987,000 $497,000 $3,424,000 $ 7,123,000
========== ========= ======== ========== ===========
</TABLE>

F-28
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information at October 3, 1998 and for the 39 Weeks ended

September 27, 1998 and October 3, 1998 is Unaudited)

<TABLE>
<CAPTION>
MFI and
Affiliates and
OCC and
Affiliates H&M Pretzel Time Great American Consolidated
----------------- ----------------- ----------------- ----------------- -----------------
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
------ ---------- ------ ---------- ------ ---------- ------ ---------- ------ ----------
<S> <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 closed or
franchised for the 39
weeks ended October 3,
1998 (unaudited)....... (11) (13) (1) -- (1) -- (8) -- (21) (13)
--- --- --- --- --- --- --- --- --- ---
Balance, October 3, 1998
(unaudited)............ 27 39 7 -- 3 -- 46 11 83 50
=== === === === === === === === === ===
</TABLE>

During the period from inception to December 28, 1996, the year ended January
3, 1998 and the 39 weeks ended September 27, 1997 and October 3, 1998, the net
store sales and store contribution for stores in the process of being closed
totaled $5,777,000 and $121,000, $10,599,000 and $2,038,000, $6,380,000 and
$(2,082,000) and $3,038,000 and $(1,311,000), respectively.

F-29
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information at October 3, 1998 and for the 39 Weeks ended

September 27, 1998 and October 3, 1998 is Unaudited)

The following tables present a summary of changes in the property and
equipment impairment reserve in amount and the number of stores to be closed
and franchised:

<TABLE>
<CAPTION>
MFI and
Affiliates
and OCC and Pretzel Great
Affiliates H&M Time American 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
To record property and
equipment impairment
upon acquisition,
September 2, 1997...... -- -- -- --
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
Utilization for the 39
weeks ended October 3,
1998 (unaudited)
related to stores to be
closed................. (1,436,000) (93,000) -- (250,000) (1,779,000)
Utilization for the 39
weeks ended October 3,
1998 (unaudited)
related to stores to be
franchised............. (313,000) (363,000) -- -- (676,000)
----------- ---------- ---- ---------- -----------
Balance, October 3, 1998
(unaudited)............ $ 4,312,000 $1,836,000 $-- $1,900,000 $ 8,048,000
=========== ========== ==== ========== ===========
</TABLE>

F-30
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information at October 3, 1998 and for the 39 Weeks ended

September 27, 1998 and October 3, 1998 is Unaudited)

<TABLE>
<CAPTION>
MFI and
Affiliates and
OCC and
Affiliates H&M Great American Consolidated
----------------- ----------------- ----------------- -----------------
To Be To Be To Be To Be To Be To Be To Be To Be
Closed Franchised Closed Franchised Closed Franchised Closed Franchised
------ ---------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stores identified for
closure or franchise at
inception, September
18, 1996............... 117 54 -- -- -- -- 117 54
Stores closed or
franchised from
inception (September
18, 1996) to December
28, 1996............... (17) (3) -- -- -- -- (17) (3)
--- --- --- --- --- --- --- ---
Balance, December 28,
1996................... 100 51 -- -- -- -- 100 51
Stores identified for
closure or franchise
upon acquisition, July
25, 1997............... -- -- 11 14 -- -- 11 14
Stores closed or
franchised from
December 28, 1996 to
January 3, 1998........ (64) (9) (3) -- -- -- (67) (9)
--- --- --- --- --- --- --- ---
Balance, January 3,
1998................... 36 42 8 14 -- -- 44 56
Stores identified for
closure or franchise
upon acquisition,
August 24, 1998........ -- -- -- -- 54 11 54 11
Stores closed or
franchised for the 39
weeks ended October 3,
1998 (unaudited)....... (11) (8) (1) (4) (8) -- (20) (12)
--- --- --- --- --- --- --- ---
Balance, October 3, 1998
(unaudited)............ 25 34 7 10 46 11 78 55
=== === === === === === === ===
</TABLE>

F-31
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

6. MANDATORILY REDEEMABLE CUMULATIVE PREFERRED STOCKS OF SUBSIDIARIES

In connection with the MFI and affiliates and OCC and affiliates business
combinations discussed in Note 1, MFB issued 100 shares of mandatorily
redeemable cumulative preferred stock (the "MFB Preferred Stock") which had an
initial liquidation preference of $35,000 per share and a cumulative annual
dividend rate of 10 percent compounded quarterly. During the period ended
December 28, 1996 and the year ended January 3, 1998, MFB elected to add the
dividends to the liquidation preference. As part of the Refinancing, MFH
converted the $3,500,000 face amount of the MFB Preferred Stock together with
accrued but unpaid dividends of approximately $435,000 to common equity and the
related preferred stock was cancelled.

The mandatorily redeemable cumulative preferred stock of PTI (the "PTI
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 PTI 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 PTI. In the event of
a liquidation or sale of PTI, 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 PTI
(September 2, 1997) to January 3, 1998 and for the 39 weeks ended October 3,
1998, PTI increased the liquidation preference of the PTI Preferred Stock by
$68,000 and $108,000, respectively, in lieu of paying cash dividends. In
addition, the PTI Preferred Stock was increased by $238,000 and $225,000,
respectively, for the accretion required over time to amortize the original
issue discount incurred at the time of issuance. As of January 3, 1998 and
October 3, 1998, accrued dividends of $195,000 and $303,000, respectively, were
unpaid.

During the period from September 2, 1997 to January 3, 1998, PTI repurchased
17.5 shares of the PTI Preferred Stock for an aggregate of $175,000 in cash, or
$10,000 per share, plus accrued dividends totaling approximately $20,200. As of
January 3, 1998 and October 3, 1998, there are 127 shares of PTI Preferred
Stock issued and outstanding with an aggregate liquidation preference of
approximately $1,437,000 and $1,481,000, respectively.

7. COMMITMENTS AND CONTINGENCIES

Stock Pledged as Collateral

MFH has pledged all of the Company's capital stock as collateral for MFH's 14
percent Senior Secured Discount Notes due December 1, 2005 (the "MFH Discount
Notes"). MFH issued the MFH Discount Notes on August 24, 1998, in connection
with the Great American Acquisitions and the MFH Equity Infusion (see Note 1).
In connection with the issuance of the $55,000,000 principal amount at maturity
of MFH Discount Notes, MFH recorded an aggregate original issue discount of
approximately $24,136,000. The principal amount of the MFH Discount Notes will
accrete at a rate of 14 percent compounded semi-annually to an aggregate
principal amount of $55,000,000 at December 1, 2002. Thereafter, the MFH
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.

MFH is a holding company and does not have separate operations from which it
can generate cash flows. Under the circumstances, MFH 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

F-32
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

in 2003. The Company has not guaranteed, nor is it obligated to make principal
or interest payments related to the MFH Discount Notes. However, in accordance
with the Company's Indenture, the Company may pay dividends to MFH, in order
for MFH 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 MFH 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.

For the period ended December 28, 1996, the year ended January 3, 1998 and
the 39 weeks ended September 27, 1997 and October 3, 1998, rent expense is as
follows:

<TABLE>
<CAPTION>
Inception
(September 18, 39 Weeks 39 Weeks
1996) to Year Ended Ended Ended
December 28, January 3, September 27, October 3,
1996 1998 1997 1998
-------------- ----------- ------------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Minimum rentals.......... $ 8,216,000 $30,654,000 $18,938,000 $23,076,000
Contingent rentals....... 105,000 432,000 324,000 522,000
Sub-lease rentals........ (2,220,000) (8,756,000) (3,189,000) (5,837,000)
----------- ----------- ----------- -----------
$ 6,101,000 $22,330,000 $16,073,000 $17,761,000
=========== =========== =========== ===========
</TABLE>

As of January 3, 1998, 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>
1998............................................................ $ 30,605,000
1999............................................................ 26,968,000
2000............................................................ 21,948,000
2001............................................................ 18,283,000
2002............................................................ 15,673,000
Thereafter...................................................... 24,374,000
------------
$137,851,000
============
</TABLE>

F-33
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

As of January 3, 1998, the future minimum sublease payments due to the
Company under these leases are as follows:

<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
1998............................................................. $ 9,959,000
1999............................................................. 9,067,000
2000............................................................. 7,506,000
2001............................................................. 6,497,000
2002............................................................. 6,190,000
Thereafter....................................................... 10,481,000
-----------
$49,700,000
===========
</TABLE>

In January 1998, the Company entered into an operating lease agreement for
corporate office facilities totaling 31,000 square feet. The lease commenced on
May 1, 1998 and will expire April 30, 2008. The lease includes escalating
monthly rental payments totaling $6,900,000 over the life of the lease, or
approximately $57,500 per month on a straight-line basis. These commitments are
not included in the preceding commitment presentation.

Contractual Arrangements

The Company has entered into a supply agreement to buy frozen dough products
through 1998. The agreement stipulates minimum annual purchase commitments of
not less than 22,000,000 pounds of the products during fiscal year 1998. The
terms of the agreement include certain volume incentives and penalties. 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 January 3, 1998 and October 3, 1998 were approximately
$550,000 and $328,000, 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 3, 1998 and October 3, 1998, the Company has assumed
obligations totaling approximately $203,000 and $113,000 (unaudited),
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 agreement with a
supplier in connection with the MFI and affiliates and OCC 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, PTI
entered into a long-term marketing and supply agreement with a supplier. Under
terms of the agreement, the Company is

F-34
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

obligated to purchase a minimum amount of product from the supplier. An
additional $437,000 in deferred credits were recorded pursuant to this
agreement. The termination date of this agreement will be the later of December
31, 2003 or when PTI has met its purchase commitment. Under these agreements,
the Company recognized approximately $64,000, $1,393,000, $721,000 (unaudited)
and $672,000 (unaudited) as a reduction primarily to food cost of sales during
the period ended December 28, 1996, the year ended January 3, 1998 and the 39
weeks ended September 27, 1997 and October 3, 1998, respectively.

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. The Company 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 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 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 the Company 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 the Company as a license fee.

In connection with the acquisition of H&M, certain franchise agreements and
an area development agreement with PTI were assigned to the Company. The
franchise agreements provide for the franchise by the Company of the PTI stores
previously franchised by H&M and the payment by the Company to PTI of an annual
franchise royalty equal to seven percent of the annual sales by such stores,
plus an advertising fee of one percent of sales. The franchise agreements also
provide for the conversion, within three years, of the Company's Hot Sam and
Pretzel Oven stores to Pretzel Time franchises on a royalty-free basis for the
first five years following the date of conversion. The area development
agreement provides for the grant by PTI to the Company of area development
rights to open additional Pretzel Time stores in a territory covering 16
states, predominantly in the western United States, four western Canadian
provinces and in Mexico. The additional stores may be opened by the Company as
the franchisee or by third parties as franchisees. Under the area development
agreement, the Company is obligated to pay to PTI a $5,000 franchise fee per
new location within the territory. PTI is obligated under the area development
agreement to pay to the Company an annual royalty of up to two percent with
respect to Pretzel Time franchises opened by parties other than the Company
within the territory.

The Company has entered into employment agreements with five key officers
with terms of two to three years. The agreements are for an aggregate 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 December 28, 1996, January 3, 1998 and October 3, 1998, the Company had
receivables due from franchisees and licensees, primarily related to prepaid
rent which the Company had paid on behalf of

F-35
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

franchisees, totaling approximately $1,524,000, $2,176,000 and $5,616,000
(unaudited), respectively. Such amounts are included in amounts due from
franchisees and affiliates and are net of allowance for doubtful accounts
totaling $320,000, $582,000 and $979,000 (unaudited), respectively.

As of December 28, 1996 and January 3, 1998, the Company had net payables of
approximately $98,000, and $105,000, respectively, due to MFH. As of October 3,
1998, the Company had receivables of approximately $478,000 (unaudited) due
from MFH. The amounts due to or from MFH are recorded in prepaid rent and other
in the accompanying consolidated balance sheets.

During the period ended December 28, 1996, the year ended January 3, 1998 and
the 39 weeks ended October 3, 1998, the Company accrued approximately $130,000,
$441,000 and $0, respectively, of interest expense due MFH related to the
convertible subordinated notes MFH purchased. As part of the Refinancing, MFH
converted all of the $4,643,000 convertible subordinated notes to equity and
the notes were cancelled (see Note 3).

The Company previously leased certain office space to an entity which is
owned in part by a director of the Company. Billings to the entity during the
period ended December 28, 1996, the year ended January 3, 1998 and the 39 weeks
ended September 27, 1997 and October 3, 1998, totaled approximately $60,000,
$274,000, $204,000 (unaudited) and $0 (unaudited), respectively, of which
approximately $29,000, $23,000 and $0 (unaudited) is included in amounts due
from franchisees and affiliates as of December 28, 1996, January 3, 1998 and
October 3, 1998, respectively. The lease was terminated during the 39 weeks
ended October 3, 1998.

The Company paid fees to Korn/Ferry International ("KFI") totaling
approximately $47,000, $157,000, $147,000 (unaudited) and $47,000 (unaudited)
during the period ended December 28, 1996, the year ended January 3, 1998 and
the 39 weeks ended September 27, 1997 and October 3, 1998, respectively. KFI 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. In addition, the director's company received a fee of $250,000
(unaudited), plus expenses, from the Company during the 39 weeks ended October
3, 1998 pursuant to an agreement to provide advisory acquisition and consulting
services to the Company. The Company believes that the arrangements were on
terms that could have been obtained from an unaffiliated third party.

As of January 3, 1998 and October 3, 1998, the Company has a loan due from
the founder and minority stockholder of PTI totaling $552,000. 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 PTI stock; provided that in any calendar year no more than
$100,000 may be so offset. In addition, as of October 3, 1998, the Company is
due approximately $462,000 (unaudited) from the founder in connection with
certain lease payments related to the purchase of PTI for which the Company is
indemnified. These amounts are recorded in other assets in the accompanying
consolidated balance sheets.

At the time of the Refinancing, a subsidiary of MIDIAL (the parent company of
OCC and affiliates) was the holder of $27,000,000 in aggregate principal amount
of senior notes of the Company and $8.4 million in aggregate principal amount
of subordinated notes of the Company as to which the Company had accrued or
paid interest of $3,177,000 from the date of inception (September 18, 1996)
through November 26, 1997. In connection with the Refinancing, the Company
repaid all such notes and related interest. The Chairman and Chief Executive
Officer of MIDIAL was a former director of the Company.

F-36
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information at October 3, 1998 and for the 39 Weeks ended
September 27, 1997 and October 3, 1998 is Unaudited)

The Company and MFH 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 period ended December 28, 1996, the year
ended January 3, 1998 and the 39 weeks ended September 27, 1997 and October 3,
1998 were approximately $6,800, $97,900, $73,111 (unaudited) and $87,000
(unaudited), respectively.

10. SUBSEQUENT EVENT (UNAUDITED)

On September 12, 1997, nine Great American Cookies franchisees filed a
lawsuit against the Company and certain other parties alleging certain
anticipatory breaches of contract and violations of certain state,
franchise and unfair trade practice laws. These allegations were made as a
result of the discussions held between the Company and Cookies USA regarding
the possibility of the Company acquiring all of the outstanding shares of
common stock of Cookies USA. The nine Great American Cookies franchisees have
withdrawn their lawsuit pursuant to Settlement Agreements and Waivers among the
parties. The Settlement Agreements and Waivers provide for a mutual release,
tag-along rights to the franchisees of Great American Cookies if the Company's
ownership is sold in the future and certain other guarantees by the Company to
the franchisees of Great American Cookies. The Settlement Agreements and
Waivers were offered to all of the franchisees of Great American Cookies.

11. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Company's obligation related to its $140,000,000 aggregate principal
amount of Senior Notes due 2004 (see Note 3) is fully and unconditionally
guaranteed on a joint and several basis and on a senior basis by two 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. and The Mrs.
Fields' Brand, Inc. (the "Guarantor Subsidiaries") and Mrs. Fields' Cookies
Australia, Mrs. Fields' Cookies (Canada) Ltd. and H & M Canada, and four
partially owned subsidiaries, the largest of which is Pretzel Time, Inc., of
which the Company owns a majority interest (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.

In the supplemental condensed consolidating financial statements, the
principal elimination entries eliminate the Parent Company's investments in
subsidiaries and intercompany balances and transactions.

F-37
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 is (Unaudited)

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 28, 1996
(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.......... $ 6,091 $ 588 $ 30 $ -- $ 6,709
Accounts receivable,
net.................. 1,187 -- 13 -- 1,200
Amounts due from (to)
franchisees and
licensees, net....... 1,309 290 (75) -- 1,524
Inventories........... 3,043 -- -- -- 3,043
Other current assets.. 3,416 -- -- -- 3,416
------- ------- ---- ------- --------
Total current as-
sets............... 15,046 878 (32) -- 15,892
PROPERTY AND EQUIPMENT,
net.................... 26,181 1 23 -- 26,205
INTANGIBLES, net........ 50,047 16,285 -- -- 66,332
INVESTMENTS IN SUBSIDI-
ARIES.................. 3,100 -- -- (3,100) --
OTHER ASSETS............ 1,626 -- -- -- 1,626
------- ------- ---- ------- --------
$96,000 $17,164 $ (9) $(3,100) $110,055
======= ======= ==== ======= ========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
Current portion of
long-term debt and
capital lease
obligations.......... $ 1,950 $ 500 $-- $ -- $ 2,450
Accounts payable...... 6,188 6 7 -- 6,201
Accrued liabilities... 9,782 348 -- -- 10,130
------- ------- ---- ------- --------
Total current
liabilities........ 17,920 854 7 -- 18,781
LONG-TERM DEBT AND
CAPITAL LEASE
OBLIGATIONS, net of
current portion........ 52,016 13,097 -- -- 65,113
OTHER ACCRUED
LIABILITIES............ 5,603 -- -- -- 5,603
MANDATORILY REDEEMABLE
CUMULATIVE PREFERRED
STOCK.................. -- 3,597 -- -- 3,597
STOCKHOLDERS' EQUITY
(DEFICIT).............. 20,461 (384) (16) (3,100) 16,961
------- ------- ---- ------- --------
$96,000 $17,164 $ (9) $(3,100) $110,055
======= ======= ==== ======= ========
</TABLE>

F-38
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 is Unaudited)

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............ $40,823 $ 559 $-- $-- $41,382
------- ----- ---- ---- -------
OPERATING COSTS AND
EXPENSES:
Selling and store
occupancy costs...... 19,492 -- -- -- 19,492
Food cost of sales.... 9,862 -- -- -- 9,862
General and
administrative....... 3,871 146 18 -- 4,035
Depreciation and
amortization......... 2,027 317 -- -- 2,344
------- ----- ---- ---- -------
Total operating
costs and
expenses........... 35,252 463 18 -- 35,733
------- ----- ---- ---- -------
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-39
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 is Unaudited)

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-40
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 (is Unaudited)

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-41
<PAGE>

MRS. FIELDS ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 is Unaudited)

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............ $122,090 $ 2,004 $7,077 $ (664) $130,507
-------- ------- ------ ------ --------
OPERATING COSTS AND
EXPENSES:
Selling and store
occupancy costs...... 63,765 -- 3,731 (664) 66,832
Food cost of sales.... 27,272 -- 855 -- 28,127
General and
administrative....... 14,753 1,066 911 -- 16,730
Depreciation and
amortization......... 8,745 1,125 533 -- 10,403
-------- ------- ------ ------ --------
Total operating
costs and
expenses........... 114,535 2,191 6,030 (664) 122,092
-------- ------- ------ ------ --------
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-42
<PAGE>

MRS. FIELDS ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 is Unaudited)

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 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 MFH...... (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-43
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 is Unaudited)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE 39 WEEKS ENDED SEPTEMBER 27, 1997
(Dollars in Thousands)

<TABLE>
<CAPTION>
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET REVENUES............ $86,225 $ 1,215 $ 86 $ -- $87,526
------- ------- ---- ----- -------
OPERATING COSTS AND
EXPENSES:
Selling and store
occupancy costs...... 48,200 -- -- -- 48,200
Food cost of sales.... 19,549 -- -- -- 19,549
General and
administrative....... 10,060 607 136 -- 10,803
Depreciation and
amortization......... 5,766 830 -- -- 6,596
------- ------- ---- ----- -------
Total operating
costs and
expenses........... 83,575 1,437 136 -- 85,148
------- ------- ---- ----- -------
(Loss) income from
operations......... 2,650 (222) (50) -- 2,378
INTEREST EXPENSE AND
OTHER, net............. (4,134) (1,011) -- -- (5,145)
------- ------- ---- ----- -------
(Loss) income before
provision for income
taxes, preferred
stock accretion and
dividends of
subsidiaries and
equity in net loss of
consolidated
subsidiaries......... (1,484) (1,233) (50) -- (2,767)
PROVISION FOR INCOME
TAXES.................. (179) -- -- -- (179)
------- ------- ---- ----- -------
(Loss) income before
preferred stock
accretion and
dividends of
subsidiaries and
equity in net loss of
consolidated
subsidiaries......... (1,663) (1,233) (50) -- (2,946)
PREFERRED STOCK
ACCRETION AND DIVIDENDS
OF SUBSIDIARIES........ -- (276) -- -- (276)
EQUITY IN NET LOSS OF
CONSOLIDATED
SUBSIDIARIES........... -- -- -- (2) (2)
------- ------- ---- ----- -------
NET LOSS................ $(1,663) $(1,509) $(50) $ (2) $(3,224)
======= ======= ==== ===== =======
</TABLE>

F-44
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 is Unaudited)

SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 39 WEEKS ENDED SEPTEMBER 27, 1997
(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............ $ 309 $(39) $521 $ -- $ 791
------- ---- ---- ----- -------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of property
and equipment, net.. (3,216) -- -- -- (3,216)
------- ---- ---- ----- -------
Net cash used in
investing
activities........ (3,216) -- -- -- (3,216)
------- ---- ---- ----- -------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Principal payments on
long-term debt and
capital lease
obligations......... (98) -- -- -- (98)
------- ---- ---- ----- -------
Net cash used in
financing
activities........ (98) -- -- -- (98)
------- ---- ---- ----- -------
NET (DECREASE) INCREASE
IN CASH AND CASH
EQUIVALENTS........... (3,005) (39) 521 -- (2,523)
CASH AND CASH
EQUIVALENTS, beginning
of period............. 6,121 588 -- -- 6,709
------- ---- ---- ----- -------
CASH AND CASH
EQUIVALENTS, end of
period................ $ 3,116 $549 $521 $ -- $ 4,186
======= ==== ==== ===== =======
</TABLE>

F-45
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 is Unaudited)

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
AS OF OCTOBER 3, 1998
(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.......... $ (1,378) $ 5,114 $1,410 $ -- $ 5,146
Accounts receivable,
net.................. 1,745 -- 151 -- 1,896
Amounts due from
franchisees and
licensees, net....... 1,537 3,951 128 -- 5,616
Inventories........... 3,862 922 6 -- 4,790
Other current assets
and amounts due from
(to) affiliates,
net.................. 47,017 (39,355) (585) -- 7,077
-------- -------- ------ -------- --------
Total current
assets............. 52,783 (29,368) 1,110 -- 24,525
PROPERTY AND EQUIPMENT,
net.................... 33,313 1,434 256 -- 35,003
INTANGIBLES, net........ 65,491 77,085 6,580 -- 149,156
INVESTMENT IN
SUBSIDIARIES........... 53,650 -- -- (53,650) --
OTHER ASSETS............ 11,921 1,441 611 -- 13,973
-------- -------- ------ -------- --------
$217,158 $ 50,592 $8,557 $(53,650) $222,657
======== ======== ====== ======== ========
</TABLE>

LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<S> <C> <C> <C> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term
debt and capital lease
obligations.................... $ 143 $ 31 $ 384 $ -- $ 558
Accounts payable................ 7,755 865 49 -- 8,669
Accrued liabilities............. 13,622 3,276 676 -- 17,574
-------- -------- ------ -------- --------
Total current liabilities..... 21,520 4,172 1,109 -- 26,801
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS, net of current
portion.......................... 139,542 -- 56 -- 139,598
OTHER ACCRUED LIABILITIES......... 4,648 -- -- -- 4,648
MANDATORILY REDEEMABLE CUMULATIVE
PREFERRED STOCK.................. -- -- 1,171 -- 1,171
MINORITY INTEREST................. -- -- 268 40 308
STOCKHOLDERS' EQUITY.............. 51,448 46,420 5,953 (53,690) 50,131
-------- -------- ------ -------- --------
$217,158 $ 50,592 $8,557 $(53,650) $222,657
======== ======== ====== ======== ========
</TABLE>

F-46
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 is Unaudited)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE 39 WEEKS ENDED OCTOBER 3, 1998
(Dollars in Thousands)

<TABLE>
<CAPTION>
Non-
Parent Guarantor guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET REVENUES........... $ 91,342 $3,194 $2,842 $(1,419) $95,959
-------- ------ ------ ------- -------
OPERATING COSTS AND
EXPENSES:
Selling and store
occupancy costs..... 53,096 -- 251 (990) 52,357
Food cost of sales... 21,196 748 73 (429) 21,588
General and
administrative...... 10,692 812 1,117 -- 12,621
Depreciation and
amortization........ 8,073 1,285 349 -- 9,707
-------- ------ ------ ------- -------
Total operating
costs and
expenses.......... 93,057 2,845 1,790 (1,419) 96,273
-------- ------ ------ ------- -------
(Loss) income from
operations.......... (1,715) 349 1,052 -- (314)
INTEREST EXPENSE AND
OTHER, net............ (8,733) 18 8 -- (8,707)
-------- ------ ------ ------- -------
(Loss) income before
provision for income
taxes, preferred
stock accretion and
dividends of
subsidiaries and
equity in net loss
of consolidated
subsidiaries........ (10,448) 367 1,060 -- (9,021)
PROVISION FOR INCOME
TAXES................. (68) -- -- -- (68)
-------- ------ ------ ------- -------
(Loss) income before
preferred stock
accretion and
dividends of
subsidiaries and
equity in net loss
of consolidated
subsidiaries........ (10,516) 367 1,060 -- (9,089)
PREFERRED STOCK
ACCRETION AND
DIVIDENDS OF
SUBSIDIARIES.......... -- -- (333) -- (333)
EQUITY IN NET LOSS OF
CONSOLIDATED
SUBSIDIARIES.......... -- -- -- (268) (268)
-------- ------ ------ ------- -------
NET (LOSS) INCOME...... $(10,516) $ 367 $ 727 $ (268) $(9,690)
======== ====== ====== ======= =======
</TABLE>

F-47
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Information at October 3, 1998 and for the 39 Weeks Ended September 27, 1997
and October 3, 1998 is Unaudited)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For The 39 Weeks Ended October 3, 1998
(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............. $(37,783) $ 37,954 $ 505 $ -- $ 676
-------- -------- ------ ----- --------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Net cash paid for
acquisitions and
related expenses..... (35,656) 6,957 -- -- (28,699)
Purchase of property
and equipment, net... (5,609) -- (7) -- (5,616)
-------- -------- ------ ----- --------
Net cash (used in)
provided by
investing
activities......... (41,265) 6,957 (7) -- (34,315)
-------- -------- ------ ----- --------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from long-
term debt............ 39,400 -- -- -- 39,400
Payment of debt
financing costs...... (5,007) -- -- -- (5,007)
Equity infusion from
MFH.................. 29,056 -- -- -- 29,056
Principal payments on
long-term debt and
capital lease
obligations.......... (49) (40,522) (316) -- (40,887)
Reduction in preferred
stock of PTI......... -- -- (64) -- (64)
-------- -------- ------ ----- --------
Net cash provided by
(used in) financing
activities......... 63,400 (40,522) (380) -- 22,498
-------- -------- ------ ----- --------
NET (DECREASE) INCREASE
IN CASH AND CASH
EQUIVALENTS............ (15,648) 4,389 118 -- (11,141)
CASH AND CASH
EQUIVALENTS, beginning
of period.............. 14,270 725 1,292 -- 16,287
-------- -------- ------ ----- --------
CASH AND CASH
EQUIVALENTS, end of
period................. $ (1,378) $ 5,114 $1,410 $ -- $ 5,146
======== ======== ====== ===== ========
</TABLE>

F-48
<PAGE>

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-49
<PAGE>

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.

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-50
<PAGE>

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-51
<PAGE>

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-52
<PAGE>

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-53
<PAGE>

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-54
<PAGE>

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-55
<PAGE>

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-56
<PAGE>

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 herein 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

F-57
<PAGE>

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

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-58
<PAGE>

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

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-59
<PAGE>

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-60
<PAGE>

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-61
<PAGE>

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-62
<PAGE>

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-63
<PAGE>

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-64
<PAGE>

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.

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-65
<PAGE>

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-66
<PAGE>

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-67
<PAGE>

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-68
<PAGE>

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-69
<PAGE>

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-70
<PAGE>

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

F-71
<PAGE>

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-72
<PAGE>

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-73
<PAGE>

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-74
<PAGE>

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-75
<PAGE>

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-76
<PAGE>

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-77
<PAGE>

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-78
<PAGE>

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-79
<PAGE>

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-80
<PAGE>

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-81
<PAGE>

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-82
<PAGE>

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 pursuant to 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-83
<PAGE>

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-84
<PAGE>

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 aggregate 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-85
<PAGE>

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-86
<PAGE>

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
aggregate 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-87
<PAGE>

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 aggregate 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 aggregate 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-88
<PAGE>

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 aggregate
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 aggregate 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-89
<PAGE>

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-90
<PAGE>

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 pursuant to 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 thereto 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 aggregate 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 aggregate 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 pursuant to 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 aggregate 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-91
<PAGE>

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-92
<PAGE>

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 aggregate purchase price of approximately $18.4 million, pursuant to 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 set forth 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 set forth 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 aggregate 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-93
<PAGE>

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-94
<PAGE>

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-95
<PAGE>

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-96
<PAGE>

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-97
<PAGE>

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-98
<PAGE>

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-99
<PAGE>

DEBLAN CORPORATION

STATEMENTS OF CASH FLOWS--(Continued)
(Dollars in Thousands)

<TABLE>
<CAPTION>
For the Year For the Six
Ended December Months Ended
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-100
<PAGE>

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-101
<PAGE>

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

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 herein, 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.

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)

F-102
<PAGE>

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)

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-103
<PAGE>

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 June
December 31, 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
==== ==== ====

5. NOTES PAYABLE

Notes payable are as follows (in thousands):

<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 aggregate 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 aggregate 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 aggregate
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-104
<PAGE>

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
Months
For the Year Ended Ended June
December 31, 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-105
<PAGE>

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-106
<PAGE>

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.

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-107
<PAGE>

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-108
<PAGE>

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-109
<PAGE>

CHOCOLATE CHIP COOKIES OF TEXAS, INC.

STATEMENTS OF OPERATIONS
(In Thousands)

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

F-110
<PAGE>

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-111
<PAGE>

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-112
<PAGE>

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-113
<PAGE>

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-114
<PAGE>

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

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-115
<PAGE>

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-116
<PAGE>

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-117
<PAGE>

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-118
<PAGE>

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.

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-119
<PAGE>

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-120
<PAGE>

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-121
<PAGE>

THE COMBINED KARP ENTITIES

COMBINED STATEMENTS OF OPERATIONS
(In Thousands)

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

F-122
<PAGE>

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-123
<PAGE>

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-124
<PAGE>

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-125
<PAGE>

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-126
<PAGE>

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

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-127
<PAGE>

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-128
<PAGE>

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-129
<PAGE>

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-130
<PAGE>

THE COMBINED KARP ENTITIES

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(Including Notes to Unaudited Periods)

6. RELATED-PARTY TRANSACTIONS

Related-party Operating Leases

<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-131
<PAGE>

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 consummated.

F-132
<PAGE>

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-133
<PAGE>

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-134
<PAGE>

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-135
<PAGE>

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-136
<PAGE>

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-137
<PAGE>

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-138
<PAGE>

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.

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-139
<PAGE>

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 pursuant to 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-140
<PAGE>

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-141
<PAGE>

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 aggregate 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-142
<PAGE>

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-143
<PAGE>

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-144
<PAGE>

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-145
<PAGE>

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 thereto included in this filing.

F-146
<PAGE>

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.

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-147
<PAGE>

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.

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-148
<PAGE>

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-149
<PAGE>

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-150
<PAGE>

PRETZELMAKER HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
February 24 Years Ended December Nine Months Ended
(Inception) to 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-151
<PAGE>

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-152
<PAGE>

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-153
<PAGE>

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

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-154
<PAGE>

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-155
<PAGE>

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-156
<PAGE>

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-157
<PAGE>

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-158
<PAGE>

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-159
<PAGE>

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 form 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-160
<PAGE>

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-161
<PAGE>

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-162
<PAGE>

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

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 herein 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

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

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 + 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

2.2 + 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.

2.3 + 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
<PAGE>

EXHIBIT (CONTINUED)

2.4 + 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.

2.5 + 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.

2.6 + 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.

2.7 + 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.

2.8 + 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.

2.9 + 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.

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 + 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

3.7 + 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

3.8 + By-Laws of Great American Cookie Company, Inc.

3.9 By-Laws of Pretzelmaker Holdings, 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, Slate, Meagher & Flom LLP to 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. and Great American Cookie Company, 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

2
<PAGE>

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
<PAGE>

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
<PAGE>

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 August 25, 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
<PAGE>

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-Q for the quarter ended October 3, 1998

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
<PAGE>

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.

<PAGE>

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 16th day of November,
1998.

MRS. FIELDS' ORIGINAL COOKIES, INC.

By /s/Larry A. Hodges
----------------------
Larry A. Hodges
President/CEO

8
<PAGE>

POWER OF ATTORNEY

We, the undersigned directors and officers of Mrs. Fields' Original
Cookies, Inc. and each of us, do hereby constitute and appoint Michael R. Ward
or L. Tim Pierce, 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 __________, 1999.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* President, Chief Executive Officer
------------------------------------ and Director
(Larry A. Hodges)

* Senior Vice President, Chief
------------------------------------ Financial Officer and Secretary
(L. Tim Pierce)

* 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
<PAGE>

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 16th day of November,
1998.

THE MRS. FIELDS' BRAND, INC.

By /s/Larry A. Hodges
---------------------
Larry A. Hodges
President/CEO

10
<PAGE>

POWER OF ATTORNEY

We, the undersigned directors and officers of The Mrs. Fields' Brand, Inc.
and each of us, do hereby constitute and appoint Michael R. Ward or L. Tim
Pierce, 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 __________, 1999.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* President, Chief Executive Officer
----------------------------------- and Director, Secretary & Treasurer
(Larry A. Hodges)

* Chief Financial Officer
-----------------------------------
(L. Tim Pierce)

* 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
<PAGE>

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 16th day of
November, 1998.

GREAT AMERICAN COOKIE COMPANY, INC.

By /s/Larry A. Hodges
---------------------
Larry A. Hodges
President/CEO

12
<PAGE>

POWER OF ATTORNEY

We, the undersigned directors and officers of Great American Cookie
Company, Inc. and each of us, do hereby constitute and appoint Michael R. Ward
or L. Tim Pierce, 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 __________, 1999.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Chairman of the Board of Directors
------------------------------------- and President
(Larry A. Hodges)

* Chief Financial Officer
------------------------------------- Secretary and Director
(L. Tim Pierce)

/s/Michael R. Ward Vice President and Director
-------------------------------------
(Michael R. Ward)

* By: /s/ Michael R. Ward
-------------------------------------
Michael R. Ward
Attorney-in-Fact
</TABLE>

13
<PAGE>

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+ 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

2.2+ 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.

2.3+ 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.

2.4+ 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.

2.5+ 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.

2.6+ 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.

2.7+ 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.

2.8+ 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.

2.9+ 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.

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+ 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
<PAGE>

EXHIBIT (CONTINUED)

3.7+ 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
3.8+ By-Laws of Great American Cookie Company, Inc.

3.9 By-Laws of Pretzelmaker Holdings, 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, Slate, Meagher & Flom LLP to 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. and Great American Cookie Company, 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

<PAGE>

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

<PAGE>

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 August 25, 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
<PAGE>

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-Q for the quarter ended October 3, 1998

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

<PAGE>

_______________________________________________________________________________

MRS. FIELDS' ORIGINAL COOKIES, INC.

$40,000,000
Aggregate Principal Amount of
10% Series C Senior Notes due 2004

____________________________________

PURCHASE AGREEMENT

Dated as of August 13, 1998

____________________________________

Jefferies & Company, Inc. BT Alex. Brown Incorporated

_______________________________________________________________________________
<PAGE>

$40,000,000
Aggregate Principal Amount of
10.% Series C Senior Notes due 2004

MRS. FIELDS' ORIGINAL COOKIES, INC.

PURCHASE AGREEMENT

August 13, 1998

JEFFERIES & COMPANY, INC.
BT ALEX. BROWN INCORPORATED
c/o Jefferies & Company, Inc.
11100 Santa Monica Boulevard
Los Angeles, California 90025

Ladies and Gentlemen:

Mrs. Fields' Original Cookies, Inc., a Delaware corporation (the .Company.),
proposes to issue and sell to Jefferies & Company, Inc. (.Jefferies.) and BT
Alex. Brown Incorporated (.BT.) (each, an .Initial Purchaser,. and,
collectively, the .Initial Purchasers.) an aggregate of $40,000,000 in principal
amount of its 10.% Series C Senior Notes due 2004 (the .Senior Notes.), subject
to the terms and conditions set forth herein. The Senior Notes are to be issued
pursuant to the provisions of an indenture (the .Indenture.), dated as of
November 26, 1997, and amended as of the Closing Date (as defined), among the
Company, the Guarantors (as defined) and The Bank of New York, as trustee (the
.Trustee.). The Senior Notes and the Exchange Notes (as defined) issuable in
exchange therefor are collectively referred to herein as the .Notes.. The Notes
will be guaranteed (together with any future guarantees of the Notes, the
.Guarantees.) by The Mrs. Fields' Brand, Inc., a Delaware corporation (.MFB.).
Upon consummation of the Great American Transactions (as defined), Great
American Cookie Company, Inc., a Delaware corporation (.Great American.) will
guarantee the Notes. As of the date of this agreement, the term .Guarantors.
refers to MFB, and upon consummation of the Great American Transactions, the
term .Guarantors. will also refer to Great American in the sections referred to
on the signature page to this agreement executed by Great American. Capitalized
terms used but not defined herein shall have the meanings given to such terms in
the Indenture.

Concurrently with the offering of the Senior Notes (the .Offering.), the
Company will (i) acquire all of the outstanding capital stock and subordinated
indebtedness of Cookies USA, Inc. a Delaware corporation (.Cookies USA.), and
pay certain liabilities of Great American (the .Great American Acquisition.),
(ii) finance the acquisition of a total of 29 Great American franchise stores
from two Great American franchisees (the .Franchise Acquisition.) and (iii)
finance a tender offer and consent solicitation (the .Great American Tender
Offer.) for all the outstanding $40 million aggregate amount of Great American's
10.% Senior Secured Notes due 2001 (the .Great American Senior Notes.). The
Great American Acquisition, the Franchise Acquisition and the Great American
Tender Offer are referred to herein as the .Great American Transactions..

1
<PAGE>

1. OFFERING CIRCULAR. The Senior Notes will be offered and sold to
-----------------
the Initial Purchasers pursuant to one or more exemptions from the registration
requirements under the Securities Act of 1933, as amended (the .Securities
Act.). The Company and MFB have prepared an offering memorandum, dated August
13, 1998 (the .Offering Circular.), relating to the Senior Notes and the
Guarantees.

Upon original issuance thereof, and until such time as the same is no longer
required pursuant to the Indenture, the Senior Notes (and all securities issued
in exchange therefor, in substitution thereof or upon conversion thereof) shall
bear the following legend:

.THIS SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY HAS NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
.SECURITIES ACT.), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A .QUALIFIED INSTITUTIONAL BUYER. (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT)(A .QIB.), (B) IT IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES
ACT OR (C) IT IS AN INSTITUTIONAL .ACCREDITED INVESTOR. (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN
.ACCREDITED INVESTOR.), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (C) IN AN
OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF THE SECURITIES
ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (E) TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE TRANSFER OF THIS SECURITY (THE FORM OF WHICH
CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN
AGGREGATE PRINCIPAL AMOUNT OF SECURITIES LESS THAN $250,000, AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH
THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS .OFFSHORE
TRANSACTION. AND .UNITED STATES. HAVE THE MEANINGS GIVEN TO

2
<PAGE>

THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE
CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING..

2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
-------------------------------
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Company agrees to
issue and sell to the Initial Purchasers, and the Initial Purchasers agree,
severally and not jointly, to purchase from the Company, the principal amounts
of Senior Notes set forth opposite the name of such Initial Purchaser on
SCHEDULE A hereto at a purchase price equal to 96.75% of the principal amount
thereof (the .Purchase Price.).

3. TERMS OF OFFERING. The Initial Purchasers have advised the
-----------------
Company that the Initial Purchasers will make offers (the .Exempt Resales.) of
the Senior Notes purchased hereunder on the terms set forth in the Offering
Circular, as amended or supplemented, solely to (i) persons whom the Initial
Purchasers reasonably believe to be .qualified institutional buyers. as defined
in Rule 144A under the Securities Act (.QIBs.) and (ii) not more than ten other
institutional .accredited investors,. as defined in Rule 501(a)(1),(2),(3) or
(7) of Regulation D under the Securities Act, that make certain representations
and agreements to the Company (each, an .Accredited Institution.)(such persons
specified in clauses (i) and (ii) being referred to herein as the .Eligible
Purchasers.). The Initial Purchasers will offer the Senior Notes to Eligible
Purchasers initially at a price equal to 100% of the principal amount thereof.
Such price may be changed at any time without notice.

Holders (including subsequent transferees) of the Senior Notes will have the
registration rights set forth in the registration rights agreement (the
.Registration Rights Agreement.), to be dated the Closing Date (as defined), in
substantially the form of EXHIBIT A hereto, for so long as such Senior Notes
constitute .Transfer Restricted Securities. (as defined in the Registration
Rights Agreement). Pursuant to the Registration Rights Agreement, the Company
and the Guarantors will agree to file with the Securities and Exchange
Commission (the .Commission.) under the circumstances set forth therein, (i) a
registration statement under the Securities Act (the .Exchange Offer
Registration Statement.) relating to the Company's 10.% Series C Senior Notes
due 2004, having terms identical to those of the Senior Notes (the .Exchange
Notes.), and guarantees of the Exchange Notes to be offered in exchange for the
Senior Notes (such offer to exchange being referred to as the .Exchange Offer.)
and the Guarantees thereof and (ii) if applicable, a shelf registration
statement pursuant to Rule 415 under the Securities Act (the .Shelf Registration
Statement. and, together with the Exchange Offer Registration Statement, the
.Registration Statements.) relating to the resale by certain holders of the
Senior Notes, and to use their best efforts to cause such Registration
Statements to be declared and remain effective and usable for the periods
specified in the Registration Rights Agreement and to consummate the Exchange
Offer. This Agreement, the Indenture, the Senior Notes, the Guarantees and the
Registration Rights Agreement are hereinafter sometimes referred to collectively
as the .Operative Documents..

4. DELIVERY AND PAYMENT.
--------------------

(a) Delivery of, and payment of the Purchase Price for, the Senior Notes and
payment by the Company of the Advisory Fee shall be made at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP at 919 Third Avenue, New York, New
York 10022, or such other location as may be mutually acceptable. Such
delivery and payments shall be made at 9:00 a.m. New York City time, on
August 24, 1998 or at such other time as shall be agreed upon by the
Initial Purchasers and the Company. The time and date of such

3
<PAGE>

delivery and the payments are herein called the .Closing Date..

(b) Senior Notes sold by the Initial Purchasers to QIBs will be represented by
one or more Senior Notes in definitive global form, registered in the name
of Cede & Co., as nominee of The Depository Trust Company (.DTC.), having
an aggregate principal amount corresponding to the aggregate principal
amount of the Senior Notes sold to such QIBs (collectively, the .Global
Note.). Senior Notes sold by the Initial Purchasers to Accredited
Institutions will be represented by one or more Senior Notes in definitive
form, registered in the name of such Accredited Institutions, having an
aggregate principal amount corresponding to the aggregate principal amount
of the Senior Notes sold to such Accredited Institutions (collectively, the
.Accredited Institution Note.). The Global Note and the Accredited
Institution Note shall be delivered by the Company to the Initial
Purchasers (or as the Initial Purchasers direct), in each case with any
transfer taxes thereon duly paid by the Company, against payment by the
Initial Purchasers of the Purchase Price thereof by wire transfer in same-
day funds to the order of the Company. The Global Note and the Accredited
Institution Note shall be made available to the Initial Purchasers for
inspection not later than 9:30 a.m., New York City time, on the business
day immediately preceding the Closing Date.

5. AGREEMENTS OF THE COMPANY AND THE GUARANTORS. Each of the
---------------------------------------------
Company and the Guarantors hereby agrees with the Initial Purchasers as follows:

(a) To advise the Initial Purchasers promptly and, if requested by the Initial
Purchasers, confirm such advice in writing, (i) of the issuance by any
state securities commission of any stop order suspending the qualification
or exemption from qualification of any Senior Notes for offering or sale in
any jurisdiction designated by the Initial Purchasers pursuant to Section
5(e) hereof, or the initiation of any proceeding by any state securities
commission or any other federal or state regulatory authority for such
purpose and (ii) of the happening of any event during the period referred
to in Section 5(c) hereof that makes any statement of a material fact made
in the Offering Circular untrue or that requires any additions to or
changes in the Offering Circular in order to make the statements therein
not misleading. The Company shall use its best efforts to prevent the
issuance of any stop order or order suspending the qualification or
exemption of any Senior Notes under any state securities or Blue Sky laws
and, if at any time any state securities commission or other federal or
state regulatory authority shall issue an order suspending the
qualification or exemption of any Senior Notes under any state securities
or Blue Sky laws, the Company shall use its best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.

(b) At any time prior to the completion of Exempt Resales by the Initial
Purchasers, to furnish the Initial Purchasers as many copies of the
Offering Circular, and any amendments or supplements thereto, as the
Initial Purchasers may reasonably request. Subject to the Initial
Purchasers' compliance with their representations and warranties and
agreements set forth in Section 7 hereof, the Company consents to the use
of the Offering Circular, and any amendments and supplements thereto
required pursuant hereto, by the Initial Purchasers in connection with
Exempt Resales.

(c) At any time prior to the completion of Exempt Resales by the Initial
Purchasers and in connection with market-making activities of the Initial
Purchasers for so long as any Senior Notes are outstanding, (i) not to make
any amendment or supplement to the Offering Circular of which the Initial
Purchasers shall not previously have been advised or to which the Initial
Purchasers shall reasonably object (within five business days after
receiving a copy thereof) after being so advised and (ii) to prepare
promptly upon the Initial Purchasers' reasonable request, any amendment or
supplement to the Offering Circular which may be necessary or advisable in
connection with such Exempt Resales or such market-making activities.

4
<PAGE>

(d) If, during the period referred to in Section 5(c) hereof, any event shall
occur or condition shall exist as a result of which, in the opinion of
counsel to the Initial Purchasers, it becomes necessary to amend or
supplement the Offering Circular in order to make the statements therein,
in the light of the circumstances when such Offering Circular is delivered
to an Eligible Purchaser, not misleading, or if, in the opinion of counsel
to the Initial Purchasers, it is necessary to amend or supplement the
Offering Circular to comply with any applicable law, forthwith to prepare
an appropriate amendment or supplement to such Offering Circular so that
the statements therein, as so amended or supplemented, will not, in the
light of the circumstances when it is so delivered, be misleading, or so
that such Offering Circular will comply with applicable law, and to furnish
to the Initial Purchasers and such other persons as the Initial Purchasers
may designate such number of copies thereof as the Initial Purchasers may
reasonably request.

(e) Prior to the sale of all Senior Notes pursuant to Exempt Resales as
contemplated hereby, to cooperate with the Initial Purchasers and counsel
to the Initial Purchasers in connection with the registration or
qualification of the Senior Notes for offer and sale to the Initial
Purchasers and pursuant to Exempt Resales under the securities or Blue Sky
laws of such jurisdictions as the Initial Purchasers may reasonably request
and to continue such qualification in effect so long as required for Exempt
Resales and to file such consents to service of process or other documents
as may be necessary in order to effect such registration or qualification;
provided that neither the Company nor the Guarantors shall be required in
connection therewith to register or qualify as a foreign corporation in any
jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process or taxation in
any jurisdiction in which it is not now so subject.

(f) So long as the Notes are outstanding, to furnish to the Initial Purchasers
as soon as available copies of all reports or other communications
furnished by the Company or any of the Guarantors to the holders of Notes
or furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company or any of the
Guarantors is listed and such other publicly available information
concerning the Company and/or its subsidiaries as the Initial Purchasers
may reasonably request.

(g) So long as any of the Senior Notes remain outstanding and during any period
in which the Company and the Guarantors are not subject to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the .Exchange
Act.), to make available to any holder of Senior Notes in connection with
any sale thereof and any prospective purchaser of such Senior Notes from
such holder, the information (.Rule 144A Information.) required by Rule
144A(d)(4) under the Securities Act.

(h) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of the obligations of the Company and
the Guarantors under this Agreement, including (i) the fees, disbursements
and expenses of counsel to the Company and the Guarantors and accountants
of the Company and the Guarantors in connection with the sale and delivery
of the Senior Notes to the Initial Purchasers and pursuant to Exempt
Resales, and all other fees or expenses in connection with the preparation,
printing, filing and distribution of the Offering Circular and all
amendments and supplements to any of the foregoing (including financial
statements) specified in Section 5(b) and 5(c) hereof prior to or during
the period specified in Section 5(c) hereof, including the mailing and
delivery of copies thereof to the Initial Purchasers in the quantities
specified herein, (ii) all costs and expenses related to the transfer and
delivery of the Senior Notes to the Initial Purchasers and pursuant to
Exempt Resales, including any transfer or other taxes payable thereon,
(iii) all costs of printing or producing this Agreement, the other
Operative Documents

5
<PAGE>

and any other agreements or documents in connection with the offering,
purchase, sale or delivery of the Senior Notes, (iv) all expenses in
connection with the registration or qualification of the Senior Notes and
the Guarantees for offer and sale under the securities or Blue Sky laws of
the several states and all costs of printing or producing any Blue Sky
memoranda in connection therewith (including the filing fees and fees and
disbursements of counsel for the Initial Purchasers in connection with such
registration or qualification and memoranda relating thereto), (v) the cost
of printing certificates representing the Senior Notes and the Guarantees,
(vi) all expenses and listing fees in connection with the application for
quotation of the Senior Notes in the National Association of Securities
Dealers, Inc. (.NASD.) Automated Quotation System - PORTAL (.PORTAL.),
(vii) the fees and expenses of the Trustee and the Trustee's counsel in
connection with the Indenture, the Notes and the Guarantees, (viii) the
costs and charges of any transfer agent, registrar and/or depositary
(including DTC), (ix) any fees charged by rating agencies for the rating of
the Notes, (x) all costs and expenses of the Exchange Offer and any
Registration Statement, as set forth in the Registration Rights Agreement,
(xi) all out-of-pocket expenses incurred by Jefferies in connection with
its services rendered (including, without limitation, the fees and
disbursements of Jefferies' counsel, travel and lodging expenses, word
processing charges, messenger and duplicating services, facsimile expenses
and other customary expenditures) up to a maximum amount of $450,000 (which
maximum amount applies to all out-of-pocket expenses incurred by Jefferies
in connection with the Offering and the concurrent offering of Units by
Mrs. Fields' Holding Company, Inc.), and (xii) all other costs and expenses
incident to the performance of the obligations of the Company and the
Guarantors hereunder for which provision is not otherwise made in this
Section.

(i) To use its best efforts to effect the inclusion of the Senior Notes in
PORTAL and to maintain the listing of the Senior Notes on PORTAL for so
long as the Senior Notes are outstanding.

(j) To obtain the approval of DTC for .book-entry. transfer of the Notes, and
to comply with all of its agreements set forth in the representation
letters of the Company and the Guarantors to DTC relating to the approval
of the Notes by DTC for .book-entry. transfer.

(k) During the period beginning on the date hereof and continuing to and
including the Closing Date, not to offer, sell, contract to sell or
otherwise transfer or dispose of any debt securities of the Company or the
Guarantors or any warrants, rights or options to purchase or otherwise
acquire debt securities of the Company or the Guarantors substantially
similar to the Senior Notes and the Guarantees (other than (i) the Senior
Notes and the Guarantee and (ii) commercial paper issued in the ordinary
course of business), without the prior written consent of the Initial
Purchasers.

(l) Not to sell, offer for sale or solicit offers to buy or otherwise negotiate
in respect of any security (as defined in the Securities Act) that would be
integrated with the sale of the Senior Notes to the Initial Purchasers or
pursuant to Exempt Resales in a manner that would require the registration
of any such sale of the Senior Notes under the Securities Act.

(m) To use its best efforts to do and perform all things required or necessary
to be done and performed under this Agreement by it prior to the Closing
Date and to satisfy all conditions precedent to the delivery of the Senior
Notes and the Guarantee.

6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY AND THE
-----------------------------------------------------------------
GUARANTORS. As of the date hereof, each of the Company and MFB, jointly and
- -----------
severally, represents and warrants to, and agrees with, the Initial Purchasers
that:

6
<PAGE>

(a) The Offering Circular does not, as of the date thereof, and will not, as of
the Closing Date, and any supplement or amendment to the Offering Circular,
as of the date thereof and as of the Closing Date, will not, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties contained in
this paragraph (a) shall not apply to statements in or omissions from the
Offering Circular (or any supplement or amendment thereto) based upon
information relating to the Initial Purchasers furnished to the Company in
writing by the Initial Purchasers expressly for use therein (the .Initial
Purchasers' Information.). The parties hereto acknowledge and agree that
the Initial Purchasers' Information consists solely of the statements with
respect to stabilization set forth in the fifth full paragraph on page ii
and the statements set forth under the caption .Plan of Distribution. in
the Offering Circular. No stop order preventing the use of the Offering
Circular, or any amendment or supplement thereto, or any order asserting
that any of the transactions contemplated by this Agreement are subject to
the registration requirements of the Securities Act, has been issued.

(b) Each of the Company and Material Subsidiaries (i) has been duly
incorporated and validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation, (ii) has all requisite
corporate power and authority to carry on its business as described in the
Offering Circular and to own, lease and operate its properties, and (iii)
is duly qualified and in good standing as a foreign corporation authorized
to do business in each jurisdiction in which the nature of its business or
its ownership or leasing of property requires such qualification, except
where the failure to be so qualified would not (i) have a material adverse
effect on the business, prospects, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole, or (ii)
draw into question the validity of this Agreement or the other Operative
Documents (a .Material Adverse Effect.).

(c) All outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid, non-assessable and not
subject to any preemptive or similar rights.

(d) The entities listed on SCHEDULE B hereto are the only subsidiaries, direct
or indirect, of the Company as of the date hereof and after giving effect
to the Great American Transactions. All of the outstanding shares of
capital stock of each of the Company.s Material Subsidiaries have been duly
authorized and validly issued and are, or will be, fully paid and non-
assessable, and are, or will be, owned by the Company, directly or
indirectly through one or more subsidiaries (other than 30% of the shares
of common stock of Pretzel Time), free and clear of any security interest,
claim, lien, encumbrance or adverse interest of any nature (each, a .Lien.)
other than Liens existing under the Amended and Restated Loan Agreement
between the Company and LaSalle National Bank, dated as of February 28,
1998, and the ancillary documents thereto. No subsidiary listed on
SCHEDULE B hereto, other than the Material Subsidiaries, is a .significant
subsidiary. of the Company (as such term is defined in Rule 1-02 of
Regulation S-X under the Securities Act).

(e) The Company and its subsidiaries do not have any ownership interest in any
joint venture.

(f) This Agreement has been or as of the Closing Date will have been duly
authorized, executed and delivered by the Company and the Guarantors.

(g) The Indenture has been or as of the Closing Date will have been duly
authorized by the Company and the Guarantors and, when the Indenture has
been duly executed and delivered by the Company and the Guarantors, the
Indenture will be a valid and binding agreement of the Company and the

7
<PAGE>

Guarantors, enforceable against the Company and the Guarantors in
accordance with its terms except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors.
rights generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability.

(h) The Senior Notes have been or as of the Closing Date will have been duly
authorized and, when the Senior Notes have been issued, executed and
authenticated in accordance with the provisions of the Indenture and
delivered to and paid for by the Initial Purchasers in accordance with the
terms of this Agreement, the Senior Notes will be entitled to the benefits
of the Indenture and will be valid and binding obligations of the Company,
enforceable in accordance with their terms, except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors. rights generally and (ii) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability. On the Closing Date, the Senior Notes
will conform as to legal matters to the description thereof contained in
the Offering Circular.

(i) The Exchange Notes have been or as of the Closing Date will have been duly
authorized by the Company. When the Exchange Notes are issued, executed
and authenticated in accordance with the terms of the Exchange Offer and
the Indenture, the Exchange Notes will be entitled to the benefits of the
Indenture and will be the valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as
(i) the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability.

(j) The Guarantees to be endorsed on the Senior Notes by the Guarantors have
been duly authorized by the Guarantors and, when the Senior Notes have been
issued, executed and authenticated in accordance with the Indenture and
delivered to and paid for by the Initial Purchasers in accordance with the
terms of this Agreement, the Guarantees of the Guarantors endorsed thereon
will be entitled to the benefits of the Indenture and will be the valid and
binding obligation of the Guarantors, enforceable against the Guarantors in
accordance with their terms, except as (i) the enforceability thereof may
be limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability. On the Closing Date, the Guarantees to be endorsed on the
Senior Notes will conform as to legal matters to the description thereof
contained in the Offering Circular.

(k) The Guarantees to be endorsed on the Exchange Notes by the Guarantors have
been or as of the Closing Date will have been duly authorized by the
Guarantors and, when the Exchange Notes have been issued, executed and
authenticated in accordance with the terms of the Exchange Offer and the
Indenture, the Guarantees of the Guarantors endorsed thereon will be
entitled to the benefits of the Indenture and will be the valid and binding
obligation of the Guarantors, enforceable against the Guarantors in
accordance with their terms, except as (i) the enforceability thereof may
be limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability. When the Exchange Notes are issued, authenticated and
delivered, the Guarantees to be endorsed on the Exchange Notes will conform
as to legal matters to the description thereof in the Offering Circular.

(l) The Registration Rights Agreement has been or as of the Closing Date will
have been duly authorized by the Company and the Guarantors and, when the
Registration Rights Agreement has been duly executed and delivered by the
Company and the Guarantors, the Registration Rights Agreement will be a

8
<PAGE>

valid and binding agreement of the Company and the Guarantors, enforceable
against the Company and the Guarantors in accordance with its terms, except
as (i) the enforceability thereof may be limited by bankruptcy, insolvency
or similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability. On the Closing Date, the
Registration Rights Agreement will conform as to legal matters to the
description thereof in the Offering Circular.

(m) Neither the Company nor any of its Material Subsidiaries is in violation of
its respective charter or bylaws or in default in the performance of any
obligation, agreement, covenant or condition contained in any indenture,
loan agreement, mortgage, lease or other agreement or instrument that is
material to the Company and its Material Subsidiaries, taken as a whole, to
which the Company or any of its subsidiaries is a party or by which the
Company or any of its Material Subsidiaries or their respective property
is, or will be, bound.

(n) The execution, delivery and performance of this Agreement and the other
Operative Documents by the Company and the Guarantors, compliance by the
Company and the Guarantors with all provisions hereof and thereof and the
consummation of the transactions contemplated hereby and thereby will not
(i) require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except such
as may be required under the securities or Blue Sky laws of the various
states), (ii) conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter or bylaws of the Company or
any of its Material Subsidiaries or any indenture, loan agreement,
mortgage, lease or other agreement or instrument that is material to the
Company and its subsidiaries, taken as a whole, to which the Company or any
of its Material Subsidiaries is a party or by which the Company or any of
its Material Subsidiaries or their respective property is bound, or (iii)
violate or conflict with any applicable law or any rule, regulation,
judgment, order or decree of any court or any governmental body or agency
having jurisdiction over the Company, any of its Material Subsidiaries or
their respective property.

(o) There are no legal or governmental proceedings pending or threatened to
which the Company or any of its subsidiaries is or could be a party or to
which any of their respective property is, or could be, subject, which
might result, singly or in the aggregate, in a Material Adverse Effect.

(p) Neither the Company nor any of its subsidiaries has violated any foreign,
federal, state or local law or regulation relating to the protection of
human health and safety, the environment or hazardous or toxic substances
or wastes, pollutants or contaminants (.Environmental Laws.) or any
provisions of the Employee Retirement Income Security Act of 1974, as
amended (.ERISA.), or the rules and regulations promulgated thereunder,
except for such violations which, singly or in the aggregate, would not
have a Material Adverse Effect.

(q) There are no costs or liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any Authorization, any related constraints on
operating activities and any potential liabilities to third parties) which
would, singly or in the aggregate, on the date hereof and after giving
effect to the Great American Transactions, have a Material Adverse Effect.

(r) Each of the Company and its subsidiaries has such permits, licenses,
consents, exemptions, franchises, authorizations and other approvals (each,
an .Authorization.) of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations
and all courts and

9
<PAGE>

other tribunals, including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and operate its
respective properties and to conduct its business, except where the failure
to have any such Authorization or to make any such filing or notice would
not, singly or in the aggregate, have a Material Adverse Effect. Each such
Authorization is valid and in full force and effect and each of the Company
and its subsidiaries is in compliance with all the terms and conditions
thereof and with the rules and regulations of the authorities and governing
bodies having jurisdiction with respect thereto; and no event has occurred
(including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse of time
or both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would
result in any other impairment of the rights of the holder of any such
Authorization; and such Authorizations contain no restrictions that are
burdensome to the Company or any of its subsidiaries; except where such
failure to be valid and in full force and effect or to be in compliance,
the occurrence of any such event or the presence of any such restriction
would not, singly or in the aggregate, have a Material Adverse Effect.

(s) All leases to which the Company and its subsidiaries are a party are valid,
subsisting and enforceable leases, and no default has, or will have,
occurred or is, or will be, continuing thereunder which could, singly or in
the aggregate, reasonably be expected to have a Material Adverse Effect or
materially and adversely affect the offering of the Senior Notes, and the
Company and its subsidiaries enjoy peaceful and undisturbed possession to
which any of them is a party as lessee (with such exceptions as do not
materially interfere with the use made by the Company or such subsidiary).

(t) The Company and its subsidiaries own or possess, or can acquire on
reasonable terms all patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names (.intellectual
property.) currently employed by them in connection with the business now
operated by them, except where the failure to own or possess or otherwise
be able to acquire such intellectual property would not, singly or in the
aggregate, have a Material Adverse Effect; and neither the Company nor any
of its subsidiaries has received any notice of infringement of or conflict
with asserted rights of others with respect to any of such intellectual
property which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse
Effect.

(u) Except as disclosed in the Offering Circular, no relationship, direct or
indirect, exists between or among the Company or any of its subsidiaries
except for Great American, on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company or any of its
subsidiaries except for Great American, on the other hand, which would be
required by the Securities Act to be described in the Offering Circular if
the Offering Circular were a prospectus included in a registration
statement on Form S-1 filed with the Commission.

(v) The Company and each of its subsidiaries maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management.s general or
specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management.s general
or specific authorization and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.

(w) All material tax returns required to be filed by the Company and each of
its subsidiaries in any jurisdiction have been filed, other than those
filings being contested in good faith, and all material taxes,

10
<PAGE>

including withholding taxes, penalties and interest, assessments, fees and
other charges due pursuant to such returns or pursuant to any assessment
received by the Company or any of its subsidiaries have been, or will be,
paid, other than those being contested in good faith and for which adequate
reserves have been provided.

(x) All indebtedness of the Company and the Guarantors that will be repaid with
the proceeds of the issuance and sale of the Senior Notes was incurred, and
the indebtedness represented by the Senior Notes and the Guarantees is
being incurred, for proper purposes and in good faith, and each of the
Company and the Guarantors was at the time of the incurrence of such
indebtedness that will be repaid with the proceeds of the issuance and sale
of the Senior Notes, and will be on the Closing Date (after giving effect
to the application of the proceeds from the issuance of the Senior Notes),
solvent, and had at the time of the incurrence of such indebtedness that
will be repaid with the proceeds of the issuance and sale of the Senior
Notes, and will have on the Closing Date (after giving effect to the
application of the proceeds from the issuance of the Senior Notes),
sufficient capital for carrying on their respective business and were at
the time of the incurrence of such indebtedness that will be repaid with
the proceeds of the issuance and sale of the Senior Notes, and will be on
the Closing Date (after giving effect to the application of the proceeds
from the issuance of the Senior Notes), able to pay their respective debts
as they mature.

(y) The accountants, Arthur Andersen LLP, Deloitte & Touche LLP, Price
Waterhouse LLP and Weinstein Spira & Company, P.C., that have issued their
reports on the financial statements included in the Offering Circular are
independent public accountants with respect to the Company and Cookies USA,
as required by the Securities Act and the Exchange Act. The historical
financial statements and notes, set forth in the Offering Circular comply
as to form in all material respects with the requirements applicable to
registration statements on Form S-1 under the Securities Act, except for
(i) any schedules that would be required to be included in Part II of a
registration statement on Form S-1 under the Securities Act has not been
included and (ii) the historical financial statements of the eight stores
being purchased from entities controlled by Arthur Karp have not been
included.

(z) The historical financial statements and notes forming part of the Offering
Circular (and any amendment or supplement thereto), present fairly the
consolidated financial position, results of operations and changes in
financial position of the Company and its subsidiaries at the respective
dates or for the respective periods to which they apply; such statements
and notes have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved,
except as disclosed therein; and the other financial information set forth
in the Offering Circular (and any amendment or supplement thereto) are, in
all material respects, accurately presented and prepared on a basis
consistent with such financial statements and the books and records of the
Company; except that EBITDA and Adjusted EBITDA are not presented in such
historical financial statements.

(aa) The pro forma financial statements included in the Offering Circular have
been prepared on a basis consistent with the historical financial
statements of the Company and its subsidiaries and give effect to
assumptions used in the preparation thereof on a reasonable basis and in
good faith and present fairly the proposed transactions contemplated by the
Offering Circular; and such pro forma financial statements comply as to
form in all material respects with the requirements applicable to pro forma
financial statements included in registration statements on Form S-1 under
the Securities Act; except (i) that no separate columnar presentation was
made for the contemplated acquisition of the eight stores from entities
controlled by Arthur Karp, (ii) that the transactions described as "Other
Recent Transactions" were not given complete pro forma treatment but rather
only Adjusted EBITDA was impacted, and (iii) that the Staff of the
Commission does not permit adjusted EBITDA to be included in registration
statements on Form S-1 or S-4 under the Securities Act. Except as set
forth in the proviso in the preceding sentence, the other pro forma

11
<PAGE>

financial information included in the Offering Circular are, in all
material respects, accurately presented and prepared on a basis consistent
with the pro forma financial statements.

(ab) The Company is not and, after giving effect to the offering and sale of the
Senior Notes and the application of the net proceeds thereof as described
in the Offering Circular, will not be, an .investment company,. as such
term is defined in the Investment Company Act of 1940, as amended (the
.Investment Company Act.).

(ac) Other than the Registration Rights Agreement and the Registration Rights
Agreement, dated as of November 26, 1997, among the Company, MFB and the
Initial Purchasers, there are no contracts, agreements or understandings
between the Company or the Guarantors and any person granting such person
the right to require the Company or the Guarantors to file a registration
statement under the Securities Act with respect to any securities of the
Company or the Guarantors or to require the Company or the Guarantors to
include such securities with the Notes and Guarantees registered pursuant
to any Registration Statement.

(ad) Neither the Company nor any of its subsidiaries nor any agent thereof
acting on the behalf of them has taken, and none of them will take, any
action that might cause this Agreement or the issuance or sale of the
Senior Notes to violate Regulation T (12 C.F.R. Part 220), Regulation U (12
C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of
Governors of the Federal Reserve System.

(ae) Since the date as of which information is given in the Offering Circular
and other than as set forth in the Offering Circular (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement), (i) there has not occurred any material adverse change or any
development involving a prospective material adverse change in the
condition, financial or otherwise, or the earnings, business, management or
operations of the Company and its subsidiaries, taken as a whole, (ii)
there has not been any material adverse change or any development involving
a prospective material adverse change in the capital stock or in the long-
term debt of the Company or any of its subsidiaries and (iii) neither the
Company nor any of its subsidiaries has incurred any material liability or
obligation, direct or contingent.

(af) The Offering Circular, as of its date, contains all the information
specified in, and meeting the requirements of, Rule 144A(d)(4) under the
Securities Act.

(ag) When the Senior Notes and the Guarantees are issued and delivered pursuant
to this Agreement, neither the Senior Notes nor the Guarantees will be of
the same class (within the meaning of Rule 144A under the Securities Act)
as any security (except for the Company's Series A and Series B 10.% Senior
Notes due 2004) of the Company or the Guarantors that is listed on a
national securities exchange registered under Section 6 of the Exchange Act
or that is quoted in a United States automated inter-dealer quotation
system.

(ah) No form of general solicitation or general advertising (as defined in
Regulation D under the Securities Act) was used by the Company, the
Guarantors or any of their respective representatives (other than the
Initial Purchasers, as to whom the Company and the Guarantors make no
representation) in connection with the offer and sale of the Senior Notes
contemplated hereby, including, but not limited to, articles, notices or
other communications published in any newspaper, magazine, or similar
medium or broadcast over television or radio, or any seminar or meeting
whose attendees have been invited by any general solicitation or general
advertising. No securities (except for the Company's Series A and Series B
10.% Senior Notes due 2004) of the same class as the Senior Notes have been
issued and sold by the

12
<PAGE>

Company within the six-month period immediately prior to the date hereof.

(ai) Prior to the effectiveness of any Registration Statement, the Indenture (as
it will be amended on the Closing Date) is not required to be qualified
under the TIA.

(aj) No registration under the Securities Act of the Senior Notes or the
Guarantees is required for the sale of the Senior Notes and the Guarantees
to the Initial Purchasers as contemplated hereby or for the Exempt Resales
assuming the accuracy of the Initial Purchasers' representations and
warranties and agreements set forth in Section 7 hereof.

(ak) Each certificate signed by any officer of the Company or the Guarantors and
delivered to the Initial Purchasers or counsel for the Initial Purchasers
shall be deemed to be a representation and warranty by the Company or the
Guarantors to the Initial Purchasers as to the matters covered thereby.

The Company and the Guarantors acknowledge that the Initial Purchasers and,
for purposes of the opinions to be delivered to the Initial Purchasers
pursuant to Section 9 hereof, counsel to the Company and the Guarantors and
counsel to the Initial Purchasers will rely upon the accuracy and truth of
the foregoing representations and hereby consent to such reliance.

7. INITIAL PURCHASERS' REPRESENTATIONS AND WARRANTIES. Each of the
--------------------------------------------------
Initial Purchasers, severally and not jointly, represents and warrants to the
Company and the Guarantors, and agrees that:

(a) Such Initial Purchaser is either a QIB or an Accredited Institution, in
either case, with such knowledge and experience in financial and business
matters as is necessary in order to evaluate the merits and risks of an
investment in the Senior Notes.

(b) Such Initial Purchaser (i) is not acquiring the Senior Notes with a view to
any distribution thereof or with any present intention of offering or
selling any of the Senior Notes in a transaction that would violate the
Securities Act or the securities laws of any state of the United States or
any other applicable jurisdiction and (ii) will be reoffering and reselling
the Senior Notes only to (A) QIBs in reliance on the exemption from the
registration requirements of the Securities Act provided by Rule 144A and
(B) not more than ten Accredited Institutions that execute and deliver a
letter containing certain representations and agreements in the form
attached as Annex A to the Offering Circular.

(c) Such Initial Purchaser agrees that no form of general solicitation or
general advertising (within the meaning of Regulation D under the
Securities Act) has been or will be used by such Initial Purchaser or any
of its representatives in connection with the offer and sale of the Senior
Notes pursuant hereto, including, but not limited to, articles, notices or
other communications published in any newspaper, magazine or similar medium
or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising.

(d) Such Initial Purchaser agrees that, in connection with Exempt Resales, such
Initial Purchaser will solicit offers to buy the Senior Notes only from,
and will offer to sell the Senior Notes only to, Eligible Purchasers. Each
Initial Purchaser further agrees that it will offer to sell the Senior
Notes only to, and will solicit offers to buy the Senior Notes only from
(i) Eligible Purchasers that the Initial Purchaser reasonably believes are
QIBs, and (ii) Accredited Institutions who make the representations
contained in, and execute and return to the Initial Purchasers, a
certificate in the form of Annex A attached to the Offering Circular, in
each case, that agree that (A) the Senior Notes purchased by them may be
resold, pledged or

13
<PAGE>

otherwise transferred within the time period referred to under Rule 144(k)
(taking into account the provisions of Rule 144(d) under the Securities
Act, if applicable) under the Securities Act, as in effect on the date of
the transfer of such Senior Notes, only (1) to the Company or any of its
subsidiaries, (2) to a person whom the seller reasonably believes is a QIB
purchasing for its own account or for the account of a QIB in a transaction
meeting the requirements of Rule 144A under the Securities Act, (3) in an
offshore transaction (as defined in Rule 902 under the Securities Act)
meeting the requirements of Rule 904 of the Securities Act, (4) in a
transaction meeting the requirements of Rule 144 under the Securities Act,
(5) to an Accredited Institution that, prior to such transfer, furnishes
the Trustee a signed letter containing certain representations and
agreements relating to the registration of transfer of such Senior Note
(the form of which can be obtained from the Trustee) and, if such transfer
is in respect of an aggregate principal amount of Senior Notes less than
$250,000, an opinion of counsel acceptable to the Company that such
transfer is in compliance with the Securities Act, (6) in accordance with
another exemption from the registration requirements of the Securities Act
(and based upon an opinion of counsel acceptable to the Company) or (7)
pursuant to an effective registration statement and, in each case, in
accordance with the applicable securities laws of any state of the United
States or any other applicable jurisdiction and (B) they will deliver to
each person to whom such Senior Notes or an interest therein is transferred
a notice substantially to the effect of the foregoing.

The Initial Purchasers acknowledge that the Company and the Guarantors and,
for purposes of the opinions to be delivered to each Initial Purchaser
pursuant to Section 9 hereof, counsel to the Company and the Guarantors and
counsel to the Initial Purchasers will rely upon the accuracy and truth of
the foregoing representations and the Initial Purchasers hereby consent to
such reliance.

8. INDEMNIFICATION.
---------------

(a) The Company and the Guarantors agree, jointly and severally, to indemnify
and hold harmless each Initial Purchaser, its directors, its officers and
each person, if any, who controls such Initial Purchaser within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act, from
and against any and all losses, claims, damages, liabilities and judgments
(including, without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any
action, that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Offering Circular (or any
amendment or supplement thereto) or any Rule 144A Information provided by
the Company or the Guarantors to any holder or prospective purchaser of
Senior Notes pursuant to Section 5(h) hereof or caused by any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement
or omission based upon the Initial Purchasers' Information.

(b) Each Initial Purchaser agrees, severally and not jointly, to indemnify and
hold harmless the Company and the Guarantors, and their respective
directors and officers and each person, if any, who controls (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) the Company or the Guarantors, to the same extent as the foregoing
indemnity from the Company and the Guarantor to the Initial Purchasers but
only with reference to Initial Purchasers' Information.

(c) In case any action shall be commenced involving any person in respect of
which indemnity may be sought pursuant to Section 8(a) or 8(b) hereof (the
.indemnified party.), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the .indemnifying party.)

14
<PAGE>

in writing, and the indemnifying party shall assume the defense of such
action, including the employment of counsel reasonably satisfactory to the
indemnified party and the payment of all fees and expenses of such counsel,
as incurred (except that, in the case of any action in respect of which
indemnity may be sought pursuant to both Sections 8(a) and 8(b) hereof, the
Initial Purchasers shall not be required to assume the defense of such
action pursuant to this Section 8(c), but may employ separate counsel and
participate in the defense thereof; however, the fees and expenses of such
counsel, except as provided below, shall be at the expense of the Initial
Purchasers). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of the
indemnified party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action
or employ counsel reasonably satisfactory to the indemnified party within a
reasonable period of time after notice of the institution of such action or
(iii) the named parties to any such action (including any impleaded
parties) include both the indemnified party and the indemnifying party, and
the indemnified party shall have been advised by such counsel that there
may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case
the indemnifying party shall not have the right to assume the defense of
such action on behalf of the indemnified party). In any such case, the
indemnifying party shall not, in connection with any one action or separate
but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for
the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all indemnified parties and all such
fees and expenses shall be reimbursed as they are incurred (upon written
request and presentation of reasonably satisfactory invoices). Such firm
shall be designated in writing by Jefferies & Company, Inc., in the case of
the parties indemnified pursuant to Section 8(a) hereof, and by the
Company, in the case of parties indemnified pursuant to Section 8(b)
hereof. The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i)
effected with its written consent or (ii) effected without its written
consent if the settlement is entered into more than twenty business days
after the indemnifying party shall have received a request from the
indemnified party for reimbursement for the fees and expenses of counsel
(in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the
indemnifying party shall have received written notice of such settlement
and shall have failed to comply with such reimbursement request. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement or compromise of, or consent to
the entry of judgment with respect to, any pending or threatened action in
respect of which the indemnified party is or could have been a party and
indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment includes
an unconditional release of the indemnified party from all liability on
claims that are or could have been the subject matter of such action.

(d) To the extent the indemnification provided for in this Section 8 is
unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages, liabilities or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as
a result of such losses, claims, damages, liabilities and judgments (i) in
such proportion as is appropriate to reflect the relative benefits received
by the Company and the Guarantors, on the one hand, and the Initial
Purchasers, on the other hand, from the offering of the Senior Notes or
(ii) if the allocation provided by clause 8(d)(i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause 8(d)(i) above but also the
relative fault of the Company and the Guarantors, on the one hand, and the
Initial Purchasers, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The

15
<PAGE>

relative benefits received by the Company and the Guarantors, on the one
hand, and the Initial Purchasers, on the other hand, shall be deemed to be
in the same proportion as the total net proceeds from the offering of the
Senior Notes (before deducting expenses) received by the Company, and the
total discounts and commissions received by the Initial Purchasers bear to
the total price to investors of the Senior Notes, in each case as set forth
in the table on the cover page of the Offering Circular. The relative
fault of the Company and the Guarantors, on the one hand, and the Initial
Purchasers, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates
to information supplied by the Company or the Guarantors, on the one hand,
or the Initial Purchasers, on the other hand.

The Company and the Guarantors and the Initial Purchasers agree that
it would not be just and equitable if contribution pursuant to this Section
8(d) were determined by pro rata allocation (even if the Initial Purchasers
were treated as one entity for such purposes) or by any other method of
allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages,
liabilities or judgments referred to in the immediately preceding paragraph
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses incurred by such indemnified party in connection
with investigating or defending any matter, including any action, that
could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, no Initial
Purchaser shall be required to contribute any amount in excess of the
amount by which the total price of the Senior Notes purchased by it were
sold to investors in Exempt Resales exceeds the amount of any damages which
such Initial Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) hereof of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Initial Purchasers' obligations to contribute
pursuant to this Section 8(d) are several in proportion to the respective
principal amount of Senior Notes purchased by each of the Initial
Purchasers hereunder and not joint.

(e) The remedies provided for in this Section 8 are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.

9. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The obligations
---------------------------------------------
of the Initial Purchasers to purchase the Senior Notes under this Agreement are
subject to the satisfaction of each of the following conditions:

(a) All the representations and warranties of the Company and the Guarantors
contained in this Agreement shall be true and correct on the Closing Date
with the same force and effect as if made on and as of the Closing Date.

(b) On or after the date hereof, (i) there shall not have occurred any
downgrading, suspension or withdrawal of, nor shall any notice have been
given of any potential or intended downgrading, suspension or withdrawal
of, or of any review (or of any potential or intended review) for a
possible change that does not indicate the direction of the possible change
in, any rating of the Company or the Guarantors or any securities of the
Company or the Guarantors (including, without limitation, the placing of
any of the foregoing ratings on credit watch with negative or developing
implications or under review with an uncertain direction) by Standard &
Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc., or
Moody's Investors Service, Inc., (provided, that the foregoing shall not
include the Company's receiving a B2 rating with a negative outlook from
Moody's Investors Service, Inc.) (ii) there shall not have occurred

16
<PAGE>

any change, nor shall notice have been given of any potential or intended
change, in the outlook for any rating of the Company or the Guarantors by
any such rating organization and (iii) no such rating organization shall
have given notice that it has assigned (or is considering assigning) a
lower rating to the Notes than that on which the Notes were marketed.

(c) Since the respective dates as of which information is given in the Offering
Circular other than as set forth in the Offering Circular (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement), (i) there shall not have occurred any change or any development
involving a prospective change in the condition, financial or otherwise, or
the earnings, business, management or operations of the Company and its
subsidiaries, taken as a whole, (ii) there shall not have been any change
or any development involving a prospective change in the capital stock or
in the long-term debt of the Company or any of its subsidiaries and (iii)
neither the Company nor any of its subsidiaries shall have incurred any
liability or obligation, direct or contingent, the effect of which, in any
such case described in clause 9(c)(i), 9(c)(ii) or 9(c)(iii), in your
judgment, is material and adverse and, in your judgment, makes it
impracticable to market the Senior Notes on the terms and in the manner
contemplated in the Offering Circular.

(d) The Initial Purchasers shall have received on the Closing Date a
certificate dated the Closing Date, signed by the President and the Chief
Financial Officer of the Company, confirming the matters set forth in
Sections 9(a), 9(b) and 9(c) hereof.

(e) The Initial Purchasers shall have received on the Closing Date an opinion
(in form and substance reasonably satisfactory to the Initial Purchasers
and counsel for the Initial Purchasers), dated the Closing Date, of
Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Company and the
Guarantor, as to the matters set forth in Exhibit B hereto and such
additional matters or modifications as to which the parties hereto mutually
agree.

(f) The Initial Purchasers shall have received on the Closing Date an opinion
(in form and substance reasonably satisfactory to the Initial Purchasers
and counsel for the Initial Purchasers), dated the Closing Date, of Michael
Ward, Esq., general counsel for the Company and the Guarantor, as to the
matters set forth in Exhibit C hereto and such additional matters and
modifications as to which the parties hereto mutually agree.

(g) The Initial Purchasers shall have received on the Closing Date an opinion,
dated the Closing Date, of Latham & Watkins, counsel for the Initial
Purchasers, in form and substance reasonably satisfactory to the Initial
Purchasers.

(h) The Initial Purchasers shall have received, at the time this Agreement is
executed and at the Closing Date, letters dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to the
Initial Purchasers from each of Arthur Andersen L.L.P., Deloitte & Touche
LLP, Price Waterhouse LLP and Weinstein, Spira & Company, P.C., independent
public accountants, containing the information and statements of the type
ordinarily included in accountants' .comfort letters. to the Initial
Purchasers with respect to the financial statements and certain financial
information contained in the Offering Circular.

(i) Concurrently with the issue and sale of the Senior Notes, the Great
American Transactions and the MFH Transactions (as defined in the Offering
Circular) shall be consummated on terms that conform in all material
respects to the description thereof in the Offering Circular, and the
Initial Purchasers

17
<PAGE>

shall have received true and correct copies of all documents pertaining
thereto and evidence satisfactory to the Initial Purchasers of the
consummation thereof.

(j) The Senior Notes shall have been approved by the NASD for trading and duly
listed in PORTAL.

(k) The Initial Purchasers shall have received a counterpart, conformed as
executed, of the (i) first supplement to the Indenture, dated as of the
Closing Date, which shall have been entered into by the Company, MFB and
the Trustee and (ii) second supplement to the Indenture, dated as of the
Closing Date, which shall have been entered into by the Company, MFB, Great
American and the Trustee.

(l) The Company and the Guarantors shall have executed the Registration Rights
Agreement and the Initial Purchasers shall have received an original copy
thereof, duly executed by the Company and the Guarantor.

(m) Concurrently with the issue and sale of Senior Notes, Cookies USA shall be
merged with and into the Company, and the Company shall continue as the
surviving corporation of the merger. Satisfactory evidence that such merger
has taken place shall be provided to the Initial Purchasers and their
counsel.

(n) The Company shall not have failed at or prior to the Closing Date to
perform or comply with any of the agreements herein contained and required
to be performed or complied with by the Company at or prior to the Closing
Date.

(o) The Company shall have entered into Settlement Agreements and Waivers with
the stockholders of Deblan Corporation and Chocolate Chip Cookies of Texas,
Inc., plus a number of the remaining Great American franchisees so that, in
total, at least 80% of the Great American franchisees shall have executed
such Settlement Agreements and Waivers.

(p) The Initial Purchasers shall have delivered to the Company a letter of
representations in form satisfactory to the Company and the Initial
Purchasers.

(r) The Initial Purchasers shall have received on the Closing Date a
certificate, dated the Closing Date, signed by the Chief Financial Officer
of the Company, confirming that the Company is not in violation of the debt
incurrence covenant in the Indenture and setting forth the basis for such
conclusion.

10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement
------------------------------------------
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.

This Agreement may be terminated at any time prior to the Closing Date by the
Initial Purchasers by written notice to the Company if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States that, in the Initial Purchasers'
judgment, is material and adverse and, in the Initial Purchasers' judgment,
makes it impracticable to market the Senior Notes on the terms and in the manner
contemplated in the Offering Circular, (ii) the suspension or material
limitation of trading in securities or other instruments on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market or
limitation on prices for securities or other instruments on any such exchange or
the Nasdaq National Market, (iii) the declaration of a banking moratorium by
either federal or New York State authorities or (iv) the taking of any action by
any federal, state or local government or agency in

18
<PAGE>

respect of its monetary or fiscal affairs which in the opinion of the Initial
Purchasers has a material adverse effect on the financial markets in the United
States.

If on the Closing Date any one or more of the Initial Purchasers shall fail or
refuse to purchase the Senior Notes which it or they have agreed to purchase
hereunder on such date and the aggregate principal amount of the Senior Notes
which such defaulting Initial Purchaser or Initial Purchasers, as the case may
be, agreed but failed or refused to purchase is not more than one-tenth of the
aggregate principal amount of the Senior Notes to be purchased on such date by
all Initial Purchasers, each non-defaulting Initial Purchaser shall be obligated
severally, in the proportion which the principal amount of the Senior Notes set
forth opposite its name in SCHEDULE A bears to the aggregate principal amount of
the Senior Notes which all the non-defaulting Initial Purchasers, as the case
may be, have agreed to purchase, or in such other proportion as you may specify,
to purchase the Senior Notes which such defaulting Initial Purchaser or Initial
Purchasers, as the case may be, agreed but failed or refused to purchase on such
date; provided that in no event shall the aggregate principal amount of the
Senior Notes which any Initial Purchaser has agreed to purchase pursuant to
Section 2 hereof be increased pursuant to this Section 10 by an amount in excess
of one-ninth of such principal amount of the Senior Notes without the written
consent of such Initial Purchaser. If on the Closing Date any Initial Purchaser
or Initial Purchasers shall fail or refuse to purchase the Senior Notes and the
aggregate principal amount of the Senior Notes with respect to which such
default occurs is more than one-tenth of the aggregate principal amount of the
Senior Notes to be purchased by all Initial Purchasers and arrangements
satisfactory to the Initial Purchasers and the Company for purchase of such
Senior Notes are not made within 48 hours after such default, this Agreement
will terminate without liability on the part of any non-defaulting Initial
Purchaser and the Company. In any such case which does not result in
termination of this Agreement, either you or the Company shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Offering Circular or any other
documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting Initial Purchaser from liability in
respect of any default of any such Initial Purchaser under this Agreement.

11. MISCELLANEOUS. Notices given pursuant to any provision of this
-------------
Agreement shall be addressed as follows: (i) if to the Company or the
Guarantors, to Mrs. Fields' Original Cookies, Inc., 2855 East Cottonwood
Parkway, Salt Lake City, Utah 84121, ATTN: Legal Department, and (ii) if to the
Initial Purchasers, to Jefferies & Company, Inc., 11100 Santa Monica Boulevard,
Los Angeles, California 90025, Attention: Syndicate Department, or in any case
to such other address as the person to be notified may have requested in
writing.

The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, the Guarantors and the Initial
Purchasers set forth in or made pursuant to this Agreement shall remain
operative and in full force and effect, and will survive delivery of and payment
for the Senior Notes, regardless of (i) any investigation, or statement as to
the results thereof, made by or on behalf of any Initial Purchaser, the officers
or directors of any Initial Purchaser, any person controlling any Initial
Purchaser, the Company, the Guarantors, the officers or directors of the Company
or the Guarantor, or any person controlling the Company or the Guarantors, (ii)
acceptance of the Senior Notes and payment for them hereunder and (iii)
termination of this Agreement.

If for any reason the Senior Notes are not delivered by or on behalf of the
Company as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 10 hereof), the Company and the Guarantors,
jointly and severally, agree to reimburse the Initial Purchasers for all out-of-
pocket expenses (including the fees and disbursements of counsel) incurred by
them. Notwithstanding any termination of this Agreement, the Company shall be
liable for all expenses which it

19
<PAGE>

has agreed to pay pursuant to Section 5(i) hereof. The Company and the Guarantor
also agree, jointly and severally, to reimburse each Initial Purchaser and its
officers, directors and each person, if any, who controls such Initial Purchaser
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act for any and all fees and expenses (including, without limitation,
the fees and expenses of counsel) incurred by it in connection with enforcing
its rights under this Agreement (including, without limitation, its rights under
this Section 8).

Except as otherwise provided, this Agreement has been and is made solely for
the benefit of and shall be binding upon the Company, the Guarantors, the
Initial Purchasers, the Initial Purchasers' directors and officers, any
controlling persons referred to herein, the directors of the Company and the
Guarantors and their respective successors and assigns, all as and to the extent
provided in this Agreement, and no other person shall acquire or have any right
under or by virtue of this Agreement. The term .successors and assigns. shall
not include a purchaser of any of the Senior Notes from the Initial Purchasers
merely because of such purchase.

This Agreement shall be governed and construed in accordance with the internal
laws of the State of New York.

This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.

Please confirm that the foregoing correctly sets forth the agreement among the
Company, the Guarantors and the Initial Purchasers.

Very truly yours,

Mrs. Fields' Original Cookies, Inc.

By: _________________________________
Name:
Title:

The Mrs. Fields' Brand, Inc.

By: _________________________________
Name:
Title:

20
<PAGE>

The foregoing Purchase Agreement is hereby agreed
to and accepted as of the consummation of the
Great American Transactions, it being understood
that the provisions thereof applicable to and
binding upon the Guarantors, including the
agreements, representations and warranties of the
Guarantors in Sections 5 and 6 of the foregoing
Purchase Agreement, and the indemnification
provisions of Section 8 of the foregoing Purchase
Agreement, shall be applicable to and binding upon
Great American Cookie Company, Inc. as of and
effective immediately upon consummation of the
Great American Transactions.

Great American Cookie Company, Inc.

By: ___________________________________
Name:
Title:

21
<PAGE>

Agreed and accepted as of the date first above written:

JEFFERIES & COMPANY, INC.

By: ___________________________________
Name:
Title:

BT ALEX. BROWN INCORPORATED

By: ___________________________________
Name:
Title:
<PAGE>

SCHEDULE A

Principal Amount of
Initial Purchasers Notes
- ---------------------------------------------------- ---------------------

Jefferies & Company, Inc............................ 28,000,000

BT Alex. Brown Incorporated......................... 12,000,000

---------------------
TOTAL $40,000,000

S-1
<PAGE>

SCHEDULE B

SUBSIDIARIES OF THE COMPANY

Airport Cookies, Inc.
Fairfield Foods, Inc.
Mrs. Fields Cookies (Canada) Ltd.
Mrs. Fields Cookies Australia
Mrs. Fields Limited
Pretzel Time, Inc.
Great American Cookie Company, Inc. (simultaneously upon consummation of the
Great American Transactions)

S-2
<PAGE>

EXHIBIT A

FORM OF REGISTRATION RIGHTS AGREEMENT

A-1
<PAGE>

EXHIBIT B

FORM OF OPINION OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP

A-2

<PAGE>

EXHIBIT C

FORM OF OPINION OF IN HOUSE COUNSEL TO THE COMPANY

(i) All of the outstanding shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued and are
fully paid and non-assessable, and are owned by the Company, free and clear of
any Lien.

(ii) Neither the Company nor any of its subsidiaries is in violation of
its respective charter or by-laws and, to the best of such counsel's knowledge
after due inquiry, neither the Company nor any of its subsidiaries is in default
in the performance of any obligation, agreement, covenant or condition contained
in any indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Company and its subsidiaries, taken as a
whole, to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries or their respective property is bound.

(iii) After due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company or any of
its subsidiaries is or could be a party or to which any of their respective
property is or could be subject, which might result, singly or in the aggregate,
in a Material Adverse Effect.

(iv) To the best of such counsel's knowledge after due inquiry, there are
no contracts, agreements or understandings between the Company or the Guarantors
and any person granting such person the right to require the Company or the
Guarantors to file a registration statement under the Securities Act with
respect to any securities of the Company or the Guarantors or to require the
Company or the Guarantor to include such securities with the Notes and
Guarantees registered pursuant to any Registration Statement.

A-3

<PAGE>

EXHIBIT 2.1

______________________

SECURITIES PURCHASE AGREEMENT

BY AND AMONG

COOKIES USA, INC.,

THE INDIVIDUALS AND ENTITIES IDENTIFIED HEREIN AS
THE SELLERS

AND

MRS. FIELDS' ORIGINAL COOKIES, INC.

DATED AS OF

AUGUST 13, 1998

______________________
<PAGE>

SECURITIES PURCHASE AGREEMENT
-----------------------------

SECURITIES PURCHASE AGREEMENT, dated as of July 30, 1998, by and among
Cookies USA, Inc., a Delaware corporation (the "Company"), the Sellers (as
hereinafter defined) and Mrs. Fields' Original Cookies, Inc., a Delaware
corporation ("Buyer").

WHEREAS, the individuals and entities identified on Annex A hereto
(the "Sellers") own in the respective amounts indicated thereon (i) all of the
outstanding shares of common stock, par value $0.01 per share, of the Company
(the "Company Common Stock"), (ii) all of the outstanding shares of the Junior
Class A Preferred Stock of the Company and the Junior Class B Preferred Stock of
the Company (together, the "Junior Preferred Stock"), (iii) all of the
outstanding shares of the Senior Convertible Preferred Stock of the Company (the
"Senior Preferred Stock"), and (iv) all of the outstanding $10 million aggregate
principal amount of the Senior Subordinated Notes of the Company (the "Senior
Subordinated Notes" and, together with the Company Common Stock, the Junior
Preferred Stock and the Senior Preferred Stock, the "Company Securities");

WHEREAS, the Company owns all of the outstanding shares of common
stock (the "Subsidiary Common Stock"), no par value, of Great American Cookie
Company, Inc., a Delaware corporation (the "Subsidiary"); and
<PAGE>

WHEREAS, Buyer desires to purchase, and the Sellers desire to sell to
Buyer, all of the Company Securities owned by them upon the terms and conditions
hereinafter set forth in this Agreement;

NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements hereinafter set forth, and intending
to be legally bound hereby, the parties hereto agree as follows:

ARTICLE I

SALE OF STOCK AND TERMS OF PAYMENT
----------------------------------

I.1 The Sale. Upon the terms and subject to the satisfaction of the
--------
conditions contained in this Agreement, at the Closing (as hereinafter defined),
each Seller will sell, assign, transfer and deliver to Buyer, and Buyer will
purchase and acquire from such Seller, free and clear of all Liens (as
hereinafter defined), all of the shares and/or principal amount of Company
Securities owned by such Seller. Notwithstanding anything in this Agreement to
the contrary, prior to the Closing Date, any Seller may transfer all or part of
the Company Securities owned by such Seller, subject to all of such Sellers'
rights and obligations under this Agreement, to any other Seller. Each Seller
agrees to give prompt written notice (which in no event shall be later than two
business days before the Closing) to Buyer of any such transfer of Company
Securities.

2
<PAGE>

I.2 Consideration.
-------------

(a) Upon the terms and subject to the satisfaction of the conditions
contained in this Agreement and subject to adjustment as set forth in Sections
1.2(b) and 1.2(c), in consideration of the aforesaid sale, assignment, transfer
and delivery of the Company Securities, at the Closing Buyer will pay or cause
to be paid to the respective Sellers the following amounts, in each case
allocated among the holders of each class of the Company Securities on a pro
rata basis as of the Closing Date (as hereinafter defined):

(i) $10,000,000 in the aggregate for all of the outstanding
Senior Subordinated Notes, plus the aggregate amount of any accrued but
unpaid interest thereon through the Closing;

(ii) $5,150,000 in the aggregate for all shares of the Senior
Preferred Stock outstanding on the Closing Date (including all accrued but
unpaid dividends);
(iii) in the aggregate for all shares of the Junior Preferred
Stock outstanding on the Closing Date (including all accrued but unpaid
dividends); and

(iv) $0 for all shares of the Company Common Stock outstanding
on the Closing Date.

(b) In the event that the aggregate amount of all Expenses (as

3
<PAGE>

hereinafter defined) shall exceed $200,000, in addition to any other adjustment
required by this Section 1.2, the consideration payable pursuant to Section
1.2(a) shall be reduced by 100% of such excess. For purposes of this Agreement,
"Expenses" shall include all professional fees and expenses paid or payable by
the Company in connection with this Agreement and the transactions contemplated
hereby, including without limitation those expenses of the Sellers contemplated
to be paid by the Company pursuant to Section 5.6, it being agreed that
"Expenses" shall not include the fees and expenses of Price Waterhouse LLP,
legal and accounting expenses incurred in the ordinary course of business,
expenses actually paid on or prior to March 29, 1998 and the Company's share of
the HSR Act fee payable pursuant to Section 5.1.

(c) By a written notice from any Seller to Buyer on or prior to the
Closing Date, such Seller may elect to reallocate the aggregate payments to be
received by such Seller pursuant to Sections 1.2(a)(ii), 1.2(a)(iii) and
1.2(a)(iv), or elect to apply such payments against any adjustments pursuant to
Section 1.2(b), among the different classes of Company Securities to be
purchased pursuant to such Sections. In the absence of any such notice, any
adjustments pursuant to Section 1.2(b) shall be applied to reduce payments under
Section 1.2(a)(iii).

I.3 The Sellers' Releases. (a) Each Seller hereby confirms and agrees
---------------------
that, effective upon such Seller's receipt of the consideration payable to such
Seller pursuant to Section 1.2, any and all claims such Seller or any of its
partners, trustees,

4
<PAGE>

beneficiaries, shareholders, affiliates, directors or officers may have against
the Company, the Subsidiary and their respective shareholders, affiliates,
directors and officers as of the Closing Date will be deemed fully discharged
and released. Without limiting the foregoing, the claims so released include
without limitation any claims under any employment or bonus agreement, any
franchise agreement, any license agreement or any other Affiliated Arrangement
(as hereinafter defined), and any claims in respect of any failure to timely pay
dividends or interest or to perform covenants, or any options or other rights to
acquire securities of the Company or the Subsidiary (the "Options"), but do not
include any of the rights of Sellers pursuant to Section 1.4 or statutory
indemnification rights or contractual indemnification rights under agreements
that are identified on Schedule 1.3.

(b) TJC Management Corp. hereby waives its right to receive any
payment under the Management Agreement, including any fee accrued on the
Company's balance sheet as of June 30, 1998.

I.4 Other Matters. Buyer hereby agrees that, in the event the
-------------
Closing shall occur, Buyer shall (a) as of the Closing Date, cede to Messrs.
Coles and Karp the Subsidiary's rights to purchase Atlanta Braves tickets
provided that Messrs. Coles and Karp pay for any tickets which the Subsidiary
has committed to purchase as of such date as and when any such payments are due,
(b) permit Messrs. Coles and

5
<PAGE>

Karp to continue at their respective expense (including for these purposes
insurance and administrative costs) their participation in the Subsidiary's
health insurance program, subject to Buyer's right to provide such coverage
under Buyer's health insurance program until November 30, 1998, (c) permit
Messrs. Coles and Karp to each receive Great American cookies without charge in
accordance with past practice, provided that as to cookies obtained from any
store other than the GACC stores at Cumberland Mall in Atlanta, Georgia, at Town
Center at Cobb in Kennesaw, Georgia, at Perimeter Mall in Atlanta, Georgia and
at Sarasota Square in Sarasota, Florida, cookies must be purchased by Messrs.
Coles and Karp and store receipts must be promptly provided to Mrs. Fields in
order for reimbursement to be received, (d) grant to Messrs. Coles and Karp a
right of first refusal to purchase for cash the Subsidiary's batter facility
(exclusive of all equipment and furnishings and otherwise "as is, where is")
should the Subsidiary determine to sell such facility within the two year period
following the Closing, such right to be exercisable for 60 days following
Messrs. Coles' and Karp's receipt of notice of a proposed sale of such facility
to a third party but only on the same terms and subject to the same conditions
as offered by such third party and subject to the further covenant by Messrs.
Karp and Coles that they shall not use the batter facility in connection with
any business, individual, partnership, firm, corporation or other entity which
is engaged, directly or indirectly, in a business that is in competition with
Buyer, and (e) pay to David Barr

6
<PAGE>

any and all amounts owing to him pursuant to any and all agreements set forth on
3.16(k) in effect immediately prior to the Closing.

I.5 Warrants. The Company and the Sellers other than Messrs. Coles
--------
and Karp shall take such action as shall be necessary under the governing
agreements to cause all of the Warrants to be cancelled on the Closing Date.
Buyer shall assist and cooperate, and shall cause its financial advisors to
assist and cooperate, with the Company and the Sellers with respect to the
foregoing matters.

ARTICLE II

THE PRE-CLOSING AND CLOSING
---------------------------

II.1 Time and Place of Pre-Closing and Closing.
-----------------------------------------

(a) Upon the terms and subject to the satisfaction of the conditions
contained in this Agreement, the pre-closing of the transactions contemplated by
this Agreement (the "Pre-Closing") will take place at the offices of Skadden,
Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022, at
10:00 A.M. (local time) on the date on which Buyer executes the purchase
agreements (the "Financing Agreements") pursuant to which Buyer is obtaining
financing (the "Financing"), or at such other place or time as the parties may
agree. At the Pre-Closing, the parties will deliver into an escrow (the "Pre-
Closing Escrow") the various documents to be delivered at the Closing, with
documents to be delivered by Sellers or the Company to be held Mayer, Brown &
Platt and with documents to be

7
<PAGE>

delivered by Buyer to be held by counsel to Buyer. The date and time at which
the Pre-Closing actually occurs is hereinafter referred to as the "Pre-Closing
Date."

(b) Upon the terms and subject to the satisfaction of the conditions
contained in this Agreement, the closing of the transactions contemplated by
this Agreement (the "Closing") will take place at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022, at 10:00
A.M. (local time) on the date on which the closing occurs under the Financing
Agreements, or at such other place or time as the parties may agree. The date
and time at which the Closing actually occurs is hereinafter referred to as the
"Closing Date." For accounting purposes only, the transactions contemplated by
this Agreement will be deemed to have occurred on June 30, 1998.

II.2 Deliveries by the Sellers and the Company . (a) In the event
-----------------------------------------
that each of the conditions to the Sellers' obligations to close hereunder are
met as of the Pre-Closing Date, each Seller hereby authorizes Mayer, Brown &
Platt to cause to be delivered into the Pre-Closing Escrow the following
documents in respect of such Seller that are being delivered as of the date
hereof to Mayer, Brown & Platt (the "Escrowed Seller Documents"): the
certificate or certificates representing the Company Securities set forth beside
the name of such Seller on Annex A hereto, duly executed in blank or accompanied
by duly executed instruments of transfer, and any other documents (including
without limitation written releases from First Na-

8
<PAGE>

tional Bank of Boston) that are necessary to transfer to Buyer good, valid and
marketable title to such Company Securities, free and clear of any lien, charge,
security interest, pledge, mortgage, encumbrance, claim, option, limitation or
restriction of any kind (collectively, "Liens"), with all necessary transfer tax
stamps affixed or accompanied by evidence that all securities transfer taxes
have been paid.

(b) At the Pre-Closing, the Company will deliver or cause to be
delivered into the Pre-Closing Escrow the following (the "Escrowed Company
Documents"):

(i) the stock book, stock ledger, minute book and corporate
seal of each of the Company and the Subsidiary;

(ii) resignations effective as of the Closing Date from all
directors and officers of the Company and the Subsidiary;

(iii) such documents as are reasonably requested by Buyer to
implement the Financing and the Senior Note Tender Offer (as hereinafter
defined);

(iv) executed Settlement Agreement and Releases in the form of
Annex B hereto from franchisees of the Subsidiary and related investors
sufficient to satisfy the Franchisee Condition (as hereinafter defined);
and

(v) such other documents, instruments and writings as are
required to be delivered by the Company at or prior to the Closing Date

9
<PAGE>

pursuant to Section 6.2 or otherwise required in connection herewith.

(c) The Company and each Seller hereby authorizes Mayer, Brown &
Platt to cause to be delivered at the Closing the Escrowed Seller Documents and
the Escrowed Company Documents in return for the Escrowed Buyer Documents (as
hereinafter defined) and the wire transfers contemplated by Section 2.3(b).

II.3 Deliveries by Buyer.
-------------------

(a) At the Pre-Closing, Buyer will deliver into the Pre-Closing
Escrow such documents, instruments and writings as are required to be delivered
by Buyer at or prior to the Closing Date pursuant to Section 6.3 or otherwise
required in connection herewith (the "Escrowed Buyer Documents").

(b) At the Closing, Buyer shall deliver to the Sellers the Escrowed
Buyer Documents and wire transfers of immediately available funds to such
accounts of the Sellers which are designated in writing by each Seller at least
two business days prior to the Closing in an amount representing the aggregate
payments to be made pursuant to Section 1.2 in return for the Escrowed Seller
Documents and the Escrowed Company Documents.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
AND THE SELLERS
---------------

The Company makes to Buyer the representations and warranties set

10
<PAGE>

forth in Sections 3.1 to 3.24 and the Sellers severally but not jointly make to
Buyer the representations and warranties set forth in Section 3.25.

III.1 Organization; Qualification. The Company and the Subsidiary are
---------------------------
each corporations duly organized, validly existing and in good standing under
the laws of the State of Delaware, and have full corporate power and authority
and possess all governmental franchises, licenses, permits, authorizations and
approvals to enable them to use their corporate names and to own, lease, or
otherwise hold their properties and to operate their properties and carry on
their business as are now being conducted, other than such franchises, licenses,
permits, authorizations and approvals the lack of which, individually or in the
aggregate, would not reasonably be expected to have a material adverse effect on
the business, results of operations, or financial condition of the Company or
the Subsidiary (a "Material Adverse Effect"). The Company and the Subsidiary are
duly qualified or licensed to do business as foreign corporations and are in
good standing in each jurisdiction in which the property owned, leased or
operated by them or the nature of the business conducted by them makes such
qualification or licensing necessary, except in each case in those jurisdictions
where the failure to be so duly qualified or licensed and in good standing would
not reasonably be expected to have a Material Adverse Effect. Schedule 3.1 sets
forth, as of the date of this Agreement, each jurisdiction in which the Company
and

11
<PAGE>

the Subsidiary are qualified to do business as foreign corporations. The Company
has heretofore delivered to Buyer complete and correct copies of the Certificate
of Incorporation and By-Laws of each of the Company and the Subsidiary as
currently in effect and evidence of qualification to do business as a foreign
corporation in each jurisdiction in which the Company or the Subsidiary are so
qualified.

III.2 The Company's Capitalization.
----------------------------

(a) The authorized capital stock of the Company consists of (i)
115,000 shares of Company Common Stock, of which 82,800 shares are issued and
outstanding and no shares are held in treasury, (ii) 10,500 shares of Senior
Preferred Stock, all of which are issued and outstanding, (iii) 2,500 shares of
Junior Class A Preferred Stock, all of which are issued and outstanding, and
(iv) 750 shares of Junior Class B Preferred Stock, all of which are issued and
outstanding. The Sellers own all of the issued and outstanding shares of Company
Common Stock, Junior Preferred Stock and Senior Preferred Stock. All outstanding
shares of capital stock of the Company are validly issued, fully paid and
nonassessable. Other than as set forth in (i) the Company's Certificate of
Incorporation and By-Laws as currently in effect, (ii) the Subscription and
Stockholders Agreement, dated as of December 10, 1993, among the Company and
certain of its stockholders, (iii) the Warrants, pursuant to which 7,200 shares
of Company Common Stock are issuable (collectively, the "Capitalization
Documents"), and (iv) the Options, pursuant to which 11,200 shares

12
<PAGE>

of Company Common Stock are issuable, there is no subscription, option, warrant,
call, right, agreement or commitment relating to the issuance, sale, delivery or
transfer by the Company or, to the Company's knowledge, any Seller (including
any right of conversion or exchange under any outstanding security or other
instrument) of any class of capital stock of the Company or the payment of money
based on the value of any class of capital stock of the Company. There are no
outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock of the Company other
than as set forth in the Capitalization Documents.

(b) The authorized capital stock of the Subsidiary consists of 2,000
shares of the Subsidiary Common Stock, of which 210 are issued and outstanding
and no shares are held in treasury. The Company owns all of the issued and
outstanding shares of the Subsidiary Common Stock. All outstanding shares of the
Subsidiary Common Stock are validly issued, fully paid and nonassessable. There
is no subscription, option, warrant, call, right, agreement or commitment
relating to the issuance, sale, delivery or transfer by the Subsidiary or the
Company (including any right of conversion or exchange under any outstanding
security or other instrument) of any class of capital stock of the Subsidiary.
There are no outstanding contractual obligations of the Subsidiary to
repurchase, redeem or otherwise acquire any outstanding shares of capital stock
of the Subsidiary.

13
<PAGE>

III.3 Title to Stock. The Sellers own the Company Securities, free
--------------
and clear of any Liens. At the Closing, Buyer will acquire good, valid and
marketable title to the respective Company Securities sold by each Seller, free
and clear of any Liens. The Company owns, and at the Closing will own, the
Subsidiary Common Stock, free and clear of any Liens.

III.4 Authority Relative to this Agreement. The Company has full
------------------------------------
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company and, assuming that this Agreement
constitutes a valid and binding agreement of Buyer and each Seller, constitutes
a valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms.

III.5 Subsidiaries and Equity Investments; Affiliates. Other than
-----------------------------------------------
the Subsidiary or as set forth on Schedule 3.5, the Company does not own or have
any right to acquire at any time by any means, directly or indirectly, any
interest or investment in any corporation, partnership, joint venture or other
business association or entity.

III.6 Consents and Approvals; No Violation. (a) Except as set forth
----------------------
in Schedule 3.6(a), neither the execution and delivery of this Agreement by the
Company nor the sale by the Sellers of the Company Securities

14
<PAGE>

pursuant to this Agreement will (i) conflict with or result in any breach of
(with or without notice or lapse of time, or both) any provision of the
Certificate of Incorporation or By-Laws of the Company or the Certificate of
Incorporation or By-Laws of the Subsidiary, (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except where the failure to obtain such consent,
approval, authorization or permit, or to make such filing or notification, would
not reasonably be expected to have a Material Adverse Effect, (iii) result in a
violation of or default under (with or without notice or lapse of time, or both)
or give rise to any right of termination, cancellation or acceleration or result
in the creation of any Lien under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license, agreement or other instrument or
obligation (other than with respect to any leases of real property or an
interest therein (the "Leases"), to which this representation shall not apply)
to which the Company or the Subsidiary is a party or by which the Company or the
Subsidiary or any of their assets may be bound, except for such defaults or
rights of termination, cancellation or acceleration or Liens as to which
requisite waivers or consents have been obtained or which, in the aggregate,
would not reasonably be expected to have a Material Adverse Effect, or (iv)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, the Subsidiary or any of their assets, which
violation would reasonably be expected to have a Material Adverse Effect.

15
<PAGE>

(b) Except for the filings by the Company and Buyer required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and except as set forth in Schedule 3.6(b), no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the consummation
by the Company or the Sellers of the transactions contemplated hereby, other
than such filings, registrations, authorizations consents or approvals which, if
not obtained or made, would not, in the aggregate, reasonably be expected to
have a Material Adverse Effect.

III.7 Reports. The Subsidiary has filed, pursuant to the Securities
-------
Act of 1933, as amended (the "Securities Act"), or the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as the case may be, all material
forms, statements, reports and documents (including all exhibits, amendments and
supplements thereto) (the "SEC Documents") required to be filed by them with
respect to the business and operations of the Subsidiary under each of the
Securities Act and the Exchange Act, and the respective rules and regulations
thereunder, and all of the SEC Documents complied in all material respects with
all applicable requirements of the Securities Act or the Exchange Act, as the
case may be, and the appropriate act and the rules and regulations thereunder in
effect on the date each such report was filed. At the respective dates they were
filed, none of the SEC Documents contained any untrue statement of a material
fact or omitted to state any material fact required to be stated

16
<PAGE>

therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of the Subsidiary included in the SEC Documents complied as
to form in all material respects with the applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied throughout the period involved (except as may be indicated
therein or in the notes thereto) and fairly present the consolidated financial
position, results of operations and cash flows of the Subsidiary as of the dates
or for the periods indicated therein, subject, in the case of the unaudited
statements, to normal year-end adjustments and the absence of certain footnote
disclosures.

III.8 Financial Statements. The Company has previously furnished to
--------------------
Buyer audited balance sheets of the Company and the Subsidiary as of June 29,
1997, June 30, 1996 and June 29, 1995 and the related audited statements of
operations, changes in stockholders' equity and cash flows of the Company and
the Subsidiary for the fiscal periods then ended, together with the respective
reports thereon of Price Waterhouse LLP, the Company's and the Subsidiary's
independent auditors. The Company has also furnished unaudited balance sheets of
the Company and the Subsidiary for the fiscal quarters ended December 31, 1997
and March 29, 1998, togeth

17
<PAGE>

er with the related unaudited operations, changes in stockholders' equity
and cash flows of the Company and the Subsidiary. The balance sheet of the
Company as of March 29, 1998, together with the balance sheet of the Subsidiary
as of March 29, 1998 are hereinafter referred to as the "Company Balance
Sheets." Each of the balance sheets included in the financial statements
referred to in this Section 3.8 (including the related notes thereto) presents
fairly the financial position of the Company or of the Subsidiary as of their
respective dates, and the other related statements included therein (including
the related notes thereto) present fairly the results of operations, changes in
financial position and cash flows for the periods then ended, all in conformity
with GAAP applied on a consistent basis, except as otherwise noted therein or in
the notes thereto and subject, in the case of unaudited statements, to normal
year-end adjustments and the absence of certain footnote disclosures. All such
financial statements are or will be complete in all material respects and have
been prepared from, and are in accordance with, the books of account and records
of the Company and the Subsidiary. Since June 30, 1997, neither the Company nor
the Subsidiary has made any change in its accounting practices or policies
applied in the preparation of its financial statements.

III.9 Undisclosed Liabilities. Except as set forth in Schedule 3.9,
-----------------------
neither the Company nor the Subsidiary has any liability or obligation, secured
or unsecured (whether absolute, accrued, contingent or otherwise, and whether
due or to

18
<PAGE>

become due), of a nature required by GAAP to be reflected in a corporate balance
sheet or disclosed in the notes thereto, except for those that either (i) are
accrued or reserved against in the Company Balance Sheets or disclosed in the
notes thereto in accordance with GAAP or (ii) were incurred in the ordinary
course of business consistent with past practice, whether before or after the
date of the Company Balance Sheet. Neither the Company nor the Subsidiary is
directly or indirectly liable upon or with respect to (by discount, repurchase
agreements or otherwise), or obligated in any other way to provide funds in
respect of, or to guarantee or assume, any material debt, obligation or dividend
of any person, except for those that are accrued or reserved against in the
Company Balance Sheets or disclosed in the notes thereto in accordance with
GAAP. Schedule 3.9 sets forth the amounts of any accrued but unpaid interest
and/or dividends on the Senior Notes or the Company Securities as of March 29,
1998.

III.10 Absence of Certain Changes or Events. Except (a) as set forth
------------------------------------
in Schedule 3.10, or in the SEC Documents, and (b) as otherwise contemplated by
this Agreement, since the date of the Company Balance Sheets there has not been:
(i) any Material Adverse Effect; (ii) any declaration, setting aside or payment
of any dividend or other distribution (whether in cash, stock, property or any
combination thereof) in respect of any class of capital stock of the Company or
of the Subsidiary,

19
<PAGE>

or any redemption or other acquisition by the Company or the Subsidiary of any
shares of capital stock of the Company or the Subsidiary, or any payment by the
Company or the Subsidiary to any Seller in its capacity as a stockholder; (iii)
any damage, destruction or casualty loss, whether covered by insurance or not,
which had a Material Adverse Effect; (iv) any increase in the rate or terms of
compensation or other benefits payable or to become payable by the Company or
the Subsidiary to their directors, officers or key employees, except increases
occurring in the ordinary course of business in accordance with their customary
practices; (v) any entry into any agreement, commitment or transaction
(including without limitation any borrowing, capital expenditure or capital
financing) by the Company or the Subsidiary, which is material to the Company or
the Subsidiary, except (a) Leases and (b) agreements, commitments or
transactions in the ordinary course of business or as contemplated herein; (vi)
any change by the Company or the Subsidiary, in their respective accounting
methods, principles or practices except as required by GAAP; or (vii) any sale,
franchise, relocation or closure of any store of the Subsidiary. Since March 29,
1998, each of the Company and the Subsidiary has conducted its business in the
ordinary course, consistent with past practice, and has made all reasonable
efforts to preserve its relationships with customers, suppliers and others with
whom it deals, the absence of which would be reasonably likely to have a
Material Adverse Effect, and neither the Company nor the Subsidiary has taken
any action that, if taken after

20
<PAGE>

the date hereof unless otherwise consistent with the transactions contemplated
hereby, would constitute or result in a material breach of any of the covenants
set forth herein.

III.11 Personal Property. Schedule 3.11 sets forth as of the date of
-----------------
this Agreement a complete and correct list of each item of machinery, equipment,
furniture, fixtures and other tangible personal property owned, leased or used
by the Company or the Subsidiary having an original purchase cost or aggregate
lease cost to the Company or the Subsidiary exceeding $25,000 (the "Machinery
and Equipment"). Except as set forth on Schedule 3.11, the Company or the
Subsidiary own outright and have good, valid and marketable title, free and
clear of all Liens (other than Permitted Exceptions (as hereinafter defined)),
to the Machinery and Equipment as owned by them and to all the machinery,
equipment, furniture, fixtures, inventory, receivables and other tangible or
intangible personal property reflected on the Company Balance Sheets and all
such property acquired since the date thereof, except for sales and dispositions
in the ordinary course of business consistent with past practice since the date
of the Company Balance Sheets, except to the extent that any such failure to
have good title would not, in the aggregate with any and all such failures,
reasonably be expected to have a Material Adverse Effect. None of the Liens
listed on Schedule 3.11 materially adversely affects the conduct of the business
of the Company or the Subsidiary. Except as set forth in Schedule 3.11, each of
the

21
<PAGE>

Company and the Subsidiary holds good and transferable leaseholds in all of
the Machinery and Equipment as leased by it, in each case under valid and
enforceable leases. The Machinery and Equipment and other personal property now
owned, leased, or used by the Company or the Subsidiary are sufficient and
adequate to carry on their businesses as presently conducted and all items
thereof are in good operating condition and repair (normal wear and tear
excepted). Neither the Company nor the Subsidiary holds any personal property
of any other person, firm or corporation pursuant to any consignment or similar
arrangement.

III.12 Real Property.
-------------

(a) Schedule 3.12(a) sets forth a true and complete list of all real
properties owned by the Company and the Subsidiary. The Company or the
Subsidiary has good, valid and marketable title to all real properties shown in
Schedule 3.12(a). Other than as set forth on Schedule 3.12(a), none of the real
properties owned by the Company or the Subsidiary is subject to any Liens (other
than Permitted Exceptions), and none of such real properties is subject to any
easements, rights of way, licenses, grants, building or use restrictions,
exceptions, reservations, limitations or other impediments which materially
adversely affect the value thereof or which materially interfere with or impair
the present and continued use thereof in the usual and normal conduct of the
business of the Company or the Subsidiary. All buildings, structures,
improvements and fixtures owned by the Company or the

22
<PAGE>

Subsidiary are in good operating condition and repair (normal wear and tear
excepted).

(b) Schedule 3.12(b) lists, as of the date of this Agreement, all
Leases under which the Company or the Subsidiary is a lessee or lessor. Except
as set forth in Schedule 3.12(b) or as may result from the consummation of the
transactions contemplated hereby, all such Leases are valid, binding and
enforceable obligations of the Company or the Subsidiary in accordance with
their terms, and to the Company's and the Subsidiary's knowledge, are in full
force and effect, there are no existing defaults by the Company or the
Subsidiary thereunder, and no event has occurred which (whether with or without
notice, lapse of time or both) would constitute a default thereunder, except in
each case for defaults which individually or in the aggregate would not have a
Material Adverse Effect.

III.13 Insurance. All policies of fire, liability, workmen's
---------
compensation and other forms of insurance owned or held by and insuring the
Company or the Subsidiary are listed on Schedule 3.13. Except as set forth in
Schedule 3.13, all policies of fire, liability, workmen's compensation and other
forms of insurance owned or held by and insuring the Company and the Subsidiary
are in full force and effect, all premiums with respect thereto covering all
periods up to and including the date as of which this representation is being
made have been paid

23
<PAGE>

(other than retroactive premiums which may be payable with respect to
comprehensive general liability and workmen's compensation insurance policies),
and no notice of cancellation or termination has been received with respect to
any such policy which was not replaced on substantially similar terms prior to
the date of such cancellation. Other than as set forth on Schedule 3.13, such
policies are valid, outstanding and enforceable policies and will not in any way
be affected by, or terminate or lapse by reason of, the transactions
contemplated by this Agreement. Except as described in Schedule 3.13, as of the
date of this Agreement neither the Company nor the Subsidiary has been refused
any insurance with respect to its assets or operations nor has their coverage
been limited in any material respect by any insurance carrier to which either of
them has applied for any such insurance or with which it has carried insurance
during the last three years. The Company and the Subsidiary have heretofore made
available to Buyer true and complete copies of all such policies.

III.14 Environmental Matters.
---------------------

(a) Each of the Company and the Subsidiary is in compliance with all
applicable Environmental Laws (which compliance includes, but is not limited to,
the possession by the Company and the Subsidiary of all permits and other
governmental authorizations ("Environmental Permits") required under applicable
Environmental Laws, and compliance with the terms and conditions thereof),
except where failure to be in compliance would not reasonably be expected to
have a Material Adverse

24
<PAGE>

Effect. Other than as set forth on Schedule 3.14, since January 1, 1995, neither
the Company nor the Subsidiary has received any communication (written or oral),
whether from a governmental authority, citizens group, employee or otherwise,
alleging that the Company or the Subsidiary is not in such compliance, and there
are no past or present actions, activities, circumstances, conditions, events or
incidents that may prevent or interfere with such compliance in the future in
all material respects. All Environmental Permits and other governmental
authorizations currently held by the Company and the Subsidiary pursuant to
applicable Environmental Laws are identified in Schedule 3.14(a).

(b) There is no Environmental Claim pending or threatened against the
Company or the Subsidiary, or, to the best knowledge of the Company and the
Subsidiary, against any person or entity whose liability for any Environmental
Claim the Company or the Subsidiary has or may have retained or assumed either
contractually or by operation of law, which would reasonably be expected to have
a Material Adverse Effect.

(c) There are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the Release or
presence of any Hazardous Material which could form the basis of any
Environmental Claim against the Company or the Subsidiary, or to the best
knowledge of the Company and the Subsidiary, against any person or entity whose
liability for any Environmental

25
<PAGE>

Claim the Company or the Subsidiary has or may have retained or assumed either
contractually or by operation of law which would reasonably be expected to have
a Material Adverse Effect.

(d) The Company has delivered or otherwise made available for
inspection to Buyer true, complete and correct copies and results of all "Phase
One" reports relating to the Subsidiary's batter facility and any reports,
studies, analyses, tests or monitoring possessed or initiated by the Company or
the Subsidiary pertaining to Hazardous Materials in, on, beneath or adjacent to
any property currently or formerly owned, operated or leased by the Company or
the Subsidiary, or regarding the Company's or the Subsidiary's compliance with
applicable Environmental Laws.

(e) Definitions.
-----------

(i) "Environmental Claim" means any claim, action, cause of
action, investigation or notice (written or oral) by any person or entity
alleging potential liability (including, without limitation, potential
liability for investigatory costs, remediation costs, governmental response
costs, natural resources damages, property damages, personal injuries, or
penalties) arising out of, based on or resulting from (A) the presence, or
Release of any Hazardous Materials at any location, whether or not owned or
operated by the Company or the Subsidiary, or (B) circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law.

26
<PAGE>

(ii) "Environmental Laws" means all federal, state, local and
foreign laws and regulations relating to pollution or protection of human
health or the environment, including, without limitation, laws relating to
Releases or threatened Releases of Hazardous Materials or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, Release, disposal, transport or handling of Hazardous Materials
and all laws and regulations with regard to recordkeeping, notification,
disclosure and reporting requirements respecting Hazardous Materials.

(iii) "Hazardous Materials" means all substances defined as
Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil
and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. ' 300.5, or
defined as such by, or regulated as such under, any Environmental Law.

(iv) "Release" means any release, spill, emission, discharge,
leaking, pumping, injection, deposit, disposal, dispersal, leaching or
migration into the indoor or outdoor environment or into or out of any
property, including the movement of Hazardous Materials through or in the
air, soil, surface water, groundwater or property.

III.15 Labor Matters.
-------------

(a) (i) There is no labor strike, dispute, or work stoppage or lockout
actually pending or, to the Company's or the Subsidiary's knowledge, threatened,

27
<PAGE>

against or affecting the Company and the Subsidiary, and since January 1, 1995
there has not been any such action; (ii) to the Company's and the Subsidiary's
knowledge, no union organizational campaign is in progress with respect to the
employees of the Subsidiary; (iii) the Company and the Subsidiary are in
compliance in all material respects with all laws applicable to the Company and
the Subsidiary with respect to employment and employment practices, terms and
conditions of employment and wages and hours, and are not engaged in any unfair
labor practice; and (iv) there is no charge, complaint or other proceeding
involving the Company or the Subsidiary or, to the Company's or the Subsidiary's
knowledge, threatened, before the National Labor Relations Board, the Equal
Employment Opportunity Commission or any state or local agency responsible for
the prevention of unlawful employment practices.

(b) Neither the Company nor the Subsidiary is a party to any labor
union or collective bargaining agreement.

(c) Neither the Company nor the Subsidiary has any liability under
the Worker Adjustment and Retraining Act or any similar state law relating to
employment termination in connection with a mass layoff or plant closing
("WARN").

III.16 ERISA; Benefit Plans.
--------------------

(a) Schedule 3.16(a) contains a list of all "employee pension benefit
plans" (as defined in Section 3(2) of the Employee Retirement Income Security
Act

28
<PAGE>

of 1974, as amended ("ERISA")) (sometimes referred to herein as "Pension
Plans"), "employee welfare benefit plans" (as defined in Section 3(1) of ERISA),
bonus, stock option, stock purchase and deferred compensation plans or
arrangements, and other employee fringe benefit plans (all the foregoing being
herein referred to as "Benefit Plans") maintained, or contributed to, by the
Company, the Subsidiary or any entity that is treated as under common control
with the Company or the Subsidiary under Section 414(b), (c), (m) or (o) of the
Internal Revenue Code of 1986, as amended (the "Code"), for the benefit of, or
relating to, any employees or former employees of the Company or the Subsidiary.
The Company has delivered to Buyer true, complete and correct copies of (i) each
Benefit Plan (or, in the case of any unwritten Benefit Plan, a description
thereof), (ii) the most recent determination letter received from the Internal
Revenue Service, (iii) the latest actuarial evaluations, (iv) the most recent
annual report on Form 5500 filed with the Internal Revenue Service with respect
to each Benefit Plan (if any such report was required), including Schedule A and
Schedule B thereto, (v) the most recent summary plan description for each
Benefit Plan for which such a summary plan description is required and (vi) each
trust agreement and group annuity contract relating to any Benefit Plan.

(b) Each Benefit Plan has been administered in all material respects
in accordance with its terms and the applicable provisions of ERISA and the
Code. Except as disclosed in Schedule 3.16(b)(i), all material reports, returns
and similar

29
<PAGE>

documents with respect to the Benefit Plans required to be filed with any
governmental agency or distributed to any Benefit Plan participant have been
duly and timely filed or distributed. Except as disclosed in Schedule
3.16(b)(ii), there are no investigations by any governmental agency, termination
proceedings or other claims (except for benefits payable in the normal operation
of the Benefit Plans), suits or proceedings or against or involving any Benefit
Plan or asserting any rights or claims to benefits under any Benefit Plan that
could reasonably give rise to any material liability and, to the Company's and
the Subsidiary's knowledge, there are no facts that could reasonably give rise
to any material liability in the event of any such investigation, claim, suit or
proceeding.

(c) Except as disclosed in Schedule 3.16(c), all contributions to,
and payments from, the Benefit Plans that may have been required to be made in
accordance with the Benefit Plans have been timely made.

(d) No "prohibited transaction" (as defined in Section 4975 of the
Code or Section 406 of ERISA) has occurred that involves the assets of any
Benefit Plan and that could subject the Company or the Subsidiary or any of
their employees or, to the Company's and the Subsidiary's knowledge, a trustee,
administrator or other fiduciary of any trusts created under any Benefit Plan,
to any material tax or penalty on prohibited transactions imposed by Section
4975 of ERISA or the sanctions imposed under Title I of ERISA. None of the
Company, the Subsidiary or any trust-

30
<PAGE>

ee, administrator or other fiduciary of any Benefit Plan nor any agent of any of
the foregoing has engaged in any transaction or acted or failed to act in a
manner that could subject the Company or the Subsidiary to any material
liability for breach of fiduciary duty under ERISA or any other applicable law.
No liability under Title IV of ERISA has been incurred by the Company, the
Subsidiary or their affiliates within six years prior to the date hereof that
has not been satisfied in full, and no condition exists that presents a material
risk of incurring such liability.

(e) Except as disclosed in Schedule 3.16(e), at no time within the
five years preceding the Closing Date has either of the Subsidiary or the
Company been required to contribute to any "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA) or incurred any withdrawal liability, within the
meaning of Section 4201 of ERISA, which liability has not been fully paid as of
the date hereof, or announced an intention to withdraw, but not yet completed
such withdrawal, from any multiemployer plan.

(f) Neither the Company nor the Subsidiary contributes to a Pension
Plan that is subject to Section 302 of ERISA or Section 412 of the Code.

(g) With respect to any Benefit Plan that is an employee welfare
benefit plan, except as disclosed in Schedule 3.16(g), (1) no such Benefit Plan
is funded through a welfare benefits fund, as such term is defined in Section
419(e) of the Code, and (2) each such Benefit Plan that is a group health plan,
as such term is

31
<PAGE>

defined in Section 5000(b)(1) of the Code, complies with the applicable
requirements of Section 4980B(f) of the Code.

(h) Neither the Company nor the Subsidiary has incurred any liability
under Section 4062(b) of ERISA to the Pension Benefit Guaranty Corporation in
connection with any Benefit Plan which is subject to Title IV of ERISA. Except
as set forth in Schedule 3.16(h), the Internal Revenue Service has issued a
letter for each Benefit Plan determining that such plan is exempt from United
States Federal Income Tax under Sections 401(a) and 501(a) of the Code, and
there has been no occurrence since the date of any such determination letter
which has adversely affected such qualification.

(i) Except as set forth in Schedule 3.16(i), neither the Company, the
Subsidiary nor any of their affiliates maintains or contributes to, or has any
liability (fixed, contingent or otherwise, under any current or former plan)
for, medical, health or life insurance benefits for terminated employees of the
Company or the Subsidiary or for present employees of the Company or the
Subsidiary after termination of their employment (other than any such welfare
benefits provided pursuant to Code Section 4980B or ERISA Sections 601-608).

(j) Schedule 3.16(j) contains a true and complete list, as of the
date of this Agreement, showing the names of all employees who during the last
fiscal year received, or in the current fiscal year are expected to receive,
compensation

32
<PAGE>

(including commissions and bonuses) in excess of $50,000. Except as disclosed on
Schedule 3.16(j), neither the Company nor the Subsidiary has agreed to increase
the salary payable to any employee listed on Schedule 3.16 by more than five
percent.

(k) The Company has made available to Buyer true and complete copies
of all contracts, agreements, plans or arrangements covering any employee or
former employee of the Company or the Subsidiary with "change of control" or
similar provisions or providing for "stay on" bonuses or severance payments
(each, a "Change of Control Arrangement"). No Change of Control Arrangement
individually or collectively could give rise to the payment of any amount that
would not be deductible pursuant to the terms of Section 280G of the Code.

(l) Except as disclosed in Schedule 3.16(l) or as a result of the
transactions contemplated hereby, there has been no amendment to or announcement
by the Company, the Subsidiary or any of their affiliates relating to a change
in employee participation or coverage or benefits under any Benefit Plan that is
reasonably expected to increase materially the expense of maintaining such
Benefit Plan above the level of expense incurred in respect thereof for the
fiscal year ended June 29, 1997.

III.17 Certain Contracts and Arrangements. (a) Schedule 3.17(a)
----------------------------------
sets forth, as of the date of this Agreement, a true and complete list of all
contracts to which the Company or the Subsidiary is a party relating to the

33
<PAGE>

business or assets of the Company or the Subsidiary (except, with respect to
clauses (ii) and (iv) below, any of the foregoing calling for aggregate payments
of less than $50,000), including, without limitation, all written or oral,
express or implied (i) contracts not made in the ordinary course of business
consistent with past practice; (ii) purchase, supply and customer contracts;
(iii) contracts relating to the borrowing of money or for lines of credit; (iv)
contracts involving leases and subleases of real or personal property; (v)
contracts for the sale of any assets other than in the ordinary course of
business consistent with past practice or for the grant of any options or
preferential rights to purchase any assets, property or rights; (vi) contracts
granting any power of attorney with respect to the affairs of either the Company
or the Subsidiary; (vii) suretyship contracts, working capital maintenance or
other forms of guaranty contracts; (viii) contracts limiting or restraining the
Company or the Subsidiary from engaging or competing in any lines of business or
with any person, firm, or corporation; (ix) partnership and joint venture
contracts; (x) employment contracts; (xi) indentures, mortgages, notes,
installment obligations, or other instruments relating to the borrowing of money
in excess of $50,000 by the Company or the Subsidiary; (xii) contracts which
have remaining terms, as of the date of this Agreement, of over one year in
length of obligation on the part of the Company or the Subsidiary and provide
for aggregate payments in excess of $50,000; (xiii) franchise contracts; and
(xiv) all amendments, modifications, extensions or renewals of any of the
foregoing. To the knowledge of the Company and the Subsidiary, each of

34
<PAGE>

such contracts is valid, binding and enforceable against the parties thereto in
accordance with its terms, and in full force and effect on the date hereof.

(b) Except as set forth on Schedule 3.17(b), the Company and the
Subsidiary have performed all obligations required to be performed by them to
date under, and are not in default in respect of, any of such contracts, and no
event has occurred which, with due notice or lapse of time or both, would
constitute such a default other than defaults which would not, individually or
in the aggregate, have a Material Adverse Effect. Except as set forth on
Schedule 3.17(b), no other party to any such contract is in default in respect
thereof, and no event has occurred which, with due notice or lapse of time or
both, would constitute such a default other than defaults which would not,
individually or in the aggregate, have a Material Adverse Effect. The Company
has made available to Buyer or its representatives true and complete originals,
copies or accurate summaries of all such contracts.

III.18 Intellectual Property. Schedule 3.18 sets forth a true and
---------------------
and complete list of all material patents, trademarks (registered or
unregistered), trade names (registered or unregistered), service marks
(registered or unregistered), registered copyrights and computer software
applications (excluding noncritical, uncustomized shrink-wrap or off-the-shelf
software) owned or used by or licensed to the Company or the Subsidiary, and all
license agreements related thereto to which the Company or the Subsidiary is a
party (collectively, the "Intellectual Property"), and, with respect to
trademarks, contains a list of all jurisdictions in which such

35
<PAGE>

trademarks are registered or applied for by the Company or the Subsidiary and
all corresponding registration and application numbers. Except as disclosed on
Schedule 3.18 or as provided in any agreement listed on Schedule 3.18, each of
the Company and the Subsidiary owns or has the right to use, without payment to
any other party, the Intellectual Property used in or necessary for the conduct
of its business and the consummation of the transactions contemplated hereby
will not, by itself, materially alter or impair any such rights. Except as
disclosed on Schedule 3.18, all Intellectual Property owned or used by the
Company and the Subsidiary is free and clear of all Liens arising through
actions of the Company or the Subsidiary. Except as disclosed on Schedule 3.18,
to the knowledge of the Company and the Subsidiary, no material claims or other
proceedings are pending or threatened against the Company or the Subsidiary by
any third party person or entity with respect to the ownership, validity,
enforceability or the right to use any Intellectual Property.

III.19 Customers, Suppliers and Competitors. Schedule 3.19 sets
------------------------------------
forth a complete and correct list of (a) the ten largest suppliers of the
Subsidiary by dollar volume for the latest fiscal year, (b) the ten largest
franchisees of the Subsidiary by dollar volume of royalties paid to the
Subsidiary for the latest fiscal year and (c) all suppliers or franchisees who
since June 29, 1997 have terminated any agreement, contract or other arrangement
with the Subsidiary or with whom the Subsidiary has terminated any agreement,
contract or other arrangement resulting in

36
<PAGE>

aggregate payments in any fiscal year in excess of $50,000, in each case with or
without cause, prior to the stated expiration thereof. Except as disclosed in
Schedule 3.19, since January 1, 1998, the Subsidiary has not at any time
delivered to, or received from, any supplier or franchisee any formal notice or
written allegation of a default or breach with respect to any agreement,
contract or other arrangement, and none of such suppliers or franchisees has
delivered any formal notice stating its intention to terminate or change
significantly its relationship with the Subsidiary.

III.20 Legal Proceedings, etc. Except as set forth in Schedule 3.20,
-----------------------
there are no claims, actions, or proceedings pending, or investigations pending
or, to the knowledge of the Company and the Subsidiary, threatened, against or
relating to the Company or the Subsidiary before any court, governmental or
regulatory authority or body acting in an adjudicative capacity, which (a)
relate to or involve more than $50,000, (b) seek any injunctive relief, or (c)
relate to the transactions contemplated by this Agreement. Except as disclosed
on Schedule 3.20, neither the Company nor the Subsidiary is in default under any
material judgment, order or decree of any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, applicable to the Company or the Subsidiary.

III.21 Tax Matters. All material tax and information returns,
-----------
reports

37
<PAGE>

and other documents required to have been filed by the Company and the
Subsidiary (either separately or as part of a consolidated, unitary, combined or
similar group) with the United States, any state and local governmental
authority and any foreign jurisdiction ("Returns") have been duly and timely
filed, and each such Return is accurate and complete in all material respects.
Copies of Returns for the fiscal years ended June 29, 1997, June 30, 1996 and
June 29, 1995 which relate to the income of the Company and the Subsidiary have
been made available to Buyer or its representatives, and such copies are
accurate and complete in all material respects as of the date hereof. The
Company has also made available to Buyer correct and complete copies of all
material notices and correspondence sent or received since January 1, 1995 by
the Company or the Subsidiary to or from any federal, state, local or foreign
tax authorities. Except as set forth in Schedule 3.21, each of the Company and
the Subsidiary has paid in full all income, franchise, business, property,
sales, use, value-added, withholding, payroll, excise, capital and other taxes
shown to be due and payable on said Returns, and all penalties, assessments or
deficiencies of every nature and description incurred with respect to such
taxes, except to the extent that the Company or the Subsidiary, as the case may
be, has established on its books appropriate reserves for such amounts in
accordance with GAAP. The United States federal and state income tax Returns of
the Company and the Subsidiary (or such Returns for the consolidated group of
which the Company and the Subsidiary is a member)

38
<PAGE>

have been audited, and the audits thereof completed or the statute of
limitations has run, for all years through 1993. Except as set forth on Schedule
3.21, neither the Company nor the Subsidiary has received any notice of
deficiency or assessment from any taxing authority with respect to liabilities
for taxes of the Company or the Subsidiary which have not been fully paid or
finally settled, and any such deficiencies have been paid or are being contested
in good faith and have been adequately reserved. Except as set forth in Schedule
3.21, neither the Company nor the Subsidiary is a party to any agreement with
respect to the sharing or allocation of taxes or tax costs. There are no liens
for any material amount of federal, state, local or foreign taxes upon the
property or assets of the Company or the Subsidiary, except liens for taxes not
yet due or delinquent or the validity of which is being contested in good faith
by appropriate proceedings. Except as set forth on Schedule 3.21, there are no
outstanding waivers or comparable consents given by the Company or the
Subsidiary regarding the application of the statute of limitations with respect
to any federal, state, local or foreign taxes or Returns. Except as set forth on
Schedule 3.21, no power of attorney has been granted by the Company or the
Subsidiary with respect to any matter relating to federal, state, local or
foreign taxes that is currently in force. Except as set forth on Schedule 3.21,
neither the Company nor the Subsidiary has been a member of any other
consolidated, unitary, combined or similar group for federal, state, local or
foreign tax purposes for any taxable period for which the

39
<PAGE>

statute of limitations has not yet expired.

III.22 Arrangements with Directors, Officers and Affiliates. Except
----------------------------------------------------
for the agreements and other arrangements disclosed in Schedule 3.22 (the
"Affiliate Arrangements"), as of the date hereof, there are no agreements or
other arrangements between the Company or the Subsidiary, on the one hand, and
any director, officer, employee, stockholder or other affiliate, as defined in
Rule 405 under the Securities Act (an "Affiliate," or, collectively,
"Affiliates"), of the Company or the Subsidiary, on the other hand, including,
without limitation, management agreements and loans to or by the Company or the
Subsidiary from or to any of such persons. Except as disclosed in Schedule 3.22,
since January 1, 1995, none of the officers or directors of the Company or the
Subsidiary, or any spouse or immediate relative of any of such persons, has been
a director or officer of, or has had any direct interest in, any firm,
corporation, association or business enterprise which during such period has
been a supplier, customer or sales agent of the Company or the Subsidiary or has
competed with or been engaged in any business of the kind being conducted by the
Company or the Subsidiary. Except as disclosed in Schedule 3.22, no Affiliate of
the Company or the Subsidiary owns or has any rights in or to any of the assets,
properties or rights used by the Company or the Subsidiary in its ordinary
course of business.

III.23 Compliance with Law. Except as set forth in Schedule 3.33 and
-------------------
except with respect to environmental matters which are covered exclusively by

40
<PAGE>

Section 3.14, the operations of the Company and the Subsidiary are being
conducted in accordance with all franchising and other applicable laws,
regulations, orders and other requirements of all courts and other governmental
or regulatory authorities having jurisdiction over the Company and the
Subsidiary and their assets, properties and operations, except where non-
compliance with such laws, regulations, orders and other requirements would not
reasonably be expected to have a Material Adverse Effect. Except as set forth in
Schedule 3.23 and except with respect to environmental matters which are covered
exclusively by Section 3.14, neither the Company nor the Subsidiary has received
notice within the past year of any violation of any such law, regulation, order
or other legal requirement, or is in default with respect to any order, writ,
judgment, award, injunction or decree of any federal, state or local court or
governmental or regulatory authority or arbitrator, domestic or foreign,
applicable to the Company or the Subsidiary or any of their assets, properties
or operations, except for such violations or defaults that do not have a
Material Adverse Effect.

III.24 Fees and Commissions. No broker, finder or other person is
--------------------
entitled to any brokerage fees, commissions or finder's fees in connection with
the transaction contemplated hereby by reason of any action taken by the Company
or the Subsidiary. Schedule 3.24 sets forth a complete and accurate list of all
transaction expenses (including management or other fees payable to the Sellers
or their

41
<PAGE>

respective Affiliates pursuant to any Affiliate Arrangement) previously or to be
paid or reimbursed by the Company or the Subsidiary on their own behalf or on
the behalf of the Sellers in connection with the transactions contemplated by
this Agreement (the "Company Transaction Expenses").

III.25 Representations of the Sellers. Each Seller represents
------------------------------
severally and not jointly that:

(a) Such Seller has all requisite power and authority to own and to
dispose of the Company Securities owned by such Seller.

(b) The number of shares and/or principal amount of the Company
Securities owned by such Seller as of the date of this Agreement is set forth
beside the name of such Seller on Annex A hereto. Except as set forth on
Schedule 3.25(b), such Seller owns his respective Company Securities, free and
clear of any Liens, and at the Closing, Buyer will acquire good, valid and
marketable title to the Company Securities owned by such Seller, free and clear
of any Liens.

(c) Such Seller has full power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby and to
sell to Buyer such Seller's Company Securities. This Agreement has been duly
and validly executed and delivered by such Seller and, assuming that this
Agreement constitutes a valid and binding agreement of Buyer, the Company and
each other Seller, constitutes a valid and binding agreement of such Seller,
enforceable against such

42
<PAGE>

Seller in accordance with its terms, except (i) as such enforceability may be
limited by bankruptcy, insolvency, moratorium and other similar laws affecting
or relating to enforcement of creditors' rights generally and (ii) as such
enforceability may be limited by general principles of equity, regardless of
whether asserted in a proceeding in equity or at law.

(d) Neither the execution and delivery of this Agreement by such
Seller nor the sale by such Seller of the Company Securities owned by such
Seller pursuant to this Agreement at the Closing will (i) conflict with or
result in any breach of (with or without notice or lapse of time, or both) any
provision of the Certificate of Incorporation, By-Laws or similar governing
documents of such Seller which is not a natural person, (ii) except for filings
required under the HSR Act, require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority by such Seller, except where the failure to obtain such consent,
approval, authorization or permit, or to make such filing or notification, would
not reasonably be expected to have a Material Adverse Effect, (iii) result in a
violation of or default under (with or without notice or lapse of time, or both)
or give rise to any right of termination, cancellation or acceleration or result
in the creation of any Lien under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license, agreement or other instrument or
obligation to which such Seller is a party or by which such Seller or any of its
assets may be

43
<PAGE>

bound, except for such defaults or rights of termination, cancellation or
acceleration or Liens as to which requisite waivers or consents have been
obtained or which, in the aggregate, would not reasonably be expected to have a
Material Adverse Effect, or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to such Seller or any of its assets,
which violation would reasonably be expected to have a Material Adverse Effect.

(e) No broker, finder or other person is entitled to any brokerage
fees, commissions or finder's fees in connection with the transaction
contemplated hereby by reason of any action taken by such Seller.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------

Buyer represents and warrants to the Sellers as follows:

IV.1 Organization. Buyer is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware. Buyer has
heretofore delivered to the Company complete and correct copies of the
Certificate of Incorporation and By-Laws of Buyer as currently in effect.

IV.2 Authority Relative to this Agreement. Buyer has full
------------------------------------
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and

44
<PAGE>

the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Buyer, and no other corporate
proceedings on the part of Buyer are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Buyer and, assuming that this Agreement
constitutes a valid and binding agreement of the Sellers, constitutes a valid
and binding agreement of Buyer, enforceable against Buyer in accordance with its
terms, except (i) as such enforceability may be limited by bankruptcy,
insolvency, moratorium and other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) as such enforceability may
be limited by general principles of equity, regardless of whether asserted in a
proceeding in equity or at law.

IV.3 Consents and Approvals; No Violation. (a) Except as set forth
------------------------------------
in Schedule 4.3, neither the execution and delivery of this Agreement by Buyer
nor the purchase by Buyer of the Company Securities pursuant to this Agreement
will (i) conflict with or result in any breach of (with or without notice or
lapse of time, or both) any provision of the Articles of Incorporation or By-
Laws of Buyer, (ii) require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority,
(iii) result in a violation of or default under (with or without notice or lapse
of time, or both), or give rise to any right of termination, cancellation or
acceleration under, any of the terms, conditions

45
<PAGE>

or provisions of any note, bond, mortgage, indenture, license, agreement or
other instrument or obligation to which Buyer is a party or by which Buyer or
any of its assets may be bound, except for such defaults or rights of
termination, cancellation or acceleration as to which requisite waivers or
consents have been obtained, or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Buyer.

(b) Except as set forth in Schedule 4.3, and except for the filings
by the Sellers and Buyer required by the HSR Act, no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the consummation
by Buyer of the transactions contemplated hereby.

IV.4 Acquisition of Stock for Investment. Buyer is acquiring the
-----------------------------------
Company Securities for investment and not with a view toward, or for sale in
connection with, any distribution thereof, nor with any present intention of
distributing or selling such Company Securities. Buyer agrees that the Company
Securities may not be sold, transferred, offered for sale, pledged, hypothecated
or otherwise disposed of without registration under the Securities Act, except
pursuant to an exemption from such registration available under the Securities
Act.

IV.5 Financing. Buyer has provided to the Company and the Seller
---------
accurate information as to its plans to obtain the Financing.

46
<PAGE>

IV.6 Fees and Commissions. Buyer represents and warrants that no
--------------------
broker, finder or other person is entitled to any brokerage fees, commissions or
finder's fees in connection with the transaction contemplated hereby by reason
of any action taken by Buyer.

IV.7 Knowledge of Inaccuracies. Buyer represents and warrants that
-------------------------
as of the date of this Agreement it has no actual knowledge that any of the
representations or warranties of the Company, the Subsidiary or any of the
Sellers in this Agreement are inaccurate or that any of such parties are in
breach of any agreement or covenant contained in this Agreement.

ARTICLE V

COVENANTS OF THE PARTIES
------------------------

V.1 HSR Act Compliance. The parties shall resist vigorously
------------------
(including, without limitation, the institution or defense of legal proceedings)
any assertion that the transactions contemplated herein constitute a violation
of the antitrust laws, all to the end of expediting consummation of the
transactions contemplated herein. The costs and expenses of compliance with this
Section 5.1 shall be borne by the Company, in the case of costs and expenses of
the Company or the Sellers, or by Buyer, in the case of costs and expenses of
Buyer, except that 50% of the fees previously paid in connection with the
notifications required to be filed in connection

47
<PAGE>

with the HSR Act shall be reimbursed by the Company.

V.2 Conduct of Business of the Company. Except as described in
----------------------------------
Schedule 5.2, during the period from the date of this Agreement to the Closing
Date, the Company will conduct its business and operations according to its
ordinary course of business consistent with past practice and will cause the
Subsidiary to conduct its business and operations according to its ordinary
course of business consistent with past practice and to keep its retail
operations substantially intact. The Company will cause the Subsidiary to
maintain in inventory, at all times prior to the Closing Date, quantities of raw
materials and other supplies and materials sufficient to allow Buyer to continue
and operate the business of the Subsidiary, after the Closing Date, free from
any shortage of such items (assuming Buyer continues to purchase such items
after the Closing Date in the ordinary course of business consistent with past
practice). The Company will use commercially reasonable efforts to preserve
intact the business organization of the Subsidiary and its goodwill, and keep
available the services of its present officers and key employees, and preserve
intact the business relationships with suppliers, customers and others having a
business relationship with the Subsidiary or the Company, and will also maintain
its present relationship in all material respects with the Subsidiary and the
Company. Without limiting the generality of the foregoing, and, except as
contemplated in this Agree-

48
<PAGE>

ment or as described in Schedule 5.2, prior to the Closing Date, without the
prior written consent of Buyer, the Company will not, and will not permit the
Subsidiary to:

(a) make any change in its Certificate of Incorporation or By-
Laws, issue any additional shares of capital stock or equity security or
grant any option, warrant, or right to acquire any capital stock or equity
securities, or issue any security convertible into or exchangeable for its
capital stock, or alter any material term of any of its outstanding
securities or make any change in its outstanding shares of capital stock or
other ownership interests in its capitalization, whether by reason of a
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, stock dividend or otherwise, or declare, set aside
or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock, or
redeem or otherwise acquire any shares of its capital stock;

(b) (i) create, incur or assume any indebtedness for money
borrowed, including obligations in respect of capital leases; or (ii)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person; provided, that the Subsidiary and the Company may endorse
--------
negotiable in-

49
<PAGE>

struments in the ordinary course of business consistent with past practice;

(c) sell, franchise, move or close any of its stores or make any
other sale, assignment, transfer, abandonment or other conveyance of any of
its assets having a fair market value in excess of $50,000 or any material
part thereof, except transactions pursuant to existing contracts set forth
in the Schedules and dispositions of inventory or of worn-out or obsolete
equipment for fair or reasonable value in the ordinary course of business
consistent with past practice;

(d) subject any of its assets, or any part thereof, to any Lien,
or suffer such to be imposed, except for Permitted Exceptions and such
Liens as may arise in the ordinary course of business consistent with past
practice which will not, individually or in the aggregate, have a Material
Adverse Effect;

(e) acquire any assets, raw materials or properties, or enter
into any other transaction in an amount in excess of $10,000 individually
or $25,000 in the aggregate, other than in the ordinary course of business
consistent with past practice;

(f) (i) increase the rate or terms of compensation payable or to
become payable by the Subsidiary or the Company to its directors, officers
or key employees, except increases occurring in the ordinary course of
business

50
<PAGE>

in accordance with its customary practices (which shall include normal
periodic performance reviews and related compensation and benefit
increases); or (ii) increase the rate or terms of any bonus, insurance,
pension or other employee benefit plan, payment or arrangement made to, for
or with any such directors, officers or key employees;

(g) enter into any agreement, commitment or transaction
(including without limitation any borrowing, capital expenditure or capital
financing) relating to the business, operations or financial condition of
the Subsidiary or the Company other than in the ordinary course of business
consistent with past practice;

(h) pay, loan or advance any amount to, or sell, transfer or
lease any properties or assets to, or enter into any agreement or
arrangement with, any of its Affiliates;

(i) make any change in any method of accounting or accounting
principle, method, estimate or practice, except for any such change
required by reason of a concurrent change in GAAP, or write-down the value
of any inventory or write-off as uncollectible any accounts receivable,
except in the ordinary course of business consistent with past practice;

(j) settle, release or forgive any claim or litigation or waive

51
<PAGE>

any right involving an amount greater than $50,000;

(k) amend in any material respect or terminate any of the
agreements identified in Schedule 3.17 other than in the ordinary course of
business consistent with past practice;

(l) commence actual construction of any new facilities other
than those identified on Schedule 5.2;

(m) engage in any activity which would cause a material change
in the regulatory status of the Subsidiary or the Company which would be
reasonably expected to have a Material Adverse Effect; or

(n) commit itself to do any of the foregoing in any manner.

V.3 Access to Information.
---------------------

(a) Between the date of this Agreement and the Closing Date, the
Company will and will cause the Subsidiary to, during ordinary business hours
and upon reasonable notice, (i) give Buyer and its accountants, counsel,
environmental consultants, financial advisors and other authorized
representatives (the "Buyer Representatives") reasonable access to all books,
records, plants, offices and other facilities and properties of the Company to
which Buyer is permitted access by law, (ii) permit Buyer to make such
reasonable inspections thereof as Buyer may reasonably request, (iii) cause its
officers and advisors to furnish Buyer with such financial and operating data
and other information with respect to the business and properties

52
<PAGE>

of the Subsidiary and the Company as Buyer may from time to time reasonably
request, (iv) cause its officers and advisors to furnish Buyer a copy of each
report, schedule or other document filed with or received by them from the SEC
with respect to the Subsidiary and the Company; provided, however, that (A) any
-------- -------
such investigation shall be conducted in such a manner as not to interfere
unreasonably with the operation of the business of the Subsidiary and the
Company, (B) the Subsidiary and the Company shall not be required to take any
action which would constitute a waiver of the attorney-client privilege, and (C)
the Subsidiary and the Company need not supply Buyer with any information which
the Subsidiary or the Company, as the case may be, is under a legal obligation
not to supply.

(b) All information furnished to or obtained by Buyer and the Buyer
Representatives pursuant to this Section 5.3 shall be subject to the provisions
of the Confidentiality Agreement, dated May 10, 1997, between the Company and
Buyer (the "Confidentiality Agreement") and shall be treated as "Information"
(as defined in the Confidentiality Agreement). In the event that this Agreement
shall be terminated without the Closing having occurred, Buyer agrees that for a
period of one year from the date of this Agreement it will not use "Information"
(as defined in the Confidentiality Agreement) to compete with the Company's
franchisees to obtain lease renewals in the malls where the Company's franchised
stores are presently located as of the date of this Agreement.
---------

53
<PAGE>

V.4 Insurance. The Company shall keep, and shall cause the
---------
Subsidiary to keep, all insurance policies set forth on Schedule 3.13, 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.

V.5 WARN Act. To the extent required by law, the Company shall cause
--------
the Subsidiary to timely give any required notices under the WARN Act relating
to any "plant closing" or "mass layoff" (as those terms are defined in WARN)
arising prior to the Closing.

V.6 Expenses. Except as specifically provided in this Agreement,
--------
whether or not the transactions contemplated hereby are consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by the party incurring such costs and
expenses. The Company shall be liable for the legal, accounting and professional
fees of the Sellers specified on Schedule 5.6 hereto.

V.7 Further Assurances. Subject to the terms and conditions of this
------------------
Agreement, each of the parties hereto will use all commercially reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the sale of Company Common Stock
pursuant to this Agreement. From time to time after the date hereof, without
further consideration, the Sellers

54
<PAGE>

will, at Buyer's expense, execute and deliver such documents to Buyer as Buyer
may reasonably request in order more effectively to vest in Buyer good title to
the Company Securities. From time to time after the date hereof, without
further consideration, Buyer will, at its own expense, execute and deliver such
documents to the Sellers as the Sellers may reasonably request in order more
effectively to consummate the sale of the Company Securities pursuant to this
Agreement.

V.8 Public Statements. The parties shall consult with each other
-----------------
prior to issuing any public announcement, statement or other disclosure with
respect to this Agreement or the transactions contemplated hereby and shall not
issue any such public announcement, statement or other disclosure prior to such
consultation, except as may be required by law and except that the parties may
make public announcements, statements or other disclosures with respect to this
Agreement and the transactions contemplated hereby to the extent and under the
circumstances in which the parties are expressly permitted by the
Confidentiality Agreement to make disclosures of "Information" (as defined in
the Confidentiality Agreement).

V.9 Consents and Approvals.
----------------------

(a) The Company and Buyer shall cooperate with each other and (i)
promptly prepare and file all necessary documentation, (ii) effect all necessary
applications, notices, petitions and filings and execute all agreements and
documents, (iii) use all commercially reasonable efforts to obtain all necessary
permits, consents, ap-

55
<PAGE>

provals and authorizations of all governmental bodies and (iv) use all
commercially reasonable efforts to obtain all necessary Environmental Permits,
Permits, consents, approvals and authorizations of all other parties, in the
case of each of the foregoing clauses (i), (ii), (iii) and (iv), necessary or
advisable to consummate the transactions contemplated by this Agreement or
required by the terms of any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other instrument to
which the Company or Buyer or any of its subsidiaries is a party or by which any
of them is bound. Without limiting the foregoing, the Company shall cooperate
with Buyer in connection with Buyer's efforts to obtain the Financing and to
successfully complete the Senior Note Tender Offer (as hereinafter defined),
such cooperation to include without limitation (i) facilitating due diligence
investigations by potential financing sources, (ii) assuring cooperation by the
Company's and the Subsidiary's independent accountants in any audit of the
Company's and the Subsidiary's, financial statements by Arthur Andersen LLP and
providing customary consents, comfort letters and access to work papers, and
(iii) executing and delivering any required supplemental indenture and other
documents in connection with the Financing and the Senior Note Tender Offer.

(b) The Sellers shall have the right but not the obligation to review
and approve in advance all characterizations of the information relating to the
Subsidiary and the Company, and each of the Sellers and Buyer shall have the
right

56
<PAGE>

but not the obligation to review and approve in advance all characterizations of
the information relating to the transactions contemplated by this Agreement,
which appear in any filing made in connection with the transactions contemplated
hereby or in the Offering Memorandum relating to the Financing. The Sellers and
Buyer agree that they will consult with each other with respect to the obtaining
of all such necessary Environmental Permits, consents, approvals and
authorizations of all third parties and governmental bodies. The Sellers and
Buyer shall designate separate counsel with respect to all applications,
notices, petitions and filings (joint or otherwise), relating to this Agreement
and the transactions contemplated hereby, on behalf of the Sellers, the
Subsidiary or the Company, on the one hand, and Buyer, on the other hand, with
all governmental bodies.

(c) The parties hereto shall consult with each other prior to
proposing or entering into any stipulation or agreement with any Federal, State
or local governmental authority or agency or any third party in connection with
any Federal, State, or local governmental consents and approvals legally
required for the consummation of the transactions contemplated hereby and shall
not propose or enter into any such stipulation or agreement without the other
party's prior written consent, which consent shall not be unreasonably withheld.

V.10 Sales and Transfer Taxes. All securities and other transfer
------------------------
taxes incurred in connection with this Agreement and the transactions
contemplated hereby

57
<PAGE>

shall be borne by the Company. Buyer will file all necessary tax returns and
other documentation with respect to all such transfer taxes, and, if required by
applicable law, the Sellers will join in the execution of any such tax returns
or other documentation, subject to their reasonable prior review thereof and
opportunity to comment thereon.

V.11 Supplemental Information. From time to time prior to the Closing
------------------------
Date and upon becoming aware of any such matter, condition or occurrence, the
Company and the Subsidiary will promptly disclose to Buyer, and Buyer will
promptly disclose to the Company, (i) any material development affecting the
ability of such party to consummate the transactions contemplated by this
Agreement, (ii) any matter, condition, occurrence or knowledge which, if
existing or occurring at the date of this Agreement, would have been required to
be excepted from any representation and warranty contained herein in order for
such representation or warranty to be true and correct on the date hereof or
otherwise set forth or described in the respective Schedule or (iii) any breach
of any covenant or agreement contained in this Agreement of which such party has
knowledge.

V.12 Employees. Buyer agrees that it will cause the Subsidiary to
---------
honor the agreements and arrangements with its employees that are identified in
Schedule 3.16. Notwithstanding the foregoing, it is understood that nothing in
this Agreement shall prohibit or restrict Buyer from terminating the employment
of any

58
<PAGE>

of the Subsidiary's employees, changing compensation levels or other terms and
conditions of employment (other than service credit for past employment with the
Subsidiary) subsequent to the Closing Date, subject to the obligations of Buyer
and the Subsidiary with respect to the items identified on Schedule 3.16.
Nothing in this Section 5.12, express or implied, is intended to confer or shall
confer upon any of the Subsidiary's employees or former employees any rights or
remedies of any nature or kind whatsoever under or by reason of this Agreement,
including, without limitation, any rights of employment.

ARTICLE VI

CLOSING CONDITIONS
------------------

VI.1 Conditions to Each Party's Obligations to Effect the
----------------------------------------------------
Transactions Contemplated Hereby. The respective obligations of each party to
- --------------------------------
effect the transactions contemplated hereby shall be subject to no preliminary
or permanent injunction or other order or decree by any federal or state court
which prevents the consummation of the transactions contemplated hereby having
been issued and remaining in effect (each party agreeing to use its reasonable
best efforts to have any such injunction, order or decree lifted), and no
statute, rule or regulation having been enacted by any Federal, State, or local
governmental agency in the United States which prohibits the consummation of the
transactions contemplated

59
<PAGE>

hereby.

VI.2 Conditions to Obligations of Buyer.
----------------------------------

(a) The obligation of Buyer to effect the transactions contemplated
by this Agreement shall be subject to the fulfillment at or prior to the Pre-
Closing Date of the following additional conditions:

(i) Buyer shall have entered into the Financing Agreements;

(ii) Buyer shall have received binding and irrevocable tenders
and consents from the holders of not less than 75% of the Subsidiary's
outstanding 10f% Senior Secured Notes due 2001 (the "Senior Notes") to sell
their Senior Notes to Buyer and to consent to such amendments to or waivers
under the Indenture under which the Senior Notes were issued as Buyer
determines are necessary to facilitate the Financing (such tender offer and
consent solicitation, collectively, the "Senior Note Tender Offer");

(iii) Buyer shall received executed Settlement Agreement and
Releases in the form of Annex B hereto from franchisees of the Subsidiary
and related investors accounting for at least 80% of the Subsidiary's
franchisees, excluding for such purposes the franchisees owned or
controlled by any of the Sellers or other significant franchisees that have
already been received;

(iv) the Company shall have provided to Buyer the

60
<PAGE>

information necessary to permit the calculation of any adjustments pursuant
to Section 1.2(b);

(v) the Company shall have provided evidence reasonably
satisfactory to Buyer that all of the Warrants have been cancelled
consistent with Section 1.5 and that the Affiliate Arrangements identified
on Schedule 6.2(a)(v) other than the Franchise Agreements for franchisees
in which Mr. Karp is an investor, as amended in accordance with Annex B
hereto, have been terminated effective not later than the Closing Date with
no additional amounts payable thereunder by the Company or the Subsidiary;
and

(vi) the Company and the Sellers shall have performed and
complied with in all material respects the covenants and agreements
contained in this Agreement required to be performed and complied with by
it or them at or prior to the Closing Date, the representations and
warranties of the Company and the Sellers set forth in this Agreement shall
be true and correct in all material respects as of the date of this
Agreement and as of the Pre-Closing Date as though made at and as of the
Pre-Closing Date, there shall not have occurred and be continuing a
Material Adverse Effect, and Buyer shall have received a certificate to the
foregoing effect signed by an authorized officer of the Company.

(b) The obligation of Buyer to effect the transactions contemplated

61
<PAGE>

by this Agreement shall be subject to the fulfillment at or prior to the Closing
Date of the following additional conditions:

(i) the delivery to it of the Escrowed Seller Documents and the
Escrowed Company Documents; and

(ii) the Company and the Sellers shall have performed and complied
with in all material respects the covenants and agreements contained in this
Agreement required to be performed and complied with by it or them at or prior
to the Closing Date.

VI.3 Conditions to Obligations of the Sellers.
----------------------------------------

The obligation of the Sellers to effect the transactions contemplated by this
Agreement shall be subject to the fulfillment at or prior to the Pre-Closing
Date of the following additional conditions:

(a) Buyer shall have performed in all material respects its covenants
and agreements contained in this Agreement required to be performed at or prior
to the Pre-Closing Date; and

(b) the representations and warranties of Buyer set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though made at and as of the
Closing Date, and the Company and the Sellers the Sellers shall have received a
certificate to that effect signed by an authorized officer of Buyer.

62
<PAGE>

ARTICLE VII

TERMINATION AND ABANDONMENT
---------------------------

VII.1 Termination.
-----------

(a) This Agreement may be terminated at any time prior to the Closing
Date, by mutual written consent of Buyer, the Company and the Sellers.

(b) This Agreement may be terminated by the Company, Buyer or the
Sellers if the transactions contemplated hereby shall not have been consummated
on or before August 24, 1998; provided that the right to terminate this
--------
Agreement under this Section 7.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing Date to occur on or before such date.

(c) This Agreement may be terminated by either the Company or Buyer
if any court of competent jurisdiction in the United States or any State shall
have issued an order, judgment or decree permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated hereby and such order,
judgment or decree shall have become final and nonappealable.

(d) This Agreement may be terminated by Buyer if there has been a
material violation or breach by the Company or the Sellers of any agreement,
representation or warranty contained in this Agreement which has rendered the
satis-

63
<PAGE>

faction of any condition to the obligations of Buyer impossible and such
violation or breach has not been waived by Buyer.

(e) This Agreement may be terminated by the Company or the Sellers if
there has been a material violation or breach by Buyer of any agreement,
representation or warranty contained in this Agreement which has rendered the
satisfaction of any condition to the obligations of the Sellers impossible and
such violation or breach has not been waived by the Sellers.

VII.2 Procedure and Effect of Termination. In the event of
-----------------------------------
termination of this Agreement and abandonment of the transactions contemplated
hereby by either or both of the parties pursuant to Section 7.1, written notice
thereof shall forthwith be given by the terminating party to the other party and
this Agreement shall terminate and the transactions contemplated hereby shall be
abandoned, without further action by any of the parties hereto. If this
Agreement is terminated as provided herein:

(a) none of the parties hereto nor any of their respective
directors, officers or affiliates, as the case may be, shall have any
liability or further obligation to the other party or any of their
respective directors, officers or affiliates, as the case may be, pursuant
to this Agreement, except for liability for any breach of this Agreement
and except in each case as stated in this Section 7.2 and in Sections
5.3(b), 5.6 and 5.8; provided, that the sole
--------

64
<PAGE>

recourse of Buyer with respect to any such liability arising out of this
Section 7.2(a) shall be to assert a claim against the Company (which shall
be responsible for any breaches by the Company or by the Sellers) and not
the Sellers; and

(b) all filings, applications and other submissions made
pursuant to this Agreement, to the extent practicable, shall be withdrawn
from the agency or other person to which they were made.

ARTICLE VIII

INDEMNIFICATION
---------------

VIII.1 Coverage. Each of the Sellers, severally, but not jointly,
--------
shall indemnify, defend and hold harmless Buyer from all damages, liabilities,
losses, costs, expenses (including all reasonable fees), claim or cause of
action ("Losses") arising out of or resulting from, or shall pay or become
obligated to pay any sum on account of, any breach of representation and
warranty as to such Seller in Section 3.25.

VIII.2 Limitation of Liability. Any Seller's liability with respect
-----------------------
to indemnification in Section 8.1 shall be limited to that portion of the cash
purchase price received for Company Securities sold by such Seller.

ARTICLE IX

65
<PAGE>

MISCELLANEOUS PROVISIONS
------------------------

IX.1 Amendment and Modification. Subject to applicable law, this
--------------------------
Agreement may be amended, modified or supplemented only by written agreement of
the Company, the Sellers and Buyer.

IX.2 Waiver of Compliance; Consents. Except as otherwise provided in
------------------------------
this Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.

IX.3 No Survival of Representations and Warranties. Each and every
---------------------------------------------
representation and warranty contained in this Agreement and each and every
covenant contained in this Agreement (other than the covenants in Section
5.3(b), 5.6, 5.8 and 5.12 and the representations and warranties in Section
3.25) shall expire with, and be terminated and extinguished by, (i) the
consummation of the sale of the Company Securities pursuant to this Agreement
and shall not survive the Closing Date, or (ii) the termination of this
Agreement pursuant to Section 7.1 or otherwise.

IX.4 Notices. All notices and other communications hereunder shall
-------

66
<PAGE>

be in writing and shall be deemed given if delivered personally or by facsimile
transmission or mailed by registered or certified mail (return receipt
requested), postage prepaid, to the parties at the following addresses or
facsimile numbers (or at such other address or facsimile number for a party as
shall be specified by like notice; provided that notices of a change of address
--------
shall be effective only upon receipt thereof):

(a If to Buyer, to:
Mrs. Fields' Original Cookies, Inc.
2855 East Cottonwood Parkway, Suite 400
Salt Lake City, Utah 84121
facsimile no.: (801) 736-5943

Attention: Mr. Larry A. Hodges

with copies to:

Mrs. Fields' Original Cookies, Inc.
2855 East Cottonwood Parkway, Suite 400
Salt Lake City, Utah 84121
facsimile no.: (801) 736-5943

Attention: Legal Department

Capricorn Management, G.P.
30 East Elm Street
Greenwich, Connecticut 06830
facsimile no.: (203) 861-6671

Attention: Mr. Herbert S. Winokur, Jr.

and

Skadden, Arps, Slate, Meagher

67
<PAGE>

& Flom LLP
919 Third Avenue
New York, New York 10022
facsimile no.: (212) 735-2000

Attention: Randall H. Doud, Esq.

(b) if to the Company or the Sellers, to:

Cookies USA, Inc.
c/o The Jordan Company
9 West 57th Street, Suite 4000
New York, New York 10019
facsimile no.: (212) 755-5263

Attention: Mr. Adam Max

with copies to:

Mayer Brown & Platt
1675 Broadway
New York, New York 10019-5820
facsimile no.: (212) 262-1910

Attention: Martin J. Collins, Esq., and

Michael Coles
2450 Kirk Lane
Kennesaw, Georgia 30144, and

Arthur S. Karp
7902 Sanderling Road
Sarasota, Florida 34242

IX.5 Assignment. This Agreement and all of the provisions hereof
----------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but, except to the extent
specifically

68
<PAGE>

provided in Section 1.1, neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any party hereto, including by
operation of law, without the prior written consent of the other party, nor is
this Agreement intended to confer upon any other person except the parties
hereto any rights or remedies hereunder.

IX.6 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York (regardless of
the laws that might otherwise govern under applicable New York principles of
conflicts of law) as to all matters, including but not limited to matters of
validity, construction, effect, performance and remedies.

IX.7 Counterparts. This Agreement may be executed in two
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

IX.8 Interpretation. The article and section headings contained in
--------------
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. All references to Schedules are to the
Disclosure Schedule delivered by the Company to Buyer as of the date of this
Agreement, as they may be amended pursuant to Section 5.11 subject to Buyer's
rights under Section 7.1(d). As used in

69
<PAGE>

this Agreement, the term "person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a governmental entity or any department or agency thereof. As
used in this Agreement, the term "Permitted Exceptions" shall mean and include
(i) those exceptions to title to the properties and assets of the Company listed
in Schedule 3.11; (ii) all exceptions, restrictions, easements, rights of way
and encumbrances set forth in title reports or title insurance binders which
have been made available to Buyer; (iii) mortgages, liens, pledges, charges,
encumbrances and restrictions which secure debt that is reflected as a liability
on the Company Balance Sheet or which are otherwise reflected in the Company
Balance Sheet or disclosed in the notes thereto; (iv) mortgages, liens, pledges,
charges, encumbrances and restrictions incurred in connection with the Company's
purchase of properties and assets after the date of the Company Balance Sheet
securing all or a portion of the purchase price therefor; (v) statutory liens
for current taxes or assessments not yet due or delinquent or the validity of
which is being contested in good faith by appropriate proceedings; (vi)
mechanics', carriers', workers', repairers' and other similar liens arising or
incurred in the ordinary course of business relating to obligations as to which
there is no default on the part of the Company; (vii) zoning, entitlement and
other land use and environmental regulations by governmental authorities and
(viii) such other liens, imperfections in title, charges, easements,
restrictions and encumbrances which do not materi-

70
<PAGE>

ally detract from the value of or materially interfere with the present use of
any property subject thereto or affected thereby that is material to the
business, operations or financial condition of the Company or which relate to
properties that are not material to the Company and do not, in the aggregate
have a Material Adverse Effect. As used in this Agreement, the term "subsidiary"
when used in reference to any other person shall mean any corporation of which
outstanding securities having ordinary voting power to elect a majority of the
Board of Directors of such corporation are owned directly or indirectly by such
other person.

IX.9 Entire Agreement. This Agreement, including the documents,
----------------
Schedules, certificates and instruments referred to herein, and the
Confidentiality Agreement embody the entire agreement and understanding of the
parties hereto in respect of the transactions contemplated by this Agreement.
There are no restrictions, promises, representations, warranties, covenants or
undertakings, other than those expressly set forth or referred to herein or
therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such transactions other than the
Confidentiality Agreement.

71
<PAGE>

IN WITNESS WHEREOF, the Company, the Sellers and Buyer have caused
this agreement to be signed by their respective duly authorized officers as of
the date first above written.

MRS. FIELDS' ORIGINAL COOKIES,
INC.

By /s/ Larry A. Hodges
-------------------------------
Name: Larry A. Hodges
Title: CEO

COOKIES USA, INC.

By /s/ Adam E. Max
Name: Adam E. Max
Title: VP

THE SELLERS:

LEUCADIA INVESTORS, INC.

By /s/ Joseph A. Orlardo
Name: Joseph A. Orlardo
Title: Vice President

JOHN W. JORDAN, II REVOCABLE TRUST

By /s/ John W. Jordan
Name: John W. Jordan
Title:

72
<PAGE>

UNIVERSITY OF NOTRE DAME/THE JOHN
W. JORDAN II FUND

By: /s/ E. William Beauchamze
Name: E. William Beauchamze
Title: EVP

/s/ David W. Zalaznick
-------------------------------
David W. Zalaznick

/s/ Johnathan F. Boucher
-------------------------------
Johnathan F. Boucher

/s/ John R. Lowden
-------------------------------
John R. Lowden

DELEWARE CHARTER GUARANTEE & TRUST
CO. F/B/O JOHN R. LOWDEN

By: /s/ John R. Lowden
Name: John R. Lowden
Title: Trustee

/s/ Adam E. Max
---------------
Adam E. Max

/s/ John M. Camp
-------------------------------
John M. Camp

JOHN M. CAMP III, PROFIT SHARING PLAN, 1/1/88,
JOHN M. CAMP III, TRUSTEE

By /s/ John M. Camp
Name: John M. Camp
Title: Trustee

/s/ A. Richard Caputo, Jr.
-------------------------------
A. Richard Caputo, Jr.

73
<PAGE>

JAMES E. JORDAN, JR. PROFIT SHARING PLAN & TRUST

By /s/ James E. Jordan, Jr.
Name: James E. Jordan, Jr.
Title: Trustee

PAUL RODZEVIK PROFIT SHARING PLAN & TRUST

By /s/ Paul Rodzevik
Name: Paul Rodzedvik
Title: Trustee

/s/ Thomas H. Quinn
-------------------------------
Thomas H. Quinn
JII PARTNERS

By /s/ Thomas H. Quinn
Name: Thomas H. Quinn
Title:

MCIT (EXISTING POOL) LIMITED

By /s/ James E. Jordan
Name: James E. Jordan
Title: Director

74
<PAGE>

COOKIES USA PARTNERS, L.P.

By Jefferies & Company, Inc. Its General Partner

By /s/ Jerry M. Gluck
Name: Jerry M. Gluck
Title: Executive Vice President

/s/ Michael J. Coles
-------------------------------
Michael J. Coles

/s/ Arthur S. Karp
-------------------------------
Arthur S. Karp

GEORGIA COOKIES, INC.

By /s/ Arthur S. Karp
Name: Arthur S. Karp
Title: President

THE ARTHUR S. KARP FAMILY FOUNDATION, INC.

By /s/Arthur S. Karp
Name: Arthur S. Karp
Title: Chair

75
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I SALE OF STOCK AND TERMS OF PAYMENT............................ 2
1.1 The Sale........................................................ 2
1.2 Consideration................................................... 3
1.3 The Sellers' Releases........................................... 5
1.4 Other Matters................................................... 6
1.5 Warrants........................................................ 8

ARTICLE II THE PRE-CLOSING AND CLOSING................................... 8
2.1 Time and Place of Pre-Closing and Closing....................... 8
2.2 Deliveries by the Sellers and the Company....................... 10
2.3 Deliveries by Buyer............................................. 12

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANYAND THE SELLERS.. 12
3.1 Organization; Qualification..................................... 13
3.2 The Company's Capitalization.................................... 14
3.3 Title to Stock.................................................. 16
3.4 Authority Relative to this Agreement............................ 16
3.5 Subsidiaries and Equity Investments; Affiliates................. 17
3.6 Consents and Approvals; No Violation............................ 17
3.7 Reports......................................................... 19
3.8 Financial Statements............................................ 20
3.9 Undisclosed Liabilities......................................... 22
3.10 Absence of Certain Changes or Events........................... 23
3.11 Personal Property.............................................. 25
3.12 Real Property.................................................. 26
3.13 Insurance...................................................... 28
3.14 Environmental Matters.......................................... 29
3.15 Labor Matters.................................................. 33
3.16 ERISA; Benefit Plans........................................... 34
3.17 Certain Contracts and Arrangements............................. 40
3.18 Intellectual Property.......................................... 42
</TABLE>

lxxvi
<PAGE>

<TABLE>
<S> <C>
3.19 Customers, Suppliers and Competitors.......................... 44
3.20 Legal Proceedings, etc........................................ 44
3.21 Tax Matters................................................... 45

3.22 Arrangements with Directors, Officers
and Affiliates................................................ 48
3.23 Compliance with Law........................................... 49
3.24 Fees and Commissions.......................................... 50
3.25 Representations of the Sellers................................ 50

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER........................ 53

4.1 Organization................................................... 53
4.2 Authority Relative to this Agreement........................... 53
4.3 Consents and Approvals; No Violation........................... 54
4.4 Acquisition of Stock for Investment............................ 56
4.5 Financing...................................................... 56
4.6 Fees and Commissions........................................... 56
4.7 Knowledge of Inaccuracies...................................... 56

ARTICLE V COVENANTS OF THE PARTIES........................................ 57
5.1 HSR Act Compliance............................................. 57
5.2 Conduct of Business of the Company............................. 57
5.3 Access to Information.......................................... 63
5.4 Insurance...................................................... 64
5.5 WARN Act....................................................... 65
5.6 Expenses....................................................... 65
5.7 Further Assurances............................................. 65
5.8 Public Statements.............................................. 66
5.9 Consents and Approvals......................................... 67
5.10 Sales and Transfer Taxes...................................... 69
5.11 Supplemental Information...................................... 70
5.12 Employees..................................................... 70

ARTICLE VI CLOSING CONDITIONS............................................. 71
6.1 Conditions to Each Party's Obligations to
Effect the Transactions Contemplated Hereby.................... 71
6.2 Conditions to Obligations of Buyer............................. 72
6.3 Conditions to Obligations of the Sellers....................... 74
</TABLE>

lxxvii
<PAGE>

<TABLE>
<S> <C>
ARTICLE VII TERMINATION AND ABANDONMENT................................... 75
7.1 Termination.................................................... 75
7.2 Procedure and Effect of Termination............................ 77

ARTICLE VIIIINDEMNIFICATION............................................... 78
8.1 Coverage....................................................... 78
8.2 Limitation of Liability........................................ 78

ARTICLE IXMISCELLANEOUS PROVISIONS........................................ 79
9.1 Amendment and Modification..................................... 79
9.2 Waiver of Compliance; Consents................................. 79
9.3 No Survival of Representations and Warranties.................. 79
9.4 Notices........................................................ 80
9.5 Assignment..................................................... 81
9.6 Governing Law.................................................. 82
9.7 Counterparts................................................... 82
9.8 Interpretation................................................. 82
9.9 Entire Agreement............................................... 84
</TABLE>

lxxviii

<PAGE>

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

THE ORIGINAL GREAT AMERICAN CHOCOLATE
CHIP COOKIE COMPANY, INC.

(Pursuant to Sections 242 and 245 of the General
Corporation Law of the State of Delaware)

THE ORIGINAL GREAT AMERICAN CHOCOLATE CHIP COOKIE COMPANY, INC., a
corporation organized and existing under the laws of the State of Delaware,
hereby certifies as follows:

1. The original Certificate of Incorporation of the corporation was
filed with the Secretary of State of the State of Delaware on June 10, 1977.

2. This Amended and Restated Certificate of Incorporation amends and
restates the provisions of the Certificate of Incorporation of this corporation,
was duly adopted in accordance with the provisions of Sections 242 and 245 of
the General Corporation Law of the State of Delaware, and was duly approved at
a meeting of the majority stockholders of the Corporation pursuant to Section
228 (d) of the General Corporation Law of the State of Delaware, with those
stockholders requiring written notice of a meeting having received and
acknowledged such notice.

3. The text of the Certificate of Incorporation is hereby amended
and restated to read in its entirety as follows:

ARTICLE I
---------

The name of the corporation is GREAT AMERICAN COOKIE COMPANY, INC.

ARTICLE II
----------

The address of the registered office of the corporation is 1013 Centre
Road, Wilmington, New Castle County, Delaware 19805. The name of its registered
agent at such address is Corporation Service Company.

ARTICLE III
-----------
<PAGE>

The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.

ARTICLE I-V
-----------

The total number of shares of stock which the corporation shall have
authority to issue is Two Thousand (2,000) shares, all of which shares shall be
Common Stock, no par value.

ARTICLE V
---------

In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors- of the corporation is expressly authorized to
adopt, alter or repeal its By-Laws.

ARTICLE VI
----------

A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for injury resulting from a
breach of his fiduciary duty as a director, except for liability (i) for injury
resulting from a breach of his duty of loyalty to the corporation and its
stockholders, (ii) for injury resulting from acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law, as the same exists or
hereafter may be amended, or (iv) for injury resulting from any transaction from
which the director derives an improper personal benefit. If the Delaware General
Corporation Law hereafter is amended so as to authorize the further elimination
or limitation of the liability of directors to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
then the liability of a director of the corporation for monetary damages, in
addition to the limitation on personal liability provided in the preceding
sentence, shall automatically, by virtue hereof and without any further action
on the part of the corporation or its stock holders, be further limited so as to
be limited to the fullest extent permitted by the Delaware General Corporation
Law. Any repeal or modification of this Section by the stockholders of the
corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the corporation-with
regard to actions taken or omitted before such repeal or modification.

ARTICLE VII
-----------

2
<PAGE>

The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, or
by or in the right of the corporation to procure a judgment in its favor, by
reason of the fact that he is or was a director, officer, employee or agent 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 attorneys'
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, in accordance with and to the full extent
permitted by statute. Expenses incurred in defending a civil or criminal action,
suit or proceeding shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the Board of
Directors in the specific cast upon receipt of an undertaking by or on behalf of
the director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this section. The indemnification provided by this
section shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under this Certificate of Incorporation or any
agreement or vote of stockholders or disinterested directors or otherwise, both
as to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.

3
<PAGE>

IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation
has been executed on behalf of this corporation this 10th day of December, 1993.

THE ORIGINAL GREAT AMERICAN
CHOCOLATE CHIP COOKIE COMPANY, INC.

By: /s/ Adam E. Max
---------------------------
Adam E. Max, Vice President

Attest:

/s/ Herbert B. Max
------------------
Herbert B. Max
Assistant Secretary

THE ORIGINAL GREAT AMERICAN
CHOCOLATE CHIP COMPANY COOKIE
COMPANY, INC.
By: /s/ Arthur S. Karp
------------------------
Chairman of the Board of
Directors or President

Attest: /s/ Michael J. Coles
----------------------
Secretary or Assistant
Secretary

Board of Directors of
Pennsylvania Cookies, Inc.

/s/ Arthur S. Karp
------------------
Arthur S. Karp

/s/ Michael J. Coles
--------------------
Michael J. Coles

4
<PAGE>

Shareholder of Pennsylvania
Cookies, Inc.

The Original Great American
Chocolate Chip Cookie Company, Inc.

By: /s/ Arthur S. Karp
-----------------------------
Arthur S. Karp, President; or
Michael J. Coles, Vice
President

<PAGE>

ARTICLES OF INCORPORATION

PRETZELMAKER HOLDINGS, INC.

The undersigned natural, adult person, acting as incorporator of a
corporation (hereinafter usually referred to as the "Corporation") pursuant to
the provisions of the Colorado Corporation Code, hereby adopts the following
Articles of Incorporation for said Corporation:

ARTICLE I

Name
----

The name of the Corporation shall be Pretzelmaker Holdings, Inc.

ARTICLE II

Duration
--------

The period of duration of the Corporation shall be perpetual.

ARTICLE III

Purpose
-------

The purpose for which the Corporation is organized is to transact any
or all lawful business for which corporations may be incorporated pursuant to
the Colorado Corporation Code.

ARTICLE IV

Capital Stock
-------------

The authorized capital stock of the Corporation shall consist of
1,000,000 shares of common stock with a par value of $0.001 per share and
500,000 shares of preferred stock with a par value of $0.001 per share.

ARTICLE V
<PAGE>

Preferences, Limitations,
-------------------------
and Relative Rights of Capital Stock
------------------------------------

No share of the common stock shall have any preference over or
limitation in respect to any other share of such common stock. All shares of
common stock shall have equal rights and privileges, including the following:

1. All shares of common stock shall share equally in dividends. Subject
to the applicable provisions of the laws of Colorado, the Board of Directors of
the Corporation may, from time to time, declare and the Corporation may pay
dividends in cash, property, or its own shares, except when the Corporation is
insolvent or when the payment thereof would render the Corporation insolvent or
when the declaration or payment thereof would be contrary to any restrictions
contained in these Articles of Incorporation. When any dividend is paid or any
other distribution is made, in whole or in part, from sources other than
unreserved and unrestricted earned surplus, such dividend or distribution shall
be identified as such, and the source and amount per share paid from each source
shall be disclosed to the stockholder receiving the same concurrently with the
distribution thereof and to all other stockholders not later than six months
after the end of the Corporation's fiscal year during which such distribution
was made.

2. All shares of common stock shall share equally in distributions in
partial liquidation. Subject to the applicable provisions of the laws of
Colorado, the Board of Directors of the Corporation may distribute, from time to
time, to its stockholders in partial liquidation, out of stated capital or
capital surplus of the Corporation, a portion of its assets in cash or property,
except when the Corporation is insolvent or when such distribution would render
the Corporation insolvent. Each such distribution, when made, shall be
identified as a distribution in partial liquidation, out of stated capital or
capital surplus, and the source and amount per share paid from each source shall
be disclosed to all stockholders of the Corporation concurrently with the
distribution thereof. Any such distribution may be made by the Board of
Directors from stated capital without the affirmative vote of any stockholders
of the Corporation.

3. Each outstanding share of common stock shall be entitled to one vote
at stockholders' meetings, either in person or by proxy.

(1) The designations, powers, rights, preferences, qualifications,
restrictions and limitations of the preferred stock shall be established
from time

2
<PAGE>

to time by the Corporation's Board of Directors, in accordance with the
Colorado Corporation Code.

(2) 1. Cumulative voting shall not be allowed in elections of
directors or for any purpose.

1. No holders of shares of common stock of the Corporation shall
be entitled, as such, to any preemptive or preferential right to
subscribe to any unissued stock or any other securities which the
Corporation may now or hereafter be authorized to issue. The Board of
Directors of the Corporation, however, in its discretion by resolution,
may determine that any unissued securities of the Corporation shall be
offered for subscription solely to the holders of common stock of the
Corporation, or solely to the holders of any class or classes of such
stock, which the Corporation may now or hereafter be authorized to
issue, in such proportions based on stock ownership as said board in
its discretion may determine.

2. The Board of Directors may restrict the transfer of any of the
Corporation's stock issued by giving the Corporation or any stockholder
"first right of refusal to purchase" the stock, by making the stock
redeemable, or by restricting the transfer of the stock under such
terms and in such manner as the directors may deem necessary and as are
not inconsistent with the laws of this State. Any stock so restricted
must carry a conspicuous legend noting the restriction and the place
where such restriction may be found in the records of the Corporation.

3. The judgment of the Board of Directors as to the adequacy of
any consideration received or to be received for any shares, options,
or any other securities which the Corporation at any time may be
authorized to issue or sell or otherwise dispose of shall be conclusive
in the absence of fraud, subject to the provisions of these Articles of
Incorporation and any applicable law.

ARTICLE VI

Place of Business
-----------------

The principal office and the principal place of business of the
Corporation initially shall be:

3
<PAGE>

555 Seventeenth Street
14th Floor
Denver, Colorado 80202

The Board of Directors, however, from time to time may establish such
other offices, branches, subsidiaries, or divisions which it may consider to be
advisable. The address of the Corporation's initial registered office in
Colorado for purposes of the Colorado Corporation Code, as amended, shall be:

555 Seventeenth Street
14th Floor
Denver, Colorado 80202

The name of the Corporation's initial registered agent at the address of the
aforesaid registered office shall be:

Marc N. Geman

ARTICLE VII

Directors
---------

The affairs of the Corporation shall be governed by a board of not less
than one (1) director and no more than ten (10) directors, who shall be elected
in accordance with the Bylaws of the Corporation. Subject to such limitation,
the number of directors shall be fixed by or in the manner provided in the
Bylaws of the Corporation, as may be amended from time to time. The organization
and conduct of the board shall be in accordance with the following:

4. The names and addresses of the initial Directors, who shall hold
office until the first annual meeting of the stockholders of the Corporation or
until their successors shall have been elected and qualified, are:

Name Address
------------------------------------------------------
Donald Cox 501 Cook Street
Denver, CO 80206

Marc N. Geman 555 Seventeenth Street
14th Floor

4
<PAGE>

Denver, CO 80202

5. The directors of the Corporation need not be residents of Colorado
and shall not be required to hold shares of the Corporation's capital stock.

6. Meetings of the Board of Directors, regular or special, may be held
within or without Colorado upon such notice as may be prescribed by the By-laws
of the Corporation. Attendance of a director at a meeting shall constitute a
waiver by him of notice of such meeting unless he attends only for the express
purpose of objecting to the transaction of any business thereat on the ground
that the meeting is not lawfully called or convened.

7. A majority of the number of directors at any time constituting the
Board of Directors shall constitute a quorum for the transaction of business.

8. By resolution adopted by a majority of the Directors at any time
constituting the Board of Directors, the Board of Directors may designate two or
more directors to constitute an Executive Committee or one or more other
committees each of which shall have and may exercise, to the extent permitted by
law or in such resolution, all the authority of the Board of Directors in the
management of the Corporation; but the designation of any such committee and the
delegation of authority thereto shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed on it or him by
law.

9. Any vacancy in the Board of Directors, however caused or created,
may be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board of Directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office
and until his successor is duly elected and qualified.

ARTICLE VIII

Officers
--------

The officers of the Corporation shall be prescribed by the Bylaws of
the Corporation.

ARTICLE IX

Meetings of Stockholders
------------------------

5
<PAGE>

Meetings of the stockholders of the Corporation shall be held at such place
within or without Colorado and at such times as may be prescribed in the Bylaws
of the Corporation. Special meetings of the stockholders of the Corporation may
be called by the President of the Corporation, the Board of Directors, or by the
record holder or holders of at least ten percent (10%) of all shares entitled to
vote at the meeting. At any meeting of the stockholders, except to the extent
otherwise provided by law, a quorum shall consist of a majority of the shares
entitled to vote at the meeting; and, if a quorum is present, the affirmative
vote of the majority of shares represented at the meeting and entitled to vote
thereat shall be the act of the stockholders unless the vote of a greater number
is required by law.

ARTICLE X

Voting
------

When, with respect to any action to be taken by stockholders of this
Corporation, the Colorado Corporation Code requires the affirmative vote of the
holders of more than a majority of the outstanding shares entitled to vote
thereon, or of any class or series, such action may be taken by the affirmative
vote of the holders of a majority of the outstanding shares entitled to vote on
such action.

ARTICLE XI

By-laws
-------

The initial By-laws of the Corporation shall be adopted by its Board of
Directors. Subject to repeal or change by action of the stockholders, the power
to alter, amend, or repeal the By-laws or to adopt new By-laws shall be vested
in the Board of Directors.

ARTICLE XII

Transactions with Directors and Other Interested Parties
--------------------------------------------------------

No contract or other transaction between the Corporation and any other
corporation, whether or not a majority of the shares of the capital stock of
such other corporation is owned by the Corporation, and no act of the
Corporation shall in any way be affected or invalidated by the fact that any of
the directors of the Corporation are pecuniarily or otherwise interested in, or
are directors or officers of, such other

6
<PAGE>

corporation. Any director of the corporation, individually, or any firm with
which such director is affiliated may be a party to or may be pecuniarily or
otherwise interested in any contract or transaction of the Corporation;
provided, however, that the fact that he or such firm is so interested shall be
- -------- -------
disclosed or shall have been known to the Board of Directors of the Corporation,
or a majority thereof, at or before the entering into such contract or
transaction; and any director of the Corporation who is also a director or
officer of such other corporation, or who is so interested, may be counted in
determining the existence of a quorum at any meeting of the Board of Directors
of the Corporation which shall authorize such contract or transaction, with like
force and effect as if he were not such director or officer of such other
corporation or not so interested.

ARTICLE XIII

Limitation of Director Liability and Indemnification
----------------------------------------------------

No director of the Corporation shall have liability to the Corporation
or to its stockholders or to other security holders for monetary damages for
breach of fiduciary duty as a director; provided, however, that such provisions
-------- -------
shall not eliminate or limit the liability of a director to the Corporation or
to its shareholders or other security holders for monetary damages for: (i) any
breach of the director's duty of loyalty to the Corporation or to its
shareholders or other security holders; (ii) acts or omissions of the director
not in good faith or which involve intentional misconduct or a knowing violation
of the law by such director; (iii) acts by such director as specified by the
Colorado Corporation Code; or (iv) any transaction from which such director
derived an improper personal benefit.

No officer or director shall be personally liable for any injury to
person or property arising out of a tort committed by an employee of the
Corporation unless such officer or director was personally involved in the
situation giving rise to the injury or unless such officer or director committed
a criminal offense. The protection afforded in the preceding sentence shall not
restrict other common law protections and rights that an officer or director may
have.

The word "director" shall include at least the following, unless
limited by Colorado law: an individual who is or was a director of the
Corporation and an individual who, while a director of a Corporation is or was
serving at the Corporation's request as a director, officer, partner, trustee,
employee or agent of any other foreign or domestic corporation or of any
partnership, joint venture, trust, other enterprise or employee benefit plan. A
director shall be considered to be serving an

7
<PAGE>

employee benefit plan at the Corporation's request if his duties to the
Corporation also impose duties on or otherwise involve services by him to the
plan or to participants in or beneficiaries of the plan. To the extent allowed
by Colorado law, the word "director" shall also include the heirs and personal
representatives of all directors.

This Corporation shall be empowered to indemnify its officers and
directors to the fullest extent provided by law, including but not limited to
the provisions set forth in the Colorado Corporation Code, or any successor
provision.

ARTICLE XIV

Incorporator
------------

The name and address of the incorporator of the Corporation is as
follows:

Name Address
--------------------------------------------------------
William T. Hart 1624 Washington Street
Denver, Colorado 80203

IN WITNESS WHEREOF, the undersigned incorporator has hereunto affixed
his signature on the 15th day of February, 1995.

/s/ William T. Hart
--------------------------------------
William T. Hart

STATE OF COLORADO )
CITY AND ) ss.
COUNTY OF DENVER )

I, Kathryn R. Sweeney, a Notary Public in and for the State of
Colorado, hereby certify that on the 15th day of February, 1995, personally
appeared before me William T. Hart, being by me first duly sworn, who declared
that he is the person who signed the foregoing Articles of Incorporation as
incorporator and that the statements contained therein are true.

/s/ Kathryn R. Sweeney
--------------------------------------
NOTARY PUBLIC

8
<PAGE>

My Commission expires 1/25/96
----------
(SEAL)

9
<PAGE>

CONSENT OF REGISTERED AGENT

The undersigned does hereby consent to act as the Registered Agent of
Pretzelmaker Holdings, Inc.

DATED: February 15, 1995 /s/ Marc N. Geman
--------------------------------------
Marc N. Geman
555 Seventeenth Street
14th Floor
Denver, CO 80202

10
<PAGE>

PRETZELMAKER HOLDINGS, INC.

AMENDMENT TO THE
ARTICLES OF INCORPORATION

I, Marc N. Geman, the Chief Executive Officer of Pretzelmaker
Holdings, Inc., a corporation organized and existing under the Colorado Business
Corporation Act, DO HEREBY CERTIFY:

That pursuant to the authority conferred upon the Board of Directors by
the Articles of Incorporation of the Corporation and Section 7-106-102 of the
Colorado Business Corporation Act, the Board of Directors on February 28, 1995,
adopted the following amendments to the Articles of Incorporation.

Article IV was amended by the addition of the following sections:

Series A Preferred Stock. By resolution dated February 28, 1995, the
------------------------
Corporation's Board of Directors established the Series A Preferred Shares. The
relative rights and preferences of the Series A Preferred Shares are as follows:

1.1. Designation and Amount. The shares of such series shall be
----------------------
designated as "Series A Preferred Shares" (the "Series A Preferred Shares"), and
the number of shares constituting such series shall be 300,000 with a par value
of $0.001 per share. The number of shares constituting such series may, unless
prohibited by the Articles of Incorporation, be decreased by resolution of the
Board of Directors; provided that no decrease shall reduce the number of Series
A Preferred Shares to a number less than the number of shares then outstanding
plus the number of shares issuable upon the exercise of outstanding options,
rights or warrants or upon the conversion of any outstanding securities issued
by the Corporation convertible in Series A Preferred Shares. The shares of the
Series A Preferred Stock are on parity with the shares of the Series B Preferred
Stock.

1.2. Dividends and Distributions.
---------------------------

(1) The holders of Series A Preferred Shares, in preference to the
holders of Common Shares, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for
the purpose, annual dividends payable in cash on the 28th day of March
in each year, commencing on March 28, 1996 at the rate of $0.05 per
share.

11
<PAGE>

(2) Dividends which are not declared will accrue and will be
cumulative. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the Series A Preferred Shares in an amount less than
the total amount of such dividends at the time such dividends are
declared and become payable shall be allocated pro rata on a
share-by-share basis among all such shares outstanding at that time.
The Board of Directors may fix a record date for the determination of
holders of Series A Preferred Shares entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be
not more than thirty (30) days prior to the date fixed for the payment
thereof.

1.3. No Voting Rights. The Series A Preferred Shares will not have any
----------------
voting rights except as may be provided by the Colorado Business Corporation
Act.

1.4. Certain Restrictions. Whenever dividends declared or other
--------------------
distributions payable on the Series A Preferred Shares as provided in Section 2
hereof are in arrears, thereafter and until all unpaid dividends and
distributions on the outstanding Series A Preferred Shares shall have been paid
in full, the Corporation shall not:

(1) declare or pay dividends, or make any other distributions, on
any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Shares;

(2) declare or pay dividends or make any other distributions, on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Shares, except dividends paid ratably on the Series A Preferred Shares
and all such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all such
shares are then entitled;

1.5. Reacquired Shares. Any Series A Preferred Shares purchased or
-----------------
otherwise acquired by the Corporation in any manner whatsoever shall constitute
authorized but unissued Preferred Shares and may be reissued as part of a new
series of Preferred Shares by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein, in the Articles of Incorporation, or in any other Certificate of
Designation creating a series of Preferred Shares or as otherwise required by
law.

1.6. Liquidation, Dissolution, Redemption and Conversion. Upon any
---------------------------------------------------
liquidation, dissolution or winding up of the Corporation, each outstanding
share of

12
<PAGE>

Series A Preferred Stock is entitled to a distribution, computed on the
following basis, prior to any distribution to the holders of the Corporation's
Common Stock.

$1.00 x 0.08 x D
----------------
$1.00 + 365 + Any Accrued but Unpaid Dividends

D = Number of days Series A Preferred Stock was issued and outstanding prior to
notice of redemption.

At the option of the Corporation, the Series A Preferred Stock may be
redeemed by the payment of an amount equal to that which the Corporation would
be required to pay upon the dissolution or liquidation of the Corporation. The
Corporation may redeem the Series A Preferred Shares at any time, however, the
Corporation must give Notice of Redemption within five years of the issuance of
the Series A Preferred Stock. Holders of the Series A Preferred Stock have 30
days to convert the Series A Preferred Stock into Common Stock after the date of
the Notice of Redemption. Following the date of the Notice of Redemption, the
Corporation may not issue any additional shares of Common Stock until 45 days
after the Notice of Redemption, except for any shares issued upon the conversion
of the Series A or Series B Preferred Stock.

The Series A Preferred Stock may be converted into shares of the
Corporation's Common Stock at any time at the option of the holder of the
shares. Each share of Series A Preferred Stock, together with all accrued but
unpaid dividends, is convertible into shares of the Corporation's Common Stock
on the following basis.

TSO
------
92% - TSO = X

X Number of Shares of Common Stock to be Received upon
---- = Conversion of One Share of Series A Preferred Stock
PS

TSO = Total Shares of Corporation's Common Stock Issued and Outstanding on Date
of Notice of Redemption or Date Notice of Conversion is Delivered by
Holder to Corporation

PS = Number of Series A Preferred Shares issued by Corporation

1.7. Consolidation, Merger, Exchange, etc. In case the Corporation
-------------------------------------
shall enter into any consolidation, merger, combination, statutory share
exchange or other transaction in which the Corporation's Common Shares are
exchanged for or

13
<PAGE>

changed into other stock or securities, money and/or any other property, then in
any such case provision shall be made such that each outstanding Series A
Preferred Share shall at the same time be similarly exchanged or changed into a
preferred share of the surviving entity with rights, preferences and limitations
as equal as reasonably practicable to the Series A Preferred Shares.

Series B Preferred Stock. By resolution dated February 28, 1995, the
------------------------
Corporation's Board of Directors established the Series B Preferred Shares. The
relative rights and preferences of the Series B Preferred Shares are as follows:

B.1. Designation and Amount. The shares of such series shall be
----------------------
designed as "Series B Preferred Shares" (the "Series B Preferred Shares"), and
the number of shares constituting such series shall be 800 with a par value of
$0.001 per share. The number of shares constituting such series may, unless
prohibited by the Articles of Incorporation, be decreased by resolution of the
Board of Directors; provided that no decrease shall reduce the number of Series
B Preferred Shares to a number less than the number of shares then outstanding
plus the number of shares issuable upon the exercise of outstanding options,
rights or warrants or upon the conversion of any outstanding securities issued
by the Corporation convertible in Series B Preferred Shares. The shares of the
Series B Preferred Stock are on parity with the shares of the Series A Preferred
Stock.

B.2. Dividends and Distributions.
---------------------------

(1) The holders of Series B Preferred Shares, in preference to the

holders of Common Shares, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for
the purpose, annual dividends payable in cash on the 28th day of March
in each year, commencing on March 28, 1996 at the rate of $50.00 per
share.

(2) Dividends which are not declared will accrue and will be
cumulative. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the Series B Preferred Shares in an amount less than
the total amount of such dividends at the time such dividends are
declared and become payable shall be allocated pro rata on a
share-by-share basis among all such shares outstanding at that time.
The Board of Directors may fix a record date for the determination of
holders of Series B Preferred Shares entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be
not more than thirty (30) days prior to the date fixed for the payment
thereof.

14
<PAGE>

B.3. No Voting Rights. The Series B Preferred Shares will not have any
----------------
voting rights except as may be provided by the Colorado Business Corporation
Act.

B.4. Certain Restrictions. Whenever dividends declared or other
--------------------
distributions payable on the Series B Preferred Shares as provided in Section 2
hereof are in arrears, thereafter and until all unpaid dividends and
distributions on the outstanding Series B Preferred Shares shall have been paid
in full, the Corporation shall not:

(2) declare or pay dividends, or make any other distributions, on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series B Preferred
Shares, except dividends paid ratably on the Series B Preferred Shares
and all such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all such
shares are then entitled;

B.5. Reacquired Shares. Any Series B Preferred Shares purchased or
-----------------
otherwise acquired by the Corporation in any manner whatsoever shall constitute
authorized but unissued Preferred Shares and may be reissued as part of a new
series of Preferred Shares by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein, in the Articles of Incorporation, or in any other Certificate of
Designation creating a series of Preferred Shares or as otherwise required by
law.

B.6. Liquidation, Dissolution, Redemption and Conversion. Upon any
---------------------------------------------------
liquidation, dissolution or winding up of the Corporation, each outstanding
share of Series B Preferred Stock is entitled to a distribution, computed on the
following basis, prior to any distribution to the holders of the Corporation's
Common Stock.

$800 x 0.1875 x D
-----------------
$800 + 365 + Any Accrued but Unpaid Dividends

At the option of the Corporation, the Series B Preferred Stock may be
redeemed by the payment of an amount equal to that which the Corporation would
be required to pay upon the dissolution or liquidation of the Corporation. The
Corporation may redeem the Series B Preferred Stock at any time, however, the
Corporation must give Notice of Redemption within five years of issuance of the
Series B

15
<PAGE>

Preferred Stock. The Notice of Redemption must apply to all outstanding shares
of Series B Preferred Stock. With the Notice of Redemption, the Corporation must
provide shareholders with the appraised value of the Corporation and a copy of
the appraisal. Holders of the Series B Preferred Stock have 30 days to convert
the Series B Preferred Stock into Common Stock after the date of the Notice of
Redemption. Following the date of the Notice of Redemption, the Corporation may
not issue any additional shares of Common Stock until 45 days after the Notice
of Redemption, except for any shares issued upon the conversion of the Series A
or Series B Preferred Stock.

The Series B Preferred Stock may only be converted into shares of the
Corporation's Common Stock following a notice of the Corporation's intent to
redeem the Series B Preferred shares. Each share of Series B Preferred Stock,
together with all accrued but unpaid dividends, is convertible into shares of
the Corporation's Common Stock on the following basis.

TSO
------
1 - V - TSO = X

X Number of Shares of Common Stock to be Received upon
--- Conversion of One Share of Series B Preferred Stock
800 =

TSO = Total Shares of Corporation's Common Stock Issued and Outstanding on Date
of Notice of Redemption

V = VSB
-----------------------------------
Value of Corporation as Determined
by an Independent Appraisal

$640,000 x 0.1875 x D
-------------------------
VSB = $640,000 + 365

V cannot be more than 37.3% or less than 16%.

D = Number of days Series B Preferred Stock was issued and outstanding prior to
notice of redemption.

8.7. Consolidation, Merger, Exchange, etc. In case the Corporation
-------------------------------------
shall enter into any consolidation, merger, combination, statutory share
exchange or other transaction in which the Corporation's Common Shares are
exchanged for or changed

16
<PAGE>

into other stock or securities, money and/or any other property, then in any
such case each outstanding Series B Preferred Share shall at the same time be
similarly exchanged or changed into the amount of stock, securities, money
and/or any other property (payable in kind), as the case may be, which would
have been received if the Series B Preferred Share was converted into Common
Stock immediately prior to any such consolidation, merger, combination,
statutory share exchange or other similar transaction.

PRETZELMAKER HOLDINGS, INC.

DATED: March 20, 1995 /s/ Marc N. Geman
--------------------------------------
Marc N. Geman
Chief Executive Officer

17
<PAGE>

FEE $ 25.00 STATE OF COLORADO 007
----------------- BIENNIAL REPORT OF
ON OR BEFORE A CORPORATION OR LIMITED LIABILITY COMPANY
DATE DUE 4/30/97
--------------
REPORT YEAR 1997
-----------
<TABLE>
<CAPTION>
READ INSTRUCTIONS ON REVERSE SIDE BEFORE COMPLETING THIS FORM MUST BE TYPED
SUBMIT SIGNED FORM WITH FILING FEE
MAILING DATE 02/01/97
INFORMATION BELOW IS ON FILE IN THIS OFFICE - DO NOT CHANGE PRE-PRINTED INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>

CORPORATE NAME REGISTERED AGENT, REGISTERED OFFICE, CITY, STATE & ZIP FOR OFFICE USE ONLY
951023771 DP STATE/COUNTRY OF INC CO

GEMAN MARC N 971022317 C $25.00
PRETZELMAKER HOLDINGS, INC. SECRETARY OF STATE
02-13-97 14:13
555 17TH ST 14TH FLR
DENVER CO 80202 FIRST REPORT OR CORRECTIONS IN THIS COLUMN
- ------------------------------------------------------------------------------------------------------------------------------------
TYPE NEW AGENT NAME
Return completed reports to: ROBERT K. SULLIVAN
Department of State ------------------------------------------------
Corporate Report Section SIGNATURE OF NEW REGISTERED AGENT
1560 Broadway, Suite 200 /s/ ROBERT K. SULLIVAN
Denver, CO 80202 ------------------------------------------------
MUST HAVE A STREET ADDRESS
1050 17th Street, Suite 1400
------------------------------------------------
CITY STATE ZIP
Denver CO 80265
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS NAME AND ADDRESS TITLE Marc N. Geman - President
-------------------------------------------------------------
1050 17th Street, Suite 1400
-------------------------------------------------------------
Denver, CO 80265
- ------------------------------------------------------------------------------------------------------------------------------------
Robert K. Sullivan - Secretary/Treasurer
-------------------------------------------------------------
1050 17th Street, Suite 1400
-------------------------------------------------------------
Denver, CO 80265
- ------------------------------------------------------------------------------------------------------------------------------------

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

DIRECTORS OR LIMITED LIABILITY COMPANY MANAGERS (if you have less than 3 shareholders, you may list
COX DONALD less than 3 directors)
501 COOK ST Lonis Marks
-------------------------------------------------------------
DENVER CO 80206 1050 17th Street, Suite 1400
-------------------------------------------------------------
Denver, CO 80265
- ------------------------------------------------------------------------------------------------------------------------------------
GEMAN MARC N Marc N. Geman
555 17TH ST 14TH FLR -------------------------------------------------------------
1050 17th Street, Suite 1400
DENVER CO 80202 -------------------------------------------------------------
Denver, CO 80265
- ------------------------------------------------------------------------------------------------------------------------------------
Bruce Bausman
-------------------------------------------------------------
1050 17th Street, Suite 1400
-------------------------------------------------------------
Denver, CO 80265
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Address of Principal Place of Business
Street 1050 17th Street, Suite 1400
-------------------------------------------------------------------------
City Denver State CO Zip 80265
------------------------------------ --------- -----------------

SIGNATURE
Under penalties of perjury and as an authorized officer, I declare that this
biennial report and, if applicable, the statement of change of registered office
and/or agent, has been examined by me and is, to the best of my knowledge and
belief, true, correct, and complete.
NAME /s/ Robert K. Sullivan
TITLE Secretary/Treasurer DATE 2/11/1997

NOTE: DO NOT USE THIS BOX IF THIS IS YOUR FIRST REPORT!!! SEE
INSTRUCTIONS ON REVERSE. IF THERE ARE NO CHANGES SINCE YOUR LAST
[_] REPORT, MARK THIS BOX, SIGN ABOVE AND RETURN WITH THE FEE AND BY THE
DATE DUE INDICATED ABOVE (UPPER LEFT HAND CORNER). IF YOU ARE FILING
AFTER THE DATE DUE ABOVE, CONTACT THIS OFFICE FOR THE PROPER FEE. (303)
894-2251

SEE INSTRUCTIONS ON BACK

<PAGE>

BY-LAWS
OF
GREAT AMERICAN COOKIE COMPANY, INC.
(A Delaware corporation)
Effective 9:00 a.m. est - December, 1993
----------------------------------------

ARTICLE I

Meetings of Stockholders
------------------------

SECTION 1. Annual Meeting. The annual meeting of the stockholders of
--------------
GREAT AMERICAN COOKIE COMPANY, INC. (hereinafter, the "Corporation") for the
election of directors and for the transaction of such other proper business
shall be held on such date and at such time as may be fixed by the Board of
Directors, at the office of the Corporation or at such other place, and at such
hour as shall be designated by the Board of Directors, or, if no such time be
fixed, then at 10:00 in the forenoon.

SECTION 2. Special Meetings. Special meetings of the stockholders, unless
----------------
otherwise prescribed by statute, may be called at any time by the Board of
Directors or by the holder or holders of more than 10% of the outstanding shares
of Common Stock entitled to vote at such meeting.

SECTION 3. Notice of Meetings. Written notice of each meeting of the
------------------
stockholders, which shall state the place, date and hour of the meeting and the
purpose or purposes for which it is called, shall be given not less than ten nor
more than sixty days before the date of such meeting to each stockholder
entitled to vote at such meeting, and, if mailed, shall be deposited in the
United States mail, postage prepaid, directed to the stockholder at the
stockholder's address as it appears on the records of the Corporation. Any such
notice for any meeting other than the annual meeting shall indicate that it is
being issued at the direction of the Board or other-wise, as the case may be.
Whenever notice is required to be given, a written waiver thereof signed by the
person entitled thereto, whether before or after the time stated therein, shall
be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
<PAGE>

meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. When a meeting is adjourned to another time or place, notice need not
be given if the time and place thereof are announced at the meeting at which the
adjournment is taken. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.

SECTION 4. Quorum. At any meeting of the stockholders the holders of the
------
majority of the shares, issued and outstanding and entitled to vote, shall be
present in person or represented by proxy in order to constitute a quorum for
the transaction of any business. In the absence of a quorum, the holders of a
majority of the shares present in person or represented by proxy and entitled to
vote may adjourn the meeting from time to time. At any such adjourned meeting at
which a quorum may be present, the Corporation may transact any business which
might have been transacted at the original meeting.

SECTION 5. Organization. At each meeting of the stockholders, the Chairman
------------
of the Board, or in his absence or inability to act, the Vice Chairman, if any,
or, in his absence or inability to act, the President or, in his absence or
inability to act, any Vice President or, in his absence of inability to act, any
person chosen by the majority of those stockholders present in person or
represented by proxy shall act as chairman of the meeting. The Secretary or, in
his or her absence or inability to act, any person appointed by the chairman of
the meeting shall act as secretary of the meeting and keep the minutes thereof.

SECTION 6. Order of Business. The order of business at all meetings of the
-----------------
stockholders shall be as determined by the chairman of the meeting.

SECTION 7. Voting. Unless otherwise provided in the Certificate of
------
Incorporation, and subject to statute, each stockholder shall be entitled to one
vote for each share of capital stock held by such stockholder:

(1) on the date fixed pursuant to the provisions of Section 5 of
Article V of these By-Laws as the record date for the determination of the
stockholders to be entitled to notice of or to vote at such meeting; or

2
<PAGE>

(2) if no record date is fixed, then at the close of business on the
day next preceding the day on which notice is given. Each stockholder
entitled to vote at any meeting of stockholders 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. Any such proxy shall be
delivered to the secretary of such meeting at or prior to the time
designated in the order of business for so delivering such proxies. Except
as otherwise required by statute or by the Certificate of Incorporation, a
majority of the votes cast at a meeting of the stockholders shall be
necessary to authorize any corporate action to be taken by vote of the
stockholders. Unless required by statute, or determined by the chairman of
the meeting to be advisable, the vote on any question other than the
election of directors need not be by ballot. On a vote by ballot, each
ballot shall be signed by the stockholder voting, or by his proxy if there
be such proxy, and shall state the number of shares voted.

SECTION 8. List of Stockholders. A list of the stockholders entitled to
--------------------
vote at any meeting shall be produced and kept and made available for at least
days prior to and at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder.

SECTION 9. Inspectors. The Board may, in advance of any meeting of
----------
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting shall appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. On request of the chairman
of the meeting or any stockholder entitled to vote thereat, the inspectors shall
make a report in writing of any challenge, question or matter determined by them
and shall execute a certificate of any fact found by them. No director or
candidate for the office of

3
<PAGE>

director shall act as an inspector of an election of directors. Inspectors need
not be stockholders.

ARTICLE II

Board of Directors
------------------

SECTION 10. General Powers. The business and affairs of the Corporation
--------------
shall be managed by or under the direction of a Board of Directors. The Board
may exercise all such authority and powers of the Corporation and do all such
lawful acts and things as are not by statute or the Certificate of Incorporation
directed or required to be exercised or done by the stockholders.

SECTION 11. Number, Qualifications, Election and Term of Office. The Board
---------------------------------------------------
of Directors shall consist of three persons so long as there is three or less
holders of the Corporation's common stock, thereafter at least four and no more
than five Directors beginning the day after the stock of the Corporation has
been acquired by Cookies USA, Inc. Each director shall hold office until the
annual meeting of stockholders of the Corporation next succeeding his election
or until his successor is duly elected and qualified. Directors need not be
stockholders. One of the directors may be designated a Senior Director.

SECTION 12. Place of Meeting. The Board of Directors shall hold its
----------------
meetings at such place, within or without the State of Delaware, as it may from
time to time determine or as shall be specified in the notice of any such
meeting.

SECTION 13. Annual Meeting. The Board shall meet for the purpose of
--------------
organization, the election of officers and the transaction of other business as
soon as practicable after each annual meeting of the stockholders, on the same
day and at the same place where such annual meeting shall be held. Notice of
such meeting need not be given. Such meeting may be held at any other time or
place, within or without the State of Delaware, which shall be specified in a
notice thereof given as hereinafter provided in Section 7 of this Article II.

SECTION 14. Regular Meetings. Regular meetings of the Board shall be held
----------------
at such time as the Board may fix. If any day fixed for a regular meeting shall
be a legal holiday at the place where the meeting is to be held, then the
meeting which would otherwise be held on that day shall be held at the same hour
on the next

4
<PAGE>

succeeding business day. Notice of regular meetings of the Board need not be
given except as otherwise required by statute or these By-Laws.

SECTION 15. Special Meetings. Special meetings of the Board may be called
----------------
by the Chairman of the Board, the President or by any two directors.

SECTION 16. Notice of Meetings. Notice of each special meeting of the Board
------------------
(and of each regular meeting for which notice shall be required) shall be given
by the Secretary as hereinafter provided in this Section 7, in which notice
shall be stated the time and place of the meeting. Except as otherwise required
by these By-laws, such notice need not state the purposes of such meeting.
Notice of each such meeting shall be mailed by first class mail, postage
prepaid, or by overnight delivery service, to each director, addressed to him at
his residence or usual place of business, at least two (2) days before the day
on which such meeting is to be held, or shall be sent addressed to him at such
place by telegraph, telex, cable or wireless, or be delivered to him personally
or by facsimile, at least 24 hours before the time at which such meeting is to
be held. A written waiver of notice, signed by the director entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Notice of any such meeting need not be given to any director who shall,
either before or after the meeting, submit a signed waiver of notice or who
shall attend such meeting without protesting, prior to or at its commencement,
the lack of notice to him.

SECTION 17. Quorum and Manner of Acting. Except as hereinafter provided, a
---------------------------
majority of the entire Board shall be present in person or by means of a
conference telephone or similar communications equipment which allows all
persons participating in the meeting to hear each other at the same time at any
meeting of the Board in order to constitute a quorum for the transaction of
business at such meeting. In the absence of a quorum at any meeting of the
Board, a majority of the directors present thereat may adjourn such meeting to
another time and place. Notice of the time and place of any such adjourned
meeting shall be given to the directors who were not present at the time of the
adjournment and, unless such time and place were announced at the meeting at
which the adjournment was taken, to the other directors. At any adjourned
meeting at which a quorum is present, any business may be transacted which might
have been transacted at the meeting as originally called. The directors shall
act only as a Board and the individual directors shall have no power as such.

5
<PAGE>

Except as otherwise required by statute, the Certificate of Incorporation,
the By-Laws or any Subscription Agreement in writing to which the Corporation is
a party, the act of a majority of the directors present at any meeting at which
a quorum is present shall be the act of the Board.

SECTION 18. Action Without a Meeting. Any action required or permitted to
------------------------
be taken at any meeting of the Board of Directors may be taken without a meeting
if all members of the Board consent thereto in writing, and the writing or
writings are filed with the minutes of the Board.

SECTION 19. Telephonic Participation. Members of the Board of Directors may
------------------------
participate in a meeting of the Board by means of a conference telephone or
similar communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation in such a meeting
shall constitute presence in person at such meeting.

SECTION 20. Organization. At each meeting of the Board, the Chairman of the
------------
Board or, in his absence or inability to act, the President or, in his absence
or inability to act, the Senior Director or another director chosen by a
majority of the directors present shall act as chairman of the meeting and
preside thereat. The Secretary or, in his or her absence or inability to act,
any person appointed by the chairman shall act as secretary of the meeting and
keep the minutes thereof.

SECTION 21. Resignations. Any director may resign at any time upon written
------------
notice to the Corporation. Any such resignation shall take effect at the time
specified therein or, if the time when it shall become effective shall not be
specified therein, immediately upon its receipt; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.

SECTION 22. Vacancies. Vacancies and newly created directorships resulting
---------
from any increase in the authorized number of directors to the extent permitted
herein may be filled by a majority of the directors then in office, although
less than a quorum, or by a sole remaining director. If there are no directors
in office, then a special meeting of stockholders for the election of directors
may be called and held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole Board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding

6
<PAGE>

having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office, in the manner provided by
statute. When one or more directors shall resign from the Board, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office until the next election
of directors and until their successors shall be elected and qualified.

SECTION 23. Removal of Directors. Except as otherwise provided in the
--------------------
Certificate of Incorporation or in these By-Laws, and subject to the
Subscription Agreements, any director may be removed, either with or without
cause, at any time, by the affirmative vote of the holders of record of a
majority of the issued and outstanding stock entitled to vote for the election
of directors of the Corporation given at a special meeting of the stockholders
called and held for the purpose; and the vacancy in the Board caused by such
removal may be filled by such stockholders at such meeting, or, if the
stockholders shall fail to fill such vacancy, as in these By-Laws provided.

SECTION 24. Compensation. The Board of Directors shall have authority to
------------
fix the compensation, including fees and reimbursement of expenses, of directors
for services to the corporation in any capacity.

ARTICLE III

Executive and Other Committees
------------------------------

SECTION 25. Executive and Other Committees. The Board may, by resolution
------------------------------
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in the resolution shall
have and may exercise the powers of the Board in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it; provided, however, that in the
absence or disqualification of any member of such committee or committees, the
member or

7
<PAGE>

members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board to act at the meeting in the place of any such absent or disqualified
member. Each committee shall keep written minutes of its proceedings and shall
report such minutes to the Board when required. All such proceedings shall be
subject to revision or alteration by the Board; provided, however, that third
parties shall not be prejudiced by such revision or alteration.

SECTION 26. General. A majority of any committee may determine its action
-------
and fix the time and place of its meetings, unless the Board shall otherwise
provide. Notice of such meeting shall be given to each member of the committee
in the manner provided for in Article II, Section 7. The Board shall have any
power at any time to fill vacancies in, to change the membership of, or to
dissolve any such committee. Nothing herein shall be deemed to prevent the Board
from appointing one or more committees consisting in whole or in part of persons
who are not directors of the Corporation; provided, however, that no such
committee shall have or may exercise any authority of the Board.

SECTION 27. Action Without a Meeting. Any action required or permitted to
------------------------
be taken by any committee at a meeting may be taken without a meeting if all of
the members of the committee consent in writing to the adoption of the
resolutions authorizing such action. The resolutions and written consents
thereto shall be filed with the minutes of the committee.

SECTION 28. Telephonic Participation. One or more members of a committee
------------------------
may participate in a meeting by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at the meeting.

ARTICLE IV

Officers
--------

SECTION 29. Number and Qualifications. The officers of the Corporation
-------------------------
shall include the Chairman of the Board, the Vice Chairman of the Board, the
President, one or more Vice Presidents (including Executive Vice Presidents and
Senior Vice Presidents), the Treasurer, the Secretary and the Control-

8
<PAGE>

ler. Any number of offices may be held by the same person. Such officers shall
be elected from time to time by the Board. Each officer shall hold his office
until his successor is elected and qualified or until his earlier resignation or
removal. The Board may from time to time elect, or delegate to the Chairman of
the Board or the President the power to appoint such other officers (including
one or more Assistant Treasurers and one or more Assistant Secretaries) and such
agents as may be necessary or desirable for the business of the Corporation.
Such other officers and agents shall have such duties and shall hold their
offices for such terms as may be prescribed by the Board or by the appointing
authority.

SECTION 30. Resignations. Any officer may resign at any time upon written
------------
notice to the Corporation. Any such resignation shall take effect at the time
specified therein or, if the time when it shall become effective shall not be
specified therein, immediately upon its receipt; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.

SECTION 31. Removal. Any officer or agent of the corporation may be
-------
removed, either with or without cause, at any time, by the Board at any meeting
of the Board or, except in the case of an officer or agent elected or appointed
by the Board, by the Chairman of the Board or the President.

SECTION 32. Vacancies. Any vacancy occurring in any office of the
---------
Corporation by death, resignation, removal or otherwise shall be filled for the
unexpired portion of the term of the office which shall be vacant, in the manner
prescribed in these By-laws for the regular election or appointment to such
office.

SECTION 33. The Chairman of the Board. The Chairman of the Board shall have
-------------------------
the general and active supervision and direction over the other officers, agents
and employees and shall see that their duties are properly performed and shall
be the chief executive officer. He shall, if present, preside at each meeting of
the stockholders and of the Board and shall be an ex officio member of all
committees of the Board. He shall perform all duties incident to the office of
Chairman of the Board and such other duties as may from time to time be assigned
to him by the Board.

SECTION 34. The President. The President shall have general and active
-------------
supervision and direction over the business operations and affairs of the
Corporation and over its several officers, agents and employees, subject,
however, to the direction of the Chairman of the Board and the control of the
Board of Directors.

9
<PAGE>

At the request of the Chairman of the Board, or in the case
of his absence or inability to act, the President shall perform the duties of
the Chairman of the Board and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the Chairman of the Board. In general,
the President shall have such other powers and shall perform such other duties
as usually pertain to the office of President or as from time to time may be
assigned to him by the Board, the Chairman of the Board or these By-Laws.

SECTION 35. Vice Presidents. Each Vice President shall have such powers
---------------
and perform such duties as from time to time may be assigned to him by the
Board.

SECTION 36. The Treasurer. The Treasurer shall
-------------

(1) have charge and custody of, and be responsible for, all the
funds and securities of the Corporation;

(2) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation;

(3) cause all monies and other valuables to be deposited to the
credit of the Corporation in such depositories as may be designated by
the Board;

(4) receive, and give receipts for, monies due and payable to
the Corporation from any source whatsoever;

(5) disburse the funds of the Corporation and supervise the
investment of its funds as ordered or authorized by the Board, taking
proper vouchers therefor; and

(6) in general, have all the powers and perform all the duties
incident to the office of Treasurer and such other duties as from time
to time may be assigned to him by the Board, the Chairman of the
Board, the Vice Chairman of the Board or the President.

SECTION 37. The Secretary. The Secretary shall
-------------

10
<PAGE>

(1) record the proceedings of the meetings of the stockholders
and directors in a minute book to be kept for that purpose;

(2) see that all notices are duly given in accordance with the
provisions of these By-laws and as required by law;

(3) be custodian of the records and the seal of the Corporation
and affix and attest the seal to all stock certificates of the
Corporation (unless the seal of the Corporation on such certificates
shall be a facsimile, as hereinafter provided) and affix and attest
the seal to all other documents to be executed on behalf of the
Corporation under its seal;

(4) see that the books, reports, statements, certificates and
other documents and records required by law to be kept and filed are
properly kept and filed; and

(5) in general, have all the powers and perform all the duties
incident to the office of Secretary and such other duties as from time
to time may be assigned to him or her by the Board, the Chairman of
the Board, or the President.

SECTION 38. The Controller. The Controller shall be responsible for
--------------
preparation of all required financial statements of the Corporation, subject to
the direction of such officer or officers as shall be designated by the Chairman
of the Board, and shall perform such other duties and have such other
responsibilities as shall be assigned to him by the Chairman of the Board or the
Board of Directors.

SECTION 39. Officers' Bonds or Other Security. The Board may secure
---------------------------------
the fidelity of any or all of its officers or agents by bond or otherwise, in
such amount and with such surety or sureties as the Board may require.

SECTION 40. Compensation. Subject to any employment agreement entered
------------
into by the Corporation and any officer, the compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to time
by the Board; provided, however, that the Board may delegate to the Chairman of
the Board or the President the power to fix the compensation of officers and
agents appointed by the Chairman of the Board or the President, as the case may
be. An officer of the Corporation shall not be prevented from receiving
compensation by

11
<PAGE>

reason of the fact that he is also a director of the Corporation, but any such
officer who shall also be a director (except in the event there is only one
director of the Corporation) shall not have any vote in the determination of the
amount of compensation paid to him.

ARTICLE V

Shares, etc.
------------

SECTION 41. Stock Certificates. Every holder of stock in the
------------------
Corporation shall be entitled to have a certificate signed by or in the name of
the Corporation by the Chairman of the Board or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, certifying the number of shares owned by him in the
Corporation. Any of or all the signatures on the certificate may be a facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer, transfer agent or registrar before such certificate is issued,
it may nevertheless be issued by the Corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.

SECTION 42. Books of Account and Record of Stockholders. The books and
-------------------------------------------
records of the Corporation may be kept at such places, within or without the
State of Delaware, as the Board of Directors may from time to time determine.
The stock record books and the blank stock certificate books shall be kept by
the Secretary or by any other officer or agent designated by the Board of
Directors.

SECTION 43. Transfer of Shares. Transfers of shares of stock of the
------------------
Corporation shall be made on the stock records of the Corporation only upon
authorization by the registered holder thereof, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary or
with a transfer agent or transfer clerk, and on surrender of the certificate or
certificates for such shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on the record of
stockholders as the owner of such share or shares for all purposes, including,
without limitation, the rights to receive dividends or other distributions, and
to vote as such owner, and the Corporation may hold any such stockholder of
record liable for calls and assessments and the Corporation shall not be bound
to recognize any equitable or legal claim to or interest in any

12
<PAGE>

such shares or shares on the part of any other person whether or not it shall
have express or other notice thereof. Whenever any transfers of shares shall be
made for collateral security and not absolutely, and both the transferor and
transferee request the Corporation to do so, such fact shall be stated in the
entry of the transfer.

SECTION 44. Regulations. The Board may make such additional rules and
-----------
regulations, not inconsistent with these By-laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to bear
the signature or signatures of any of them.

SECTION 45. Fixing of Record Date. In order that the Corporation may
---------------------
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to express consent to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action.

SECTION 46. Lost, Stolen or Destroyed Stock Certificates. The holder of
--------------------------------------------
any certificate representing shares of stock of the Corporation shall notify the
Corporation of any loss, destruction or mutilation of such certificate, and the
corporation may issue a new certificate of stock in the place of any certificate
theretofore issued by it, alleged to have been lost, stolen or destroyed, and
the Board may, in its discretion, require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the Corporation a
bond sufficient, as the Board in its absolute discretion shall determine, to
indemnify the Corporation against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate. Anything herein to the contrary
notwithstanding, the Board, in its absolute discretion, may refuse to issue any
such new certificate, except pursuant to judicial proceedings under the laws of
the State of Delaware.

ARTICLE VI

<PAGE>

Contracts, Checks, Drafts, Bank Accounts, Etc.
----------------------------------------------

SECTION 47. Execution of Contracts. Except as otherwise required by
----------------------
statute, the Certificate of Incorporation or these By-Laws, any contract or
other instrument may be executed and delivered in the name and on behalf of the
Corporation by such officer or officers (including any assistant officer) of the
Corporation as the Board may from time to time direct. Such authority may be
general or confined to specific instances as the Board may determine.

SECTION 48. Loans. Unless the Board shall otherwise determine, the
-----
Chairman of the Board, the President or a Vice President may effect loans and
advances at any time for the Corporation from any bank, trust company or other
institution, or from any firm, corporation or individual, and for such loans and
advances may make, execute and deliver promissory notes, bonds or other
certificates or evidences of indebtedness of the Corporation, but no officer or
officers shall mortgage, pledge, hypothecate or transfer any securities or other
property of the Corporation other than in connection with the purchase of
chattels for use in the Corporation's operations, except when authorized by the
Board.

SECTION 49. Checks, Drafts, etc. All checks, drafts, bills of exchange
-------------------
or other orders for the payment of money out of the funds of the Corporation,
and all notes or other evidence of indebtedness of the Corporation, shall be
signed in the name and on behalf of the Corporation by such persons and in such
manner as shall from time to time be authorized by the Board.

SECTION 50. Deposits. All funds of the Corporation not otherwise
--------
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositaries as the Board may from time
to time designate or as may be designated by any officer or officers of the
Corporation to whom such power of designation may from time to time be delegated
by the Board. For the purpose of deposit and for the purpose of collection for
the account of the Corporation, checks, drafts and other orders for the payment
of money which are payable to the order of the Corporation may be endorsed,
assigned and delivered by any officer or agent of the Corporation.

SECTION 51. General and Special Bank Accounts. The Board may from time
---------------------------------
to time authorize the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositaries as the Board may

14
<PAGE>

designate or as may be designated by any officer or officers of the Corporation
to whom such power of designation may from time to time be delegated by the
Board. The Board may make such special rules and regulations with respect to
such bank accounts, not inconsistent with the provisions of these By-Laws, as it
may deem expedient.

ARTICLE VII

Offices
-------

SECTION 52. Registered Office. The registered office and registered
-----------------
agent of the Corporation will be as specified in the Certificate of
Incorporation of the Corporation.

SECTION 53. Other Offices. The Corporation may also have such offices,
-------------
both within or without the State of Delaware, as the Board of Directors may from
time to time determine or the business of the Corporation may require.

ARTICLE VIII

Fiscal Year
-----------

The fiscal year of the Corporation shall be so determined by the Board
of Directors.

ARTICLE IX

Seal
----

The seal of the Corporation shall be circular in form, shall bear the
name of the Corporation and shall include the words and numbers "Corporate
Seal," "Delaware" and the year of incorporation.

ARTICLE X

Indemnification
---------------

15
<PAGE>

SECTION 54. General. The Corporation shall indemnify any person who
-------
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, or by or in the right of the Corporation to procure a judgment
in its favor, by reason of the fact that he is or was a director, officer,
employee or agent 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 attorneys' 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, in accordance
with and to the full extent permitted by statute and by the Certificate of
Incorporation of the Corporation. 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 as authorized by the
Board of Directors in the specific case upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount unless
it shall ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this section. The indemnification provided by this
section shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under these By-Laws or any agreement or vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.

SECTION 55. Insurance. The Corporation may purchase and maintain
---------
insurance on behalf of any person who is or was a director, officer, employee or
agent 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 any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of statute or of this section.

ARTICLE XI

Amendment
---------

16
<PAGE>

The By-Laws may be amended, repealed or altered by vote of the holders
of a majority of the shares of stock at the time entitled to vote in the
election of directors, except as otherwise provided in the Certificate of
Incorporation. The By-Laws may also be amended, repealed or altered by the Board
of Directors, but any By-Law adopted by the Board of Directors may be amended,
repealed or altered by the stockholders entitled to vote thereon as herein
provided.

<PAGE>

BYLAWS

PRETZELMAKER HOLDINGS, INC.

ARTICLE I

OFFICES
-------

Section 1. Offices:

The principal office of the Corporation shall be at 555 Seventeenth
Street, 14th Floor, Denver, CO 80202, and the Corporation shall have other
offices at such places as the Board of Directors may from time to time
determine.

ARTICLE II

STOCKHOLDER'S MEETINGS
----------------------

Section 2. Place:

The place of stockholders' meetings shall be the principal office of
the Corporation unless some other place either within or without the State of
Colorado shall be determined and designated from time to time by the Board of
Directors.

Section 3. Annual Meeting:

The annual meeting of the stockholders of the Corporation for the
election of directors to succeed those whose terms expire, and for the
transaction of such other business as may properly come before the meeting,
shall be held each year on a date to be determined by the Board of Directors
beginning in the year 1996. If the annual meeting of the stockholders be not
held, or if held and directors shall not have been elected for any reason, then
the election of directors may be held at any meeting of stockholders thereafter
called pursuant to these Bylaws and the laws of Colorado.

Section 4. Special Meeting:
<PAGE>

Special meetings of the stockholders for any purpose or purposes may
be called by the President, the Board of Directors, or the holders of ten
percent (10%) or more of all the shares entitled to vote at such meeting, by the
giving of notice in writing as hereinafter described.

Section 5. Voting:

At all meetings of stockholders, voting may be viva voce; but any
qualified voter may demand a stock vote, whereupon such vote shall be taken by
ballot and the Secretary shall record the name of the stockholder voting, the
number of shares voted, and, if such vote shall be by proxy, the name of the
proxy holder. Voting may be in person or by proxy appointed in writing, manually
signed by the stockholder or his duly authorized attorney-in-fact. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided therein.

Each stockholder shall have such rights to vote as the Articles of
Incorporation provide for each share of stock registered in his name on the
books of the Corporation, except where the transfer books of the Corporation
shall have been closed or a date shall have been fixed as a record date, not to
exceed, in any case, fifty (50) days preceding the meeting, for the
determination of stockholders entitled to vote. The Secretary of the Corporation
shall make, at least ten (10) days before each meeting of stockholders, a
complete list of the stockholders entitled to vote at such meeting or any
adjournment thereof, arranged in alphabetical order, with the address of and the
number of shares held by each, which list, for a period of ten (10) days prior
to such meeting, shall be kept on file at the principal office of the
Corporation and shall be subject to inspection by any stockholder at any time
during usual business hours. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to the inspection of any
stockholder during the whole time of the meeting.

Section 6. Order of Business:

The order of business at any meeting of stockholders shall be as
follows:

1. Calling the meeting to order.

2. Calling of roll.

3. Proof of notice of meeting.

-2-
<PAGE>

4. Report of the Secretary of the stock represented at the meeting
and the existence or lack of a quorum.

5. Reading of minutes of last previous meeting and disposal of any
unapproved minutes.

6. Reports of officers.

7. Reports of committees.

8. Election of directors, if appropriate.

9. Unfinished business.

10.New business.

11.Adjournment.

12. To the extent that these Bylaws do not apply, Roberts' Rules of
Order shall prevail.

Section 7. Notices:

Written or printed notice stating the place, day, and hour of the
meeting and, in case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten (10) nor more than fifty
(50) days before the date of the meeting, either personally or by mail, by or at
the direction of the President, the Secretary, or the officer or persons calling
the meeting, to each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
stock transfer books of the Corporation, with postage thereon prepaid.

Section 8. Quorum:

A quorum at any annual or special meeting shall consist of the
representation in person or by proxy of a majority in number of shares of the
outstanding capital stock of the Corporation entitled to vote at such meeting.
In the event a quorum be not present, the meeting may be adjourned by those
present for a period not to exceed sixty (60) days at any one adjournment; and
no further notice of the meeting or its adjournment shall be required. The
stockholders entitled to vote, present either in

-3-
<PAGE>

person or by proxy at such adjourned meeting, shall, if equal to a majority of
the shares entitled to vote at the meeting, constitute a quorum, and the votes
of a majority of those present in numbers of shares entitled to vote shall be
deemed the act of the shareholders at such adjourned meeting.

Section 9. Action by Shareholders Without a Meeting:

Any action required to be or which may be taken at a meeting of the
shareholders of the Corporation may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof.

ARTICLE III

BOARD OF DIRECTORS
------------------

Section 10. Organization and Powers:

The Board of Directors shall constitute the policy-making or
legislative authority of the Corporation. Management of the affairs, property,
and business of the Corporation shall be vested in the Board of Directors, which
shall consist of not less than one and not more than ten members, who shall be
elected at the annual meeting of stockholders by a plurality vote for a term of
one (1) year, and shall hold office until their successors are elected and
qualify. Directors need not be stockholders. Directors shall have all powers
with respect to the management, control, and determination of policies of the
Corporation that are not limited by these Bylaws, the Articles of Incorporation,
or the statutes of the State of Colorado, and the enumeration of any power shall
not be considered a limitation thereof.

Section 11. Vacancies:

Any vacancy in the Board of Directors, however caused or created,
shall be filled by the affirmative vote of a majority of the remaining
directors, though less than a quorum of the Board, or at a special meeting of
the stockholders called for that purpose. The directors elected to fill
vacancies shall hold office for the unexpired term and until their successors
are elected and qualify.

Section 12. Regular Meetings:

-4-
<PAGE>

A regular meeting of the Board of Directors shall be held, without
other notice than this Bylaw, immediately after and at the same place as the
annual meeting of stockholders or any special meeting of stockholders at which a
director or directors shall have been elected. The Board of Directors may
provide by resolution the time and place, either within or without the State of
Colorado, for the holding of additional regular meetings without other notice
than such resolution.

Section 13. Special Meetings:

Special meetings of the Board of Directors may be held at the
principal office of the Corporation, or such other place as may be fixed by
resolution of the Board of Directors for such purpose, at any time on call of
the President or of any member of the Board, or may be held at any time and
place without notice, by unanimous written consent of all the members, or with
the presence and participation of all members at such meeting. A resolution in
writing signed by all the directors shall be as valid and effectual as if it had
been passed at a meeting of the directors duly called, constituted, and held.

Section 14. Notices:

Notices of both regular and special meetings, save when held by
unanimous consent or participation, shall be mailed by the Secretary to each
member of the Board not less than three days before any such meeting and notices
of special meetings may state the purposes thereof. No failure or irregularity
of notice of any regular meeting shall invalidate such meeting or any proceeding
thereat.

Section 15. Quorum and Manner of Acting:

A quorum for any meeting of the Board of Directors shall be a
majority of the Board of Directors as then constituted. Any act of the majority
of the directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors. Any action of such majority, although not at a
regularly called meeting, and the record thereof, if assented to in writing by
all of the other members of the Board, shall always be as valid and effective in
all respects as if otherwise duly taken by the Board of Directors.

Section 16. Executive Committee:

The Board of Directors may by resolution of a majority of the Board
designate two (2) or more directors to constitute an executive committee, which

-5-
<PAGE>

committee, to the extent provided in such resolution, shall have and may
exercise all of the authority of the Board of Directors in the management of the
Corporation; but the designation of such committee and the delegation of
authority thereto shall not operate to relieve the Board of Directors, or any
member thereof, of any responsibility imposed on it or him by law.

Section 17. Order of Business:

The order of business at any regular or special meeting of the Board
of Directors, unless otherwise prescribed for any meeting by the Board, shall be
as follows:

1. Reading and disposal of any unapproved minutes.

2. Reports of officers and committees.

3. Unfinished business.

4. New business.

5. Adjournment.

6. To the extent that these Bylaws do not apply, Roberts' Rules of
Order shall prevail.

Section 18. Remuneration:

No stated salary shall be paid to directors for their services as
such, but, by resolution of the Board of Directors, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of the Board. Members of special or standing committees may be allowed
like compensation for attending meetings. Nothing herein contained shall be
construed to preclude any director from receiving compensation for serving the
Corporation in any other capacity, subject to such resolutions of the Board of
Directors as may then govern receipt of such compensation.

ARTICLE IV

OFFICERS
--------

-6-
<PAGE>

Section 19. Titles:

The officers of the Corporation shall consist of a President, one or
more Vice Presidents, a Secretary, and a Treasurer, the last two of which
offices may be combined and held by one person, who shall be elected for one (1)
year by the directors at their first meeting following the annual meeting of
stockholders. Such officers shall hold office until their successors are elected
and qualify. The Board of Directors may appoint from time to time such other
officers as it deems desirable who shall serve during such terms as may be fixed
by the Board at a duly held meeting. The Board, by resolution, shall specify the
titles, duties and responsibilities of such officers.

Section 20. President:

The President shall preside at all meetings of stockholders and, in
the absence of a, or the, Chairman of the Board of Directors, at all meetings of
the directors. He shall be generally vested with the power of the chief
executive officer of the Corporation and shall countersign all certificates,
contracts, and other instruments of the Corporation as authorized by the Board
of Directors or required by law. He shall make reports to the Board of Directors
and stockholders and shall perform such other duties and services as may be
required of him from time to time by the Board of Directors.

Section 21. Vice President:

The Vice President shall perform all the duties of the President if
the President is absent or for any other reason is unable to perform his duties
and shall have such other duties as the Board of Directors shall authorize or
direct.

Section 22. Secretary:

The Secretary shall issue notices of all meetings of stockholders
and directors, shall keep minutes of all such meetings, and shall record all
proceedings. He shall have custody and control of the corporate records and
books, excluding the books of account, together with the corporate seal. He
shall make such reports and perform such other duties as may be consistent with
his office or as may be required of him from time to time by the Board of
Directors.

Section 23. Treasurer:

-7-
<PAGE>

The Treasurer shall have custody of all moneys and securities of the
Corporation and shall have supervision over the regular books of account. He
shall deposit all moneys, securities, and other valuable effects of the
Corporation to such banks and depositories as the Board of Directors may
designate and shall disburse the funds of the Corporation in payment of just
debts and demands against the Corporation, or as they may be ordered by the
Board of Directors, shall render such account of his transactions as may be
required of him by the President or the Board of Directors from time to time and
shall otherwise perform such duties as may be required of him by the Board of
Directors.

The Board of Directors may require the Treasurer to give a bond
indemnifying the Corporation against larceny, theft, embezzlement, forgery,
misappropriation, or any other act of fraud or dishonesty resulting from his
duties as Treasurer of the Corporation, which bond shall be in such amount as
appropriate resolution or resolutions of the Board of Directors may require.

Section 24. Vacancies or Absences:

If a vacancy in any office arises in any manner, the directors then
in office may choose, by a majority vote, a successor to hold office for the
unexpired term of the officer. If any officer shall be absent or unable for any
reason to perform his duties, the Board of Directors, to the extent not
otherwise inconsistent with these Bylaws, may direct that the duties of such
officer during such absence or inability shall be performed by such other
officer or subordinate office, as seems advisable to the Board.

Section 25. Compensation:

No officer shall receive any salary or compensation for his services
unless and until the Board of Directors authorizes and fixes the amount and
terms of such salary or compensation.

ARTICLE V

STOCK
-----

Section 26. Certificates of Shares:

-8-
<PAGE>

Each holder of stock of the Corporation shall be entitled to a stock
certificate signed by the President or Vice President and also by the Secretary
or an assistant secretary of the Corporation. The certificates of shares shall
be in such form, not inconsistent with the Certificate of Incorporation or
Articles of Incorporation, as shall be prepared or approved by the Board of
Directors. (All certificates shall be prepared or approved by the Board of
Directors). All certificates shall be consecutively numbered. Each certificate
shall state upon its face that the Corporation is organized under the laws of
this state; the name of the person to whom issued; the number and class of
shares; and the designation of the series, if any, which such certificate
represents; the par value of each share represented by the certificate, or a
statement that the shares are without par value. The name of the person owning
the shares represented thereby, with the number of such shares and the date of
issue, shall be entered on the Corporation's books, and no certificate shall be
valid unless it be signed by the President or Vice President and by the
Secretary or an assistant secretary of the Corporation. The seal of the
Corporation affixed to stock certificates may be a facsimile. The signatures of
officers as above described on any such certificate may be a facsimile if the
certificate is countersigned by a transfer agent, or registered by a registrar,
other than the Corporation itself or an employee of the Corporation.

Section 27. New Certificates:

All certificates surrendered to the Corporation shall be canceled
and no new certificate shall be issued, except to evidence transfer of stock
from the unissued stock or treasury of the Corporation, or in the case of a lost
certificate, except upon posting a bond of indemnity in such form and with such
surety or sureties and for such amount as shall be satisfactory to the directors
and upon producing by affidavit or otherwise such evidence of loss or
destruction as the Board may require, until the former certificates for the same
number of shares have been surrendered and canceled.

Section 28. Transfer of Shares:

Shares in the capital stock of the Corporation shall be transferred
only on the books of the Corporation by the holder thereof in person, or by his
attorney, upon surrender and cancellation of certificates for a like number of
shares. The delivery of a certificate of stock of this Corporation to a bona
fide purchaser or pledgee for value, together with a written transfer of the
same or a written power of attorney to sell, assign, and transfer the same,
signed by the owner of the certificate, shall be a sufficient delivery to
transfer the title against all persons except the Corporation. No transfer of
stock shall be valid against the Corporation until it shall have been registered
upon the books of the Corporation.

-9-
<PAGE>

Section 29. Closing of Transfer Books or Provisions for Record Date:

The stock transfer books may be closed by the Board of Directors for
a period not exceeding fifty (50) days prior to any meeting of the stockholders
or prior to the payment of dividends; or the Board of Directors may fix in
advance a day not more than fifty (50) days prior to the holding of any such
meeting of stockholders or payment of dividends as the day as of which
stockholders entitled to notice of and to vote at such meeting or to payment of
dividends, as the case may be, shall be determined; and only stockholders of
record on such day shall be entitled to notice or to vote at such meeting, or to
receive dividends, as the case may be.

Section 30. Regulations:

The Board of Directors shall have power and authority to take all
such rules and regulations as they deem expedient concerning the issue,
transfer, and registration of certificates for shares of the capital stock of
the Corporation. The Board of Directors may appoint a Transfer Agent and a
Registrar and may require all stock certificates to bear the signature of such
Transfer Agent or such Registrar.

Section 31. Restrictions on Stock:

The Board of Directors may restrict any stock issued by giving the
Corporation or any stockholder "first right of refusal to purchase" the stock,
by making the stock redeemable or by restricting the transfer of the stock,
under such terms and in such manner as the directors may deem necessary and as
are not inconsistent with the Articles of Incorporation or the laws of the State
of Colorado. Any stock so restricted must carry a stamped legend setting out the
restriction or conspicuously noting the restriction and stating where it may be
found in the records of the Corporation.

ARTICLE VI

DIVIDENDS AND FINANCES
----------------------

Section 32. Dividends:

Dividends may be declared by the directors and paid out of any funds
legally available therefor under the laws of Colorado, as may be deemed
advisable from time to time by the Board of Directors of the Corporation. Before
declaring any

-10-
<PAGE>

dividends, the Board of Directors may set aside out of net profits or earned or
other surplus such sums as the Board may think proper as a reserve fund to meet
contingencies or for other purposes deemed proper and to the best interests of
the Corporation.

Section 33. Monies:

The monies, securities, and other valuable effects of the
Corporation shall be deposited in the name of the Corporation in such banks or
trust companies as the Board of Directors shall designate and shall be drawn out
or removed only as may be authorized by the Board of Directors from time to
time.

Section 34. Fiscal Year:

Unless and until the Board of Directors by resolution shall
determine otherwise, the fiscal year shall begin on the 1st day of January and
end on the 31st day of December, and the first fiscal period shall end December
31, 1995.

ARTICLE VII

SEAL
----

The Board of Directors shall provide a corporate seal which shall be
in the form of a circle and shall have inscribed thereon the name of the
Corporation and the words "SEAL, Colorado," and shall be entrusted in the care
of the Secretary or such other officer of the Corporation as the Board of
Directors shall designate.

ARTICLE VIII

NOTICES
-------

Section 35. Requirements:

Whenever a notice shall be required by the statutes of the State of
Colorado or by these Bylaws, such notice may be given in writing by depositing
the same in the United States mails in a postpaid, sealed envelope addressed to
the person for whom such notice is intended to his or her home or other address,
as the same shall appear on the stock transfer books of the Corporation. The
time of mailing shall be deemed to be the time of giving such notice. A waiver
of any notice in writing, signed

-11-
<PAGE>

by a stockholder, director, or officer, whether before, at, or after the time
stated in such waiver for holding a meeting, shall be deemed the equivalent of
duly giving such notice.

Section 36. Presence:

The presence of any officer at a meeting, or the presence of any
stockholder or director at a meeting, unless such presence is for the sole
purpose of objecting to the holding of such meeting on the ground that it is not
duly held or convened, shall in all events be considered a waiver of notice
thereof; and failure to vote thereat shall not defeat the effectiveness of such
waiver.

Section 37. Ratification:

The ratification or approval in writing of the minutes of any
meeting of officers, stockholders, or directors shall have the same force and
effect as if the ratifying or approving officer, director, or stockholder were
present in person at said meeting.

ARTICLE IX

AMENDMENTS
----------

These Bylaws may be altered, amended, or repealed by the Board of
Directors by resolution of a majority of the Board.

ARTICLE X

INDEMNIFICATION
---------------

The Corporation shall indemnify any and all of its directors or
officers, or former directors or officers, or any person who may have served at
its request as a director or officer of another corporation in which this
Corporation owns shares of capital stock or of which it is a creditor and the
personal representatives of all such persons, against expenses actually and
necessarily incurred in connection with the

-12-
<PAGE>

defense of any action, suit, or proceeding in which they, or any of them, were
made parties, or a party, by reason of being or having been directors or
officers or a director or officer of the Corporation, or of such other
corporation, except in relation to matters as to which any such director or
officer or person shall have been adjudged in such action, suit, or proceeding
to be liable for negligence or misconduct in the performance of any duty owed to
the Corporation. Such indemnification shall not be deemed exclusive of any other
rights to which those indemnified may be entitled, independently of this Article
X, by law, under any Bylaw agreement, vote of stockholders, or otherwise.

ARTICLE XI

CONFLICTS OF INTEREST
---------------------

No contract or other transaction of the Corporation with any
other persons, firms or corporations, or in which the Corporation is interested,
shall be affected or invalidated by the fact that any one or more of the
directors or officers of the Corporation is interested in or is a director or
officer of such other firm or corporation; or by the fact that any director or
officer of the Corporation, individually or jointly with others, may be a party
to or may be interested in any such contract or transaction; and relieves every
person who may become a director or officer of the Corporation from any
liability that might otherwise arise by reason of his contracting with the
Corporation for the benefit of himself or any firm or corporation in which he
may in any way be interested.

-13-
<PAGE>

CERTIFICATE
-----------

I do hereby certify that I was Secretary of the meeting of the
Board of Directors duly called and held on the 28th day of February, 1995, and I
do hereby certify that the above and foregoing Bylaws were duly adopted as the
Bylaws of said Corporation at such meeting.

-------------------------------------
Marc N. Geman, Secretary

(SEAL)

-14-

<PAGE>

FIRST SUPPLEMENTAL INDENTURE

FIRST SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as
of August 24, 1998, among Mrs. Fields' Original Cookies, Inc. (or its permitted
successor), a Delaware corporation (the "Company"), The Mrs. Fields' Brand, Inc.
(the "Guaranteeing Subsidiary"), and The Bank of New York, as trustee under the
indenture referred to below (the "Trustee").

W I T N E S S E T H

WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of November 26, 1997,
providing for the issuance of an aggregate principal amount of up to $200.0
million of 101/8% Notes due 2004 (the "Notes");

WHEREAS, the Company has previously issued $100 million aggregate
principal amount of Notes designated as Series A or Series B Notes;

WHEREAS, the Company desires to issue $40 million aggregate principal
amount of Notes on the date hereof, to be designated Series C Notes; and

WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.

NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Company and the Trustee mutually covenant and agree for the equal and ratable
benefit of the Holders of the Notes as follows:

1. Capitalized Terms. Capitalized terms used herein without
-----------------
definition shall have the meanings assigned to them in the Indenture.

2. Designation of Series C Notes. The Company, the Guaranteeing
------------------------------
Subsidiary and the Trustee hereby agree as follows:

The second paragraph of the preamble to the Indenture is replaced by
the following:

"The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 101/8% Series
A Notes
<PAGE>

due 2004 (the "Series A Notes" ), the 101/8% Series B Notes due 2004 (the
"Series B Notes") and such additional 101/8% notes in any series that the
Company may choose to designate in amounts that are permitted to be issued under
the Indenture (collectively, the "Notes"):"

3. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

4. Counterparts. The parties may sign any number of copies of this
-------------
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.

5. Effect of Headings. The Section headings herein are for
------------------
convenience only and shall not affect the construction hereof.

6. The Trustee. The Trustee shall not be responsible in any manner
-----------
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.

2
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.

Dated: August 24, 1998

MRS. FIELDS' ORIGINAL COOKIES, INC.

By: __________________________
Name:
Title:

THE MRS. FIELDS' BRAND, INC.

By: _________________________
Name:
Title

THE BANK OF NEW YORK,
AS TRUSTEE

By: __________________________
Name:
Title:

<PAGE>

SECOND SUPPLEMENTAL INDENTURE

SECOND SUPPLEMENTAL INDENTURE (this Supplemental Indenture), dated
as of August 24, 1998, among Mrs. Fields' Original Cookies, Inc., a Delaware
corporation (or its permitted successor) (the "Company"), Great American Cookie
Company, Inc. (the Guaranteeing Subsidiary), a Delaware corporation and a
subsidiary of the Company, The Mrs. Fields' Brand, Inc., a Delaware corporation
("MFB" and, together with the Guaranteeing Subsidiary, the "Guarantors"), and
The Bank of New York, as trustee under the Indenture referred to herein (the
Trustee).

W I T N E S S E T H

WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the Indenture), dated as of November 26, 1997, as
amended by the First Supplemental Indenture, dated August 24, 1998, providing
for the issuance of an aggregate principal amount of up to $200.0 million of
10 1/8% Notes due 2004 (the Notes);

WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company,s Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the Guarantee); and

WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.

NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:

1. Capitalized Terms. Capitalized terms used herein without
-----------------
definition shall have the meanings assigned to them in the Indenture.

2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby agrees
----------------------
as follows:
<PAGE>

(a) Along with MFB, to jointly and severally Guarantee to each
Holder of a Note authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the validity
and enforceability of the Indenture, the Notes or the obligations of
the Company hereunder or thereunder, that:

(i) the principal of and interest on the Notes will be promptly
paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful,
and all other obligations of the Company to the Holders or
the Trustee hereunder or thereunder will be promptly paid in
full or performed, all in accordance with the terms hereof
and thereof; and

(ii) in case of any extension of time of payment or renewal of
any Notes or any of such other obligations, that same will
be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the
Guarantors shall be jointly and severally obligated to pay
the same immediately.

(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the
Notes or the Indenture, the absence of any action to enforce the same,
any waiver or consent by any Holder of the Notes with respect to any
provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or
defense of a guarantor.

(c) The following is hereby waived: diligence presentment,
demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a

2
<PAGE>

proceeding first against the Company, protest, notice and all demands
whatsoever.

(d) This Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and the
Indenture.

(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guaranteeing Subsidiary, MFB,
or any Custodian, Trustee, liquidator or other similar official acting
in relation to either the Company or the Guaranteeing Subsidiary or
MFB, any amount paid by either to the Trustee or such Holder, this
Guarantee, to the extent theretofore discharged, shall be reinstated
in full force and effect.

(f) The Guaranteeing Subsidiary shall not be entitled to any
right of subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby.

(g) As between the Guarantors, on the one hand, and the Holders
and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in
Article 6 of the Indenture for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and
(y) in the event of any declaration of acceleration of such
obligations as provided in Article 6 of the Indenture, such
obligations (whether or not due and payable) shall forthwith become
due and payable by the Guarantors for the purpose of this Guarantee.

(h) The Guarantors shall have the right to seek contribution from
any non-paying Guarantor so long as the exercise of such right does
not impair the rights of the Holders under the Guarantee.

(i) Pursuant to Section 10.02 of the Indenture, after giving
effect to any maximum amount and any other contingent and fixed
liabilities that are relevant under any applicable Bankruptcy or
fraudulent conveyance laws, and after giving effect to any collections
from, rights

3
<PAGE>

to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the obligations of such
other Guarantor under Article 10 of the Indenture shall result in the
obligations of such Guarantor under its Guarantee not constituting a
fraudulent transfer or conveyance.

3 Execution and Delivery. The Guaranteeing Subsidiary agrees that
----------------------
the Guarantee shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Guarantee.

4. Guaranteeing Subsidiary May Consolidate, Etc. on Certain Terms.
--------------------------------------------------------------

(a) The Guaranteeing Subsidiary may not consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person)
another corporation, Person or entity whether or not affiliated with
such Guarantor unless:

(i) subject to Section 10.05 of the Indenture, the Person formed
by or surviving any such consolidation or merger (if other
than a Guarantor or the Company) unconditionally assumes all
the obligations of such Guarantor, pursuant to a
supplemental indenture in form and substance reasonably
satisfactory to the Trustee, under the Notes, the Indenture
and the Guarantee on the terms set forth herein or therein;
and

(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists.

(b) In case of any such consolidation, merger, sale or
conveyance and upon the assumption by the successor corporation, by
supplemental indenture, executed and delivered to the Trustee and
satisfactory in form to the Trustee, of the Guarantee endorsed upon
the Notes and the due and punctual performance of all of the covenants
and conditions of the Indenture to be performed by the Guarantor, such
successor corporation shall succeed to and be substituted for the
Guarantor with the same effect as if it had been named herein as a
Guarantor. Such successor corporation thereupon may cause to be signed
any or all of the Guarantees to be endorsed upon all of the Notes

4
<PAGE>

issuable hereunder which theretofore shall not have been signed by the
Company and delivered to the Trustee. All the Guarantees so issued
shall in all respects have the same legal rank and benefit under the
Indenture as the Guarantees theretofore and thereafter issued in
accordance with the terms of the Indenture as though all of such
Guarantees had been issued at the date of the execution hereof.

(c) Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding clauses (a) and (b) above, nothing contained in the
Indenture or in any of the Notes shall prevent any consolidation or
merger of a Guarantor with or into the Company or another Guarantor,
or shall prevent any sale or conveyance of the property of a Guarantor
as an entirety or substantially as an entirety to the Company or
another Guarantor.

5. Releases.
---------

(a) In the event of a sale or other disposition of all of the
assets of any Guarantor, by way of merger, consolidation or otherwise,
or a sale or other disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other
disposition, by way of merger, consolidation or otherwise, of all of
the capital stock of such Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) will be released
and relieved of any obligations under its Guarantee; provided that the
Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture, including
without limitation Section 4.10 of the Indenture. Upon delivery by the
Company to the Trustee of an Officers' Certificate and an Opinion of
Counsel to the effect that such sale or other disposition was made by
the Company in accordance with the provisions of the Indenture,
including without limitation Section 4.10 of the Indenture, the
Trustee shall execute any documents reasonably required in order to
evidence the release of any Guarantor from its obligations under its
Guarantee.

(b) Any Guarantor not released from its obligations under its
Guarantee shall remain liable for the full amount of principal of and

5
<PAGE>

interest on the Notes and for the other obligations of any Guarantor
under the Indenture as provided in Article 10 of the Indenture.

6. No Recourse Against Others. No past, present or future director,
----------------------------
officer, employee, incorporator, stockholder or agent of the Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the
Company, the Guaranteeing Subsidiary or under the Notes, any Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.

8. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
----------------------
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

9. Counterparts. The parties may sign any number of copies of this
------------
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.

10. Effect of Headings. The Section headings herein are for
------------------
convenience only and shall not affect the construction hereof.

11. The Trustee. The Trustee shall not be responsible in any manner
-----------
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary, MFB and the Company.

6
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.

Dated: August 24, 1998

GREAT AMERICAN COOKIE COMPANY, INC.

By:___________________________
Name:
Title:

MRS. FIELDS' ORIGINAL COOKIES, INC.

By: __________________________
Name:
Title:

THE MRS. FIELDS' BRAND, INC.

By: __________________________
Name:
Title:

THE BANK OF NEW YORK,
AS TRUSTEE

By: __________________________
Name:
Title:

<PAGE>

MFOC Exhibit 4.6
MFH Exhibit 4.10
THIRD SUPPLEMENTAL INDENTURE

THIRD SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
November 20 , 1998, among Mrs. Fields' Original Cookies, Inc., a Delaware
corporation (or its permitted successor) (the "Company"), Great American Cookie
Company, Inc. ("Great American"), a Delaware corporation and a subsidiary of the
Company, The Mrs. Fields' Brand, Inc., a Delaware corporation and a subsidiary
of the Company ("MFB"), Pretzelmaker Holdings, Inc., a Colorado corporation and
a subsidiary of the Company (the "Guaranteeing Subsidiary" and, together with
the other Guarantors defined in the Indenture referred to herein, the
"Guarantors"), and The Bank of New York, as trustee under the Indenture referred
to herein (the "Trustee").

W I T N E S S E T H

WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (the "Indenture"), dated as of November 26, 1997, as amended by the
First Supplemental Indenture, dated as of August 24, 1998, and the Second
Supplemental Indenture, dated as of August 24, 1998, providing for the issuance
of an aggregate principal amount of up to $200.0 million of 101/8% Notes due
2004 (the "Notes");

WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company"s Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "Guarantee"); and

WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.

NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:

1. Capitalized Terms. Capitalized terms used herein without definition
-----------------
shall have the meanings assigned to them in the Indenture.
<PAGE>

2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby agrees as
----------------------
follows:

(a) Along with all Guarantors named in the Indenture, to jointly and
severally Guarantee to each Holder of a Note authenticated and delivered by
the Trustee and to the Trustee and its successors and assigns, irrespective
of the validity and enforceability of the Indenture, the Notes or the
obligations of the Company hereunder or thereunder, that:

(i) the principal of and interest on the Notes will be promptly paid
in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal of
and interest on the Notes, if any, if lawful, and all other
obligations of the Company to the Holders or the Trustee
hereunder or thereunder will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof;
and

(ii) in case of any extension of time of payment or renewal of any
Notes or any of such other obligations, that same will be
promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. Failing payment when due
of any amount so guaranteed or any performance so guaranteed for
whatever reason, the Guarantors shall be jointly and severally
obligated to pay the same immediately.

(b) The obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or the Indenture,
the absence of any action to enforce the same, any waiver or consent by any
Holder of the Notes with respect to any provisions hereof or thereof, the
recovery of any judgment against the Company, any action to enforce the
same or any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor.

(c) The following is hereby waived: diligence presentment, demand of
payment, filing of claims with a court in the event of
<PAGE>

insolvency or bankruptcy of the Company, any right to require a proceeding
first against the Company, protest, notice and all demands whatsoever.

(d) This Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and the Indenture.

(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guaranteeing Subsidiary, MFB, Great
American, or any Custodian, Trustee, liquidator or other similar official
acting in relation to either the Company or the Guaranteeing Subsidiary,
MFB or Great American, any amount paid by either to the Trustee or such
Holder, this Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect.

(f) The Guaranteeing Subsidiary shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed
hereby.

(g) As between the Guarantors, on the one hand, and the Holders and
the Trustee, on the other hand, (x) the maturity of the obligations
guaranteed hereby may be accelerated as provided in Article 6 of the
Indenture for the purposes of this Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of
the obligations guaranteed hereby, and (y) in the event of any declaration
of acceleration of such obligations as provided in Article 6 of the
Indenture, such obligations (whether or not due and payable) shall
forthwith become due and payable by the Guarantors for the purpose of this
Guarantee.

(h) The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does not impair
the rights of the Holders under the Guarantee.

(i) Pursuant to Section 10.02 of the Indenture, after giving effect
to any maximum amount and any other contingent and fixed liabilities that
are relevant under any applicable Bankruptcy or fraudulent conveyance laws,
and after giving effect to any collections from, rights

3
<PAGE>

to receive contribution from or payments made by or on behalf of any other
Guarantor in respect of the obligations of such other Guarantor under
Article 10 of the Indenture shall result in the obligations of such
Guarantor under its Guarantee not constituting a fraudulent transfer or
conveyance.

3. Execution and Delivery. The Guaranteeing Subsidiary agrees that the
----------------------
Guarantee shall remain in full force and effect notwithstanding any failure to
endorse on each Note a notation of such Guarantee.

4. Guaranteeing Subsidiary May Consolidate, Etc. on Certain Terms.
--------------------------------------------------------------

(i) subject to Section 10.05 of the Indenture, the Person formed by
or surviving any such consolidation or merger (if other than a
Guarantor or the Company) unconditionally assumes all the
obligations of such Guarantor, pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the Guarantee on the
terms set forth herein or therein; and

(ii) immediately after giving effect to such transaction, no Default
or Event of Default exists.

(b) In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory in form
to the Trustee, of the Guarantee endorsed upon the Notes and the due and
punctual performance of all of the covenants and conditions of the
Indenture to be performed by the Guarantor, such successor corporation
shall succeed to and be substituted for the Guarantor with the same effect
as if it had been named herein as a Guarantor. Such successor corporation
thereupon may cause to be signed any or all of the Guarantees to be
endorsed upon all of the Notes issuable hereunder which theretofore shall
not have been signed by the

4
<PAGE>

Company and delivered to the Trustee. All the Guarantees so issued shall in
all respects have the same legal rank and benefit under the Indenture as
the Guarantees theretofore and thereafter issued in accordance with the
terms of the Indenture as though all of such Guarantees had been issued at
the date of the execution hereof.

(c) Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding clauses (a) and (b) above, nothing contained in the
Indenture or in any of the Notes shall prevent any consolidation or merger
of a Guarantor with or into the Company or another Guarantor, or shall
prevent any sale or conveyance of the property of a Guarantor as an
entirety or substantially as an entirety to the Company or another
Guarantor.

5. Releases.
--------

(a) In the event of a sale or other disposition of all of the assets
of any Guarantor, by way of merger, consolidation or otherwise, or a sale
or other disposition of all of the capital stock of any Guarantor, then
such Guarantor (in the event of a sale or other disposition, by way of
merger, consolidation or otherwise, of all of the capital stock of such
Guarantor) or the corporation acquiring the property (in the event of a
sale or other disposition of all or substantially all of the assets of such
Guarantor) will be released and relieved of any obligations under its
Guarantee; provided that the Net Proceeds of such sale or other disposition
are applied in accordance with the applicable provisions of the Indenture,
including without limitation Section 4.10 of the Indenture. Upon delivery
by the Company to the Trustee of an Officers" Certificate and an Opinion of
Counsel to the effect that such sale or other disposition was made by the
Company in accordance with the provisions of the Indenture, including
without limitation Section 4.10 of the Indenture, the Trustee shall execute
any documents reasonably required in order to evidence the release of any
Guarantor from its obligations under its Guarantee.

(b) Any Guarantor not released from its obligations under its
Guarantee shall remain liable for the full amount of principal of and
interest on the Notes and for the other obligations of any Guarantor under
the Indenture as provided in Article 10 of the Indenture.

5
<PAGE>

6. No Recourse Against Others. No past, present or future director,
--------------------------
officer, employee, incorporator, stockholder or agent of the Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the
Company, the Guaranteeing Subsidiary or under the Notes, any Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver may
not be effective to waive liabilities under the federal securities laws and it
is the view of the Commission that such a waiver is against public policy.

9. Counterparts. The parties may sign any number of copies of this
------------
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.

10. Effect of Headings. The Section headings herein are for convenience
------------------
only and shall not affect the construction hereof.

6
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, all as of the date first above written.

Dated: As of November 20, 1998

PRETZELMAKER HOLDINGS, INC.

By:
------------------------------
Name:
Title:

MRS. FIELDS' ORIGINAL COOKIES, INC.

By: /s/ Larry A. Hodges
------------------------------
Name:
Title:

THE MRS. FIELDS' BRAND, INC.

By: /s/ Larry A. Hodges
------------------------------
Name:
Title:

GREAT AMERICAN COOKIE COMPANY, INC.

By: /s/ Larry A. Hodges
------------------------------
Name:
Title:

THE BANK OF NEW YORK,
AS TRUSTEE

By: /s/ Michele L. Russo
------------------------------
Name:
Title:

<PAGE>

EXECUTION COPY
- --------------------------------------------------------------------------------

MRS. FIELDS' ORIGINAL COOKIES, INC.

$40,000,000
Aggregate Principal Amount of
10% Series C Senior Notes due 2004

____________________________________

REGISTRATION RIGHTS AGREEMENT

Dated as of August 24, 1998

____________________________________

Jefferies & Company, Inc. BT Alex. Brown Incorporated
- --------------------------------------------------------------------------------
<PAGE>

This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into
as of August 13, 1998, by and among Mrs. Fields' Original Cookies, Inc., a
Delaware corporation (the "Company"), The Mrs. Fields' Brand, Inc., a Delaware
corporation ("MFB") and Great American Cookie Company, Inc., a Delaware
corporation ("Great American" and, together with MFB, the "Guarantors") and
Jefferies & Company, Inc. and BT Alex. Brown Incorporated (each, an "Initial
Purchaser" and, collectively, the "Initial Purchasers"), each of whom has agreed
to purchase the Company's 10% Series C Senior Notes due 2004 (the "Senior
Notes") pursuant to the Purchase Agreement (as defined).

This Agreement is made pursuant to the Purchase Agreement, dated, as of August
13, 1998 (the "Purchase Agreement"), by and among the Company, the Guarantors
and the Initial Purchasers. In order to induce the Initial Purchasers to
purchase the Senior Notes, the Company has agreed to provide the registration
rights set forth in this Agreement. The execution and delivery of this
Agreement is a condition to the obligations of the Initial Purchasers set forth
in Section 3 of the Purchase Agreement.

The parties hereby agree as follows:

SECTION 1. DEFINITIONS

As used in this Agreement, the following capitalized terms shall have the
following meanings:

Advice: As defined in Section 6(d) hereof.

Business Day: Any day except a Saturday, Sunday or other day in the City of
New York, or in the city of the corporate trust office of the Trustee, on which
banks are authorized to close.

Broker-Dealer: Any broker or dealer registered under the Exchange Act.

Broker-Dealer Transfer Restricted Securities: New Notes that are acquired
by a Broker-Dealer in the Exchange Offer in exchange for Senior Notes that such
Broker-Dealer acquired for its own account as a result of market-making
activities or other trading activities (other than Senior Notes acquired
directly from the Company or any of its affiliates).

Certificated Securities: As defined in the Indenture.

Closing Date: The date hereof.

Commission: The Securities and Exchange Commission.

Consummate: An Exchange Offer shall be deemed "Consummated" for purposes of
this Agreement upon the occurrence of (a) the filing and effectiveness under the
Securities Act of the Exchange Offer Registration Statement relating to the New
Notes to be issued in the Exchange Offer, (b) the maintenance of such
Registration Statement continuously effective and the keeping of the Exchange
Offer open for a period not less than the minimum period required pursuant to
Section 3(b) hereof and (c) the delivery by the Company to the Registrar under
the Indenture of New Notes in the same aggregate principal amount as the
aggregate principal amount of Senior Notes tendered by Holders thereof pursuant
to the Exchange Offer.

1
<PAGE>

controlling person: As defined in Section 8(a) hereof.

Damages Payment Date: With respect to the Senior Notes, each Interest Payment
Date.

Exchange Act: The Securities Exchange Act of 1934, as amended.

Exchange Offer: The registration by the Company under the Securities Act of
the New Notes pursuant to the Exchange Offer Registration Statement pursuant to
which the Company shall offer the Holders of all outstanding Transfer Restricted
Securities the opportunity to exchange all such outstanding Transfer Restricted
Securities for New Notes in an aggregate principal amount equal to the aggregate
principal amount of the Transfer Restricted Securities tendered in such exchange
offer by such Holders.

Exchange Offer Registration Statement: The Registration Statement relating to
the Exchange Offer, including the related Prospectus.

Exempt Resales: The transactions in which the Initial Purchasers propose to
sell the Senior Notes to certain "qualified institutional buyers," as such term
is defined in Rule 144A under the Securities Act, and to persons permitted to
purchase the Senior Notes in offshore transactions in reliance upon Regulation S
under the Securities Act.

Global Note Holder: As defined in the Indenture.

Holders: As defined in Section 2 hereof.

Indemnified Holder: As defined in Section 8(a) hereof.

Indenture: The Indenture, dated as of November 26, 1997, among the Company,
the Guarantors and The Bank of New York, as trustee (the "Trustee"), pursuant to
which the Notes are to be issued, as such Indenture is amended or supplemented
from time to time in accordance with the terms thereof.

Interest Payment Date: As defined in the Indenture and the Notes.

Liquidated Damages: As defined in Section 5 hereof.

NASD: The National Association of Securities Dealers, Inc.

New Notes: The Company's 10% Senior Notes due 2004, identical in all
material respects to the Senior Notes, which are to be issued pursuant to the
Indenture (i) in the Exchange Offer or (ii) upon the request of any Holder of
Senior Notes covered by a Shelf Registration Statement, in exchange for such
Senior Notes.

Notes: The Senior Notes and the New Notes.

Person: An individual, partnership, corporation, trust, unincorporated
organization, or a government or agency or political subdivision thereof.

2
<PAGE>

Prospectus: The prospectus included in a Registration Statement at the time
such Registration Statement is declared effective, as amended or supplemented by
any prospectus supplement and by all other amendments thereto, including post-
effective amendments, and all material incorporated by reference into such
Prospectus.

Record Holder: With respect to any Damages Payment Date, each Person who is a
Holder of Notes on the record date with respect to the Interest Payment Date on
which such Damages Payment Date shall occur.

Registration Default: As defined in Section 5 hereof.

Registration Statement: Any registration statement of the Company and the
Guarantors (on the appropriate form under the Securities Act selected by the
Company) relating to (a) an offering of New Notes pursuant to an Exchange Offer
or (b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, in each case, (i) which is filed pursuant to
the provisions of this Agreement and (ii) including the Prospectus included
therein, all amendments and supplements thereto (including post-effective
amendments) and all exhibits and material incorporated by reference therein.

Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer Transfer
Restricted Securities.

Securities Act: The Securities Act of 1933, as amended.

Shelf Registration Statement: As defined in Section 4(a) hereof.

TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb), as in
effect on the date of the Indenture.

Transfer Restricted Securities: Each Note, until the earliest to occur of (a)
the date on which such Note is exchanged in the Exchange Offer and entitled to
be resold to the public by the Holder thereof without complying with the
prospectus delivery requirements of the Securities Act, (b) the date on which
such Note has been disposed of in accordance with a Shelf Registration
Statement, (c) the date on which such Note is disposed of by a Broker-Dealer
pursuant to the "Plan of Distribution" contemplated by the Exchange Offer
Registration Statement (including delivery of the Prospectus contained therein)
or (d) the date on which such Note is distributed to the public pursuant to Rule
144 under the Securities Act.

underwriters: As defined in Section 11 hereof.

Underwritten Registration or Underwritten Offering: A registration in which
securities of the Company are sold to an underwriter for reoffering to the
public.

SECTION 2. HOLDERS

A Person is deemed to be a holder of Transfer Restricted Securities (each, a
"Holder") whenever such Person owns Transfer Restricted Securities.

3
<PAGE>

SECTION 3. REGISTERED EXCHANGE OFFER

(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a)(i) hereof have been complied
with), the Company and the Guarantors shall (i) cause to be filed with the
Commission as soon as practicable after the Closing Date, but in no event later
than 90 days after the Closing Date, the Exchange Offer Registration Statement,
(ii) use their best efforts to cause such Exchange Offer Registration Statement
to become effective at the earliest possible time, but in no event later than
150 days after the Closing Date, (iii) in connection with the foregoing, (A)
file all pre-effective amendments to such Exchange Offer Registration Statement
as may be necessary in order to cause such Exchange Offer Registration Statement
to become effective, (B) file, if applicable, a post-effective amendment to such
Exchange Offer Registration Statement pursuant to Rule 430A under the Securities
Act and (C) cause all necessary filings, if any, in connection with the
registration and qualification of the New Notes to be made under the Blue Sky
laws of such jurisdictions as are necessary to permit Consummation of the
Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer
Registration Statement, commence and Consummate the Exchange Offer. The Exchange
Offer shall be on the appropriate form permitting registration of the New Notes
to be offered in exchange for the Senior Notes that are Transfer Restricted
Securities and to permit sales of Broker-Dealer Transfer Restricted Securities
by Restricted Broker-Dealers as contemplated by Section 3(c) hereof.

(b) The Company and the Guarantors shall use their respective best efforts to
cause the Exchange Offer Registration Statement to be effective continuously,
and shall keep the Exchange Offer open for a period of not less than the minimum
period required under applicable federal and state securities laws to Consummate
the Exchange Offer; provided that in no event shall such period be less than 20
Business Days. The Company and the Guarantors shall cause the Exchange Offer to
comply with all applicable federal and state securities laws. No securities
other than the Notes shall be included in the Exchange Offer Registration
Statement. The Company and the Guarantors shall use their respective best
efforts to cause the Exchange Offer to be Consummated on the earliest
practicable date after the Exchange Offer Registration Statement has become
effective, but in no event later than 30 Business Days thereafter.

(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Restricted Broker-Dealer who holds Senior Notes that are
Transfer Restricted Securities and that were acquired for the account of such
Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Senior Notes (other than Transfer Restricted
Securities acquired directly from the Company or any Affiliate of the Company)
pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be
an "underwriter" within the meaning of the Securities Act and must, therefore,
deliver a prospectus meeting the requirements of the Securities Act in
connection with its initial sale of each New Note received by such Broker-Dealer
in the Exchange Offer, which prospectus delivery requirement may be satisfied by
the delivery by such Broker-Dealer of the Prospectus contained in the Exchange
Offer Registration Statement. Such "Plan of Distribution" section shall also
contain all other information with respect to such sales of Broker-Dealer
Transfer Restricted Securities by Restricted Broker-Dealers that the Commission
may require in order to permit such sales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount of
Notes held by any such Broker-Dealer, except to the extent required by the
Commission as a result of a change in policy after the date of this Agreement.

4
<PAGE>

The Company and the Guarantors shall use their respective best efforts to keep
the Exchange Offer Registration Statement continuously effective, supplemented
and amended as required by the provisions of Section 6(c) hereof to the extent
necessary to ensure that it is available for sales of Broker-Dealer Transfer
Restricted Securities by Restricted Broker-Dealers, and to ensure that such
Registration Statement conforms with the requirements of this Agreement, the
Securities Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of 120 days from the date on which the
Exchange Offer is Consummated.

The Company and the Guarantors shall promptly provide sufficient copies of the
latest version of such Prospectus to such Restricted Broker-Dealers promptly
upon request, and in no event later than one day after such request, at any time
during such 120-day period in order to facilitate such sales.

SECTION 4. SHELF REGISTRATION

(a) Shelf Registration. If (i) the Company is not required to file an
------------------
Exchange Offer Registration Statement with respect to the New Notes because the
Exchange Offer is not permitted by applicable law (after the procedures set
forth in Section 6(a)(i) hereof have been complied with) or (ii) if any Holder
of Transfer Restricted Securities shall notify the Company within 20 Business
Days following the Consummation of the Exchange Offer that (A) such Holder was
prohibited by law or Commission policy from participating in the Exchange Offer
or (B) such Holder 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 Exchange Offer Registration Statement is not appropriate or available for
such resales by such Holder or (C) such Holder is a Broker-Dealer and holds
Senior Notes acquired directly from the Company or one of its affiliates, then
the Company and the Guarantors shall (x) cause to be filed on or prior to 30
days after the date on which the Company determines that it is not required to
file the Exchange Offer Registration Statement pursuant to clause (i) above or
60 days after the date on which the Company receives the notice specified in
clause (ii) above a shelf registration statement pursuant to Rule 415 under the
Securities Act, which may be an amendment to the Exchange Offer Registration
Statement (in either event, the "Shelf Registration Statement"), relating to all
Transfer Restricted Securities the Holders of which shall have provided the
information required pursuant to Section 4(b) hereof, and shall (y) use their
respective best efforts to cause such Shelf Registration Statement to become
effective on or prior to 120 days after the date on which the Company becomes
obligated to file such Shelf Registration Statement. If, after the Company has
filed an Exchange Offer Registration Statement which satisfies the requirements
of Section 3(a) above, the Company is required to file and make effective a
Shelf Registration Statement solely because the Exchange Offer shall not be
permitted under applicable federal law, then the filing of the Exchange Offer
Registration Statement shall be deemed to satisfy the requirements of clause (x)
above. Such an event shall have no effect on the requirements of clause (y)
above. The Company and the Guarantors shall use their respective best efforts to
keep the Shelf Registration Statement discussed in this Section 4(a)
continuously effective, supplemented and amended as required by and subject to
the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure
that it is available for sales of Transfer Restricted Securities by the Holders
thereof entitled to the benefit of this Section 4(a), and to ensure that it
conforms with the requirements of this Agreement, the Securities Act and the
policies, rules and regulations of the Commission as announced from time to
time, for a period of at least two years (as extended pursuant to Section
6(c)(i) hereof) following the date on which such Shelf Registration Statement
first becomes effective under the Securities Act or for such shorter period
which will terminate when (i) all of the Transfer

5
<PAGE>

Restricted Securities covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement, (ii) the date on which, in the
opinion of counsel to the Company, all of the Transfer Restricted Securities
then held by the Holders may be sold by the Holders in the public United States
securities markets in the absence of a registration statement covering such
sales or (iii) the date on which there ceases to be outstanding any Transfer
Restricted Securities.

(b) Provision by Holders of Certain Information in Connection with the Shelf
------------------------------------------------------------------------
Registration Statement. No Holder of Transfer Restricted Securities may include
- ----------------------
any of its Transfer Restricted Securities in any Shelf Registration Statement
pursuant to this Agreement unless and until such Holder furnishes to the Company
in writing, within 20 days after receipt of a request therefor, such information
specified in item 507 of Regulation S-K under the Securities Act for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. No Holder of Transfer Restricted Securities shall
be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until
such Holder shall have used its best efforts to provide all such information.
Each Holder as to which any Shelf Registration Statement is being effected
agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not materially misleading.

SECTION 5. LIQUIDATED DAMAGES

If (i) any Registration Statement required by this Agreement is not filed with
the Commission on or prior to the date specified for such filing in this
Agreement, (ii) any such Registration Statement has not been declared effective
by the Commission on or prior to the date specified for such effectiveness in
this Agreement, (iii) the Exchange Offer has not been Consummated within 30
Business Days after the Exchange Offer Registration Statement is first declared
effective by the Commission or (iv) any Registration Statement required by this
Agreement is filed and declared effective but shall thereafter cease to be
effective or fail to be usable for its intended purpose without being succeeded
immediately by a post-effective amendment to such Registration Statement that
cures such failure and that is itself declared effective immediately (each such
event referred to in clauses (i) through (iv), a "Registration Default"), then
the Company and the Guarantors hereby jointly and severally agree to pay
liquidated damages ("Liquidated Damages") to each Holder of Transfer Restricted
Securities with respect to the first 90-day period immediately following the
occurrence of such Registration Default, in an amount equal to $.05 per week per
$1,000 principal amount of Transfer Restricted Securities held by such Holder
for each week or portion thereof that the Registration Default continues. The
amount of the Liquidated Damages shall increase by an additional $.05 per week
per $1,000 in principal amount of Transfer Restricted Securities 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 Transfer Restricted Securities. Notwithstanding anything to
the contrary set forth herein, (1) upon filing of the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration
Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange
Offer Registration Statement (and/or, if applicable, the Shelf Registration
Statement), in the case of (ii) above, (3) upon Consummation of the Exchange
Offer, in the case of (iii) above, or (4) upon the filing of a post-effective
amendment to the Registration Statement or an additional Registration Statement
that causes the Exchange Offer Registration Statement (and/or, if applicable,
the Shelf Registration Statement) to again be declared effective or made usable
in the case of (iv) above, the accrual of Liquidated Damages payable with
respect to the Transfer Restricted Securities as a result of such clause (i),
(ii), (iii) or (iv), as applicable, shall cease.

6
<PAGE>

All accrued Liquidated Damages shall be paid to the Global Note Holder by wire
transfer of immediately available funds or by federal funds check and to Holders
of Certificated Securities by mailing checks to their registered addresses on
each Damages Payment Date. All obligations of the Company and the Guarantors
set forth in the preceding paragraph that are outstanding with respect to any
Transfer Restricted Security at the time such security ceases to be a Transfer
Restricted Security shall survive until such time as all such obligations with
respect to such security shall have been satisfied in full.

SECTION 6. REGISTRATION PROCEDURES

(a) Exchange Offer Registration Statement. In connection with the Exchange
-------------------------------------
Offer, the Company and the Guarantors shall comply with all applicable
provisions of Section 6(c) hereof, shall use their respective best efforts to
effect such exchange and to permit the sale of Broker-Dealer Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof, and shall comply with all reasonable requests from, or
conditions specified by the Commission in connection therewith, including,
without limitation, as a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer Restricted
Securities shall furnish, upon the request of the Company, prior to the
Consummation of the Exchange Offer, a written representation to the Company and
the Guarantors (which may be contained in the letter of transmittal contemplated
by the Exchange Offer Registration Statement) to the effect that (A) it is not
an affiliate of the Company, (B) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the New Notes to be issued in the Exchange
Offer and (C) it is acquiring the New Notes in its ordinary course of business.
Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such
Holder using the Exchange Offer to participate in a distribution of the
securities to be acquired in the Exchange Offer (1) could not under Commission
policy as in effect on the date of this Agreement rely on the position of the
Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991)
----------------------
and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted
----------------------------------
in the Commission's letter to Shearman & Sterling dated July 2, 1993, and
similar no-action letters (including, if applicable, any no-action letter
obtained by the Company), and (2) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction and that such a secondary resale transaction must
be covered by an effective registration statement containing the selling
security holder information required by Item 507 or 508, as applicable, of
Regulation S-K if the resales are of New Notes obtained by such Holder in
exchange for Senior Notes acquired by such Holder directly from the Company or
an affiliate thereof.

(b) Shelf Registration Statement. In connection with the Shelf Registration
----------------------------
Statement, the Company and the Guarantors shall comply with all the provisions
of Section 6(c) hereof and shall use their respective best efforts to effect
such registration to permit the sale of the Transfer Restricted Securities being
sold in accordance with the intended method or methods of distribution thereof
(as indicated in the information furnished to the Company pursuant to Section
4(b) hereof), and pursuant thereto the Company and the Guarantors will prepare
and file with the Commission a Registration Statement relating to the
registration on any appropriate form under the Securities Act, which form shall
be available for the sale of the Transfer Restricted Securities in accordance
with the intended method or methods of distribution thereof within the time
periods and otherwise in accordance with the provisions hereof.

7
<PAGE>

Prospectus required by this Agreement to permit the sale or resale of Transfer
Restricted Securities (including, without limitation, any Exchange Offer
Registration Statement and the related Prospectus, to the extent that the same
are required to be available to permit sales of Broker-Dealer Transfer
Restricted Securities by Restricted Broker-Dealers), the Company and the
Guarantors shall:

(i) use their respective best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 hereof, as
applicable. Upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to contain a
material misstatement or omission or (B) not to be effective and usable for
resale of Transfer Restricted Securities during the period required hereby,
the Company and the Guarantors shall file promptly an appropriate amendment
to such Registration Statement, (1) in the case of clause (A), correcting
any such misstatement or omission, and (2) in the case of clauses (A) and
(B), use their respective best efforts to cause such amendment to be
declared effective and such Registration Statement and the related
Prospectus to become usable for their intended purpose(s) as soon as
practicable thereafter.

(ii) prepare and file with the Commission such amendments and post-
effective amendments to the Registration Statement as may be necessary to
keep the Registration Statement effective for the applicable period set
forth in Section 3 or 4 hereof, or such shorter period as will terminate
when all Transfer Restricted Securities covered by such Registration
Statement have been sold; cause the Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 under the Securities Act, and to comply fully with Rules 424,
430A and 462, as applicable, under the Securities Act in a timely manner;
and comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration Statement during
the applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;

(iii) advise the underwriter(s), if any, and selling Holders of
Transfer Restricted Securities covered by the applicable Shelf Registration
Statement, promptly and, if requested by such Persons, confirm such advice
in writing, (A) when the Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect to any Registration
Statement or any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or
for additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Securities Act or of the suspension by any
state securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation of
any proceeding for any of the preceding purposes, (D) of the existence of
any fact or the happening of any event that makes any statement of a
material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes
in the Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes in
the Prospectus in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If at any time
the Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, or any state

8
<PAGE>

securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws, the
Company and the Guarantors shall use their respective best efforts to
obtain the withdrawal or lifting of such order at the earliest possible
time;

(iv) furnish to the Initial Purchasers, each selling Holder named in
any Registration Statement or Prospectus and each of the underwriter(s) in
connection with such sale, if any, before filing with the Commission,
copies of any Registration Statement or any Prospectus included therein or
any amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents will be
subject to the review and comment of such Holders and underwriter(s) in
connection with such sale, if any, for a period of at least five Business
Days, and the Company will not file any such Registration Statement or
Prospectus or any amendment or supplement to any such Registration
Statement or Prospectus (including all such documents incorporated by
reference) to which the selling Holders of the Transfer Restricted
Securities covered by such Registration Statement or the underwriter(s) in
connection with such sale, if any, shall reasonably object within five
Business Days after the receipt thereof;

(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the selling Holders and to the
underwriter(s) in connection with such sale, if any, make the Company's and
the Guarantors' representatives available for discussion of such document
and other customary due diligence matters, and include such information in
such document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;

(vi) make available at reasonable times for inspection by the
selling Holders, any managing underwriter participating in any disposition
pursuant to such Registration Statement and any attorney or accountant
retained by such selling Holders or any of such underwriter(s), all
financial and other records, pertinent corporate documents and properties
of the Company and the Guarantors and cause the Company's and the
Guarantors' officers, directors and employees to supply all information
reasonably requested by any such Holder, underwriter, attorney or
accountant in connection with such Registration Statement or any post-
effective amendment thereto subsequent to the filing thereof and prior to
its effectiveness as shall be reasonably necessary to enable them to
exercise any applicable due diligence responsibilities, provided that each
such person shall first agree in writing with the Company and the
Guarantors that (A) any information that is designated in writing by the
Company or the Guarantors in good faith as confidential at the time of
delivery of such information (the "Information") to such person shall be
kept confidential by such person, unless such disclosure is made in
connection with a court proceeding or required by law, or such Information
becomes available to the public generally or through a third party without
an accompanying obligation of confidentiality, (B) such Information shall
be deemed confidential and shall not be used by such person as the basis
for any market transactions in the securities of the Company or the
Guarantors unless and until such Information is made generally available to
the public, and (C) such person will, upon learning that disclosure of such
Information is sought in a court of competent jurisdiction, give notice to
the Company or the Guarantors and allow the Company or the Guarantors (at
the Company's or the Guarantors' expense, as applicable) to undertake
appropriate action to prevent disclosure of such Information;

9
<PAGE>

(vii) if requested by any selling Holders or the underwriter(s) in
connection with such sale, if any, promptly include in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective
amendment if necessary, such information as such selling Holders and
underwriter(s), if any, may reasonably request to have included therein,
including, without limitation, information relating to the "Plan of
Distribution" of the Transfer Restricted Securities, information with
respect to the principal amount of Transfer Restricted Securities being
sold to such underwriter(s), the purchase price being paid therefor and any
other terms of the offering of the Transfer Restricted Securities to be
sold in such offering; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after the
Company is notified of the matters to be included in such Prospectus
supplement or post-effective amendment; provided, that the Company shall
not be required to take any action pursuant to this Section 6(c)(vii) that
would, in the opinion of counsel to the Company, violate applicable law;

(viii) furnish to each selling Holder and each of the underwriter(s)
in connection with such sale, if any, without charge, at least one copy of
the Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);

(ix) deliver to each selling Holder and each of the underwriter(s),
if any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Company and the Guarantors hereby
consent to the use (in accordance with law) of the Prospectus and any
amendment or supplement thereto by each of the selling Holders (but, in the
case of a Shelf Registration Statement, only those holders selling Transfer
Restricted Securities included in such Shelf Registration Statement) and
each of the underwriter(s), if any, in connection with the offering and the
sale of the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;

(x) in the case of a Shelf Registration Statement, enter into such
agreements (including an underwriting agreement) and make such customary
representations and warranties and take all such other actions in
connection therewith reasonably necessary in order to expedite or
facilitate the disposition of the Transfer Restricted Securities pursuant
to any Shelf Registration Statement contemplated by this Agreement as may
be reasonably requested by any Holder of Transfer Restricted Securities or
underwriter in connection with any sale or resale pursuant to any Shelf
Registration Statement contemplated by this Agreement, and in such
connection, whether or not an underwriting agreement is entered into and
whether or not the registration is an Underwritten Registration, the
Company and the Guarantors shall:

(A) furnish to each selling Holder and each underwriter, if
any, upon the effectiveness of the Shelf Registration Statement (1) an
opinion, dated the date of Consummation of the Exchange Offer or the
date of effectiveness of the Shelf Registration Statement, as the case
may be, of counsel for the Company and the Guarantors, in form and
substance reasonably satisfactory to the underwriters, if any, and the
Holders of a majority in principal amount of the Transfer Restricted
Securities being sold, covering customary matters, and (2) a customary
comfort letter, dated as of the date of effectiveness of the

10
<PAGE>

Shelf Registration Statement or the date of Consummation of the
Exchange Offer, as the case may be, from the Company's independent
accountants, in the customary form and covering matters of the type
customarily covered in comfort letters to underwriters in connection
with primary underwritten offerings; and

(B) deliver such other documents and certificates as may be
reasonably requested by the selling Holders, the underwriter(s), if
any, and Restricted Broker Dealers, if any, to evidence compliance
with clause (A) above and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the
Company and the Guarantors pursuant to this clause (x).

The above shall be done at each closing under such underwriting or similar
agreement, as and to the extent required thereunder, and if at any time the
representations and warranties of the Company and the Guarantors contained
in such underwriting or similar agreement cease to be true and correct, the
Company and the Guarantors shall so advise the underwriter(s), if any, the
selling Holders and each Restricted Broker-Dealer promptly and if requested
by such Persons, shall confirm such advice in writing;

(xi) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification of
the Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the selling Holders or underwriter(s), if any, may
request and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the applicable Registration Statement; provided that
neither the Company nor any Guarantor shall be required to register or
qualify as a foreign corporation where it is not now so qualified or to
take any action that would subject it to the service of process in suits or
to taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so subject;

(xii) issue, upon the request of any Holder of Senior Notes covered
by any Shelf Registration Statement contemplated by this Agreement, and
upon surrender of the Senior Notes held by such Holder to the Company for
cancellation, New Notes having an aggregate principal amount equal to the
aggregate principal amount of Senior Notes surrendered to the Company by
such Holder in exchange therefor or being sold by such Holder; such New
Notes to be registered in the name of such Holder or in the name of the
purchaser(s) of such Notes, as the case may be; in return, the Senior Notes
held by such Holder shall be surrendered to the Company for cancellation;

(xiii) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the selling Holders and the underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and to register such Transfer Restricted Securities in
such denominations and such names as the Holders or the underwriter(s), if
any, may request at least two Business Days prior to such sale of Transfer
Restricted Securities;

(xiv) subject to Section 6(c)(i) hereof, if any fact or event
contemplated by Section

11
<PAGE>

6(c)(iii)(D) hereof shall exist or have occurred, prepare a supplement or
post-effective amendment to the Registration Statement or related
Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers
of Transfer Restricted Securities, the Prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading;

(xv) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering such
Transfer Restricted Securities and provide the Trustee under the Indenture
with printed certificates for the Transfer Restricted Securities which are
in a form eligible for deposit with The Depository Trust Company;

(xvi) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD, and use their respective best efforts to cause such Registration
Statement to become effective and approved by and the disposition of the
Transfer Restricted Securities covered by such Registration Statement to be
registered with or approved by, such governmental agencies or authorities
as may be necessary to enable the Holders selling Transfer Restricted
Securities to consummate the disposition of such Transfer Restricted
Securities;

(xvii) otherwise use their respective best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited)
covering a twelve-month period beginning after the effective date of the
Registration Statement (as such term is defined in paragraph (c) of Rule
158 under the Securities Act);

(xviii) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement and, in connection therewith, cooperate with the Trustee and
the Holders of Notes to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance with the terms
of the TIA; and execute and use its best efforts to cause the Trustee to
execute, all documents that may be required to effect such changes and all
other forms and documents required to be filed with the Commission to
enable such Indenture to be so qualified in a timely manner; and

(d) Restrictions on Holders.
-----------------------

(i) Each Holder agrees by acquisition of a Transfer Restricted
Security that, upon receipt of the notice referred to in Section 6(c)(i) hereof
or any notice from the Company of the existence of any fact of the kind
described in Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue
disposition of Transfer Restricted Securities pursuant to the applicable
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xiv) hereof, or
until it is advised in writing by the Company that the use of the Prospectus may
be resumed, and has received copies of any additional or supplemental filings
that are incorporated by reference in the Prospectus (the "Advice"). If so
directed by the Company, each Holder will deliver to the

12
<PAGE>

Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Transfer
Restricted Securities that was current at the time of receipt of either such
notice. In the event the Company shall give any such notice, the time period
regarding the effectiveness of such Registration Statement set forth in Section
3 or 4 hereof, as applicable, shall be extended by the number of days during the
period from and including the date of the giving of such notice pursuant to
Section 6(c)(i) or Section 6(c)(iii)(D) hereof to and including the date when
each selling Holder covered by such Registration Statement shall have received
the copies of the supplemented or amended Prospectus contemplated by Section
6(c)(xiv) hereof or shall have received the Advice.

(ii) The Holders will furnish the information required to be
furnished pursuant to Section 4(b) hereof within the time period set forth
herein.

(iii) Sales of such Transfer Restricted Securities pursuant to a
Registration Statement shall only be made in the manner set forth in such
currently effective Registration Statement.

SECTION 7. REGISTRATION EXPENSES

(a) All expenses incident to the Company's and the Guarantors' performance
of or compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including, without
limitation,: (i) all registration and filing fees and expenses (including
filings made by any Initial Purchaser or Holder with the NASD (and, if
applicable, the fees and expenses of any "qualified independent underwriter")
and its counsel that may be required by the rules and regulations of the NASD);
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the New Notes to be issued in the Exchange Offer and printing
of Prospectuses), messenger and delivery services and telephone; (iv) all fees
and disbursements of counsel for the Company, the Guarantors and, subject to
Section 7(b) hereof, the Holders of Transfer Restricted Securities; (v) all
application and filing fees in connection with listing the Notes on a national
securities exchange or automated quotation system pursuant to the requirements
hereof; and (vi) all fees and disbursements of independent certified public
accountants of the Company and the Guarantors (including the expenses of any
special audit and comfort letters required by or incident to such performance).

The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.

(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
will reimburse the Initial Purchasers and the Holders of Transfer Restricted
Securities being tendered in the Exchange Offer and/or resold pursuant to the
"Plan of Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel (which counsel
shall be reasonably satisfactory to the Company), who shall be chosen by the
Holders of a majority in principal amount of the Transfer Restricted Securities
for whose benefit such Registration Statement is being prepared; provided that
such fees and disbursements of such counsel shall not exceed $50,000.

13
<PAGE>

SECTION 8. INDEMNIFICATION

(a) The Company and the Guarantors, jointly and severally, agree to
indemnify and hold harmless (i) each Holder and (ii) each person, if any, who
controls (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) any Holder (any of the persons referred to in this clause
(ii) being hereinafter referred to as a "controlling person") and (iii) the
respective officers, directors, partners, employees, representatives and agents
of any Holder or any controlling person (any person referred to in clause (i),
(ii) or (iii) may hereinafter be referred to as an "Indemnified Holder"), to the
fullest extent lawful, from and against any and all losses, claims, damages,
liabilities, judgments, actions and expenses (including, without limitation, and
as incurred, reimbursement of all reasonable costs of investigating, preparing,
pursuing or defending any claim or action, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, including the
reasonable fees and expenses of counsel to any Indemnified Holder) directly or
indirectly caused by, related to, based upon, arising out of or in connection
with any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, preliminary prospectus or Prospectus
(or any amendment or supplement thereto), or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except (i) insofar as such losses,
claims, damages, liabilities or expenses are caused by an untrue statement or
omission or alleged untrue statement or omission that is made in reliance upon
and in conformity with information relating to any of the Holders furnished in
writing to the Company by any of the Holders expressly for use therein or (ii)
to the extent that any such loses, claims, damages, liabilities, or expenses
result solely from an untrue statement of a material fact contained in, or the
omission of a material fact from the Registration Statement or Prospectus, which
untrue statement or omission was corrected in an amended or supplemented
Registration Statement or Prospectus, if the person alleging such loss, claim,
damage, liability or expense was not sent or given, at or prior to the written
confirmation of such sale, a copy of the amended or supplemented Registration
Statement or Prospectus if the Company had previously furnished copies thereof
to such indemnified party and if delivery of a prospectus was required by the
Securities Act and was not so made.

In case any action or proceeding (including any governmental or regulatory
investigation or proceeding) shall be brought or asserted against any of the
Indemnified Holders with respect to which indemnity may be sought against the
Company or the Guarantors, such Indemnified Holder (or the Indemnified Holder
controlled by such controlling person) shall promptly notify the Company and the
Guarantors in writing, and the Company or the Guarantors shall assume the
defense of such action, including the employment of counsel reasonably
satisfactory to such Indemnified Holder and the payment of all fees and expenses
of such counsel, as incurred (except that, in the case of any action in respect
of which indemnity may be sought pursuant to both Section 8(a) and 8(b) hereof,
such Indemnified Holder shall not be required to assume the defense of such
action pursuant hereto, but may employ separate counsel and participate in the
defense thereof; however, the fees and expense of such counsel, except as
provided below, shall be at the expense of such Indemnified Holder). Such
Indemnified Holder shall have the right to employ it own counsel; any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expenses of such Indemnified Holder unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the Company or the Guarantors, (ii) the Company or the Guarantors shall have
failed to assume the defense of such action or employ counsel reasonably
satisfactory to such Indemnified Holder within a reasonable period of time after
notice of the institution of such action or (iii) the named parties to any such
action (including any impleaded parties)

14
<PAGE>

include both such Indemnified Holder and the Company or the Guarantors, and such
Indemnified Holder shall have been advised by such counsel that there may be one
or more legal defenses available to it which are different from or additional to
those available to the Company or the Guarantors (in which case the Company or
the Guarantors shall not have the right to assume the defense of such action on
behalf of such Indemnified Holder). In any such case, the Company and the
Guarantors shall not, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the fees and
expense of more than on separate firm of attorneys (in addition to any local
counsel) for all indemnified parties and all such fees and expenses shall be
reimbursed as they are incurred (upon written request and presentation of
reasonably satisfactory invoices). Such firm shall be designated in writing by
all Indemnified Holders, in the case of the parties indemnified pursuant to
Section 8(a) hereof, and by the Company, in the case of parties indemnified
pursuant to Section 8(b) hereof. The Company and the Guarantors shall indemnify
and hold harmless such Indemnified Holder from and against any and all losses,
claims, damages, liabilities and judgments by reason of any settlement of any
action (i) effected with its written consent or (ii) effected without its
written consent if the settlement is entered into more than twenty business days
after the Company or the Guarantors shall have received a request form such
Indemnified Holder for reimbursement for the fees and expenses of counsel (in
any case where such fees and expenses are at the expense of the Company or the
Guarantors), and prior to the date of such settlement, the Company or the
Guarantors shall have received written notice of such settlement and shall have
failed to comply with such reimbursement request. Neither the Company nor the
Guarantors shall, without the prior written consent of such Indemnified Holder,
effect any settlement or compromise of, or consent to the entry of judgment with
respect to, any pending or threatened action in respect of which such
Indemnified Holder is or could have been a party and indemnity or contribution
may be or could have been sought hereunder by such Indemnified Holders, unless
such settlement, compromise or judgement includes an unconditional release of
such Indemnified Holder from all liability on claims that are or could have been
the subject matter of such action.

(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and the Guarantors, and
their respective directors, officers, and any person controlling (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
the Company, and the respective officers, directors, partners, employees,
representatives and agents of each such person, to the same extent as the
foregoing indemnity from the Company and the Guarantors to each of the
Indemnified Holders, but only with respect to claims and actions based on
information relating to such Holder furnished in writing by such Holder
expressly for use in any Registration Statement. In case any action or
proceeding shall be brought against the Company, any Guarantor or its directors
or officers or any such controlling person in respect of which indemnity may be
sought against a Holder of Transfer Restricted Securities, such Holder shall
have the rights and duties given the Company and the Guarantors, and the
Company, such Guarantors, such directors or officers or such controlling person
shall have the rights and duties given to each Holder by the preceding
paragraph. In no event shall any Holder be liable or responsible for any amount
in excess of the amount by which the total received by such Holder with respect
to its sale of Transfer Restricted Securities pursuant to a Registration
Statement exceeds (i) the amount paid by such Holder for such Transfer
Restricted Securities and (ii) the amount of any damages which such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.

(c) If the indemnification provided for in this Section 8 is unavailable
to an indemnified party under Section 8(a) or 8(b) hereof (other than by reason
of exceptions provided in those Sections) in respect

15
<PAGE>

of any losses, claims, damages, liabilities or expenses referred to therein,
then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Guarantors, on the one hand, and the Holders, on
the other hand, from their sale of Transfer Restricted Securities or if such
allocation is not permitted by applicable law, the relative fault of the Company
and the Guarantors, on the one hand, and of the Indemnified Holder, on the other
hand, in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Company and the Guarantors,
on the one hand, and of the Indemnified Holder, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or such Guarantor
or by the Indemnified Holder. The amount paid or payable by a party as a result
of the losses, claims, damages, liabilities and expenses referred to above shall
be deemed to include, subject to the limitations set forth in the second
paragraph of Section 8(a) hereof, any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.

(d) The Company, the Guarantors and each Holder of Transfer Restricted
Securities agree that it would not be just and equitable if contribution
pursuant to this Section 8(c) were determined by pro rata allocation (even if
the Holders were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities
or expenses referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, no Holder or its related Indemnified Holders shall
be required to contribute, in the aggregate, any amount in excess of the amount
by which the total received by such Holder with respect to the sale of its
Transfer Restricted Securities pursuant to a Registration Statement exceeds the
sum of (A) the amount paid by such Holder for such Transfer Restricted
Securities plus (B) the amount of any damages which such Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 8(c) are several in proportion to the respective principal amount of
Senior Notes held by each of the Holders hereunder and not joint.

SECTION 9. RULE 144A

The Company and each Guarantor hereby agrees with each Holder, for so long
as any Transfer Restricted Securities remain outstanding and during any period
in which the Company or such Guarantor is not subject to Section 13 or 15(d) of
the Exchange Act, to make available, upon request of any Holder of Transfer
Restricted Securities, to any Holder or beneficial owner of Transfer Restricted
Securities in connection with any sale thereof and any prospective purchaser of
such Transfer Restricted Securities designated by such Holder or beneficial
owner, the information required by Rule 144A(d)(4) under the Securities Act in
order to permit resales of such Transfer Restricted Securities pursuant to Rule
144A.

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<PAGE>

SECTION 10. UNDERWRITTEN REGISTRATIONS

No Holder may participate in any Underwritten Registration hereunder unless
such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on
the basis provided in customary underwriting arrangements entered into in
connection therewith and (b) completes and executes all reasonable
questionnaires, powers of attorney, and other documents required under the terms
of such underwriting arrangements.

SECTION 11. SELECTION OF UNDERWRITERS

For any Underwritten Offering, the investment banker or investment bankers
and manager or managers for any Underwritten Offering that will administer such
offering will be selected by the Holders of a majority in aggregate principal
amount of the Transfer Restricted Securities included in such offering provided,
that such underwriters must be reasonably satisfactory to the Company. Such
investment bankers and managers are referred to herein as the "underwriters."

SECTION 12. MISCELLANEOUS

(a) Remedies. Each Holder, in addition to being entitled to exercise all
--------
rights provided herein, in the Indenture, the Purchase Agreement or granted by
law, including recovery of liquidated or other damages, will be entitled to
specific performance of its rights under this Agreement. The Company and the
Guarantors agree that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by them of the provisions of this
Agreement and hereby agree to waive the defense in any action for specific
performance that a remedy at law would be adequate.

(b) No Inconsistent Agreements. Neither the Company nor any Guarantor
--------------------------
will, on or after the date hereof, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. Neither the Company
nor any Guarantor has previously entered into any agreement granting any
registration rights with respect to its securities to any Person. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's and the
Guarantors' securities under any agreement in effect on the date hereof.

(c) Adjustments Affecting the Notes. Neither the Company nor any Guarantor
-------------------------------
will take any action, or voluntarily permit any change to occur, with respect to
the Notes that would materially and adversely affect the ability of the Holders
to Consummate any Exchange Offer.

(d) Amendments and Waivers. The provisions of this Agreement may not be
----------------------
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 12(d)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities affected by such
amendment, modification, supplement, waiver or consent, and (ii) in the case of
all other provisions hereof, the Company has obtained the written consent of
Holders of a majority of the outstanding principal amount of Transfer Restricted
Securities. Notwithstanding the foregoing, a waiver or consent to departure from
the provisions hereof that relates exclusively to the rights of Holders whose
securities are being tendered pursuant to the Exchange Offer and that does not
affect directly or indirectly the rights of other Holders

17
<PAGE>

whose securities are not being tendered pursuant to such Exchange Offer may be
given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities being sold rather than being registered in such
Exchange Offer.

(e) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:

(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and

(ii) if to the Company or the Guarantors:

Mrs. Fields' Original Cookies, Inc.
2855 E. Cottonwood Parkway
Salt Lake City, Utah 84121
Telecopier No.: (801) 736-5600
Attention: Chief Financial Officer

With a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telecopier No.: (212) 735-2000
Attention: Randall H. Doud, Esq.

All such notices and communications shall be deemed to have been duly
given: (i) at the time delivered by hand, if personally delivered; (ii) five
Business Days after being deposited in the mail, postage prepaid, if mailed;
(iii) when receipt acknowledged, if telecopied; and (iv) on the next business
day, if timely delivered to an air courier guaranteeing overnight delivery.

Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.

(f) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and assigns of each of the parties,
including, without limitation, and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided that this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities directly from such Holder.

(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall

18
<PAGE>

not limit or otherwise affect the meaning hereof.

(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.

(j) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.

(k) Entire Agreement. This Agreement is intended by the parties as a final
----------------
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.

19
<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.

MRS. FIELDS' ORIGINAL COOKIES, INC.

By: _______________________________
Name: Tim Pierce
Title: Chief Financial Officer

THE MRS. FIELDS' BRAND, INC.

By: _______________________________
Name: Tim Pierce
Title: Chief Financial Officer

GREAT AMERICAN COOKIE COMPANY, INC.

By: ______________________________
Name: Tim Pierce
Title: Chief Financial Officer

JEFFERIES & COMPANY, INC.

By: _______________________________
Name:
Title:

BT ALEX. BROWN INCORPORATED

By: _______________________________
Name:
Title:

<PAGE>

[LOGO OF COCA COLA USA FOUNTAIN APPEARS HERE]

December 1, 1997

Mr. Larry Hodges
President
Mrs. Field's Original Cookies, Inc.
462 West Bearcat Drive
Salt Lake City, Utah 84115

Dear Mr. Hodges:

This letter will constitute an amendment (the "Amendment") to that certain
amended and restated marketing agreement between Mrs. Field's Original
Cookies, Inc. ("MFOC") and Coco-Cola USA Fountain ("CCF") dated January 9,
1997 (the "Restated Agreement"). The capitalized terms contained in this
Amendment will have the same meanings set forth in the Restated Agreement
unless otherwise defined herein.

Effective as of the date of execution of this Amendment, the Restated
Agreement is amended to reflect that the Term will end the Letter of
December 31, 2002 or when the MFOC System has purchased the Volume
Commitment of CCF's Fountain Syrups, unless terminated earlier pursuant to
the terms of the Restated Agreement. The Restated Agreement id further
amended to reflect the fact that CCF forgives MFOC's repayment of the
Unearned 1993 Funding which currently amounts to Five Hundred Four Thousand
Dollars ($504,000). Accordingly, the second to the last sentence of Section
4 of the Restated Agreement is deleted in its entirety and the last
sentence of such sections is replaced by the following: "Once the $600,000
advance has been earned, Company will begin to pay any additional funding
earned by the MFOC System to MFOC on a quarterly basis, after the end of
the three month period in which it is earned."

Except as specifically set forth above, the Restated Agreement and the
terms and conditions thereof will remain in full force and effect for the
remainder of the Term. From and after the date of execution of this
Amendment, all references to
<PAGE>

Mr. Larry Hodges
December 1, 1997
Page 2

the Restated Agreement shall be deemed to be references to the Restated
Agreement as amended hereby.

Sincerely,

/s/ Tom Moore

Tom Moore
Vice President, Field Sales

Accepted and agreed to this 8/th/ day
of Dec, 1997.

MRS. FIELDS ORIGINAL COOKIES, INC.

By: /s/ Larry Hodges
-------------------------------
Larry Hodges, President

Date:_____________________________

<PAGE>

[Insert LOGO Here]

September 21, 1998

Mr. Larry Hodges
President and CEO
Mrs. Field's Original Cookies, Inc.
2855 E. Cottonwood Pkwy, Suite 400
Salt Lake City, UT 84121-0750

Dear Mr. Hodges:

This letter will constitute a corollary agreement to our existing marketing
agreement between Mrs. Fields' Original Cookies, Inc. ("MFOC") and Coca-Cola
USA Fountain ("CCF") dated January 9, 1997 and amended in writing on December
1, 1997.

In return for mutually agreed upon marketing promotions beginning September 1,
1998 and completed by December 31, 1998, CCF will provide marketing funds in
the amount of Four Hundred Fifty Thousand Dollars ($450,000) to MFOC.

Sincerely,

/s/ Tom Moore

Tom Moore
Vice President, Field Sales

Accepted and agreed to this ____________ day of ____________ 1998

MRS. FIELD'S ORIGINAL COOKIES, INC.

By: /s/ Larry Hodges
------------------------------
Larry Hodges, President

Date:______________________________

<PAGE>

EMPLOYMENT AGREEMENT
--------------------

THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into this
10th day of July, 1997, by and between GARRY REMINGTON ("Employee") and MRS.
FIELDS' ORIGINAL COOKIES, INC., a Delaware corporation (the "Company").

RECITAL
-------

This Agreement is made and entered into with reference to the following
facts and objectives:

The Company desires to establish its right to the services of Employee in
the capacities described below, on the terms and conditions hereinafter set
forth, and Employee is willing to accept such employment on such terms and
conditions.

Therefore, in consideration of the mutual agreements hereinafter set forth,
Employee and the Company have agreed and do hereby agree as follows:

AGREEMENT
---------

1. DUTIES. The Company does hereby hire, engage, and employ the Employee
------
as the Senior Vice President of Real Estate of the Company and Employee does
hereby accept and agree to such hiring, engagement, and employment. Employee
shall serve the Company in such position fully, diligently, competently, and in
conformity with provisions of this Agreement and the corporate policies of the
Company as they presently exist, and as such policies may be amended, modified,
changed, or adopted during the Period of Employment, as hereinafter defined.

During the Period of Employment Employee shall also serve as the Senior
Vice President of Real Estate of each subsidiary or affiliate of the Company
that is now or that becomes a part of the Mrs. Fields Company Group. As used in
this Agreement, the term the "Mrs. Fields Company Group" shall mean and refer to
the Company and the Company's subsidiaries and affiliates from time to time.

Subject to specific elaboration by the Board of Directors of the Company as
to the duties (which shall be consistent herewith and with Employee offices
provided for hereunder) that are to be performed by Employee and the manner in
which such duties are to be performed, the duties of Employee shall entail those
duties customarily performed by a Senior Vice President of Real Estate of a
company with a sales volume and the number of employees commensurate with those
of the Company. Provided, however, that at all times during the Period of
Employment, Employee shall perform those duties and fulfill those
responsibilities and refrain from those activities that are reasonably
prescribed or proscribed by the Board of Directors of the Company to be
performed or refrained from by his consistent with his positions with the
Company.

Employee shall be responsible and report only to the Company's President
and Chief Executive Officer.
<PAGE>

Throughout the Period of Employment, Employee shall devote his full time,
energy, and skill to the performance of his duties for the Company and for the
benefit of the Company and the Mrs. Fields Company Group. The foregoing
notwithstanding, Employee shall be permitted to (i) engage in charitable and
community affairs, (ii) act as a director of any corporations or organizations
outside the Mrs. Fields Company Group not in competition with the Company or any
member of the Mrs. Fields Company Group and to manage such investments, not to
exceed three (3) in number, and receive compensation therefore, and (iii) to
make investments of any character in any business or businesses not in
competition with the Company or any member of the Mrs. Fields Company Group and
to manage such investments (but not be involved in the day to day operations of
any such business), provided, in each case and collectively, that the same does
or do not constitute or involve Employee in a conflict of interest vis-(-vis the
Company or any member of the Mrs. Fields Company Group or interfere with the
performance of Employee's duties under this Agreement.

Employee shall exercise due diligence and care in the performance of his
duties for and the fulfillment of his obligations to the Company under this
Agreement.

The Company shall furnish Employee with office, secretarial and other
facilities and services as are reasonably necessary or appropriate for the
performance of Employee's duties hereunder and consistent with his position as
the Senior Vice President of Real Estate of the Company.

2. PERIOD OF EMPLOYMENT. The Period of Employment (as defined below)
--------------------
shall, unless sooner terminated as provided herein, be the two (2) year period
commencing on the date of execution of this Agreement.

Unless the Company gives notice of termination as provided under this
Agreement, this Agreement will automatically renew on each annual anniversary
from the execution of this Agreement for a successive two-year period.

3. COMPENSATION.
------------

(a) BASE SALARY. During the Period of Employment, the Company shall pay
-----------
Employee, and Employee agrees to accept from the Company, in payment for his
services a base salary of One Hundred Seventy-Five Thousand Dollars
($175,000.00) per year ("Base Salary"), payable in equal semi-monthly
installments or at such other time or times as Employee and the Company shall
agree. Upward adjustment to the Base Salary shall be considered by the Company's
Board of Directors not less frequently than annually. The Company's Board of
Directors at any time or times may, but shall have no obligation to, supplement
Employee's salary by such bonuses and/or other special payments and benefits as
the Board of Directors of the Company in its sole and absolute discretion may
determine.

(b) INCENTIVE COMPENSATION. During the Period of Employment, Employee
----------------------
shall:

(i) participate in any incentive compensation plan adopted by
the Company; or

2
<PAGE>

(ii) if the Company, for any reason, shall not adopt and implement an
incentive compensation plan in replacement of the 1997 Incentive Plan for
eligible employees of the Company (including Employee), Company and Employee
agree that this Agreement shall provide Employee with the opportunity to earn
and be paid incentive compensation to the same extent that he was eligible to
earn and be paid incentive compensation under the incentive compensation plan
under which, pursuant to the provisions of this Section 3(b), Employee was most
recently eligible to earn and be paid incentive compensation by the Company.

4. FRINGE BENEFITS. During the Period of Employment, Employee shall be
---------------
entitled to the following fringe benefits.

(a) BENEFIT PLANS. Employee shall be entitled to participate in all
-------------
benefit plans and programs generally available to all other senior management
employees of the Company or to all employees of the Company working in Salt Lake
City, Utah, subject to any restrictions specified in such plans and to receive
such other benefits and conditions of employment as are provided to all other
senior officers or executives of the Company as of the date of this Agreement.

(b) EQUITY PLAN. Employee shall be entitled to participate in an equity
-----------
based plan or arrangement which shall consist of a minimum of .75% of the total
equity of the Company (the "Equity Plan") consistent with the letter from
Herbert S. Winokur, Jr. to Lawrence Hodges, dated August 5, 1996. In the event
that (i) the Company fails to adopt the Equity Plan, Employee may terminate this
Agreement and his employment hereunder with Good Reason, as hereinafter defined,
in accordance with the provisions of Section 9(b) ("Termination by Employee-
Termination-With Good Reason"). Employee's right to terminate this Agreement
and his employment hereunder with Good Reason in accordance with said Section
9(b) shall be Employee's sole and exclusive remedy for or resulting from the
failure, for any reason, of the Company or its Board of Directors to create or
implement the Equity Plan or to take any other action specified in this Section
4(b).

Anything in this Agreement or in such plan or arrangement to the contrary
notwithstanding, the inclusion in such plan or arrangement of any provision(s)
addressing participation by Employee in such plan or arrangement for a period of
years shall not be interpreted as a promise of continued employment by the
Company for such period of years or any other period of time.

The plan or arrangement to be proposed by Employee shall provide that any
payments made thereunder, in conjunction with any other payments that constitute
"parachute payments" (as defined in Section 280G(b)(A) of the Internal Revenue
Code) (the "Code"), shall be limited such that no such payments or portions
thereof constitute an "excess parachute payment" (as defined in Section
280G(b)(1) of the Code) or are otherwise nondeductible by the Company for tax
purposes under any other provision of the Code.

(c) VACATION AND OTHER LEAVE. Employee shall be entitled to such
------------------------
amounts of paid vacation and other leave, but not less than three (3) weeks
vacation per twelve-month period of employment, as from time to time may be
allowed to the Company's senior management personnel generally, with such
vacation to be scheduled and taken in accordance with the Company's standard
vacation policies applicable to such personnel.

3
<PAGE>

(d) VESTING ON DEATH OR DISABILITY. Upon any termination of this
------------------------------
Agreement and Employee's employment hereunder by reason of Employee's death or
Permanent Disability, as defined in Section 7(b) ("Death or Disability -
Definition of Permanently Disabled and Permanent Disability"), provided that the
terms and provisions of such plan and applicable law permit, any theretofore
deferred or unvested portion of any award made to Employee in respect of any
retirement, pension, profit sharing, long term incentive, and similar plans
automatically shall become fully vested in Employee and shall be nonforfeitable,
and shall continue in effect and be redeemable by or payable to Employee (or his
designated beneficiary or estate) at the time and on the same conditions as
would have applied had Employee's employment not been so terminated. It is
expressly provided, however, that nothing in this Section 4(d) shall obligate
the Company to provide full vesting upon death or disability in connection with
participation by Employee in the equity plan or arrangement contemplated under
Section 4(b) ("Fringe Benefits-Equity Plan"), further, the provisions governing
payment of any incentive compensation payable to Employee pursuant to the
incentive compensation plan(s) referred to in Section 3(b) ("Compensation-
Incentive Compensation") shall govern any payment of incentive compensation due
thereunder in the event of Employee's death or disability.

5. BUSINESS EXPENSES AND AUTOMOBILE ALLOWANCE.
------------------------------------------
During the Period of Employment, the Company shall pay, or in case paid by
Employee in the first instance, reimburse Employee for, any and all necessary,
customary, and usual expenses incurred by him in connection with the performance
of his duties hereunder, including, without limitation, all traveling expenses,
and entertainment expenses, upon submission of appropriate vouchers and
documentation.

To the extent provided to all other senior officers or executives of the
Company, during the Period of Employment, Employee shall be entitled to receive
an automobile allowance and reimbursement for expenses associated with the
operation and maintenance of an automobile which is comparable to Employee's
current automobile. The Company will reimburse Employee upon presentation of
vouchers and documentation for any such operational and maintenance expenses
which are consistent with the usual accounting procedures of the Company.

6. NO OTHER BENEFITS OR COMPENSATION. Employee, as a result of his
---------------------------------
employment by the Company, shall be entitled to only the compensation and
benefits provided for in this Agreement, subject to the terms thereof, and no
others.

7. DEATH OR DISABILITY.
-------------------

(a) TERMINATION OF EMPLOYMENT. If Employee dies during the
-------------------------
Period of Employment, Employee's employment shall automatically cease and
terminate as of the date of Employee's death.

If Employee becomes Permanently Disabled (as hereinafter defined)
while employed by the Company, (i) Employee's employment and the Company's
obligations hereunder, including the payment of Base Salary pursuant to Section
3(a) ("Compensation-Base Salary") shall continue for a period of ninety (90)
days from the date on which the Employee is determined to be Permanently
Disabled ("Employee s Disability Date"), and (ii) ninety (90) days after the
Employee's Disability Date, Employee's employment and all obligations of the
Company hereunder shall automatically cease and terminate.

4
<PAGE>

In the case of Employee's death or Permanent Disability (as
hereinafter defined), the Company shall be obligated to pay to Employee (or to
Employee s estate in the case of Employee's death) any Base Salary and any
incentive compensation accrued to Employee as of the date of the Employee's
death, or in the case of Employee's Permanent Disability, as of the Employee's
Disability Date. In the event Employee's employment is terminated on account of
Employee's Permanent Disability, he shall, so long as his Permanent Disability
continues, remain eligible for all benefits provided under any long-term
disability programs of the Company in effect at the time of such termination,
subject to the terms and conditions of any such programs, as the same may be
changed, modified, or terminated for or with respect to all senior management
personnel of the Company.

(b) DEFINITION OF PERMANENTLY DISABLED AND PERMANENT DISABILITY.
-----------------------------------------------------------
For purposes of this Agreement (other than Sections 4 (a) ("Fringe Benefits-
Benefit Plans"), 4 (d) ("Fringe Benefits-Vesting on Death or Disability"), and
the provisions relating to disability insurance contained in the last sentence
of Section 7(a) ("Death or Disability-Termination of Employment"), the terms
"Permanently Disabled" and "Permanent Disability" shall mean Employee's
inability, because of physical or mental illness or injury, to perform
substantially all of his customary duties pursuant to this Agreement, and the
continuation of such disabled condition for a period of ninety (90) continuous
days, or for not less than one hundred eighty (180) days during any continuous
twenty-four (24) month period. Whether Employee is Permanently Disabled shall be
certified to the Company by a Qualified Physician (as hereinafter defined), or
if requested by Employee a panel of three Qualified Physicians. If Employee
requests such a panel, Employee and the Company shall each select a Qualified
Physician who together shall then select a third Qualified Physician. The
determination of the individual Qualified Physician or the panel, as the case
may be, shall be binding and conclusive for all purposes. As used herein, the
term "Qualified Physician" shall mean any medical doctor who is licensed to
practice medicine in the State of Utah and is reasonably acceptable to each of
Employee and the Company. Employee and the Company may in any instance, and in
lieu of a determination by a Qualified Physician or panel of Qualified
Physicians, agree between themselves that Employee is Permanently Disabled. The
terms Permanent Disability and Permanently Disabled as used herein may have
meanings different from those used in any disability insurance policy or program
maintained by Employee or the Company.

8. TERMINATION BY THE COMPANY.
--------------------------

(a) TERMINATION FOR CAUSE. The Company, by action of its Board
---------------------
of Directors, may, by providing written notice to Employee, terminate the
employment of Employee under this Agreement for "cause" at any time. The term
"cause" for purpose of this Agreement shall mean:

(i) The refusal of Employee to implement or adhere to
lawful policies or directives of the Board of Directors of the Company
consistent with this Agreement; or

(ii) Employee's conviction of or entrance of a plea of
nolo contendere to (A) a felony, (B) to any other crime, which other crime is
punishable by incarceration for a period of one (1) year or longer, or (C) other
conduct of a criminal nature that may have an adverse impact on the Company s
reputation and standing in the community; or

5
<PAGE>

(iii) conduct that is in violation of Employee's common law
duty of loyalty to the Company; or

(iv) fraudulent conduct by Employee in connection with the
business affairs of the Company, regardless of whether said conduct is designed
to defraud the Company or others; or

(v) theft, embezzlement, or other criminal
misappropriation of funds by Employee, whether from the Company or any other
person; or

(vi) any breach of or Employee's failure to fulfill any of
Employee's obligations, covenants, agreements, or duties under this Agreement.

Provided, however, that "cause" pursuant to clause (i) or (vi) shall not be
deemed to exist unless the Company has given Employee written notice thereof
specifying in reasonable detail the facts and circumstances alleged to
constitute "cause", and thirty (30) days after such notice such conduct or
circumstances has not entirely ceased or been entirely remedied. If Employee's
employment is terminated for "cause," the termination shall take effect upon the
effective date (pursuant to Section 24 ("Notices")) of written notice of such
termination to Employee. In the event Employee's employment is terminated for
"cause," then except for unpaid accrued vacation, the Company shall have no
obligation to pay Employee any amounts, including, but not limited to Base
Salary, for or with respect to any period after the effective date of the
termination of Employee's employment for "cause," including any obligation under
the replacement to the 1994 Incentive Plan or the Equity Plan.

If the Company attempts to terminate Employee's employment pursuant to this
Section 8(a) and it is ultimately determined that the Company lacked "cause,"
the provisions of Section 8(b) ("Termination by the Company-Termination Without
Cause") shall apply, and Employee's sole and exclusive remedy for such breach of
this Agreement by the Company and/or any other damages that Employee shall have
suffered or incurred of any nature whatsoever, shall be to receive the payments
expressly called for by Section 8(b) ("Termination by the Company-Termination
Without Cause") with interest on any past due payments at the rate of eight
percent (8%) per year from the date on which the applicable payment would have
been made pursuant to Section 8(b) ("Termination by the Company-Termination
Without Cause") plus Employee's costs and expenses (including but not limited to
reasonable attorneys' fees) incurred in connection with such dispute.

(b) TERMINATION WITHOUT CAUSE. The Company may, with or without
-------------------------
reason, terminate Employee's employment under this Agreement without "cause" at
any time, by providing Employee thirty (30) days prior written notice of such
termination. If Employee's employment is terminated pursuant to this Section
8(b), Employee shall not be obligated to render services to the Company
following the effective date of such notice (the "Notice Date") except such
services as are requested by the Company pursuant to Section 11 ("Transition
Period Services"), and as its sole and exclusive obligation and duty to Employee
resulting directly or indirectly from the termination of Employee's employment
with the Company and in full and complete settlement of any and all claims that
Employee may have or claim to have arising directly or indirectly out of the
termination of his employment with the Company, the Company shall, subject to
Section 12 ("Non Competition") pay Employee, as severance pay, an amount (the
"Severance Amount") equal to the product of multiplying the then current semi-
monthly base salary

6
<PAGE>

by thirty-six (36) semi-monthly periods (the "Severance Period"). The Severance
Amount shall be payable by the Company to Employee in an amount equal to the
Base Salary payable in twelve (12) equally monthly installments commencing on
the Notice Date. The Company shall also pay to the Employee a portion of any
discretionary bonus (the "Bonus Portion"), as determined by the Company's Board
of Directors, referred to in Section 3(a) ("Compensation-Base Salary"), that,
but for the termination of Employee's employment, would have been paid to
Employee for or with respect to the calendar year in which Employee's employment
is terminated. The Bonus Portion shall consist of that percentage of the said
discretionary bonus determined by dividing the number of full or partial
calendar months during the calendar year in which Employee's employment is
terminated that Employee was in the employ of the Company by twelve (12). Until
the end of the Severance Period or until Employee is gainfully employed by
another employer, which ever time period is less, the Company shall allow
Employee to continue participation in the Company s group health insurance plan
at the Company's expense. In accordance with all applicable laws, Employee shall
be extended all COBRA rights and benefits at the end of the Severance Period.

9. TERMINATION BY EMPLOYEE.
-----------------------

(a) TERMINATION-WITHOUT GOOD REASON. Employee shall have the right to
-------------------------------
terminate this Agreement and his employment hereunder at any time upon thirty
(30) days prior written notice of such termination to the Company. Except as
expressly set forth in Section 11 ("Transition Period Services"), upon the
effective date of any such termination all obligations and rights of Employee
and the Company hereunder shall terminate and cease.

(b) TERMINATION-WITH GOOD REASON. If the Company:
----------------------------
(i) requires Employee to relocate his home, without Employee's
consent, to a location which is more than 75 miles from 462 West Bearcat Drive,
Salt Lake City, Utah 84115; or

(ii) fails to provide Employee with the compensation and
benefits called for by this Agreement; or

(iii) assigns Employee to a lower organizational level than the
level at which he is on the date of this Agreement assigned, or substantially
diminishes Employee's assignment, duties, responsibilities, or operating
authority from those specified in Section 1 ("Duties"); or

(iv) fails to implement an incentive compensation plan required
by Section 3(b) ("Compensation-Incentive Compensation"); or

(v) fails to implement an equity plan or arrangement required
by Section 4(b) ("Fringe Benefits-Equity Plan"); or

(vi) is divested, by sale, closure, liquidation, foreclosure,
or other means, of any substantial part of its assets or business as now held or
conducted; or

7
<PAGE>

(vii) breaches this Agreement and such breach continues for a
period of thirty (30) days after written notice thereof given by Employee to the
Company, then any one or more of such circumstances shall constitute "Good
Reason", and, subject to the provisions of Section 10 ("Means and Effect of
Termination"), Employee shall have the right to terminate this Agreement and his
employment hereunder for Good Reason, if, thirty (30) days after the effective
date of Employee's notice to the Company of such circumstances constituting Good
Reason, such circumstances continue to exist, and for all purposes of this
Agreement any such termination of this Agreement by Employee shall have the same
effects under this Agreement as the termination of the Employee's employment
under this Agreement by Company without "cause."

10. MEANS AND EFFECT OF TERMINATION. Any termination of Employee's
-------------------------------
employment under this Agreement shall be communicated by written notice of
termination from the terminating party to the other party. The notice of
termination shall indicate the specific provision(s) of this Agreement relied
upon in effecting the termination and shall set forth in reasonable detail the
facts and circumstances alleged to provide a basis for termination, if any such
basis is required by the applicable provision(s) of this Agreement. Any notice
of termination by the Company shall be approved by a resolution duly adopted by
a majority of the directors of the Company then in office. The burden of
establishing the existence of "cause" or Good Reason shall be upon the
terminating party. If Employee's employment is terminated by either party, then
promptly after the effective date of such termination or in the manner and at
the time or times provided in the relevant Section of this Agreement, the
Company promptly shall provide and pay to Employee, or in case of his death his
estate or heirs, all compensation, benefits, and reimbursements due or payable
to Employee for the period to the effective date of the termination. To the
extent permitted by applicable law, the calendar month in which Employee's
employment is terminated shall be counted as a full month in determining amount
and vesting of any benefits under benefit plans of the Company.

11. TRANSITION PERIOD SERVICES. In the event Employee's employment is
--------------------------
terminated by the Company pursuant to section 8(b) ("Termination by the Company-
Termination Without Cause") or by Employee pursuant to Section 9(a)
("Termination by Employee-Without Good Reason"), if requested by the Company in
writing, Employee shall render such services, on a part-time basis for a period
not to exceed sixty (60) days after the effective date of the notice of
termination (whether given by the Company or by Employee), as the Company's
Board of Directors reasonably requests for transition purposes. Employee shall
receive no compensation for such services, other than the payment of Base Salary
as provided in Section 8(b) ("Termination by the Company-Termination Without
Cause") and reimbursement for expenses incurred by Employee in providing such
services as provided in, and subject to the provisions of, Section 5 ("Business
Expenses and Automobile Allowance")

12. NON COMPETITION. For a period of one year from the date of the
---------------
termination of Employee's employment hereunder, Employee shall not become an
employee, owner (except for passive investments of not more than three percent
(3%) of the outing shares of, or any other equity interest in, any company or
entity listed or traded on a national securities exchange or in an

8
<PAGE>

over-the-counter securities market), officer, agent or director of any firm or
person which either directly competes with a line or lines of business (which
shall be defined as cookies or pretzels only) of the Company accounting for ten
percent (10%) or more of the Company's gross sales, revenues or earnings before
taxes. If, in any judicial proceeding, a court shall refuse to enforce all of
the separate covenants deemed included in this paragraph, the parties intend
that those of such covenants which, if eliminated, would permit the remaining
separate covenants to be enforced in such proceedings shall, for the purpose of
such proceedings, be deemed eliminated from the provisions of this Section 12.

In addition to any other remedies that may otherwise be available for a
breach of Section 12 hereof by Employee, Employee agrees that in the event of
such breach he shall irrevocably forfeit any right he may have to any remaining
severance payment to be made under Section 8(b) ("Termination by the Company-
Termination Without Cause") subsequent to such breach.

13. ASSIGNMENT. This Agreement is personal in its nature and neither of
----------
the parties hereto shall, without the consent of the other, assign or transfer
this Agreement or any rights or obligations hereunder; provided, however, that,
in the event of the merger, consolidation, or transfer or sale of all or
substantially all of the assets of the Company with or to any other individual
or entity, this Agreement shall, subject to the provisions hereof, be binding
upon and inure to the benefit of such successor and such successor shall
discharge and perform all the promises, covenants, duties, and obligations of
the Company hereunder.

14. GOVERNING LAW. This Agreement and the legal relations hereby created
-------------
between the parties hereto shall be governed by and construed under and in
accordance with the internal laws of the State of Utah, which internal laws
exclude any law or rule of the State of Utah, or any interpretation thereof,
that would require or call for the application of the laws of any other state or
jurisdiction hereto.

15. ENTIRE AGREEMENT. Except with respect to final agreement regarding
----------------
those open incentive compensation matters described in Section 3(b)
("Compensation-Incentive Compensation") and the equity plan or arrangement
contemplated under Section 4(b) ("Fringe Benefits-Equity Plan"), this Agreement
embodies the entire agreement of the parties hereto respecting the matters
within its scope. This Agreement supersedes all prior agreements of the parties
hereto on the subject matter hereof. Any prior negotiations, correspondence,
agreements, proposals, or understandings relating to the subject matter hereof
shall he deemed to be merged into this Agreement and to the extent inconsistent
herewith, such negotiations, correspondence, agreements, proposals, or
understandings shall be deemed to be of no force or effect. There are no
representations, warranties, or agreements, whether express or implied, or oral
or written, with respect to the subject matter hereof, except as set forth
herein.

This Agreement shall not be modified by any oral agreement, either express
or implied, and all modifications hereof shall be in writing and be signed by
the parties hereto. The provisions of this and the immediately preceding
sentence themselves may not be modified, either orally or by conduct, either
express or implied, and it is the declared intention of the parties hereto that
no

9
<PAGE>

provision of this Agreement, including said two sentences, shall be modifiable
in any way or manner whatsoever other than through a written document signed by
the parties hereto.

16. WAIVER. Failure to insist upon strict compliance with any of the
------
terms, covenants, or conditions hereof shall not be deemed a waiver of such
term, covenant, or condition, nor shall any waiver or relinquishment of, or
failure to insist upon strict compliance with, any right or power hereunder at
any one or more times be deemed a waiver or relinquishment of such right or
power at any other time or times.

17. NUMBER AND GENDER. Where the context requires, the singular shall
-----------------
include the plural, the plural shall include the singular, and any gender shall
include all other genders.

18. SECTION HEADINGS. The section headings in this Agreement are for the
----------------
purpose of convenience only and shall not limit or otherwise affect any of the
terms hereof.

19. DISPUTE RESOLUTION.
------------------

(a) NEGOTIATION AND MEDIATION. In the event any dispute arises
-------------------------
hereunder, the parties shall first attempt to resolve the dispute by negotiation
in good faith. If the dispute cannot be timely resolved through negotiation, the
parties will, before resorting to any of their remedies at law or in equity, try
to settle the dispute in good faith by mediation in Salt Lake City, Utah or such
other location as the parties may agree, under the then operative mediation
rules of the American Arbitration Association or such other mediation tribunal
or private mediator or medication services provider as the parties agree. The
mediator shall be such person as the parties mutually agree, but if the parties
have failed to agree on a mediator within seven (7) days after the date on which
any party demands that the parties proceed to mediation, the mediator shall be
selected by the American Arbitration Association or such other mediation
services provider as the parties agree.

(b) OTHER REMEDIES. Failing settlement of the dispute by negotiation
--------------
or mediation, the parties shall, unless they mutually agree to resolve the
dispute finally by arbitration, be entitled to pursue their legal and equitable
remedies (subject to the provisions of Section 20 ("Liquidated Damages-Breach by
the Company") in any court having jurisdiction.

20. LIQUIDATED DAMAGES-BREACH BY THE COMPANY. Because the damages
----------------------------------------
suffered by Employee in such an event would be difficult or impossible to
estimate, establish, ascertain, or prove, and in order to provide Employee with
a remedy in such an event without the necessity and associated cost of Employee
having to establish or prove the damages suffered by Employee as a result
thereof (which remedy the parties hereto have and do agree would be appropriate
and adequate compensation to Employee in such event), in the event that this
Agreement and Employee's employment hereunder shall be terminated (whether by
the Company or Employee) and thereafter Employee shall prevail in any dispute
between Employee and the Company relative to, involving, or concerning the
legality of or justification for the termination of this Agreement and
Employee's employment hereunder and any other issues or matters directly or
indirectly arising out of or in connection with such termination and Employee's
employment by the Company, subject to Section 12 ("Non Competition") Employee
shall be entitled to the continued payment of the Base Salary as provided in
Section 8(b) ("Termination by the Company-Termination Without Cause") as
liquidated and exclusive damages and not as a penalty, and in such case this

10
<PAGE>

Agreement and Employee's employment hereunder, shall for all purposes be treated
as having been terminated by the Company without "cause" pursuant to Section
8(b) ("Termination by the Company-Termination Without Cause").

In the event Employee files any claim, complaint, charge, action, or
lawsuit against the Company or its employees, agents, officers, directors, or
any other person affiliated or associated with the Company, with any
governmental agency, any state or federal court, or any mediation or arbitration
body or group, for or with respect to a matter, claim, or incident, known or
unknown, which has occurred or arisen or which shall hereafter occur or arise
relative to, involving, or concerning the termination of this Agreement and
Employee's employment hereunder (whether as a result of action of Employee or
the Company) and any other issues or matters directly or indirectly arising out
of or in connection with such termination and Employee's employment by the
Company, and in such claim, complaint, action, charge, or lawsuit, Employee
alleges or asserts the right to recover, receive, or be awarded damages from the
Company or its employees, agents, officers, directors, or any other person
affiliated or associated with the Company in addition to or in lieu of the
liquidated damages expressly provided for in this Section 20, Employee hereby
stipulates, agrees, and consents to the dismissal or withdrawal, with prejudice,
of any such claim, complaint, action, charge, or lawsuit (collectively, a
"Dismissable Claim"). In the event that Employee files any Dismissable Claim,
Employee shall be liable to the party or parties against whom the Dismissable
Claim is filed (the "Nonfiling Party") and shall indemnify and save the
Nonfiling Party harmless from all costs and expenses, including, but not limited
to, attorneys fees, incurred by the Nonfiling Party and/or the Nonfiling Party s
officers, agents, employees, directors, and/or any other person affiliated or
associated with the Nonfiling Party, if any, in defending or responding to any
such Dismissable Claim, regardless of whether such defense or response is before
a state or federal court or administrative agency or a mediation or arbitration
body and regardless of who might ultimately be deemed to be the prevailing party
as to any such Dismissable Claim.

21. ATTORNEY'S FEES. Employee and the Company agree that in any dispute
---------------
resolution proceedings arising out of this Agreement, the prevailing party shall
be entitled to its or his reasonable attorney's fees and costs incurred by it or
his in connection with resolution of the dispute in addition to any other relief
granted.

22. INDEMNIFICATION. If Employee is made a party to, is threatened to be
---------------
made a party to, or is otherwise involved in any action, suit, or proceeding,
whether civil, criminal, administrative or investigative (a "Proceeding") by
reason of the fact that he is or was a director, officer, or employee of the
Company or is or was serving at the request of the Company as a director,
officer, employee, or agent of another corporation or of a partnership, joint
venture, trust, or other enterprise, including service with respect to employee
benefit plans, whether before, during or after expiration or termination of this
Agreement, the Company shall indemnify and hold Employee harmless to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than such law permitted the Company to provide prior to
such amendment), against all expense, liability, and loss (including attorneys
fees, judgment fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by Employee in connection therewith,
and such indemnification shall continue after Employee ceases to be a director,
officer, employee, or agent of the Company and shall inure to the benefit of
Employee's heirs, executors, and administrators. The right to indemnification
conferred hereby shall include the right to be paid by the Company the

11
<PAGE>

reasonable expenses incurred in defending any Proceeding in advance of its final
disposition as such expenses are incurred. The indemnification provided herein
shall not be deemed exclusive of any other rights to which Employee may be
entitled under the Certificate of Incorporation, Bylaws, any agreement, or vote
of stockholders or disinterested directors of the Company, or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office or position, and shall continue with respect to action in
such capacities even if Employee has thereafter ceased to be a director,
officer, employee, or agent of the Company, and shall inure to the benefit of
Employee's heirs, executors and administrators. Except in the case of
fraudulent conduct or theft, embezzlement, or other criminal misappropriation of
funds by Employee, then nothing in this Agreement waives the Company's
obligations under this paragraph, even if Employee is terminated.

23. SEVERABILITY. In the event that a court of competent jurisdiction
------------
determines that any portion of this Agreement is in violation of any statute or
public policy, then only the portions of this Agreement which violate such
statute or public policy shall be stricken, All portions of this Agreement which
do not violate any statute or public policy shall continue in full force and
effect. Furthermore, any court order striking any portion of this Agreement
shall modify the stricken terms as narrowly as possible to give as much effect
as possible to the intentions of the parties under this Agreement.

24. NOTICES. All notices under this Agreement shall be in writing and
-------
shall be either personally delivered or mailed postage prepaid, by certified
mail, return receipt requested, (a) if to the Company, to it at 462 West Bearcat
Drive, Salt Lake City, Utah 84115 Attention: President or (b) if to Employee to
him at 462 West Bearcat Drive, Salt Lake City, Utah 84115 by the same means, or
in either party's case to such other address or to the attention of such person
as the party has specified by prior written notice to the other party. Notice
shall be effective when personally delivered, or five (5) business days after
being so mailed.

25. COUNTERPARTS. This Agreement may be executed in counter
------------
parts collectively containing the signatures of each of the parties.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer, and Employee has hereunto signed this Agreement, on
the date first written above.

MRS. FIELDS' ORIGINAL COOKIES, INC.,
a Delaware Corporation (the "Company")

By:__________________________________

Its:__________________________________

______________________________________
GARRY REMINGTON ("Employee")

<PAGE>

MRS. FIELDS' HOLDING COMPANY, INC.
DIRECTOR STOCK OPTION PLAN

1 Purpose.
-------

The purpose of the MRS. FIELDS' HOLDING COMPANY, INC. Director Stock
Option Plan (the "Plan") is to align the interests of outside directors of MRS.
FIELDS' HOLDING COMPANY, INC., a Delaware corporation (the "Company"), and its
subsidiaries, with those of the stockholders of the Company; and to attract,
motivate and retain as directors the best available individuals.

2 Definitions.
-----------

The following terms, as used herein, shall have the following
meanings:

(a) "Award" shall mean any Option granted pursuant to the Plan.

(b) "Award Agreement" shall mean any written agreement, contract or other
instrument or document between the Company and a Participant
evidencing an Award.

(d) "Capricorn" shall mean Capricorn Investors II,L.P. together with any
affiliated persons.

(e) "Change of Control" shall mean the earliest to occur of (i) a
transaction in which Capricorn's equity investment in the Company is
reduced(including through the operation of a merger in which the
Company is not the surviving corporation and the Common Stock is
converted into the right to receive cash or other property) such that
Capricorn is no longer the largest equity investor in the Company or
(ii) a sale by the Company or MFOC of all or substantially all of its
assets.
<PAGE>

(f) "Common Stock" shall mean the Common Stock, par value $.01 per share,
of the Company.

(g) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.

(h) "Committee" shall mean a committee of the Board which administers the
Plan as provided herein.

(i) "Company" shall mean MRS. FIELDS' HOLDING COMPANY, INC.

(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time now or hereafter construed, interpreted and
applied by regulations, rulings and cases.

(k) "Initial Public Offering" shall mean a public offering of Common Stock
pursuant to a registration statement under the Securities Act.

(l) "MFOC" shall mean Mrs. Fields' Original Cookies, Inc., the Company's
subsidiary.

(m) "Option" shall mean the right, granted pursuant to the Plan, of a
holder to purchase shares of Common Stock. Options granted hereunder
shall not qualify as "incentive stock options" within the meaning of
Section 422 of the Code.

(n) "Participant" shall mean a director of the Company who is, pursuant to
Section 4 of the Plan, selected to participate in the Plan.

(o) "Plan" shall have the meaning set forth in Section 1 hereof.

(p) "Securities Act" shall mean the Securities Act of 1933, as amended
from time to time, and as now or hereafter construed, interpreted and
applied by regulations, rulings and cases.

(q) "Time Vested Option" shall mean an Option that will vest 25% per year
on the anniversaries of the date as of which it was awarded and will
vest in full upon the occurrence of a Change of Control.

3 Administration.
--------------
<PAGE>

The Plan shall be administered by the Committee. The Committee shall
have the authority, in its sole discretion, subject to and not inconsistent with
the express provisions of the Plan, to administer the Plan and to exercise all
the powers and authorities either specifically granted to it under the Plan or
necessary or advisable in connection with the administration of the Plan,
including, without limitation, the authority to take the following actions: to
grant Awards; to determine the persons to whom and the time or times at which
Awards shall be granted; to determine the type and number of Awards to be
granted, the number of shares of Common Stock to which an Award may relate and
the terms, conditions, restrictions and performance criteria relating to any
Award; to determine whether, to what extent, and under what circumstances an
Award may be settled, cancelled, adjusted, forfeited, exchanged, or surrendered
or accelerated or an Option or Options may be repriced to a lower exercise
price; to make adjustments to performance goals in recognition of unusual or
non-recurring events affecting the Company or its financial statements, or in
response to changes in applicable laws, regulations or accounting principles; to
construe and interpret the Plan and any Award; to prescribe, amend and rescind
rules and regulations relating to the Plan; to determine the terms and
provisions of Award Agreements, consistent with the terms and provisions of the
Plan; and to make all other determinations deemed necessary or advisable for the
administration of the Plan, consistent with the terms and provisions of the
Plan. From and after the Initial Public Offering, the Committee shall consist
of two or more persons who are intended to be "disinterested persons" within the
meaning of Rule 16b-3 under the Exchange Act.

4 Eligibility.
-----------

Awards may be granted to officers or other employees of the Company
and its subsidiaries in the sole discretion of the Committee. In determining
the persons to whom Awards shall be granted and the type of Award, the Committee
shall take into account such factors as the Committee shall deem relevant in
connection with accomplishing the purposes of the Plan.

5 Stock Subject to the Plan.
-------------------------

(a) Number of Shares. The maximum number of shares of Common Stock
----------------
reserved for issuance pursuant to the Plan shall be 50,000. All such shares of
Common Stock shall be subject to equitable adjustment as provided herein. Such
shares may, in whole or in part, be authorized but unissued shares or shares
that shall have been or may be reacquired by the Company in the open market, in
private transactions or otherwise. If any shares subject to an Award are
forfeited, cancelled, ex-

3
<PAGE>

changed or surrendered or if an Award otherwise terminates or expires without a
distribution of shares to the Participant, the shares of Common Stock with
respect to such Award shall, to the extent of any such forfeiture, cancellation,
exchange, surrender, termination or expiration, again be available for Awards
under the Plan.

(b) Equitable Adjustment. In the event that an extraordinary
--------------------
transaction or other event or circumstance affecting the Common Stock shall
occur, including, but not limited to, any dividend or other distribution
(whether in the form of cash, stock or other property), recapitalization, stock
split, reverse stock split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, sale of assets or other similar
transaction or event, and the Committee determines that a change or adjustment
in the terms of any Award is appropriate, then the Committee may, in its sole
discretion, make such equitable changes or adjustments or take any other actions
that it deems necessary or appropriate (which shall be effective at such time as
the Committee in its sole discretion determines), including, but not limited to
causing changes or adjustments to any or all of (i) the number and kind of
shares of stock or other securities or property which may thereafter be issued
in connection with Awards, (ii) the number and kind of shares of stock or other
securities or property issued or issuable in respect of outstanding Awards,
(iii) the exercise price relating to any Award, and (iv) any performance
criteria relating to any Award.

6 Stock Options.
-------------

(a) Stock Options
-------------

(1) Number of Shares. Each Award Agreement shall state the
----------------
number of shares of Common Stock to which the Option relates.

(2) Option Exercise Price. Each Award Agreement shall state the
---------------------
Option exercise price. The Option exercise price shall be subject to adjustment
as provided in Section 5 hereof. Unless otherwise expressly stated in the
Committee resolution expressly granting an Option, the date as of which the
Com-

4
<PAGE>

mittee adopts the resolution expressly granting an Option shall be considered
the day on which such Option is granted.

(3) Method and Time of Payment. The Option exercise price shall
--------------------------
be paid in full, at the time of exercise, in cash, in shares of Common Stock
having a fair market value (determined by the Committee) equal to such Option
exercise price, in a combination of cash and Common Stock (or other
consideration deemed acceptable by the Committee) or, in the sole discretion of
the Committee, through a cashless exercise procedure.

(4) Term and Exercisability of Options. Each Award Agreement
----------------------------------
shall provide that each Option shall become exercisable in accordance with its
characterization as a Time-Vested Option ; provided, that the Committee shall
--------
have the authority to accelerate the exercisability of any outstanding Option at
such time and under such circumstances as it, in its sole discretion, deems
appropriate. The exercise period shall be not more than ten (10) years from the
date of the grant of the Option, or such shorter period as is determined by the
Committee. The exercise period shall be subject to earlier termination as
provided in Section 6(a)(5) hereof. An Option may be exercised, as to any or
all full shares of Common Stock as to which the Option has become exercisable,
by written notice delivered in person or by mail to the Secretary of the
Company, specifying the number of shares of Common Stock with respect to which
the Option is being exercised, together with payment in full of the Option
exercise price. For purposes of the preceding sentence, the date of exercise
will be deemed to be the date upon which the Secretary of the Company receives
both the notification and such payment.

(5) Termination. If a Participant's status as a director of the
-----------
Company or a subsidiary terminates, the Committee will have the exclusive
authority to determine if and for how long, and under what conditions, such
Option may be exercised after such termination; provided, however, that the
-------- -------
Committee may not shorten any exercise period set forth in an Award Agreement,
and provided, further, that in no event will an Option continue to be
-------- -------
exercisable beyond the expiration date of such Option.

(6) Nontransferability of Common Stock. Each Award Agreement
----------------------------------
shall provide that prior to an Initial Public Offering, the Participant shall
execute a stockholders agreement prior to being granted any Option hereunder
with respect to the shares of Common Stock to which such Option relates, in such
form and containing such terms and conditions as the Committee shall from time
to time

5
<PAGE>

approve, including without limitation, any restrictions on the transferability
of such shares.

7 General Provisions.
------------------

(a) Compliance with Legal Requirements. The Plan and the granting and
----------------------------------
exercising of Awards, and the other obligations of the Company under the Plan
and any Award Agreement or other agreement shall be subject to all applicable
federal and state laws, rules and regulations and to such approvals by any
regulatory or governmental authority or agency as may be required. The Company,
in its discretion, may postpone the issuance or delivery of Common Stock under
any Award as the Company may consider appropriate and may require any
Participant to make such representations and furnish such information as it may
consider appropriate in connection with the issuance or delivery of Common Stock
in compliance with applicable laws, rules and regulations.

(b) Nontransferability. Awards shall not be transferable by a
------------------
Participant other than by will or the laws of descent and distribution or, if
then permitted by Rule 16b-3 under the Exchange Act, pursuant to a qualified
domestic relations order as defined under the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder, and
shall be exercisable during the lifetime of a Participant only by such
Participant or his guardian or legal representative.

(c) No Right To Continued Service. Nothing in the Plan or in any
-----------------------------
Award granted or any Award Agreement or other agreement entered into pursuant
hereto shall confer upon any Participant the right to continue as a director of
the Company or any of its subsidiaries or to be entitled to any remuneration or
benefits not set forth in the Plan or such Award Agreement or other agreement or
to interfere with or limit in any way the right of the Company or its
shareholders to terminate such Participant's status as a director

(d) Withholding Taxes. Where a Participant or other person is
-----------------
entitled to receive shares of Common Stock pursuant to the exercise of an
Option, the Company shall have the right to require the Participant or such
other person to pay to the Company the amount of any taxes which the Company may
be required to withhold before delivery to such Participant or other person of a
certificate or certificates representing such shares.

6
<PAGE>

Unless otherwise prohibited by the Committee or by applicable law, a
Participant may satisfy any such withholding tax obligation by any of the
following methods, or by a combination of such methods: (a) tendering a cash
payment or (b) delivering to the Company previously acquired shares of Common
Stock (none of which shares may be subject to any claim, lien, security
interest, community property right or other right of spouses or present or
former family members, pledge, option, voting agreement or other restriction or
encumbrance of any nature whatsoever) having an aggregate fair market value,
determined by the Committee as of the date the withholding tax obligation
arises, equal to the amount of the total withholding tax obligation.

(e) Amendment and Termination of the Plan. The Board or the
-------------------------------------
Committee may at any time and from time to time alter, amend, suspend, or
terminate the Plan in whole or in part; provided that, no amendment which
-------- ----
requires stockholder approval under applicable law or in order for the Plan to
continue to comply with Rule 16b-3 under the Exchange Act shall be effective
unless the same shall be approved by the requisite vote of the stockholders of
the Company. Notwithstanding the foregoing, subject to the other provisions of
the Plan, no amendment shall affect adversely any of the rights of any
Participant, without such Participant's consent, under any Award theretofore
granted under the Plan. The power to grant Options under the Plan will
automatically terminate on September 18, 2006. If the Plan is terminated,
any unexercised Option shall continue to be exercisable in accordance with its
terms and the terms of the Plan in effect immediately prior to such termination.

(f) Participant Rights. No Participant shall have any claim to be
------------------
granted any Award under the Plan, and there is no obligation for uniformity of
treatment for Participants. Except as provided specifically herein, a
Participant or a transferee of an Award shall have no rights as a stockholder
with respect to any shares of stock covered by any Award until the date of the
issuance of a certificate to him for such shares.

(g) Unfunded Status of Awards. The Plan is intended to constitute an
-------------------------
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company.

(h) Fractional Shares. Fractional shares of Common Stock may be
-----------------
issued or delivered pursuant to the Plan or any Award. The Committee shall

7
<PAGE>

determine whether cash, other Awards or other property shall be issued or paid
in lieu of such fractional shares.

(i) Governing Law. The Plan and all determinations made and actions
-------------
taken pursuant hereto shall be governed by the laws of the State of New York
without giving effect to the conflict of laws principles thereof.

(j) Effective Date. The Plan shall become effective on September 18,
--------------
1996.

(k) Beneficiary. A Participant may file with the Committee a written
-----------
designation of a beneficiary on such form as may be prescribed by the Committee
and may, from time to time, amend or revoke such designation. If no designated
beneficiary survives the Participant, the executor or administrator of the
Participant's estate shall be deemed to be the grantee's beneficiary.

(l) Interpretation. The Plan is designed and intended to comply with
--------------
Rule 16b-3 promulgated under the Exchange Act.

<PAGE>

MRS. FIELDS' HOLDING COMPANY, INC.
EMPLOYEE STOCK OPTION PLAN

1 Purpose.
-------

The purpose of the MRS. FIELDS' HOLDING COMPANY, INC. Employee Stock
Option Plan (the "Plan") is to align the interests of officers and other
employees of MRS. FIELDS' HOLDING COMPANY, INC., a Delaware corporation (the
"Company"), and its subsidiaries, with those of the stockholders of the Company;
to attract, motivate and retain the best available executive personnel and key
employees of the Company and its subsidiaries by permitting them to acquire or
increase their proprietary interest in the Company; and to reward the
performance of individual officers and other employees in fulfilling their
personal responsibilities for long-range achievements.

2 Definitions.
-----------

The following terms, as used herein, shall have the following
meanings:

(a) "Adjusted EBITDA" shall mean, for any fiscal year of MFOC, MFOC's
consolidated earnings before depreciation, amortization, interest,
income taxes and other income (expense) for such fiscal year after
making pro forma adjustment from the beginning of such fiscal year for
any acquisitions, divestitures or discontinued operations during such
fiscal year.

(b) "Award" shall mean any Option granted pursuant to the Plan.

(c) "Award Agreement" shall mean any written agreement, contract or other
instrument or document between the Company and a Participant
evidencing an Award.

(d) "Board" shall mean the Board of Directors of the Company.

(e) "Capricorn" shall mean Capricorn Investors II, L.P. together with any
affiliated persons.
<PAGE>

(f) "Change of Control" shall mean the earliest to occur of (i) a
transaction in which Capricorn's equity investment in the Company is
reduced (including through the operation of a merger in which the
Company is not the surviving corporation and the Common Stock is
converted into the right to receive cash or other property) such that
Capricorn is no longer the single largest equity investor in the
Company or (ii) a sale by the Company or MFOC of all or substantially
all of its assets.

(g) "Common Stock" shall mean the Common Stock, par value $.01 per share,
of the Company.

(h) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.

(i) "Committee" shall mean a committee of the Board which administers the
Plan as provided herein.

(j) "Company" shall mean MRS. FIELDS' HOLDING COMPANY, INC.

(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time now or hereafter construed, interpreted and
applied by regulations, rulings and cases.

(l) "Implied Valuation" shall mean, for any fiscal year or other period of
four consecutive fiscal quarters of MFOC, the excess of 5.5x Adjusted
EBITDA for such fiscal year or other period over the Net Debt as of
the end of such fiscal year or other period; provided, that the
--------
Implied Valuation for fiscal year 1997 shall be deemed to be
$41,354,000.

(m) "Initial Public Offering" shall mean a public offering of Common Stock
pursuant to a registration statement under the Securities Act.

(n) "IRR" shall mean, as of any date, the internal rate of return,
determined in accordance with generally accepted practice, on one
share of Common Stock calculated from September 18, 1996 through the
date as of which the determination is being made, using (i)$10.00 as
the value of one share at September 18, 1996 (subject to equitable
adjustment in the event of a transaction of the nature contemplated by
Section 5(b)), (ii) if the relevant date of determination is a Change
of

2
<PAGE>

Control, the value per share of Common Stock paid pursuant to or
implicit in such Change of Control as determined in good faith by the
Committee, and (iii) if the relevant date of determination is the
expiration of such Option, the value per share of Common Stock as
determined in good faith based on the Implied Valuation determined by
using the four most recently completed fiscal quarters of MFOC for
which financial statements are vaailable as of the date of
determination as the relevant fiscal period.

(o) "MFOC" shall mean Mrs. Fields' Original Cookies, Inc., the Company's
subsidiary.

(p) "Net Debt" shall mean, for any fiscal year or other fiscal period of
MFOC, MFOC's consolidated debt net of cash and short term investments
at the end of such fiscal year.

(q) "Option" shall mean the right, granted pursuant to the Plan, of a
holder to purchase shares of Common Stock. Options granted hereunder
shall not qualify as "incentive stock options" within the meaning of
Section 422 of the Code.

(r) "Participant" shall mean an officer or other employee of the Company
or a subsidiary who is, pursuant to Section 4 of the Plan, selected to
participate in the Plan.

(s) "Performance-Vested Option" shall mean an Option that will be deemed
to be vested 20% for fiscal year 1997 and shall vest an additional 20%
per year for each fiscal year during the term of such Option beginning
with fiscal year 1998 in which the Implied Valuation for such fiscal
year shall equal or exceed 110% of the Implied Valuation for the
previous fiscal year.

(t) "Plan" shall have the meaning set forth in Section 1 hereof.

(u) "Securities Act" shall mean the Securities Act of 1933, as amended
from time to time, and as now or hereafter construed, interpreted and
applied by regulations, rulings and cases.

3
<PAGE>

(v) "Time Vested Option" shall mean an Option that will vest 25% per year
on the anniversaries of the date as of which it was awarded and will
vest in full upon the occurrence of a Change of Control.

(w) "Upside Option" shall mean an Option that will vest upon the earlier
to occur of the expiration of such Option and a Change of Control in
accordance with the following: (i) IRR through such date less than
20%, no vesting; (ii) IRR through such date in the range of 20%-
24.99%, 1/3 vesting; (iii) IRR through such date in the range of 25%-
29.99%, 2/3 vesting; and (iii) IRR through such date of 30% or more,
full vesting.

3 Administration.
--------------

4 Eligibility.
-----------

4
<PAGE>

5 Stock Subject to the Plan.
-------------------------

(a) Number of Shares. The maximum number of shares of Common Stock
----------------
reserved for issuance pursuant to the Plan shall be 492,840 allocated evenly
among Time-Vested Options, Performance-Vested Options and Upside Options. All
such shares of Common Stock shall be subject to equitable adjustment as provided
herein. Such shares may, in whole or in part, be authorized but unissued shares
or shares that shall have been or may be reacquired by the Company in the open
market, in private transactions or otherwise. If any shares subject to an Award
are forfeited, cancelled, exchanged or surrendered or if an Award otherwise
terminates or expires without a distribution of shares to the Participant, the
shares of Common Stock with respect to such Award shall, to the extent of any
such forfeiture, cancellation, exchange, surrender, termination or expiration,
again be available for Awards under the Plan.

6 Stock Options.
-------------

5
<PAGE>

Each Option granted pursuant to this Section 6 shall be evidenced by
an Award Agreement, in such form and containing such terms and conditions as the
Committee shall from time to time approve, which Award Agreement shall comply
with and be subject to the following terms and conditions, as applicable. Each
Option shall be a Performance-Vested Option, a Time-Vested Option or an Upside-
Vested Option as determined by the Committee at the time of the grant of the
Award and specified in the related Award Agreement.

(a) Stock Options
-------------

(1) Number of Shares. Each Award Agreement shall state the
----------------
type or types of Options covered by such Award and the number of shares of
Common Stock to which the Option relates.

(3) Method and Time of Payment. The Option exercise price
--------------------------
shall be paid in full, at the time of exercise, in cash, in shares of Common
Stock having a fair market value (determined by the Committee) equal to such
Option exercise price, in a combination of cash and Common Stock (or other
consideration deemed acceptable by the Committee) or, in the sole discretion of
the Committee, through a cashless exercise procedure.

(4) Term and Exercisability of Options. Each Award Agreement
----------------------------------
shall provide that each Option shall become exercisable in accordance with its
characterization as a Performance-Vested Option, a Time-Vested Option or an
Upside Option; provided, that the Committee shall have the authority to
--------
accelerate the exercisability of any outstanding Option at such time and under
such circumstances as it, in its sole discretion, deems appropriate. The
exercise period shall be not more than ten (10) years from the date of the grant
of the Option, or such shorter period as is determined by the Committee. The
exercise period shall be subject to earlier termination as provided in Section
6(a)(5) hereof. An Option may be exercised, as to any or all full shares of
Common Stock as to which the Option has become exercisable, by written notice
delivered in person or by mail to the Secretary of the Company, specifying the
number of shares of Common Stock with respect to

6
<PAGE>

which the Option is being exercised, together with payment in full of the Option
exercise price. For purposes of the preceding sentence, the date of exercise
will be deemed to be the date upon which the Secretary of the Company receives
both the notification and such payment.

(5) Termination. If a Participant's employment by the Company
-----------
or a subsidiary terminates, the Committee will have the exclusive authority to
determine if and for how long, and under what conditions, such Option may be
exercised after such termination; provided, however, that the Committee may not
-------- -------
shorten any exercise period set forth in an Award Agreement, and provided,
--------
further, that in no event will an Option continue to be exercisable beyond the
- -------
expiration date of such Option.

7 General Provisions.
------------------

7
<PAGE>

cisable during the lifetime of a Participant only by such Participant or his
guardian or legal representative.

(c) No Right To Continued Employment. Nothing in the Plan or in any
--------------------------------
Award granted or any Award Agreement or other agreement entered into pursuant
hereto shall confer upon any Participant the right to continue in the employ of
the Company or a subsidiary or to be entitled to any remuneration or benefits
not set forth in the Plan or such Award Agreement or other agreement or to
interfere with or limit in any way the right of the Company to terminate such
Participant's employment.

8
<PAGE>

cisable in accordance with its terms and the terms of the Plan in effect
immediately prior to such termination.

(h) Fractional Shares. Fractional shares of Common Stock may be
-----------------
issued or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, other Awards or other property shall be issued or paid
in lieu of such fractional shares.

(j) Effective Date. The Plan shall become effective on September 18,
--------------
1996.

(l) Interpretation. The Plan is designed and intended to comply with
--------------
Rule 16b-3 promulgated under the Exchange Act.

<PAGE>

MRS. FIELDS' HOLDING COMPANY, INC.
DIRECTOR STOCK PURCHASE PLAN

1 Purpose.
-------

The purpose of the MRS. FIELDS' HOLDING COMPANY, INC. Director Stock
Purchase Plan (the "Plan") is to align the interests of outside directors of
MRS. FIELDS' HOLDING COMPANY, INC., a Delaware corporation (the "Company"), and
its subsidiaries, with those of the stockholders of the Company; and to attract,
motivate and retain as directors the best available individuals.

2 Definitions.
-----------

The following terms, as used herein, shall have the following
meanings:

(a) "Capricorn" shall mean Capricorn Investors II, L.P. together with any
affiliated persons.

(b) "Change of Control" shall mean the earliest to occur of (i) a
transaction in which Capricorn's equity investment in the Company is
reduced (including through the operation of a merger in which the
Company is not the surviving corporation and the Common Stock is
converted into the right to receive cash or other property) such that
Capricorn is no longer the largest equity investor in the Company or
(ii) a sale by the Company or MFOC of all or substantially all of its
assets.

(d) "Company" shall mean MRS. FIELDS' HOLDING COMPANY, INC.

(e) "MFOC" shall mean Mrs. Fields' Original Cookies, Inc., the Company's
subsidiary.
<PAGE>

(f) "Participant" shall mean Capricorn and each of the directors of the
Company indicated on Annex A hereto.

(g) "Plan" shall have the meaning set forth in Section 1 hereof.

(h) "Restricted Shares" shall mean the shares of Common Stock granted to
each Participant as indicated on Annex A hereto, which are subject to
vesting as to each Participant, with 50% of the shares vesting on
January 1, 1999 and the other 50% of the shares vesting on January 1,
2000, subject to early vesting of all shares upon the occurrence of a
Change of Control.

(i) "Vested Shares" shall mean the shares of Common Stock purchased by
each Participant as indicated on Annex A hereto.

3 Issuance of Shares of Common Stock.
-----------------------------------

Shares of Common Stock being issued under the Plan include Vested
Shares, as to which each Participant is paying (or in the case of Capricorn is
deemed to have paid) the amount in cash indicated on Annex A, and Restricted
Shares, which each Participant is being granted in consideration of such
Participant's cash investment in Vested Shares. The number of Vested Shares and
Restricted Shares for each Participant is set forth on Annex A hereto.

4 General Provisions.
------------------

(a) Compliance with Legal Requirements. The Plan and the other
----------------------------------
obligations of the Company under the Plan shall be subject to all applicable
federal and state laws, rules and regulations and to such approvals by any
regulatory or governmental authority or agency as may be required. The Company,
in its discretion, may require any Participant to make such representations and
furnish such information as it may consider appropriate in connection with the
issuance or delivery of Common Stock in compliance with applicable laws, rules
and regulations.

(b) No Right To Continued Service. Nothing in the Plan shall confer
-----------------------------
upon any Participant the right to continue as a director of the Company or any
of its subsidiaries or to be entitled to any remuneration or benefits not set
forth in the Plan or to interfere with or limit in any way the right of the
Company or its shareholders to terminate such Participant's status as a
director.
<PAGE>

(c) Withholding Taxes. Where a Participant or other person is
-----------------
entitled to receive shares of Common Stock pursuant to the vesting of Restricted
Shares, the Company shall have the right to require the Participant or such
other person to pay to the Company the amount of any taxes which the Company may
be required to withhold before delivery to such Participant or other person of a
certificate or certificates representing such shares.

A Participant may satisfy any such withholding tax obligation by any
of the following methods, or by a combination of such methods: (a) tendering a
cash payment or (b) delivering to the Company previously acquired shares of
Common Stock (none of which shares may be subject to any claim, lien, security
interest, community property right or other right of spouses or present or
former family members, pledge, option, voting agreement or other restriction or
encumbrance of any nature whatsoever) having an aggregate fair market value,
determined by the Committee as of the date the withholding tax obligation
arises, equal to the amount of the total withholding tax obligation.

(d) Amendment and Termination of the Plan. The Board may at any time
-------------------------------------
and from time to time alter, amend, suspend, or terminate the Plan in whole or
in part. Notwithstanding the foregoing, subject to the other provisions of the
Plan, no amendment shall affect adversely any of the rights of any Participant,
without such Participant's consent.

(e) Unfunded Status of Awards. The Plan is intended to constitute an
-------------------------
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to the Plan, nothing contained
in the Plan shall give any such Participant any rights that are greater than
those of a general creditor of the Company.

(f) Governing Law. The Plan and all determinations made and actions
-------------
taken pursuant hereto shall be governed by the laws of the State of New York
without giving effect to the conflict of laws principles thereof.

(g) Beneficiary. A Participant may file with the Board a written
-----------
designation of a beneficiary on such form as may be prescribed by the Board and
may, from time to time, amend or revoke such designation. If no designated
beneficiary survives the Participant, the executor or administrator of the
Participant's estate shall be deemed to be the grantee's beneficiary.

3
<PAGE>

ANNEX A

- -------------------------------------------------------------------------------
Name Amount Paid Vested Restricted
- -------------------------------------------------------------------------------
Larry Hodges $250,000 25,000 5,000
- -------------------------------------------------------------------------------
Peter Mullin $100,000 10,000 5,000
- -------------------------------------------------------------------------------
Richard Ferry $ 66,667 6,667 3,333
- -------------------------------------------------------------------------------
Walker Lewis $ 50,000 5,000 2,500
- -------------------------------------------------------------------------------
Gilbert Osnos $ 50,000 5,000 2,500
- -------------------------------------------------------------------------------
Herbert Winokur, Jr.* 5,000
- -------------------------------------------------------------------------------
Nat Gregory* 5,000
- -------------------------------------------------------------------------------
* Issued to Capricorn Investors II, L.P.

<PAGE>

INTELLECTUAL PROPERTY SECURITY AGREEMENT
----------------------------------------

THIS INTELLECTUAL PROPERTY SECURITY AGREEMENT (this "Agreement"), dated as
of the 28th day of February, 1998, by MRS. FIELDS' ORIGINAL COOKIES, INC., a
Delaware corporation ("Borrower") and LASALLE NATIONAL BANK, a national banking
association, ("Lender").

W I T N E S S E T H:

WHEREAS, on the date hereof, Borrower has entered into that certain Amended
and Restated Loan Agreement of even date herewith (the same, as it may be
amended, restated, modified or supplemented and in effect from time to time,
being herein referred to as the "Loan Agreement") by and between Borrower and
Lender, providing for Lender to make available to Borrower certain revolving
credit facilities (collectively, the "Loans") on the terms and conditions set
forth therein; and

WHEREAS, Borrower has or may hereafter acquire trademarks and service
marks, patents, patent applications and inventions, copyrights and related or
similar rights and interests; and

WHEREAS, as of the date hereof, Borrower and Lender have entered into a
Security Agreement (the "Security Agreement") pursuant to which Borrower has
pledged certain collateral to Lender as security for the Obligations (as defined
in the Loan Agreement); and

WHEREAS, to induce Lender to enter into the Loan Agreement and make the
Loans thereunder, Borrower has agreed to pledge and grant a security interest in
the Collateral (as hereinafter defined) as additional security for the
Obligations.

NOW, THEREFORE, for and in consideration of the premises set forth above,
the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:

Section 1. Definitions. Capitalized terms used herein without definition
-----------
and defined in the Loan Agreement are used herein as defined therein.

Section 2. Grant of Security Interest. As collateral security for the
--------------------------
prompt payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the Obligations, Borrower hereby pledges and grants to Lender a
Lien on and security interest in and to all of Borrower's right, title and
interest in and to the following property and interests in property, whether now
owned by Borrower or hereafter acquired and whether now existing or hereafter
coming into existence (collectively referred to herein as "Collateral"):
----------
<PAGE>

(a) all of Borrower's right, title and interest in and to trademarks,
trade names, trade styles, service marks, logos, emblems, prints and
labels, all elements of package or trade dress of goods, and all general
intangibles of like nature, now existing or hereafter adopted or acquired
by Borrower, together with the goodwill of Borrower's business connected
with the use thereof and symbolized thereby, and all applications,
registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States or
in any office of the Secretary of State (or equivalent) of any state
thereof, or in any similar office or agency of any country or political
subdivision thereof throughout the world, whether now owned or hereafter
acquired by Borrower, together with all extensions, renewals and
corrections thereof and all licenses thereof or pertaining thereto (all of
the foregoing assets encompassed by this clause (a) being hereinafter
collectively referred to as the "Trademarks");
----------

(b) all of Borrower's right, title and interest in and to all
inventions and letters patent and applications therefor, and all
registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States or
any state thereof, or in any similar office or agency of any country or
political subdivision thereof throughout the world, whether now owned or
hereafter acquired by Borrower, together with all re-examinations,
reissues, continuations, continuations-in-part, divisions, improvements and
extensions thereof and all licenses thereof or pertaining thereto and all
licenses of patent rights to Borrower now in effect or entered during the
term of this Agreement, and the rights to make, use and sell, and all other
rights with respect to, the inventions disclosed or claimed therein, all
inventions, designs, proprietary or technical information, know-how, other
data or information, software, databases, all embodiments or fixations
thereof and related documentation, and all other trade secret rights not
described above (all of the foregoing assets encompassed by this clause (b)
being hereinafter collectively referred to as the "Patents");
-------

(c) all of Borrower's right, title and interest in and to copyrights
in works of authorship of any kind, and all applications, registrations and
recordings thereof in the Office of the United States Register of
Copyrights, Library of Congress, or in any similar office or agency of any
country or political subdivision thereof throughout the world, whether now
owned or hereafter acquired by Borrower, together with all extensions,
renewals, reversionary rights, and corrections thereof and all licenses
thereof or pertaining thereto (all of the foregoing assets encompassed by
this clause (c) being hereinafter collectively referred to as the
"Copyrights");
----------

(d) all of Borrower's customer lists and other records of Borrower
relating to the distribution of products bearing, constituting or
incorporating any of the Trademarks, Patents and/or Copyrights; and

(e) any and all proceeds of the foregoing, including, without
limitation, the

-2-
<PAGE>

proceeds from any claims by Borrower against third parties for past,
present or future infringement of the Trademarks, Patents or Copyrights and
any royalties from licenses to third parties of the Trademarks, Patents or
Copyrights.

Section 3. Representations, Warranties and Covenants. Borrower hereby
-----------------------------------------
represents and warrants to, and covenants and agrees with, Lender as follows:

(a) Borrower has the sole, full and clear title to the Trademarks,
including any Trademarks shown on Schedule A hereto, for the goods and
----------
services with which the Trademarks are used, and any registrations thereof
are valid and subsisting and in full force and effect. Borrower has used
and will continue to use for the duration of this Agreement standards of
quality in the manufacture of products sold under the Trademarks that are
at least equal to those standards in effect as of the date of this
Agreement.

(b) Borrower (either itself or through its licensees) will continue
to use the Trademarks on each and every trademark class of goods applicable
to its current lines of goods as reflected in its current catalogs,
brochures and price lists in order to maintain the Trademarks in full force
and effect, in the ordinary course of business, free from any claim of
abandonment for nonuse and Borrower will not (and will not permit any
licensee thereof to) do any act or knowingly omit to do any act whereby any
Trademark may become invalidated provided, however, that Borrower may
-------- -------
abandon any Trademark if Borrower believes in its reasonable business
judgment that such abandonment is in the best interest of Borrower's
business, provided, further, that (i) Borrower gives Lender written notice
-------- -------
of Borrower's intent to abandon any Trademark at least thirty (30) days
prior to abandonment, and (ii) such abandonment will not, itself or in
conjunction with any other event, materially decrease the value of the
Collateral.

(c) Borrower has the sole, full and clear title to any Patents shown
on Schedule B hereto and such Patents are valid and subsisting and in full
----------
force and effect and have not been claimed or adjudged invalid or
unenforceable in whole or in part (except as otherwise permitted by this
Agreement and the other Loan Documents). Borrower shall mark products made
and sold under the Patents in accordance with the U.S. Patent Act and other
applicable laws. Borrower shall diligently prosecute any patent application
now pending or acquired or made by it during the term of this Agreement,
shall make applications on unpatented but patentable inventions, and shall
preserve and maintain all rights of any kind in the Patents, which, in each
case, Borrower believes in its reasonable business judgment are in the best
business interests of Borrower. Borrower believes that none of the Patents
has been abandoned or dedicated and Borrower will not do any act, or omit
to do any act, nor permit any licensee thereof to do any act, whereby any
Patent may become abandoned or dedicated and shall notify Lender
immediately if it knows of any reason or has reason to know that any
material Patent may become abandoned or dedicated, provided, however, that
-------- -------
Borrower may abandon any Patent if Borrower believes in its reasonable
business judgment that such abandonment is in the best interest of
Borrower's business, provided, further, that (i) Borrower gives Lender
-------- -------
written notice of Borrower's intent to abandon any

-3-
<PAGE>

Patent at least thirty (30) days prior to abandonment, and (ii) such
abandonment will not, itself or in conjunction with any other event,
materially decrease the value of the Collateral.

(d) Borrower has the sole, full and clear title to any copyrights
shown on Schedule C hereto and such copyrights are valid and subsisting and
----------
in full force and effect and have not been claimed or adjudged invalid or
unenforceable in whole or in part (except as otherwise permitted by this
Agreement and the other Loan Documents). Borrower (either itself or through
its licensees) will place appropriate notice of copyright on all copies
embodying copyrighted works which are publicly distributed and Borrower
will not (and will not permit any licensee thereof to) do any act or
knowingly omit to do any act whereby any Copyright may become invalidated
or dedicated to the public domain.

(e) Borrower will promptly perform all acts and execute all
documents, including, without limitation, grants of security in forms
acceptable to Lender and suitable for recording with the United States
Patent and Trademark Office and the United States Register of Copyrights,
and the appropriate offices and agencies of foreign jurisdictions
reasonably requested by Lender at any time to evidence, perfect, maintain,
record or enforce Lender's interest in the Collateral or otherwise in
furtherance of the provisions of this Agreement. Borrower hereby authorizes
Lender to execute and file one or more financing or continuation statements
(and any similar documents) or copies thereof or of this Agreement with
respect to the Collateral without the signature of Borrower to the extent
permitted by law.

(f) In the event that Borrower, either itself or through any
subsidiary, affiliate, agent, employee, licensee or designee, shall file an
application for the issuance of any Patent or registration of any Trademark
with the United States Patent and Trademark Office, or any similar office
of the United States or in any office of the Secretary of State (or
equivalent) of any state thereof, or for the registration of any Copyright
with the United States Register of Copyrights, or for the registration of
any Patent, Trademark or Copyright in any similar office or agency of any
country or political subdivision thereof throughout the world, or shall
obtain issuance of any Patent or registration of any Trademark or Copyright
previously applied for, or shall adopt, acquire or obtain rights to any new
trademark, patent application or work for which a copyright application has
been or is expected to be filed, or become entitled to the benefit of any
patent application or any patent or any part thereof for reissue, re-
examination, continuation, continuation-in-part, division, improvement or
extension, Borrower shall:

(i) promptly inform Lender of any such event or action; and

(ii) execute and deliver any and all assignments, agreements,
instruments, documents and papers as are necessary or appropriate or
as Lender may request to evidence Lender's interest in such Trademark,
Patent or Copyright and the goodwill and general intangibles of
Borrower relating thereto or represented thereby.

-4-
<PAGE>

Borrower hereby constitutes Lender, or its agent, as Borrower's
attorney-in-fact to execute and file all such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed;
such power being coupled with an interest is irrevocable until the
Obligations are indefeasibly paid and satisfied in full. Borrower
authorizes the amendment of the schedules hereto to include any future
Trademark, Patent or Copyright registrations or applications which may be
acquired or made by Borrower.

(g) Borrower has the authority, right and power to enter into this
Agreement and to perform its terms and to grant the security interest
herein granted, and has not entered and will not enter into any oral or
written agreements which would prevent Borrower from complying with the
terms hereof; provided, however, Borrower may enter into or maintain in
--------
effect such license agreements (including, without limitation, any referred
to in Schedules A, B and C hereto) with respect to the Collateral as
--------------------
Borrower believes in its reasonable business judgment are in the best
interest of Borrower's business, so long as any such license agreement
permits the assignment thereof to Lender.

(h) The Collateral is not now, to Borrower's knowledge, and at all
times will not be, subject to any Liens, licenses, claims, shop rights,
covenants not to sue third persons, or encumbrances of any nature
whatsoever, except Permitted Liens; provided, however, Borrower may enter
--------
into such license agreements with respect to the Collateral as Borrower
believes in its reasonable business judgment are in the best interest of
Borrower's business, so long as any such license agreement permits the
assignment thereof to Lender. To the best knowledge of Borrower, none of
the Collateral is subject to any claims of any other party, except as may
be indicated on Schedules A, B and C to this Agreement.
--------------------

(i) As of the date hereof neither Borrower nor any affiliate or
subsidiary thereof has any Trademarks, Patents or Copyrights registered, or
the subject of any pending application, in the United States Patent and
Trademark Office, or any similar office of the United States or in any
office of the Secretary of State (or equivalent) of any state thereof, or
the United States Register of Copyrights, or in any similar office or
agency of any country or political subdivision thereof throughout the
world, other than those identified in Schedules A, B and C hereto.
--------------------

(j) Borrower will take all commercially reasonable steps in any
proceeding before the United States Patent and Trademark Office, United
States Register of Copyrights or similar office or agency of the United
States or any office of the Secretary of State (or equivalent) of any state
thereof, or in any similar office or agency of any country or political
subdivision thereof throughout the world, to maintain each application and
registration of any Collateral, including, without limitation, filing of
renewals, extensions, affidavits of use and incontestability, and
opposition, interference and cancellation proceedings (except to the extent
that dedication, abandonment or invalidation is permitted under Sections
3(b) and 3(c) hereof). Borrower shall notify Lender promptly in writing if
any application or registration relating to any Collateral may become
abandoned or dedicated or subject to an adverse final determination in any
proceeding in the United States Patent and Trademark

-5-
<PAGE>

Office or United States Register of Copyrights or in any similar office or
agency of any country or political subdivision thereof throughout the world
or in any court regarding Borrower's ownership of such Patent, Trademark or
Copyright, its right to register same, or to keep or maintain the validity
of same.

(k) In the event that Borrower acquires knowledge that any Trademark,
Patent or Copyright is infringed, misappropriated or diluted by a third
party, Borrower shall promptly sue for infringement, misappropriation
and/or dilution and obtain injunctive relief and recover damages therefor,
and Borrower shall take such other actions reasonably required to protect
such Trademark, Patent or Copyright under the circumstances, unless
Borrower shall determine in its reasonable business judgment that such suit
or action is not in the best interest of Borrower's business. Upon the
occurrence and during the continuation of an Event of Default, Lender shall
have the right, but in no way shall be obligated, to bring suit in its or
Borrower's name to enforce the Trademarks, Patents and Copyrights and any
licenses thereunder, in which event Borrower shall, at the request of
Lender, do any and all lawful acts requested by Lender and execute any and
all documents required by Lender to aid such enforcement, and Borrower
shall, upon demand, promptly reimburse and indemnify Lender for all costs
and expenses incurred in such enforcement.

Section 4. Remedies. Upon the occurrence of an Event of Default which is
--------
continuing, in addition to all other rights and remedies provided for in the
Loan Documents, all such rights and remedies being cumulative, not exclusive and
enforceable alternatively, successively or concurrently, without (except as
provided herein) notice to, or consent by, Borrower, Lender shall have the
following rights and remedies:

(a) Lender may (without assuming any obligations or liability
thereunder), at any time, enforce (and shall have the exclusive right to
enforce) against any licensee or sublicensee all rights and remedies of
Borrower in, to and under any one or more license agreements with respect
to the Collateral, and take or refrain from taking any action under any
thereof, and Borrower hereby releases Lender from, and agrees to indemnify
and hold Lender and its agents and their respective officers, directors,
employees and agents, free and harmless from and against any claims arising
out of any action taken or omitted to be taken with respect to any such
license agreement, except for acts constituting gross negligence or willful
misconduct;

(b) Lender may, at any time and from time to time, upon ten (10)
days' prior written notice to Borrower, assign, sell, or otherwise dispose
of the Collateral or any of it, either with or without special or other
conditions or stipulations, with power to buy the Collateral or any part of
it at any such sale, and do all other acts and things for completing the
assignment, sale or disposition which Lender shall, in its sole discretion,
deem appropriate or proper;

(c) in addition to the foregoing, in order to implement any
assignment, sale, license or other disposal of any of the Collateral
pursuant to this Agreement, Lender may, at

-6-
<PAGE>

any time, pursuant to the authority granted in the power of attorney
described in Section 3(f) hereof (such authority becoming effective upon
occurrence of an Event of Default), execute and deliver on behalf of
Borrower one or more instruments of assignment, sale, license or other
disposition of the Collateral. Borrower agrees to pay when due all
reasonable costs incurred in any such transfer of the Collateral, including
any taxes, fees and reasonable attorneys' fees, and all such costs shall be
added to the Obligations. Lender may apply the proceeds actually received
from any such license, assignment, sale or other disposition in accordance
with clause (d) of this Section 4, and Borrower shall remain liable and
will pay Lender on demand any deficiency remaining, together with interest
thereon at a rate equal to the rate then payable on the Obligations and the
balance of any expenses unpaid.

Nothing herein contained shall be construed as requiring Lender to take any such
action at any time.

(d) The proceeds of any collection, sale or other realization of all
or any part of the Collateral, and any other cash at the time held by
Lender under this Agreement, shall be applied:

first, to payment of all the costs and expenses of disposition of
-----
and/or realization upon the Collateral and any other expenses payable
or reimbursable by Borrower under this Agreement;

second, to payment of all expenses payable or reimbursable by
------
Borrower under the Loan Agreement;

third, to payment of all accrued unpaid interest on the
-----
Obligations;

fourth, to payment of principal of the Obligations;
------

fifth, to payment of any other amounts owing constituting
-----
Obligations; and

last, any remainder shall be for the account of and paid to
----
Borrower or as otherwise directed by a court of competent
jurisdiction.

The application of proceeds of Collateral hereunder to the Obligations shall be
made pro-rata to the holders of such Obligations based on the aggregate
outstanding principal amount of such Obligations held by such holders.

Section 5. Powers of Attorney. Concurrently with the execution and
------------------
delivery hereof, Borrower is executing and delivering to Lender three (3)
original powers of attorney for the implementation of any assignment, sale or
other disposition of the Trademarks, Patents or Copyrights pursuant to this
Agreement and Borrower will, upon request of Lender, execute and deliver such
additional copies thereof as Lender may require for purposes hereof.

Section 6. Termination. This Agreement and the Liens and security
-----------
interests granted hereunder shall not terminate until the full and complete
performance and indefeasible satisfaction

-7-
<PAGE>

of all the Obligations (regardless of whether the Loan Agreement shall have
earlier terminated), whereupon Lender shall forthwith cause to be assigned,
transferred and delivered, against receipt but without any recourse, warranty or
representation whatsoever, any remaining Collateral to or on the order of
Borrower. Lender shall also execute and deliver to Borrower upon such
termination, such termination statements, certificates for terminating the Liens
and such other documentation as shall be reasonably requested by Borrower to
effect the termination and release of the Liens and security interests in favor
of Lender affecting the Collateral.

Section 7. Further Assurances. At any time and from time to time, upon the
------------------
written request of Lender or its agent, and at the sole expense of Borrower,
Borrower will promptly and duly execute and deliver any and all such further
instruments, documents and agreements and take such further actions as Lender or
its agent may reasonably require in order for Lender to obtain the full benefits
of this Agreement and of the rights and powers herein granted in favor of
Lender, including, without limitation, using Borrower's best efforts to secure
all consents and approvals necessary or appropriate for the assignment to Lender
of any Collateral not heretofore assigned and the filing of any financing or
continuation statements under the Uniform Commercial Code with respect to the
Liens and security interests granted hereby.

Section 8. Limitation on Duty of Lender. The powers conferred on Lender
----------------------------
under this Agreement are solely to protect Lender's interest in the Collateral
and shall not impose any duty upon it to exercise any such powers. Lender shall
be accountable only for amounts that it actually receives as a result of the
exercise of such powers and neither Lender nor its agent, nor any of their
respective officers, directors, employees or agents shall be responsible to
Borrower for any act or failure to act, except for gross negligence or willful
misconduct. Without limiting the generality of the foregoing, neither Lender
nor any of its agents shall have any obligation or liability under any license
by reason of or arising out of this Agreement or the granting to Lender of a
security interest therein or assignment thereof or the receipt by Lender or any
such agent of any payment relating thereto pursuant hereto, nor shall Lender or
any such agent be required or obligated in any manner to perform or fulfill any
of the obligations of Borrower under or pursuant to any license, or to make any
payment, or to make any inquiry as to the nature or the sufficiency of any
payment received by it or the sufficiency of any performance by any party under
any license, or to present or file any claim, or to take any action to collect
or enforce any performance or the payment of any amounts which may have been
assigned to Lender or to which Lender may be entitled at any time or times.

Section 9. Miscellaneous.
-------------

(a) No Waiver. No failure on the part of Lender or any of its agents to
---------
exercise, and no course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise by Lender or any of its agents of any
right, power or remedy hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law.

-8-
<PAGE>

(b) Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the internal laws (as opposed to conflicts of law) and decisions
of the State of Illinois.

(c) Notices. All notices, demands and requests that any party is required
-------
or elects to give to any other party shall be given in accordance with the
provisions of the Loan Agreement.

(d) Amendments, Etc. The terms of this Agreement may be waived, altered or
---------------
amended only by an instrument in writing duly executed by Borrower and Lender.
Any such amendment or waiver shall be binding upon Lender and Borrower and their
respective successors and assigns.

(e) Successors and Assigns. This Agreement shall be binding upon and inure
----------------------
to the benefit of the respective successors and assigns of each of the parties
hereto, provided, that Borrower shall not assign or transfer its rights or
--------
obligations hereunder without the prior written consent of Lender.

(f) Counterparts; Headings. This Agreement may be executed in any number
----------------------
of counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart. The headings in this Agreement are for convenience of
reference only and shall not alter or otherwise affect the meaning hereof.

(g) Severability. If any provision hereof is invalid and unenforceable in
------------
any jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of Lender and its agent in order to carry
out the intentions of the parties hereto as nearly as may be possible and (ii)
the invalidity or unenforceability of any provision hereof in any jurisdiction
shall not affect the validity or enforceability of such provision in any other
jurisdiction.

(h) Other Loan Documents. This Agreement supplements the other Loan
--------------------
Documents and nothing in this Agreement shall be deemed to limit or supersede
the rights granted to Lender in any of the other Loan Documents. In the event
of any conflict between this Agreement and the Loan Agreement, for purposes of
the obligations of Borrower or Lender, as applicable, the provisions of the Loan
Agreement shall govern.

(I) SUBMISSION TO JURISDICTION; WAIVER OF VENUE. EACH OF THE PARTIES
-------------------------------------------
HERETO CONSENTS AND AGREES TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
SITTING IN THE COUNTY OF COOK, STATE OF ILLINOIS, AND WAIVES ANY OBJECTION BASED
ON VENUE OR FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION INSTITUTED THEREIN,
----- --- ----------
AND AGREES THAT ANY DISPUTE CONCERNING THE INTERPRETATION OR ENFORCEMENT OF ANY
PROVISION OF THIS AGREEMENT OR THE RELATIONSHIP BETWEEN ANY OF SUCH PERSONS WITH
RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT SHALL BE HEARD ONLY IN THE
COURTS DESCRIBED ABOVE.

-9-
<PAGE>

(J) WAIVER OF RIGHT TO TRIAL BY JURY. EACH OF THE PARTIES HERETO HEREBY
--------------------------------
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (I) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR (II) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM IN RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS
RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. EACH OF SUCH PERSONS HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
THE PROVISIONS OF THIS SUBSECTION (J) SHALL SURVIVE THE TERMINATION OF THIS
AGREEMENT.

[Balance of page intentionally left blank; signature page follows.]

-10-
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this INTELLECTUAL
PROPERTY SECURITY AGREEMENT to be executed by their respective officers
thereunto duly authorized as of the day and year first above written.

Borrower:
--------

MRS. FIELDS' ORIGINAL COOKIES, INC.,
a Delaware corporation

By:_____________________________
Title:__________________________

Lender:
------

LASALLE NATIONAL BANK,
a national banking association

By:_____________________________
Title:__________________________

-11-
<PAGE>

STATE OF ____________ )
) SS
COUNTY OF ___________ )

On this ____ day of February, 1998, before me personally appeared the
above-named ________________________, to me known, who being by me duly sworn
according to law, on his oath stated that he is the _______________________ of
MRS. FIELDS' ORIGINAL COOKIES, INC. and acknowledged that he signed, sealed and
delivered the foregoing instrument as the free and voluntary act and deed of
said corporation.

______________________________________
Notary Public

My Commission Expires:

_____________________
<PAGE>

STATE OF ____________ )
) SS
COUNTY OF ___________ )

On this ______ day of February 1998, before me personally appeared the
above-named Kristen P. Freund, to me known, who being by me duly sworn according
to law, on her oath stated that she is a Vice President of LASALLE NATIONAL BANK
and acknowledged that she signed, sealed and delivered the foregoing instrument
as the free and voluntary act and deed of the corporation, by virtue of her
authority.

______________________________________
Notary Public

My Commission Expires:

_____________________
<PAGE>

Schedule A

Trademarks
----------
<PAGE>

Schedule B

Patents
-------

<PAGE>

Schedule C

Copyrights
----------

<PAGE>

PLEDGE AND SECURITY AGREEMENT

PLEDGE AND SECURITY AGREEMENT (this .Agreement.) dated as of February 28,
1998 between MRS. FIELDS ORIGINAL COOKIES, INC., a Delaware corporation
("Debtor"), and LASALLE NATIONAL BANK, a national banking association (the
"Secured Party").

W I T N E S S E T H:

WHEREAS, on the date hereof, Debtor has entered into that certain Amended
and Restated Loan Agreement of even date herewith (the same, as it may be
amended, restated, modified or supplemented and in effect from time to time,
being herein referred to as the "Loan Agreement") between Debtor and Secured
Party, as lender, providing for the Secured Party to make available to the
Debtor certain revolving credit facilities (collectively, the "Loans") on the
terms and conditions set forth therein (the Loans, together with all other
"Obligations" as defined in the Loan Agreement, are collectively referred to
herein as the "Obligations"); and

WHEREAS, to induce the Secured Party to enter into the Loan Agreement and
make the Loans thereunder, Debtor has agreed to pledge and grant a security
interest in the Collateral (as hereinafter defined) as security for the
Obligations;

NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

Section 1. Definitions. Capitalized terms used herein without definition
-----------
and defined in the Loan Agreement are used herein as defined therein. In
addition, as used herein:

"Accounts" means any "account," as such term is defined in the Uniform
--------
Commercial Code.

"Chattel Paper" means any "chattel paper," as such term is defined in
-------------
the Uniform Commercial Code.

"Collateral" has the meaning ascribed thereto in Section 3 hereof.
----------

"Contracts" means all contracts, undertakings, or other agreements
---------
(other than rights evidenced by Chattel Paper, Documents or Instruments) in
or under which Debtor may now or hereafter have any right, title or
interest, including, without limitation, with respect to an Account, any
agreement relating to the terms of payment or the terms of performance
thereof.
<PAGE>

"Documents" means any "documents," as such term is defined in the
---------
Uniform Commercial Code, and shall include, without limitation, all
documents of title (as defined in the Uniform Commercial Code) or other
receipts evidencing or representing Inventory or Equipment.

"Equipment" means any "equipment," as such term is defined in the
---------
Uniform Commercial Code.

"Financial Asset" means any "financial asset," as such term is
---------------
defined in the Uniform Commercial Code.

"Fixtures" means any "fixtures," as such term is defined in the
--------
Uniform Commercial Code.

"General Intangibles" means any "general intangibles," as such term
-------------------
is defined in the Uniform Commercial Code, and, in any event, shall
include, without limitation, all right, title and interest in or under any
Contracts, models, drawings, materials and records, claims, goodwill and
rights of indemnification.

"Goods" means any "goods," as such term is defined in the Uniform
-----
Commercial Code.

. Indebtedness. means Indebtedness as defined in the Loan Agreement.
------------

"Instruments" means any "instrument," as such term is defined in the
-----------
Uniform Commercial Code, and shall include, without limitation, promissory
notes, drafts, bills of exchange, trade acceptances, letters of credit, and
Chattel Paper.

"Inventory" means any "inventory," as such term is defined in the
---------
Uniform Commercial Code.

"Investment Property" means any "investment property," as such term
-------------------
is defined in the Uniform Commercial Code.

"Liabilities" means, collectively, the Obligations and all
-----------
obligations, liabilities and Indebtedness of Debtor under or in respect of
this Agreement.

"Motor Vehicles" means motor vehicles, tractors, trailers and other
--------------
like property, whether or not the title thereto is governed by a
certificate of title or ownership.

"Permitted Liens" means Permitted Liens as defined in the Loan
---------------
Agreement.

"Person" means and includes an individual, a partnership, a joint
------
venture,

-2-
<PAGE>

a corporation, a limited liability company, a trust, an unincorporated
organization or a government or any department or agency thereof.

"Pledged Instruments" has the meaning ascribed thereto in Section
-------------------
3(b) hereof.

"Pledged Stock" has the meaning ascribed thereto in Section 3(a)
-------------
hereof.

"Proceeds" means "proceeds," as such term is defined in the Uniform
--------
Commercial Code and, in any event, includes, without limitation, (a) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable
with respect to any of the Collateral, (b) any and all payments (in any
form whatsoever) made or due and payable from time to time in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of
all or any part of the Collateral by any governmental body, authority,
bureau or agency (or any person acting under color of governmental
authority), and (c) any and all other amounts from time to time paid or
payable under, in respect of or in connection with any of the Collateral.

"Security" means any "security," as such term is defined in the
--------
Uniform Commercial Code.

"Stock Collateral" has the meaning ascribed thereto in Section 3(a)
----------------
hereof.

"Uniform Commercial Code" means the Uniform Commercial Code as in
-----------------------
effect from time to time in the State of Illinois.

Section 2. Representations, Warranties and Covenants of Debtor. Debtor
---------------------------------------------------
represents and warrants to, and covenants with, the Secured Party as follows:

(a) Debtor is the owner of the Collateral in which it purports to
grant a security interest pursuant to Section 3 hereof (subject, with
respect to after-acquired Collateral, to Debtor's acquiring the same) and
no Lien other than Permitted Liens exists or will exist upon such
Collateral at any time;

(b) the pledge and security interest granted hereunder in favor of
the Secured Party is a first priority (subject to Permitted Liens)
perfected pledge and security interest in and to all of the Collateral
(subject, with respect to after-acquired Collateral, to Debtor's acquiring
the same);

(c) the Pledged Stock evidenced by the certificates identified in
Exhibit I hereto is, and all other Pledged Stock in which Debtor shall
---------
hereafter grant a security interest pursuant to Section 3 hereof will be,
duly authorized, validly existing, fully paid and non-assessable and none
of such Pledged Stock is or will be subject to any contractual restriction,
or any restriction under the charter or by-laws of the issuer of such
Pledged Stock, upon the transfer of such Pledged Stock (except for any such
restriction

-3-
<PAGE>

contained herein or in the other Loan Documents);

(d) the Pledged Instruments identified in Exhibit I hereto
---------
constitute all of the Instruments owned by Debtor on the date hereof
(whether or not registered in the name of Debtor) and Exhibit I correctly
---------
identifies, as of the date hereof, the issuer of each Pledged Instrument,
the date of issuance thereof, the original amount thereof, the due date
thereof and the outstanding balance thereof;

(e) all existing collateral is located at the addresses set forth in
Schedule 1 hereto, and this Agreement is effective to create in favor of
----------
Secured Party a valid security interest in and Lien upon all of the
Debtor's right, title and interest in and to the Collateral, and, upon the
filing of appropriate Uniform Commercial Code financing statements in the
jurisdictions listed on Schedule 2 attached hereto, and upon delivery of
----------
the Pledged Stock and the Pledged Instruments to the Secured Party, duly
endorsed by Debtor or accompanied by stock powers or other appropriate
instruments of transfer duly executed by Borrower, such security interest
will be duly perfected in all the Collateral; and

(f) Debtor agrees to deliver to the Secured Party all certificates
evidencing any shares of capital stock and all Instruments which Debtor
acquires after the date of this Agreement, duly endorsed in blank or
accompanied by appropriate stock powers or other instruments of transfer
executed in blank by the Debtor, promptly (and in any event within five (5)
days) upon the Debtor's receipt thereof, and, upon request from the Secured
Party, to also promptly deliver to Secured Party an updated Exhibit I to
---------
this Agreement reflecting such additional Pledged Stock and/or Pledged
Instruments.

Section 3. Grant of Security Interest. As collateral security for the
--------------------------
prompt payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the Liabilities, Debtor hereby pledges and grants to the Secured
Party a Lien on and security interest in and to all of Debtor's right, title and
interest in the following property and interests in property, whether now owned
by Debtor or hereafter acquired and whether now existing or hereafter coming
into existence (all being collectively referred to as the "Collateral"):
----------

(a) the shares of capital stock evidenced by the certificates
identified in Exhibit I hereto under the name of Debtor and all other
---------
shares of capital stock of whatever class now or hereafter owned or
acquired by Debtor, together with the certificates evidencing the same and
all other Financial Assets and Investment Property now or hereafter owned
by Debtor, including all Securities, together with any certificates
evidencing the same (collectively, the "Pledged Stock"), and:
-------------

(i) all rights and privileges of Debtor with respect to the
Pledged Stock, all shares, securities, moneys or property representing
a dividend on or proceeds of any of the Pledged Stock, or representing
a distribution or return of capital upon or in respect of any of the
Pledged Stock, or resulting from a split-up, revision,
reclassification or other like change of any of the Pledged Stock or
otherwise

-4-
<PAGE>

received in exchange therefor, and any subscription warrants, rights
or options issued to the holders of, or otherwise in respect of, any
of the Pledged Stock;

(ii) without affecting the obligations of Debtor under any
provision prohibiting such action hereunder or in the other Loan
Documents, in the event of any consolidation or merger in which the
issuer of any of the Pledged Stock is not the surviving corporation,
all shares of each class of capital stock of the successor corporation
formed by or resulting from such consolidation or merger;

(the Pledged Stock, together with all other certificates, shares,
securities, properties or moneys as may from time to time be pledged
hereunder pursuant to clause (i) or (ii) above or any other provision of
this Agreement are herein collectively called the "Stock Collateral");
----------------

(b) the Instruments identified in Exhibit I hereto and all other
---------
Instruments now or hereafter owned or acquired by Debtor
(collectively, the "Pledged Instruments"), together with all
-------------------
payments thereon or thereunder:

(d) all Inventory of Debtor;

(e) all General Intangibles of Debtor, including, without limitation,
all warranties, rights under insurance policies (including any policy for
key man term life insurance as to which Debtor is the beneficiary) and
indemnification rights arising out of any Contract to which Debtor is a
party;

(f) all Equipment of Debtor;

(g) all Documents of Debtor, including, without limitation, all
negotiable and non-negotiable bills of lading;

(h) all Contracts of Debtor, including without limitation any
agreement relating to the sale, use or management of any real property now
or hereafter owned or leased by Debtor;

(i) all Goods of Debtor;

(j) all Fixtures of Debtor;

(k) all cash of Debtor and all balances from time to time in any bank
or depositary account now or hereafter maintained by Debtor; and

(l) all other tangible and intangible property of Debtor, including,
without

-5-
<PAGE>

limitation, all Proceeds, products, accessions, rents, profits, income,
benefits, substitutions, additions and replacements of and to any of the
property of Debtor described in the preceding clauses of this Section 3
(including, without limitation, any proceeds of insurance thereon and all
rights, claims and benefits against any Person relating thereto) and, to
the extent related to any property described in said clauses or such
Proceeds, products and accessions, all books, correspondence, credit files,
records, invoices and other papers, including without limitation all tapes,
cards, computer runs, computer programs, computer files and other papers,
documents and records in the possession or under the control of Debtor or
any computer bureau or service company from time to time acting for Debtor.

Section 4. Covenants; Remedies. In furtherance of the grant of the pledge
-------------------
and security interest pursuant to Section 3 hereof, Debtor hereby agrees with
the Secured Party as follows:

4.1. Delivery and Other Perfection; Maintenance, Etc.
-----------------------------------------------

(a) Delivery of Securities. Debtor shall, if any of the
----------------------
above-described shares, securities, moneys or property required to be
pledged by Debtor under clause (a) of Section 3 hereof are received by or
issued in the name of Debtor, subject to the provisions of Section 4.4(b)
hereof, forthwith:

(i) transfer and deliver to the Secured Party such shares or
securities so received by Debtor (together with the certificates for
any such shares and securities, duly endorsed in blank or accompanied
by undated stock powers duly executed in blank), all of which
thereafter shall be held by the Secured Party pursuant to the terms of
this Agreement, as part of the Collateral; and

(ii) take such other action, at Debtor's expense, as may be
necessary or as the Secured Party shall deem appropriate to duly
perfect the Lien created hereunder in such shares, securities, moneys
or property, including, without limitation, executing and delivering
to the issuers of any uncertificated securities, registration of
pledge documents in form sufficient to perfect the Secured Party's
security interest in such uncertificated securities.

(b) Delivery of Instruments. Debtor shall deliver and pledge to the
-----------------------
Secured Party any and all Instruments, duly endorsed and/or accompanied by
such instruments of assignment and transfer executed by Debtor in such form
and substance as the Secured Party may request; provided, that so long as
--------
no Event of Default shall have occurred and be continuing, Debtor may
retain for collection in the ordinary course any Instruments received by
Debtor in the ordinary course of business, and the Secured Party shall,
promptly upon request of Debtor, make appropriate arrangements for making
any other Instrument pledged by Debtor available to Debtor for purposes of
presentation, collection or renewal (any such arrangement to be effected,
to the extent deemed appropriate by the Secured Party, against trust
receipt or like document).

-6-
<PAGE>

(c) Other Documents and Actions. Debtor shall give Secured Party not
---------------------------
less than thirty (30) days prior written notice of any change in the
location of any Collateral from the locations specified on Schedule 1
----------
hereto, which notice shall specify each new location of any Collateral and
the Collateral to be located at such new location. Debtor shall give,
execute, deliver, file and/or record any financing statement, notice,
instrument, document, agreement or other papers that may be necessary or
desirable (in the reasonable judgment of the Secured Party) to create,
preserve, perfect or validate the pledged security interest granted
pursuant hereto or to enable the Secured Party to exercise and enforce the
rights of the Secured Party hereunder with respect to such pledge and
security interest, including, without limitation, causing any or all of the
Stock Collateral to be transferred of record into the name of the Secured
Party or nominee following the occurrence and during the continuance of an
Event of Default, provided that notices to account debtors in respect of
--------
any Accounts or Instruments shall be subject to the provisions of clause
(f) below.

(d) Books and Records. Debtor shall maintain at its own cost and
-----------------
expense complete and accurate records of the Collateral, including, without
limitation, a record of all payments received and all credits granted with
respect to the Collateral and all other dealings with the Collateral. The
Secured Party shall have a special property interest in all of Debtor's
books and records pertaining to the Collateral and, upon the occurrence and
during the continuation of any Event of Default, Debtor shall deliver and
turn over any such books and records (or true and correct copies thereof)
to the Secured Party at any time on demand. Debtor shall permit any
representative of the Secured Party to inspect such books and records at
any time during reasonable business hours and will provide photocopies
thereof at Debtor's expense to the Secured Party upon request of the
Secured Party.

(e) Motor Vehicles. Debtor shall, promptly upon the request of the
--------------
Secured Party, cause the Secured Party to be listed as the Lienholder on
each certificate of title or ownership covering any Motor Vehicles.

(f) Notice to Account Debtors; Verification. Upon the occurrence
---------------------------------------
and during the continuance of any Event of Default, (i) upon request of the
Secured Party, Debtor shall promptly notify (and Debtor hereby authorizes
the Secured Party so to notify) each account debtor in respect of any
Accounts or Instruments that such Collateral has been assigned to the
Secured Party hereunder, and that any payments due or to become due in
respect of such Collateral are to be made directly to the Secured Party,
and (ii) the Secured Party shall have the right at any time or times to
make direct verification with the account debtors of any and all of the
Accounts.

(g) Further Identification of Collateral. Debtor will, when and as
------------------------------------
often as requested by the Secured Party, furnish to the Secured Party,
statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as the Secured
Party may reasonably request, all in reasonable detail.

-7-
<PAGE>

(h) Compliance with Loan Agreements. With respect to the
-------------------------------
Collateral, shall comply with the provisions of the Loan Agreement
applicable thereto, including, without limitation, maintenance of
insurance, restrictions on dispositions, and providing Secured Party and
its representatives the right to inspections with respect to the
Collateral.

4.2 Other Liens. Debtor will not create, permit or suffer to exist, and
-----------
will defend the Collateral against and take such other action as is necessary to
remove, any Lien on the Collateral except Permitted Liens, and will defend the
right, title and interest of the Secured Party in and to the Collateral and in
and to all Proceeds thereof against the claims and demands of all Persons
whatsoever.

4.3 Preservation of Rights. At any time when the Debtor is obligated to
----------------------
do so and has failed to do so after notice to the Debtor from the Secured Party,
and whether or not any Event of Default has occurred or is continuing, the
Secured Party may, but shall not be required to, take any steps the Secured
Party deems necessary or appropriate to preserve any Collateral or any rights
against third parties to any of the Collateral, including obtaining insurance of
Collateral required by the Loan Agreement or any of the other Loan Documents, at
any time when Debtor has failed to do so, and Debtor shall promptly pay, or
reimburse the Secured Party for, all expenses incurred in connection therewith.

4.4 Special Provisions Relating to Stock Collateral.
-----------------------------------------------

(a) So long as no Event of Default shall have occurred and be
continuing, Debtor shall have the right to (i) exercise all voting,
consensual and other powers of ownership pertaining to the Stock Collateral
for all purposes not inconsistent with the terms of this Agreement, the
other Loan Documents or any other instrument or agreement referred to
herein or therein, and Debtor agrees that it will not vote the Stock
Collateral in any manner that is inconsistent with the terms of this
Agreement, the other Loan Documents or any such other instrument or
agreement; and (ii) receive cash dividends or other distributions in the
ordinary course made in respect of the Stock Collateral.

(b) Debtor hereby grants to the Secured Party an irrevocable proxy to
vote the Stock Collateral, which proxy shall be effective immediately upon
the occurrence of, and during the continuance of, an Event of Default.

(c) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not the Secured Party
exercises any available right to declare any Liabilities due and payable or
seeks or pursues any other relief or remedy available to it under
applicable law or under this Agreement or any other agreement relating to
such Liabilities, all dividends and other distributions on the Stock
Collateral shall be paid directly to the Secured Party and retained by it
as part of the Stock Collateral, subject to the terms of this Agreement,
and, if the Secured Party shall so request in writing, Debtor agrees to
execute and deliver to the Secured Party appropriate additional dividend,
distribution and other orders and documents to that end.

-8-
<PAGE>

4.5 Events of Default, Etc. During the period during which an Event of
----------------------
Default shall have occurred and be continuing:

(a) Debtor shall, at the request of the Secured Party, assemble the
Collateral at such place or places as may be reasonably designated by the
Secured Party;

(b) the Secured Party may make any reasonable compromise or
settlement deemed desirable with respect to any of the Collateral and may
extend the time of payment, arrange for payment in installments, or
otherwise modify the terms of, any of the Collateral;

(c) the Secured Party shall have all of the rights and remedies with
respect to the Collateral of a secured party under the Uniform Commercial
Code (whether or not said Code is in effect in the jurisdiction where the
rights and remedies are asserted) and such additional rights and remedies
to which a secured party is entitled under the laws in effect in any
jurisdiction where any rights and remedies hereunder may be asserted,
including, without limitation, the right, to the maximum extent permitted
by law, to exercise all voting, consensual and other powers of ownership
pertaining to the Collateral as if the Secured Party were the sole and
absolute owner thereof (and Debtor agrees to take all such action as may be
appropriate to give effect to such right);

(d) the Secured Party in its discretion may, in the name of the
Secured Party or in the name of Debtor or otherwise, demand, sue for,
collect or receive any money or property at any time payable or receivable
on account of or in exchange for any of the Collateral, but shall be under
no obligation to do so;

(e) the Secured Party in its discretion may take immediate possession
and occupancy of any premises owned, used or leased by Debtor and exercise
all other rights and remedies of an assignee which may be available to the
Secured Party;

(f) the Secured Party may, without demand or notice of any kind,
appropriate and apply toward the payment of such of the Obligations,
whether matured or unmatured, including costs of collection and attorneys'
and paralegals' fees, and in such order of application as the Secured Party
may, from time to time, elect, any Indebtedness of the Secured Party to the
Debtor, however created or arising, including, but not limited to,
balances, credits, deposits, accounts or moneys of the Debtor in the
possession, control or custody of, or in transit to the Secured Party, and
the Debtor hereby waives the benefit of any law that would otherwise
restrict or limit the Secured Party in the exercise of its right, which is
hereby acknowledged, to appropriate at any time hereafter any such
Indebtedness owing from the Secured Party to the Debtor; and

(g) the Secured Party may, upon ten (10) Business Days' prior written
notice to Debtor of the time and place (which notice Debtor hereby agrees
is commercially reasonable notification for purposes hereof), with respect
to the Collateral or any part

-9-
<PAGE>

thereof which shall then be or shall thereafter come into the possession,
custody or control of the Secured Party, sell, lease, assign or otherwise
dispose of all or any part of such Collateral, at such place or places as
the Secured Party deems suitable, and for cash or for credit or for future
delivery (without thereby assuming any credit risk), at public or private
sale, without demand of performance or notice of intention to effect any
such disposition or of the time or place thereof (except such notice as is
required above or by applicable statute and cannot be waived), and the
Secured Party or anyone else may be the purchaser, lessee, assignee or
recipient of any or all of the Collateral so disposed of at any public sale
(or, to the extent permitted by law, at any private sale) and thereafter
hold the same absolutely, free from any claim or right of whatsoever kind,
including any right or equity of redemption (statutory or otherwise), of
Debtor, any such demand, notice and right or equity being hereby expressly
waived and released. The Secured Party may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from
time to time by announcement at the time and place fixed for the sale, and
such sale may be made at any time or place to which the sale may be so
adjourned.

The proceeds of each collection, sale or other disposition under this Section
4.5 shall be applied in accordance with Section 4.8 hereof.

4.6 Deficiency. If the proceeds of sale, collection or other
----------
realization of or upon the Collateral are insufficient to cover the costs and
expenses of such realization and the payment in full of the Liabilities, Debtor
shall remain liable for any deficiency.

4.7 Private Sale. Debtor recognizes that the Secured Party may be
------------
unable to effect a public sale of any or all of the Collateral consisting of
securities by reason of certain prohibitions contained in the Securities Act of
1933, as amended (the "Act"), and applicable state securities laws, but may be
compelled to resort to one or more private sales thereof to a restricted group
of purchasers who will be obliged to agree, among other things, to acquire such
Collateral for their own account for investment and not with a view to the
distribution or resale thereof. Debtor acknowledges and agrees that any such
private sale may result in prices and other terms less favorable to the seller
than if such sale were a public sale and, notwithstanding such circumstances,
agrees that any such sale shall not be deemed to have been made in a
commercially unreasonable manner by reason of its being conducted as a private
sale. The Secured Party shall be under no obligation to delay a sale of any of
the Collateral to permit Debtor to register such Collateral for public sale
under the Act, or under applicable state securities laws, even if Debtor would
agree to do so. The Secured Party shall not incur any liability as a result of
the sale of any such Collateral, or any part thereof, at any private sale
provided for in this Agreement conducted in a commercially reasonable manner,
and Debtor hereby waives any claims against the Secured Party arising by reason
of the fact that the price at which the Collateral may have been sold at such a
private sale was less than the price which might have been obtained at a public
sale or was less than the aggregate amount of the Liabilities, even if the
Secured Party accepts the first offer received and does not offer the Collateral
to more than one offeree.

Debtor further agrees to do or cause to be done all such other acts and things
as may be

-10-
<PAGE>

necessary to make such sale or sales of any portion or all of any such
Collateral valid and binding and in compliance with any and all applicable laws,
regulations, orders, writs, injunctions, decrees or awards of any and all
courts, arbitrators or governmental instrumentalities, domestic or foreign,
having jurisdiction over any such sale or sales, all at Debtor's expense,
provided that Debtor shall be under no obligation to take any action to enable
- --------
any or all of such Collateral to be registered under the provisions of the Act.
Debtor further agrees that a breach of any of the covenants contained in this
Section 4.7 will cause irreparable injury to the Secured Party, that the Secured
Party has no adequate remedy at law in respect of such breach and, as a
consequence, agrees that each and every covenant contained in this Section 4.7
shall be specifically enforceable against Debtor, and Debtor hereby waives and
agrees not to assert any defenses against an action for specific performance of
such covenants, except for a defense that no Event of Default has occurred and
is continuing.

4.8 Application of Proceeds. The proceeds of any collection, sale or
-----------------------
other realization of all or any part of the Collateral, and any other cash at
the time held by the Secured Party under this Agreement, shall be applied:

first, to payment of all the costs and expenses of disposition of
-----
and/or realization upon the Collateral and any other expenses payable
or reimbursable by Debtor under this Agreement;

second, to payment of all expenses payable or reimbursable by Debtor
------
under the Loan Agreement;

third, to payment of all accrued unpaid interest on the Obligations;
-----

fourth, to payment of principal of the Obligations;
------

fifth, to payment of any other amounts owing constituting
-----
Liabilities; and

last, any remainder shall be for the account of and paid to Debtor,
----
or as may be directed by a court having jurisdiction.

4.9 Attorney-in-Fact. Debtor hereby irrevocably constitutes and appoints
----------------
the Secured Party, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of Debtor and in the name of Debtor or in its own name, from time to time
in the discretion of the Secured Party, for the purpose of carrying out the
terms of this Agreement, at any time when an Event of Default exists to take any
and all appropriate action and to execute and deliver any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Agreement and, without limiting the generality of the foregoing, hereby
gives the Secured Party the power and right, on behalf of Debtor, without notice

-11-
<PAGE>

to or assent by Debtor, to do the following:

(a) to ask, demand, collect, receive and give acquittance and
receipts for any and all moneys due and to become due under any Collateral
and, in the name of Debtor or its own name or otherwise, to take possession
of and endorse and collect any checks, drafts, notes, acceptances or other
Instruments for the payment of moneys due under any Collateral and to file
any claim or to take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by the Secured Party for the purpose
of collecting any and all such moneys due under any Collateral whenever
payable and to file any claim or to take any other action or proceeding in
any court of law or equity or otherwise deemed appropriate by the Secured
Party for the purpose of collecting any and all such moneys due under any
Collateral whenever payable;

(b) to pay or discharge charges or Liens levied or placed on or
threatened against the Collateral (other than the Permitted Liens), to
effect any insurance called for by the terms of this Agreement and to pay
all or any part of the premiums therefor;

(c) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due, and to become due
thereunder, directly to the Secured Party or as the Secured Party shall
direct, and to receive payment of and receipt for any and all moneys,
claims and other amounts due, and to become due at any time, in respect of
or arising out of any Collateral;

(d) to sign and indorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with accounts and
other Documents constituting or relating to the Collateral;

(e) to commence and prosecute any suits, actions or proceedings at law
or in equity in any court of competent jurisdiction to collect the
Collateral or any part thereof and to enforce any other right in respect of
any Collateral;

(f) to defend any suit, action or proceeding brought against Debtor
with respect to any Collateral;

(g) to settle, compromise or adjust any suit, action or proceeding
described above and, in connection therewith, to give such discharges or
releases as the Secured Party may deem appropriate; and

(h) generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though the Secured Party was the absolute owner thereof for
all purposes, and to do, at the Secured Party's option and at Debtor's
expense, at any time, or from time to time, all acts and things which the
Secured Party reasonably deems necessary to protect, preserve or realize
upon the Collateral and the Secured Party's Lien therein, in order to
effect the intent of this

-12-
<PAGE>

Agreement, all as fully and effectively as Debtor might do.

Debtor hereby ratifies, to the extent permitted by law, all that such attorney
lawfully does or causes to be done by virtue hereof. The power of attorney
granted hereunder is a power coupled with an interest and shall be irrevocable
until the Liabilities are indefeasibly paid in full.

Debtor also authorizes the Secured Party, at any time from and after the
occurrence and during the continuation of any Event of Default, (x) to
communicate in its own name with any party to any Contract with regard to the
assignment of the right, title and interest of Debtor in and under the Contracts
hereunder and other matters relating thereto and (y) to execute, in connection
with any sale of Collateral provided for in Section 4.5 or Section 4.7 hereof,
any endorsements, assignments or other instruments of conveyance or transfer
with respect to the Collateral.

4.10 Perfection. Prior to or concurrently with the execution and
----------
delivery of this Agreement (or, if required after the date of this Agreement,
promptly upon request therefor by Secured Party), Debtor shall:

(a) execute and file such financing statements, assignments for
security, registrations of pledge agreements and other documents in such
offices as may be necessary or as the Secured Party may request to perfect
the security interests granted by Section 3 of this Agreement;

(b) enter into tri-party agreements, in form and substance acceptable
to Secured Party, with Secured Party and other financial institutions with
which Debtor may from time to time invest any funds or otherwise open
investment accounts (as permitted by the Loan Agreement), which create a
lien on and security interest in such funds or accounts in favor of Secured
Party;

(c) deliver to the Secured Party the originals of all certificates
evidencing any Pledged Stock, accompanied by undated stock powers or other
instruments of transfer duly executed by Debtor in blank;

(d) deliver to the Secured Party the originals of all Pledged
Instruments together with, in the case of Instruments constituting
promissory notes, allonges attached thereto showing such promissory notes
to be payable to the order of a blank payee; and

(e) deliver to the Secured Party, upon request at any time, the
originals of all Motor Vehicle titles, duly endorsed indicating the Secured
Party's interest therein as Lienholder.

4.11 Termination. This Agreement and the Liens and security interests
-----------
granted hereunder shall not terminate until the full and complete performance
and indefeasible satisfaction of all the Liabilities (regardless of whether the
Loan Agreement shall have earlier terminated), whereupon the Secured Party shall
forthwith cause to be assigned, transferred and delivered, against receipt but
without any recourse, warranty or representation whatsoever, any remaining
Collateral to or on the

-13-
<PAGE>

order of Debtor. The Secured Party shall also execute and deliver to Debtor upon
such termination such Uniform Commercial Code termination statements,
certificates for terminating the Liens on the Motor Vehicles (if any) and such
other documentation as shall be reasonably requested by Debtor to effect the
termination and release of the Liens and security interests in favor of the
Secured Party affecting the Collateral.

4.12 Further Assurances; Continuous Perfection. (a) At any time and from
-----------------------------------------
time to time, upon the written request of the Secured Party, and at the sole
expense of Debtor, Debtor will promptly and duly execute and deliver any and all
such further instruments, documents and agreements and take such further actions
as the Secured Party may reasonably require in order for the Secured Party to
obtain the full benefits of this Agreement and of the rights and powers herein
granted in favor of the Secured Party, including, without limitation, using
Debtor's best efforts to secure all consents and approvals necessary or
appropriate for the assignment to the Secured Party of any Collateral held by
Debtor or in which Debtor has any rights not heretofore assigned, the filing of
any financing or continuation statements under the Uniform Commercial Code with
respect to the Liens and security interests granted hereby, transferring
Collateral to the Secured Party's possession (if a security interest in such
Collateral can be perfected by possession), placing the interest of the Secured
Party as Lienholder on the certificate of title of any Motor Vehicle (subject to
Section 4.1(e) hereof) and using reasonable efforts to obtain waivers of Liens
from landlords and mortgagees. Debtor also hereby authorizes the Secured Party
to file any such financing or continuation statement without the signature of
Debtor to the extent permitted by applicable law.

(b) Upon the request of the Secured Party, Debtor shall use its best
efforts to procure insurers' acknowledgments of any assignments of key man life
insurance policies (if any) which may be assigned to the Secured Party as
additional security for the Liabilities and will take all such further action as
required by any insurer or the Secured Party in connection with any such
assignment.

4.13 Limitation on Duty of Secured Party. The powers conferred on the
-----------------------------------
Secured Party under this Agreement are solely to protect the Secured Party's
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. The Secured Party shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers and neither the
Secured Party nor any of its officers, directors, employees or agents shall be
responsible to Debtor for any act or failure to act, except for willful
misconduct. Without limiting the foregoing, the Secured Party shall be deemed
to have exercised reasonable care in the custody and preservation of the
Collateral in their possession if such Collateral is accorded treatment
substantially equivalent to that which the Secured Party, in its individual
capacity, accords its own property consisting of the type of Collateral
involved, it being understood and agreed that the Secured Party shall not have
any responsibility for taking any necessary steps (other than steps taken in
accordance with the standard of care set forth above) to preserve rights against
any person with respect to any Collateral.

Also without limiting the generality of the foregoing, the Secured Party
shall not have any obligation or liability under any Contract or license by
reason of or arising out of this Agreement or

-14-
<PAGE>

the granting to the Secured Party of a security interest therein or assignment
thereof or the receipt by the Secured Party of any payment relating to any
Contract or license pursuant hereto, nor shall the Secured Party be required or
obligated in any manner to perform or fulfill any of the obligations of Debtor
under or pursuant to any Contract or license, or to make any payment, or to make
any inquiry as to the nature or the sufficiency of any payment received by it or
the sufficiency of any performance by any party under any Contract or license,
or to present or file any claim, or to take any action to collect or enforce any
performance or the payment of any amounts which may have been assigned to it or
to which it may be entitled at any time or times.

Section 5. Miscellaneous.
-------------

5.1 No Waiver. No failure on the part of the Secured Party to exercise,
---------
and no course of dealing with respect to, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise by the Secured Party of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights and remedies provided by law.

5.2 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Illinois, without giving effect to the
choice of law principles thereof.

5.3 Notices. All notices, demands and requests that any party is
-------
required or elects to give to any other party shall be given in accordance with
the provisions of the Loan Agreement.

5.4 Amendments, Etc. The terms of this Agreement may be waived, altered
---------------
or amended only by an instrument in writing duly executed by Debtor and the
Secured Party. Any such amendment or waiver shall be binding upon the Secured
Party and Debtor and their respective successors and assigns.

5.5 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the respective successors and assigns of each of the
parties hereto, provided, that Debtor shall not assign or transfer its rights
--------
hereunder without the prior written consent of the Secured Party.

5.6 Counterparts; Headings. This Agreement may be executed in any number
----------------------
of counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart. The headings in this Agreement are for convenience of
reference only and shall not alter or otherwise affect the meaning hereof.

5.7 Severability. If any provision hereof is invalid and unenforceable in
------------
any jurisdiction, then, to the fullest extent permitted by law, (a) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Secured Party in order to carry out
the intentions of the parties hereto as nearly as may be possible and (b) the
invalidity or

-15-
<PAGE>

unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.

5.8 Other Loan Documents. This Agreement supplements the other Loan
--------------------
Documents and nothing in this Agreement shall be deemed to limit or supersede
the rights granted to the Secured Party in any other Loan Document. In the
event of any conflict between this Agreement and the Loan Agreement, the
provisions of the Loan Agreement shall govern.

5.9 SUBMISSION TO JURISDICTION; WAIVER OF VENUE. EACH OF THE PARTIES HERETO
-------------------------------------------
CONSENTS AND AGREES TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN
THE COUNTY OF COOK, STATE OF ILLINOIS, AND WAIVES ANY OBJECTION BASED ON VENUE
OR FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION INSTITUTED THEREIN, AND
----- --- ----------
AGREES THAT ANY DISPUTE CONCERNING THE INTERPRETATION OR ENFORCEMENT OF ANY
PROVISION OF THIS AGREEMENT OR THE RELATIONSHIP BETWEEN ANY OF SUCH PERSONS WITH
RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT SHALL BE HEARD ONLY IN THE
COURTS DESCRIBED ABOVE.

5.10 WAIVER OF RIGHT TO TRIAL BY JURY. EACH OF THE PARTIES HERETO HEREBY
--------------------------------
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR (B) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM IN RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS
RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. EACH OF SUCH PERSONS HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
THE PROVISIONS OF THIS SUBSECTION 5.10 SHALL SURVIVE THE TERMINATION OF THIS
AGREEMENT.

[Balance of page intentionally left blank. Signature page follows.]

-16-

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Pledge and Security
Agreement to be duly executed and delivered as of the day and year first above
written.

DEBTOR:
------

MRS. FIELDS. ORIGINAL COOKIES, INC., a Delaware
corporation

By:_____________________________
Title:___________________________

SECURED PARTY:
-------------

LASALLE NATIONAL BANK, a national banking
association

By:_____________________________
Title:___________________________
<PAGE>

EXHIBIT I

Description of Pledged Stock
----------------------------

Certificate Number of
No. Issuer Class Par Value Shares
----------- ------ ----- --------- ------------

Description of Pledged Instruments
----------------------------------

Original Outstanding
Principal Due Principal
Issuer Date Issued Amount Date Balance
- ------ ----------- --------- ---- -------------
<PAGE>

Schedule 1

Locations of Collateral
-----------------------
<PAGE>

Schedule 2

Jurisdictions
-------------

<PAGE>

_______________________________________________________________________________

_______________________________

MRS. FIELDS' HOLDING COMPANY, INC.

_______________________________

STOCKHOLDERS' AGREEMENT

among

MRS. FIELDS' HOLDING COMPANY, INC.

and

ITS STOCKHOLDERS

________________________________

Dated as of June , 1998

________________________________

________________________________________________________________________________
<PAGE>

STOCKHOLDERS' AGREEMENT
-----------------------

STOCKHOLDERS' AGREEMENT (this "Agreement"), dated as of March , 1998,
among Mrs. Fields' Holding Company, Inc., a Delaware corporation (the
"Company"), Capricorn Investors II, L.P., a Delaware limited partnership
("Capricorn"), Harvard Private Capital Holdings, Inc., a Massachusetts
corporation ("Harvard"), the individuals identified on the signature pages
hereto as "Management Investors", the individuals identified on the signature
pages hereto as the "Director Investors", the individuals identified on the
signature pages hereto as the "Other Investors" and such other persons to become
parties to this Agreement as described herein.

W I T N E S S E T H:
-------------------

WHEREAS, the parties hereto deem it in their best interests and in the best
interests of the Company to provide consistent and uniform management for the
Company and desire to enter into this Agreement in order to effectuate that
purpose and to set forth their respective rights and obligations in connection
with their investment in the Company; and

WHEREAS, the parties hereto also desire to restrict the sale, assignment,
transfer, encumbrance or other disposition of the shares of Common Stock, and to
provide for certain rights and obligations in respect thereto as hereinafter
provided;

NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto hereby agree as follows:

Section 1. Certain Definitions. As used in this Agreement, the following
-------------------
terms shall have the following respective meanings:

"Affiliate" means as to any Person (a) any Person which directly or
indirectly controls, is controlled by, or is under common control with such
Person, (b) any Person who is a director, officer, partner or principal of such
Person or of any Person which directly or indirectly controls, is controlled by,
or is under common control with such Person, and (c) any individual who is a
member of the immediate family of any Person described in clause (a) or clause
(b) above. For purposes of this definition, "control" of a Person shall mean
the power, direct or indirect, (i) to vote or direct the voting of 5% or more of
the Voting Stock of such Person or (ii) to direct or cause the direction of the
<PAGE>

management and policies of such Person whether by ownership of Capital Stock, by
contract or otherwise.

"Agreement" means this Agreement as in effect on the date hereof and as
hereafter from time to time amended, modified or supplemented in accordance with
the terms hereof.

"Board of Directors" means the Board of Directors of the Company as from
time to time hereafter constituted.

"By-Laws" means the By-Laws of the Company in effect on the date hereof and
as hereafter further amended in accordance with the terms hereof and pursuant to
applicable law.

"Call Notice" has the meaning specified in Section 6.1.

"Capital Stock" means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock of any Person, including, without limitation, shares of
preferred or preference stock, (ii) all partnership interests (whether general
or limited) in any Person which is a partnership, (iii) all membership interests
or limited liability company interests in any limited liability company, and
(iv) all equity or ownership interests in any Person of any other type.

"Cause" means, when used in connection with the termination of a Management
Investor's employment with the Company or any of its Subsidiaries, (i) the
refusal of such Management Investor to implement or adhere to lawful policies or
directives of the Board of Directors consistent with such Management Investor's
employment agreement with the Company; (ii) such Management Investor's
conviction of or entrance of a plea of nolo contendere to (A) a felony, (B) to
any other crime, which other crime is punishable by incarceration for a period
of one year or longer, or (C) other conduct of a criminal nature that may have
an adverse impact on the Company's reputation and standing in the community;
(iii) conduct that is in violation of such Management Investor's common law duty
of loyalty to the Company; (iv) fraudulent conduct by such Management Investor
in connection with the business affairs of the Company, regardless of whether
said conduct is designed to defraud the Company or others; (v) theft,
embezzlement, or other criminal misappropriation of funds by such Management
Investor, whether from the Company or any other person; or (vi) any breach of or
such Management Investor's failure to fulfill any of such Management Investor's
obligations, covenants, agreements, or duties under his employment agreement
with the Company; provided, however, that "Cause" pursuant
-------- -------

2
<PAGE>

to clause (i) or (vi) shall not be deemed to exist unless the Company has given
such Management Investor written notice thereof specifying in reasonable detail
the facts and circumstances alleged to constitute "cause", and 30 days after
such notice such conduct or circumstances has not entirely ceased or been
entirely remedied. Any determination of Cause shall be made by the Board of
Directors, which determination shall be final and binding on a Management
Investor.

"Certificate of Incorporation" means the Certificate of Incorporation of
the Company as in effect on the date hereof and as hereafter from time to time
amended, modified, supplemented or restated in accordance with the terms hereof
and pursuant to applicable law.

"Commission" means the Securities and Exchange Commission and any successor
commission or agency having similar powers.

"Date of Termination" means, with respect to any Management Investor, the
date such Management Investor ceases to be an employee of the Company or any of
its Subsidiaries or, with respect to any Director Investor, the date such
Director Investor ceases to be a director of the Company.

"Director Investor" means any director of the Company who is not a
Management Investor who purchases Common Stock, or receives options to purchase
Common Stock, from the Company, and each Permitted Transferee of any such
Person.

"Exchange Act" means, as of any date, the Securities Exchange Act of 1934,
as amended, or any similar Federal statute then in effect and superseding such
act, and any reference to a particular section thereof shall include a reference
to the comparable section, if any, of such similar Federal statute, and the
rules and regulations thereunder.

"Fair Market Value" means the fair market value of shares of Common Stock
as determined from time to time by the Board of Directors as evidenced by a
resolution thereof.

"Management Investor" means any employee of the Company or any Subsidiary
thereof who purchases Common Stock, or receives options to purchase Common
Stock, from the Company, and each Permitted Transferee of any such Person.

"NASD" means the National Association of Securities Dealers, Inc. and its
successors and assigns.

3
<PAGE>

"Offered Securities" has the meaning specified in Section 4.l(a).

"Other Investor" means any person other than Capricorn, Harvard, the
Management Investors and the Director Investors who purchases Common Stock from
the Company and each Permitted Transferee of any such Person.

"Permitted Transferee" has the meaning specified in Section 3.2.

"Person" means an individual or a corporation, association, partnership,
limited liability company, joint venture, organization, business, trust or any
other entity or organization, including a government or any subdivision or
agency thereof.

"Pro Rata Portion" means, with reference to any Shareholder at any time, a
fraction, the numerator of which is the number of shares of Common Stock then
issued and outstanding and held by such Shareholder or issuable to such
Shareholder pursuant to options that are vested at such time and which such
Shareholder commits to exercise in connection with the transaction giving rise
to the determination of "Pro Rata Portion", and the denominator of which is the
aggregate number of shares of Common Stock then issued and outstanding held by
the Shareholders taken together or issuable pursuant to options that are vested
at such time and which the Shareholders commit to exercise in connection with
the transaction giving rise to the determination of "Pro Rata Portion" taken
together; provided, that options shall be deemed to be vested for such purpose
--------
if they will vest by reason of the transaction giving rise to the determination
of "Pro Rata Portion".

"Put Notice" has the meaning specified in Section 6.3.

"Registrable Securities" means(i) all shares of Common Stock outstanding on
the date hereof and now or hereafter owned of record or beneficially by the
Shareholders, (ii) any shares of Common Stock issued or issuable upon the
exercise of options and (iii) any shares of Capital Stock issued by the Company
in respect of any shares of Common Stock referred to in (i) or (ii) by way of a
stock dividend or stock split or in connection with a combination or subdivision
of shares, reclassification, recapitalization, merger, consolidation or other
reorganization of the Company.

As to any particular Registrable Securities that have been issued, such
securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of under such registration statement, (ii) they shall have been distributed to
the public pursuant to Rule 144 under the Securities Act, (iii) they shall

4
<PAGE>

have been otherwise transferred or disposed of, and new certificates therefor
not bearing a legend restricting further transfer shall have been delivered by
the Company, and subsequent transfer or disposition of them shall not require
their registration or qualification under the Securities Act or any similar
state law then in force, (iv) they shall have ceased to be outstanding, or (v)
with respect to the Registrable Securities held by any Person, when such
Registrable Securities, when aggregated with the Registrable Securities held by
such Person's Affiliates, constitute 1% or less of the shares of Common Stock at
the time outstanding.

"Registration Expenses" shall mean any and all out-of-pocket expenses
incident to the Company's performance of or compliance with Section 5 hereof,
including, without limitation, all Commission, stock exchange and NASD
registration and filing fees, all fees and expenses of complying with securities
and blue sky laws (including the reasonable fees and disbursements of
underwriters' counsel in connection with blue sky qualifications and NASD
filings), all fees and expenses of the transfer agent and registrar for the
Registrable Securities, all printing expenses, the fees and disbursements of
counsel for the Company and of its independent public accountants, including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance, and one firm of counsel retained by each
Shareholder exercising its rights under Section 5 hereof, but excluding
underwriting discounts and commissions and applicable transfer and documentary
stamp taxes, if any, which shall be borne by the seller of the Registrable
Securities in all cases.

"Securities Act" means, as of any date, the Securities Act of 1933, as
amended, or any similar Federal statute then in effect and superseding such act,
and any reference to a particular section thereof shall include a reference to
the comparable section, if any, of any such similar Federal statute, and the
rules and regulations thereunder.

"Shareholder" means (i) Capricorn, (ii) Harvard, (iii) any Management
Investor who becomes a party hereto, (iv) any Director Investor who becomes a
party hereto, (v) any Other Investor who becomes a party hereto and (vi) each
Permitted Transferee who becomes a party to or bound by the provisions of this
Agreement in accordance with the terms hereof, in each case for so long as such
person continues to hold shares of Common Stock.

"Subsidiary" means, as to any Person, another Person of which outstanding
Voting Stock having the power to elect a majority of the members of the board of
directors (or comparable body or authority performing similar functions) of such
other Person are at

5
<PAGE>

the time owned, directly or indirectly through one or more intermediaries, or
both, by such first Person.

"Underwritten Offering" means a firm commitment underwriting through a
nationally recognized underwriter.

"Voting Stock" means Capital Stock of any class or classes, the holders of
which are ordinarily, in the absence of contingencies, entitled to vote for the
election of corporate directors (or Persons performing similar functions).

Section 20 Management.
----------

Section 2.1. Board of Directors. Subject to the terms of this Agreement
------------------
and the Certificate of Incorporation and the By-Laws, the business and affairs
of the Company shall be managed by the Board of Directors, the members of which
will be elected annually by majority vote of the Shareholders and with any
vacancies to be filled by action of the remaining members of the Board of
Directors.

Section 2.2. No Conflict with Agreement. Each Shareholder shall vote its
--------------------------
shares of Voting Stock of the Company, and shall take all actions necessary, to
ensure that the Certificate of Incorporation and By-Laws do not, at any time,
conflict with the provisions of this Agreement.

Section 30 Transfers of Shares of Common Stock and Preferred Stock.
-------------------------------------------------------

Section 3.1. Confirmation of Ownership. The Company hereby confirms that
-------------------------
the number of shares of Common Stock set forth opposite each Shareholder's name
on Annex A hereto has been validly issued to such Shareholder and is fully paid
and nonassessable. Each Shareholder hereby confirms and agrees that as of the
date of this Agreement the number of shares of Common Stock and options to
purchase Common Stock set forth opposite such Shareholder's name on Annex A
hereto is such Shareholder's entire equity interest in the Company and that any
and all agreements heretofore entereed into by such Shareholder with the Company
contemplating the issuance of Common Stock or other equity interest in the
Company to such Shareholder are no longer in effect.

Section 3.2. Restrictions on Transfer. Each Shareholder agrees that such
------------------------
Shareholder will not, directly or indirectly, offer, sell, transfer, assign or
otherwise dispose of (or make any exchange, gift, assignment or pledge of)
(collectively, for purposes of Sections 3 and 4 only, a "transfer") any of its
shares of Common Stock, or op-

6
<PAGE>

tions, warrants or rights to subscribe for or purchase shares of Common Stock
that may be issued hereafter to such Shareholder, except as provided in Section
3.3 or other than an exercise of options, warrants or rights to subscribe for or
purchase shares of Common Stock. In addition to the other restrictions contained
in this Section 3, each Shareholder agrees that it will not, directly or
indirectly, transfer any of its shares of Common Stock (or options, warrants or
rights that may be hereafter issued to such Shareholder) except as permitted
under the Securities Act and other applicable securities laws.

Section 3.3. Exceptions to Restrictions. The provisions of Section 3.2
--------------------------
shall not apply to any of the following transfers:

(a) Any transfer from Capricorn to any Affiliate of Capricorn.

(b) Any transfer from Harvard to any Affiliate of Harvard.

(c) Any transfer from a Management Investor to members of such Management
Investor's immediate family or trusts for their benefit and, upon such
Management Investor's death, such Management Investor's executors,
administrators, testamentary trustees, legatees and beneficiaries.

(d) Any transfer from a Director Investor to members of such Director
Investor's immediate family or trusts for their benefit and, upon such Director
Investor's death, such Director Investor's executors, administrators,
testamentary trustees, legatees and beneficiaries.

(e) Any transfer from an Other Investor to members of such Other Investor's
immediate family or trusts for their benefit and, upon such Other Investor's
death, such Other Investor's executors, administrators, testamentary trustees,
legatees and beneficiaries.

(f) Any transfer approved by the Board of Directors (which approval shall
not be unreasonably withheld, it being understood that the Board of Directors
must provide reasons in writing to the proposed transferor in the event that it
withholds such consent).

(g) Any transfer of shares of Common Stock in accordance with Section 4,
Section 5 or Section 6 hereof.

The exceptions in clauses (a), (b), (c), (d) and (e) above are subject to the
condition that each such Affiliate or other transferee referred to therein (each
a "Permitted Transferee") shall execute the agreement referred to in Section
3.4(b) hereof. The provisions of this

7
<PAGE>

Agreement shall be applied to the shares of Common Stock acquired by any
Permitted Transferee of a Shareholder in the same manner and to the same extent
as such provisions were applicable to such shares of Common Stock in the hands
of such Shareholder. Any reference in this Agreement to Capricorn shall be
deemed to include Capricorn and its Permitted Transferees, any reference in this
Agreement to Harvard shall be deemed to include Harvard and its Permitted
Transferees, any reference to a Management Investor shall be deemed to include
such Management Investor and his Permitted Transferees, any reference to a
Director Investor shall be deemed to include such Director Investor and his
Permitted Transferees and any reference to an Other Investor shall be deemed to
include such Other Investor and its Permitted Transferees.

No transfer of any shares of Common Stock to a Permitted Transferee shall be
effective unless such transfer is made (i) pursuant to an effective registration
statement under the Securities Act and is qualified under applicable state
securities or blue sky laws or (ii) without registration under the Securities
Act and qualification under applicable state securities or blue sky laws, as a
result of the availability of an exemption from registration and qualification
under such laws, and such Shareholder shall have furnished to the Company a
certificate or, if reasonably requested by the Company, an opinion of counsel,
in either case reasonably satisfactory in form and substance to the Company and
its counsel, to that effect; provided, however, that no such certificate or
-------- -------
opinion of counsel shall be required in connection with a transfer of shares of
Common Stock pursuant to Sections 4.1, 4.4 or 4.5 hereof.

Section 3.4. Endorsement of Certificates.
---------------------------

(a) Upon the execution of this Agreement, in addition to any other legend
that the Company may deem advisable under the Securities Act and certain state
securities laws, all certificates representing shares of issued and outstanding
shares of Common Stock that are subject to any of the provisions of this
Agreement shall be endorsed at all times as follows:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO,
AND ARE TRANSFERABLE ONLY UPON COMPLIANCE WITH, THE PROVISIONS OF
A STOCKHOLDERS' AGREEMENT DATED AS OF JUNE __, 1998, AMONG THE
COMPANY AND ITS STOCKHOLDERS. A COPY OF THE ABOVE-REFERENCED
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.

8
<PAGE>

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN
EXEMPTION FROM REGISTRATION, UNDER SAID ACT.

(b) Except as otherwise expressly provided in this Agreement, all
certificates representing shares of Common Stock hereafter issued to or acquired
by any of the Shareholders or their successors or assigns shall bear the legends
set forth above, and the shares of Common Stock represented by such certificates
shall be subject to the applicable provisions of this Agreement. The
obligations of a party hereto shall be binding upon any transferee to whom
shares of Common Stock are transferred by such party, whether or not such
transfer is permitted under the terms of this Agreement. Prior to consummation
of any such transfer, such party shall cause the transferee to execute an
agreement in form and substance reasonably satisfactory to the other parties
hereto, providing that such transferee shall be bound by and shall fully comply
with the terms of this Agreement. Prompt notice shall be given to the Company
and each Shareholder by the transferor of any transfer (whether or not to a
Permitted Transferee) of any shares of Common Stock.

Section 3.5. Improper Transfer. Any attempt to transfer or encumber any
-----------------
shares of Common Stock other than in accordance with the terms of this Agreement
shall be null and void and neither the Company nor any transfer agent of such
securities shall give any effect to such attempted transfer or encumbrance in
its stock records.

Section 40 Rights of First Refusal; Drag-Along Rights; Tag-Along Rights.
------------------------------------------------------------

Section 4.1. Transfers by Shareholders.
-------------------------

(a) Except for (i) transfers to a Permitted Transferee and (ii) the sale
of securities contemplated by Sections 5 and 6 hereof, if, at any time following
the seventh anniversary of the date hereof, a Shareholder other than Capricorn
(the "Selling Shareholder") receives a bona fide offer, which it desires to
accept (a "Transfer Offer"), to purchase any shares of Common Stock (or options,
warrants or rights to subscribe for or purchase shares of Common Stock) owned by
it, then the Selling Shareholder shall cause the Transfer Offer to be reduced to
writing and shall deliver written notice of such Transfer Offer (a "Transfer
Notice"), accompanied by a copy of such Transfer Offer, to the other
Shareholders (individually and collectively referred to as the "Other
Shareholders") and the Company, setting forth the identity of the offeror, the
number of shares of Common

9
<PAGE>

Stock (or options, warrants, or rights to subscribe for or purchase shares of
Common Stock) proposed to be transferred (the "Offered Securities"), the price
per security contained in the Transfer Offer (the "Transfer Offer Price Per
Security"), and all other terms applicable thereto. The Transfer Notice shall
also contain an irrevocable offer by the Selling Shareholder to sell the Offered
Securities to the Other Shareholders and the Company at a price equal to the
Transfer Offer Price Per Security and upon substantially the same terms as
contained in the Transfer Offer. In the event that the form of consideration
specified in the Transfer Offer is other than cash, the Other Shareholders and
the Company shall have the option of paying the Transfer Offer Price Per
Security in cash in an amount equal to the fair market value of such
consideration unless it is reasonably practicable to deliver substantially
identical consideration, in which case the purchaser may so deliver. Fair market
value shall be determined by a nationally recognized investment banking firm
mutually acceptable to the parties, unless they agree otherwise.

(b) Upon receipt of the Transfer Notice, the Company shall then have the
irrevocable right to accept such offer at the Transfer Offer Price Per Security
and on the other terms specified in the Transfer Offer with respect to all or
any portion of the Offered Securities; provided, however, that in the event the
-------- -------
Company does not purchase any or all of the Offered Securities, the Other
Shareholders shall have the irrevocable right to purchase such unpurchased
Offered Securities (including any such Offered Securities not purchased by such
Other Shareholders hereunder) in proportion to each of such Other Shareholder's
Pro Rata Portion until all of such Offered Securities are purchased or until no
Other Shareholder desires to purchase any more Offered Securities. The rights
of each of the Other Shareholders and the Company pursuant to this Section
4.1(b) shall be exercisable by the delivery of notice to the Selling Shareholder
(the "Notice of Exercise"), within 30 calendar days from the date of delivery of
the Transfer Notice. The Notice of Exercise shall state the total number of
shares of the Offered Securities as to which each of the Other Shareholders or
the Company, as the case may be, is accepting under the offer, without regard to
whether or not the Company purchases any Offered Securities. A copy of such
Notice of Exercise shall also be delivered by the Other Shareholders to the
Company. The rights of the Other Shareholders and the Company pursuant to this
Section 4.1(b) shall terminate if unexercised 30 calendar days after the date of
delivery of the Transfer Notice.

(c) In the event that the Other Shareholders or the Company exercise their
rights to purchase all of the Offered Securities in accordance with Section
4.1(b) hereof, then the Selling Shareholder must sell such Offered Securities to
the Other Shareholders or the Company, as the case may be, at the Transfer Offer
Price Per Security and on the other terms specified in the Transfer Offer.

10
<PAGE>

(d) For purposes of this Section 4, any Person who has failed to give
notice of the election of an option hereunder within the specified time period
will be deemed to have waived its rights with respect thereto on the day
immediately following the last day of such period.

Section 4.2. Transfer of Offered Securities to Third Parties. If all
-----------------------------------------------
notices required to be given pursuant to Section 4.1 hereof have been duly given
and the Other Shareholders and the Company offer to purchase fewer than all of
the Offered Securities pursuant to the provisions hereof, then the Selling
Shareholder shall have the right, subject to compliance by the Selling
Shareholder with the provisions of Section 3.4(b) hereof for a period of 120
calendar days from the earlier of (i) the expiration of the option period
pursuant to Section 4.1 hereof with respect to such Transfer Offer or (ii) the
date on which the Selling Shareholder receives notice from the Other
Shareholders and the Company that they will not exercise the option granted
pursuant to Section 4.1 hereof, to sell to any third party that is not an
Affiliate of the Selling Shareholder the Offered Securities at a price per
Offered Security of not less than 100% of the Transfer Offer Price Per Security
and on substantially the other terms specified in the Transfer Offer.

Section 4.3. Purchase of Offered Securities. The consummation of any
------------------------------
purchase and sale pursuant to Section 4.1 hereof shall take place on such date,
not later than 30 calendar days after the expiration of the option period
pursuant to Section 4.1 hereof with respect to such option, as the Other
Shareholders or the Company, as the case may be, shall select. Prior to the
consummation of any sale pursuant to Section 4.1 hereof, the Selling Shareholder
shall comply with Section 3.4(b) hereof. Upon the consummation of any such
purchase and sale, the Selling Shareholder shall deliver certificates
representing the Offered Securities sold duly endorsed, free and clear of any
liens, against delivery of the Transfer Offer Price Per Security for each of the
Offered Securities purchased by certified or bank check, wire transfer or, in
the case of non-cash consideration, such other manner reasonably acceptable to
the parties.

Section 4.4. Drag-Along Rights.
-----------------

(a) If Capricorn approves or authorizes a sale or exchange, whether
directly or pursuant to a merger, consolidation or otherwise (the "Company
Sale"), of at least a majority of the then outstanding Common Stock in a bona
fide arm's-length transaction to a third party that is not an Affiliate of
Capricorn or of the Company (an "Independent Third Party"), then Capricorn shall
have the right, subject to all the provisions of this Section 4.4 (the "Drag-
Along Right"), to require each of the other Shareholders to (i) if

11
<PAGE>

such Company Sale is structured as a sale of stock, sell, transfer and deliver
or cause to be sold, transferred and delivered to such Independent Third Party
all shares of Common Stock, and other options, warrants or rights to subscribe
for or purchase Common Stock (the "Other Rights"), owned by them; provided,
--------
however, that if Capricorn agrees to sell less than all (the "Amount") of its
- -------
shares of Common Stock to such Independent Third Party, each of the other
Shareholders shall only be required to sell, transfer and deliver to such
Independent Third Party an amount of shares of Common Stock and Other Interests
equal to the shares of Common Stock, and Other Interests, owned by it multiplied
by a fraction the numerator of which is the Amount and the denominator of which
is the total amount of shares of Common Stock, and Other Interests, owned by
Capricorn or (ii) if such Company Sale is structured as a merger, consolidation
or other transaction requiring the consent or approval of the Company's
shareholders, vote such Shareholder's shares of Voting Stock in favor thereof,
and otherwise consent to and raise no objection to such transaction, and waive
any dissenters' rights, appraisal rights or similar rights that such Shareholder
may have in connection therewith; and, in any such event, except to the extent
otherwise provided in subsection (c) of this Section 4.4, each such other
Shareholder shall agree to and shall be bound by the same terms, provisions and
conditions (including, without limitation, provisions in respect of
indemnification) in respect of the Company Sale as are applicable to Capricorn.
The provisions of Sections 4.1 through 4.3 hereof, inclusive, shall not apply to
any transactions to which this Section 4.4 applies.

(b) If Capricorn desires to exercise Drag-Along Rights, it shall give
written notice to the other Shareholders (the "Drag-Along Notice") of the
Company Sale, setting forth the name and address of the transferee, the date on
which such transaction is proposed to be consummated (which shall be not less
than 30 days after the date such Drag-Along Notice is given), and the proposed
amount and form of consideration and terms and conditions of payment offered by
such transferee, including, without limitation, the material terms of any debt
or equity securities proposed to be included as part of such consideration,
identifying the issuer or issuers thereof. If such consideration includes any
non-cash consideration, such notice shall also state the fair market value of
such non-cash consideration and shall describe in reasonable detail the method
by which such value shall have been determined.

(c) The obligations of the Shareholders in respect of a Company Sale under
this Section 4.4 are subject to the satisfaction of the following conditions:
(i) upon the consummation of the Company Sale, the same form of consideration
and the same portion of the aggregate consideration realized upon such Company
Sale shall be paid or distributed in respect of each share of Common Stock then
issued and outstanding (except as contemplated by the proviso to Section 4.4 (a)
hereof); (ii) if any Shareholder is given

12
<PAGE>

an option as to the form and amount of consideration to be received, each
Shareholder will be given the same option; (iii) each holder of then currently
vested rights to acquire shares of Common Stock will be given a reasonable
opportunity to exercise such rights prior to the consummation of the Company
Sale and thereby to participate in such sale as a holder of such Common Stock;
(iv) the maximum liability of any Shareholder for indemnification in respect of
all matters arising pursuant to or in connection with the Company Sale shall not
exceed the net proceeds received by such Shareholder from such Company Sale; and
(v) no Shareholders shall be required to make general representations or
warranties regarding the financial condition, business, assets or affairs of the
Company and its Subsidiaries.

Section 4.5. Tag-Along Rights.
----------------

(a) Notwithstanding anything in this Agreement to the contrary, except in
the case of (i) transfers by Capricorn to a Permitted Transferee referred to in
Section 3.3(a) hereof, (ii) transactions where Drag-Along Rights are exercised
pursuant to Section 4.4 hereof and (iii) sales pursuant to Section 5 hereof,
Capricorn shall refrain from effecting any transfer of the Common Stock unless,
prior to the consummation thereof, the other Shareholders shall have been
afforded the opportunity to join in such sale on the basis provided for in this
Section 4.5.

(b) Prior to consummation of such proposed transfer, Capricorn shall cause
the person or group that proposes to acquire such shares (the "Proposed
Purchaser") to offer in writing (the "Purchase Offer") to purchase shares of
Common Stock owned by the other Shareholders, such that the number of shares of
such Common Stock so offered to be purchased from the other Shareholders shall
be equal to the product obtained by multiplying the aggregate number of shares
of Common Stock proposed to be purchased by the Proposed Purchaser by such other
Shareholder's Pro Rata Portion. If the Purchase Offer is accepted by any other
Shareholder, then the number of shares of Common Stock to be sold to the
Proposed Purchaser by Capricorn, shall be reduced by the aggregate number of
shares of Common Stock to be purchased by the Proposed Purchaser from such other
Shareholder pursuant thereto. Such purchase shall be made on the same terms and
conditions as the Proposed Purchaser shall have offered to purchase shares of
Common Stock to be sold by Capricorn (net, in the case of any options, warrants
or rights, of any amounts required to be paid by the holder upon exercise
thereof). The other Shareholders shall have 20 days from the date of receipt of
the Purchase Offer during which to accept such Purchase Offer, and the closing
of such purchase shall occur within 30 days after such acceptance or at such
other time as the other Shareholders and the Proposed Purchaser may agree.

13
<PAGE>

Section 50 Registration Rights.
-------------------

Section 5.1. Demand Registration.
-------------------

(a) Subject to the conditions and limitations hereinafter set forth in
this Section 5.1, following the one year anniversary of the effectuation of an
initial public offering by the Company of the Common Stock, Harvard may request
in writing that the Company effect the registration under the Securities Act of
all or part of Harvard's Registrable Securities specifying in the request the
number and type of Registrable Securities to be registered by Harvard and the
intended method of disposition thereof (such notice is hereinafter referred to
as a "Harvard Request"). A registration requested pursuant to this Section
5.1(a) is referred to herein as a "Demand Registration." Upon receipt of such
Harvard Request, the Company will promptly give written notice of such requested
Demand Registration to all other holders of Registrable Securities, which other
holders shall have the right (subject to the limitations set forth in Section
5.1(f) hereof) to include the Registrable Securities held by them in such
registration and thereupon the Company will, as expeditiously as possible, use
its best efforts to effect the registration under the Securities Act of the
following:

(i) the Registrable Securities that the Company has been so
requested to register by Harvard; and

(ii) all other Registrable Securities that the Company has been
requested to register by any other holder thereof by written request given
to the Company within 10 calendar days after the giving of such written
notice by the Company (which request shall specify the intended method of
disposition of such Registrable Securities), all to the extent necessary to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be registered.

(b) Subject to the proviso set forth in Section 5.1(e) hereof, (i) the
Company shall not be obligated to effect more than (A) one Demand Registration
pursuant to this Section 5.1 at the request of Harvard and (ii) the Company
shall not be obligated to file a registration statement under Section 5.1(a)
hereof unless the Company shall have received requests for such registration
with respect to at least 5% of the outstanding shares of Common Stock.

14
<PAGE>

(c) The Company shall not be obligated to file a registration statement
relating to any Harvard Request under Section 5.1(a) hereof within a period of
12 months after the effective date of any other registration statement filed by
the Company with the Commission.

(d) In connection with any offering pursuant to this Section 5.1, the only
shares that may be included in such offering are (i) Registrable Securities and
(ii) shares of authorized but unissued Common Stock that the Company elects to
include in such offering ("Company Securities").

(e) If the Board of Directors of the Company makes a good faith
determination, certified by the Chief Executive Officer of the Company, that (i)
the filing of a registration statement or the compliance by the Company with its
disclosure obligations in connection with a registration statement would require
the disclosure of material information that the Company has a bona fide business
---- ----
purpose for preserving as confidential or (ii) such registration would be likely
to have an adverse affect on any proposal or plan by the Company to engage in
any financing transaction, acquisition of assets (other than in the ordinary
course of business) or any merger, consolidation, tender offer or similar
transaction, the Company may delay the filing of a registration statement and
shall not be required to maintain the effectiveness thereof or amend or
supplement a registration statement for a period expiring upon the earlier to
occur of (A) the date on which such material information is disclosed to the
public or ceases to be material, in the case of clause (i), (B) the date on
which such transaction is completed or abandoned, in the case of clause (ii), or
(C) 120 days after the Company makes such good faith determination, in the case
of either clauses (i) or (ii); provided that in such event, the holders of
--------
Registrable Securities initiating the request for such registration will be
entitled to withdraw such request, and if such request is withdrawn such
registration will not count as the permitted registration under this Section 5.1
in such event or in any other event, if in the case of any other event, such
holder reimburses the Company for all Registration Expenses relating to such
withdrawn registration.

(f) If, in connection with any Underwritten Offering, the managing
underwriter shall advise the Company and any holder of Registrable Securities
that has requested registration that, in its judgment, the number of securities
proposed to be included in such offering should be limited due to market
conditions, the Company will so advise each holder of Registrable Securities
that has requested registration, and shares shall be excluded from such offering
in the following order until such limitation has been met: First, the
-----
Registrable Securities requested to be included by the Company shall be excluded
until all such Registrable Securities shall have been so excluded; and
thereafter,
- ----------

15
<PAGE>

the Registrable Securities requested to be included in such offering pursuant to
Section 5.1(a)(i) hereof by Harvard or pursuant to Section 5.1(a)(ii) hereof by
other Shareholders shall be excluded pro rata, based on the respective number of
Registrable Securities as to which registration has been so requested by such
Shareholders.

(g) A registration requested pursuant to Section 5.1(a) hereof will not be
deemed to have been effected unless it has become effective; provided, that if
--------
after it has become effective, the offering of Registrable Securities pursuant
to such registration is interfered with by any stop order, injunction or other
order or requirement of the Commission or other governmental agency or court,
such registration will be deemed not to have been effected.

(h) If Harvard specifies in the Harvard Request an Underwritten Offering,
Harvard shall have the right, with the approval of the Company, which approval
shall not be unreasonably withheld, to select the managing underwriter;
provided, however, in the event that the Company has elected to include Company
- -------- -------
Securities in such offering, the Company shall have the right, with the approval
of a majority of the holders of Registrable Securities that have requested to be
included in such offering, which approval shall not be unreasonably withheld, to
select the managing underwriter.

(i) The Company will pay all Registration Expenses incurred in connection
with any Demand Registration effected by it pursuant to this Section 5.1.

Section 5.2. Piggyback Registrations.
-----------------------

(a) If at any time the Company proposes to register any of its equity
securities under the Securities Act (other than a registration on Form S-4 or S-
8 or any successor forms thereto) for the account of another Person or, at any
time following the effectuation of an initial public offering by the Company of
the Common Stock, for its own account, on a form and in a manner that would
permit registration of Registrable Securities for sale to the public under the
Securities Act, it will give written notice to all the holders of Registrable
Securities promptly of its intention to do so, describing such securities and
specifying the form and manner and the other relevant facts involved in such
proposed registration, including, without limitation, (x) the intended method of
disposition of the securities offered, including whether or not such
registration will be effected through an underwriter in an Underwritten Offering
or on a "best efforts" basis, and, in any case, the identity of the managing
underwriter, if any, and (y) the price at which the Registrable Securities are
reasonably expected to be sold. Upon the written request of any holder of
Registrable Securities delivered to the Company within 30 calendar days after
the receipt

16
<PAGE>

of any such notice (which request shall specify the Registrable Securities
intended to be disposed of by such holder), the Company will effect the
registration under the Securities Act of all the Registrable Securities that the
Company has been so requested to register; provided, however, that:
-------- -------

(i) if, at any time after giving such written notice of its intention
to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such securities, the
Company may, at its election, give written notice of such determination to
each holder of Registrable Securities who shall have made a request for
registration as hereinabove provided and thereupon the Company shall be
relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay the
Registration Expenses in connection therewith); and

(ii) if such registration involves an Underwritten Offering, all
holders of Registrable Securities requesting to be included in the
Company's registration must sell their Registrable Securities to the
underwriters selected by the Company on the same terms and conditions as
apply to the Company.

(b) The Company shall not be obligated to effect any registration of
Registrable Securities under this Section 5.2 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange offers,
dividend reinvestment plans or stock option or other employee benefit plans.

(c) If a registration pursuant to this Section 5.2 involves an
Underwritten Offering and the managing underwriter advises the issuer that, in
its opinion, the number of securities proposed to be included in such
registration should be limited due to market conditions, the Company will so
advise each holder of Registrable Securities that has requested registration
pursuant to Section 5.2(a) hereof, and shares shall be excluded from such
offering pro rata, based on the respective number of Registrable Securities as
--- ----
to which registration has been so requested by such Shareholders, until all such
Registrable Securities shall have been so excluded; and thereafter, the
securities requested to be registered by the Company shall be excluded.

(d) In connection with any Underwritten Offering with respect to which
holders of Registrable Securities shall have requested registration pursuant to
this Section 5.2, the Company shall have the right to select the managing
underwriter with respect to the offering; provided that such managing
--------
underwriter shall be a nationally recognized investment banking firm.

17
<PAGE>

(e) The Company will pay all Registration Expenses incurred in connection
with each of the registrations of Registrable Securities effected by it pursuant
to this Section 5.2.

Section 5.3. Registration Procedures.
-----------------------

(a) If and whenever the Company is required to use its best efforts to
effect or cause the registration of any Registrable Securities under the
Securities Act as provided in Section 5.1 or 5.2 hereof, the Company will, as
expeditiously as possible:

(i) prepare and, in any event within 90 calendar days after the end
of the period within which requests for registration may be given to the
Company, file with the Commission a registration statement with respect to
such Registrable Securities and use its best efforts to cause such
registration statement to become and remain effective; provided, that the
--------
Company may discontinue any registration of its securities that is being
effected pursuant to Section 5.2 hereof at any time prior to the effective
date of the registration statement relating thereto;

(ii) prepare and file with the Commission such amendments (including
post-effective amendments) and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep
such registration statement effective for such period as may be requested
by the Shareholders not exceeding nine months and to comply with the
provisions of the Securities Act with respect to the disposition of all the
shares of Common Stock covered by such registration statement during such
period in accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such registration statement;

(iii) furnish to each holder of Registrable Securities covered by the
registration statement and to each underwriter, if any, of such Registrable
Securities, such number of copies of a prospectus and preliminary
prospectus for delivery in conformity with the requirements of the
Securities Act, and such other documents, as such Person may reasonably
request, in order to facilitate the public sale or other disposition of the
Registrable Securities;

(iv) use its best efforts to register or qualify such Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each seller shall
reasonably request, and do any and all

18
<PAGE>

other acts and things which may be reasonably necessary or advisable to
enable such seller to consummate the disposition of the Registrable
Securities owned by such seller in such jurisdictions, except that the
Company shall not for any such purpose be required (A) to qualify to do
business as a foreign corporation in any jurisdiction where, but for the
requirements of this Section 5.3(a)(iv), it is not then so qualified, (B)
to subject itself to taxation in any such jurisdiction, or (C) to take any
action which would subject it to general or unlimited service of process in
any such jurisdiction where it is then so subject;

(v) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof to consummate the disposition of such
Registrable Securities;

(vi) immediately notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act
within the appropriate period mentioned in Section 5.3(a)(ii) hereof, if
the Company becomes aware that the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing, and, at the request of any such seller,
deliver a reasonable number of copies of an amended or supplemental
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;

(vii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission and make generally available to its
security holders, in each case as soon as practicable, but not later than
45 calendar days after the close of the period covered thereby (90 calendar
days in case the period covered corresponds to a fiscal year of the
Company), an earnings statement of the Company which will satisfy the
provisions of Section 11(a) of the Securities Act;

(viii) use its best efforts in cooperation with the underwriters to
list such Registrable Securities on each securities exchange on which the
shares of Common Stock are then

19
<PAGE>

listed or, if the shares of Common Stock are not then listed on a
securities exchange, on each securities exchange as the underwriters may
reasonably designate;

(ix) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration
statement;

(x) in the event such registration is effected through an
Underwritten Offering, use its best efforts to obtain a "cold comfort"
letter from the independent public accountants for the Company in customary
form and covering such matters of the type customarily covered by such
letters as the holders of Registrable Securities requesting registration
may reasonably request in order to effect an underwritten public offering
of such Registrable Securities; and

(xi) execute and deliver all instruments and documents (including in
an Underwritten Offering an underwriting agreement in customary form) and
take such other actions and obtain such certificates and opinions as the
holders of Registrable Securities requesting registration may reasonably
request in order to effect an underwritten public offering of such
Registrable Securities.

(b) It shall be a condition precedent to the obligation of the Company to
take any action pursuant to this Section 5 in respect of Registrable Securities
that each holder requesting registration thereof shall furnish to the Company
such information regarding the Registrable Securities held by such holder and
the intended method of disposition thereof as the Company shall reasonably
request and as shall be required in connection with the action taken by the
Company; provided, however, that the failure of any holder of Registrable
-------- -------
Securities to furnish such information shall not affect the obligations of the
Company pursuant to this Section 5 with respect to any holder of Registrable
Securities who furnishes such information to the Company. Notwithstanding any
provision to the contrary contained herein, no holder of Registrable Securities
(other than any such holder who holds of record or beneficially owns more than
10% of the outstanding Voting Stock of the Company or who is a director, nominee
for director or executive officer of the Company) shall be required (i) to
furnish any information to the Company or the underwriters in connection with
such registration, other than in a writing furnished by such holder expressly
for use in such registration statement which shall be limited to matters
concerning such holder's identity, its beneficial ownership of securities of the
Company, the class and number of such securities it intends to include in such
registration and its intended method of distribution, or (ii) to make any
representations or warranties to the Company, the underwriters or any other
Person (whether in the underwriting agreement or otherwise), except with respect
to the information so furnished.

20
<PAGE>

(c) Each holder of Registrable Securities will, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
5.3(a)(vi) hereof, forthwith discontinue disposition of the Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 5.3(a)(vi) hereof.

(d) If a registration pursuant to Section 5.1 or 5.2 hereof involves an
Underwritten Offering, each holder of Registrable Securities agrees, whether or
not such holder's Registrable Securities are included in such registration, not
to effect any sale or distribution, including any sale pursuant to Rule 144
under the Securities Act, of any Registrable Securities, or of any security
convertible into or exchangeable or exercisable for any Registrable Securities
(other than as part of such Underwritten Offering), without the consent of the
managing underwriter, during a period commencing seven calendar days before and
ending 180 calendar days (or such lesser number as the managing underwriter
shall designate) after the effective date of such registration; provided, that
--------
such period shall not extend beyond the period during which the Company is
subject to such a restriction.

(e) If a registration pursuant to Section 5.1 or 5.2 hereof involves an
Underwritten Offering, the Company agrees, if so required by the managing
underwriter, not to effect any sale or distribution of any of its equity or debt
securities, as the case may be, or securities convertible into or exchangeable
or exercisable for any of such equity or debt securities, as the case may be,
during a period commencing seven calendar days before and ending 180 calendar
days after the effective date of such registration, except for such Underwritten
Offering or except in connection with a stock option plan, stock purchase plan,
savings or similar plan, or an acquisition, merger or exchange offer.

(f) If a registration pursuant to Section 5.1 or 5.2 hereof involves an
Underwritten Offering, any holder of Registrable Securities requesting to be
included in such registration may elect, in writing, not less than five days
prior to the effective date of the registration statement filed in connection
with such registration, not to register such securities in connection with such
registration, unless such holder has agreed with the Company or the managing
underwriter to limit its rights under this Section 5.3.

(g) It is understood that in any Underwritten Offering in addition to any
shares of Common Stock (the "initial shares") the underwriters have committed to
purchase, the underwriting agreement may grant the underwriters an option to
purchase up to a number of additional authorized but unissued shares of Common
Stock (the "option shares")

21
<PAGE>

equal to 15% of the initial shares (or such other maximum amount as the NASD may
then permit), solely to cover over-allotments. Shares of Common Stock proposed
to be sold by the Company and the other sellers shall be allocated between
initial shares and option shares as agreed or, in the absence of agreement,
pursuant to Section 5.1(f) or 5.2(c) hereof, as the case may be. The number of
initial shares and option shares to be sold by requesting holders shall be
allocated pro rata among all such holders on the basis of the relative
--- ----
number of shares of Registrable Securities each such holder has requested to be
included in such registration.

Section 5.4. Indemnification.
---------------

(a) In the event of any registration of any securities under the Securities
Act pursuant to Section 5.1 or 5.2 hereof, the Company will, and it hereby
agrees to, indemnify and hold harmless, to the extent permitted by law, each
seller of any Registrable Securities covered by such registration statement, its
directors, officers, employees and agents, each Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls such seller or underwriter within the meaning of the
Securities Act, as follows:

(i) against any and all loss, liability, claim, damage or expense
whatsoever arising out of or based upon an untrue statement or alleged
untrue statement of a material fact contained in any registration statement
(or any amendment or supplement thereto), including all documents
incorporated therein by reference, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading, or arising out of an untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein not misleading;

(ii) against any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any
state securities law in connection with any matter relating to such
registration statement;

(iii) against any and all loss, liability, claim, damage and expense
whatsoever to the extent of the aggregate amount paid in settlement of any
litigation, or investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever based upon any
such untrue statement or

22
<PAGE>

omission, or any such alleged untrue statement or omission, if such
settlement is effected with the written consent of the Company; and

(iv) against any and all expense reasonably incurred by them in
connection with investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under clauses
(i), (ii) or (iii) above;

provided, however, that this indemnity does not apply to any loss, liability,
- -------- -------
claim, damage or expense to the extent arising out of an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any such seller or underwriter specifically stating that it is for use
in the preparation of any registration statement (or any amendment thereto) or
any preliminary prospectus or prospectus (or any amendment or supplement
thereto); and provided, further, that the Company will not be liable (A) in the
-------- -------
case of any Underwritten Offering, to any Person who participates as an
underwriter in the offering or sale of Registrable Securities or any other
Person, if any, who controls such underwriter within the meaning of the
Securities Act, or (B) in the case of any offering other than an Underwritten
Offering, to any seller of Registrable Securities covered by such registration
statement or any other Person, if any, who controls such seller within the
meaning of the Securities Act, under the indemnity agreement in this Section
5.4(a) with respect to any preliminary prospectus or final prospectus or final
prospectus as amended or supplemented, as the case may be, to the extent that
any such loss, claim, damage or liability of such underwriter or controlling
Person (or seller or controlling Person, as the case may be) results from the
fact that such underwriter (or seller, as the case may be) sold Registrable
Securities to a Person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the final prospectus or of the
final prospectus as then amended or supplemented, whichever is most recent, if
the Company has previously furnished copies thereof to such underwriter. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such seller, director, officer, employee, agent,
underwriter or controlling Person, and shall survive the transfer of such
securities by such seller.

(b) The Company may require, as a condition to including any Registrable
Securities in any registration statement filed in accordance with Section 5.1 or
5.2 hereof, that the Company shall have received an undertaking reasonably
satisfactory to it from the prospective seller of such Registrable Securities or
any underwriter, to indemnify and

23
<PAGE>

hold harmless (in the same manner and to the same extent as set forth in Section
5.4(a) hereof) the Company and its directors and officers and each other Person,
if any, who controls the Company within the meaning of the Securities Act, with
respect to any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary, final or summary prospectus
contained therein, or any such amendment or supplement, if such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company by or on behalf
of such seller or underwriter specifically stating that it is for use in the
preparation of such registration statement, preliminary, final or summary
prospectus or amendment or supplement; provided, however, that the maximum
-------- -------
liability of any seller of Registrable Securities for such indemnification shall
not exceed the net proceeds received by such seller from the sale of such
Registrable Securities. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or any such
director, officer or controlling Person and shall survive the transfer of such
securities by such seller.

(c) Promptly after receipt by an indemnified party hereunder of written
notice of the commencement of any action or proceeding involving a claim
referred to in this Section 5.4, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to such indemnifying party of the commencement of such action; provided,
--------
however, that the failure of any indemnified party to give notice as provided
- -------
herein shall not relieve the indemnifying party of its obligations under this
Section 5.4, except to the extent (not including any such notice of an
underwriter) that the indemnifying party is actually prejudiced by such failure
to give notice. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist in respect
of such claim (in which case the indemnifying party shall not be liable for the
fees and expenses of more than one counsel for the sellers of Registrable
Securities or for more than one counsel for the underwriters in connection with
any one action or separate but similar or related actions), the indemnifying
party will be entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying party similarly notified, to the extent that
it may wish, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof.

24
<PAGE>

(d) The Company and each seller of Registrable Securities shall provide
for the foregoing indemnity (with appropriate modifications) in any underwriting
agreement with respect to any required registration or other qualification of
securities under any federal or state law or regulation of any governmental
authority.

Section 5.5. Contribution. In order to provide for just and equitable
------------
contribution in circumstances under which the indemnity contemplated by Section
5.4 hereof is for any reason not available, the parties required to indemnify by
the terms thereof shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by the Company, any seller of Registrable Securities and one or more of
the underwriters, except to the extent that contribution is not permitted under
Section 11(f) of the Securities Act. In determining the amounts that the
respective parties shall contribute, there shall be considered the relative
benefits received by each party from the offering of the Registrable Securities
(taking into account the portion of the proceeds of the offering realized by
each), the parties' relative knowledge and access to information concerning the
matter with respect to which the claim was asserted, the opportunity to correct
and prevent any statement or omission and any other equitable considerations
appropriate under the circumstances. The Company and each Person selling
securities agree with each other that no seller of Registrable Securities shall
be required to contribute any amount in excess of the amount such seller would
have been required to pay to an indemnified party if the indemnity under Section
5.4 hereof were available. The Company and each such seller agree with each
other and the underwriters of the Registrable Securities, if requested by such
underwriters, that it would not be equitable if the amount of such contribution
were determined by pro rata or per capita allocation (even if the underwriters
--- ----
were treated as one entity for such purpose) or for the underwriters' portion of
such contribution to exceed the percentage that the underwriting discount bears
to the initial public offering price of the Registrable Securities. For
purposes of this Section 5.5, each Person, if any, who controls an underwriter
within the meaning of the Securities Act shall have the same rights to
contribution as such underwriter, and each director and each officer of the
Company who signed the registration statement, and each Person, if any, who
controls the Company or a seller of Registrable Securities, shall have the same
rights to contribution as the Company or a seller of Registrable Securities, as
the case may be.

Section 5.6. Rule 144. If the Company shall have filed a registration
--------
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company covenants that it will file the reports required to be filed by it under
the Securities Act and the Exchange Act and the rules and regulations adopted by
the Commission thereunder (or, if the

25
<PAGE>

Company is not required to file such reports, it will, upon the request of any
holder of Registrable Securities, make publicly available other information),
and it will take such further action as any holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
holder to sell shares of Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (i) Rule 144
under the Securities Act, as such Rule may be amended from time to time or (ii)
any similar rule or regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities, the Company will deliver to
such holder a written statement as to whether the Company has complied with such
requirements.

Section 6. Call Right of the Company; Put Right of Management Investors
------------------------------------------------------------
and the Director Investors.
- --------------------------

Section 6.1. Call Right; Purchase Price. If a Management Investor's
--------------------------
employment with the Company or any of its Subsidiaries is terminated, or a
Director Investor' status as a director of the Company is terminated, for any
reason prior to equity securities of the Company having been registered under
the Securities Act, the Company shall have the option, for a period commencing
46 days and ending 90 days after the Date of Termination, to purchase all or any
portion of the shares of Common Stock held by such Management Investor, Director
Investor or his Permitted Transferees. The Company may exercise such option by
giving notice thereof (the "Call Notice") to such Management Investor or
Director Investor prior to the expiration of such period. If such termination
is other than by the Company for Cause, the purchase price applicable to such
shares of Common Stock shall be the Fair Market Value of such shares as of the
Date of Termination and if such termination is by the Company for Cause, the
Company shall have the right to require such Management Investor to forfeit to
the Company on the Termination Date all of the shares of Common Stock held by
such Management Investor or his Permitted Transferees.

Section 6.2. Call Notices. The Call Notice shall specify the number of
------------
shares of Common Stock owned by the Management Investor or Director Investor as
to which the Company is exercising its call right pursuant to Section 6.1 and
shall contain an irrevocable offer to purchase such shares at a price equal to
the price required to be paid by the Company pursuant to Section 6.1.

Section 6.3. Put Right; Sale Price. If a Management Investor's employment
---------------------
with the Company or any of its Subsidiaries is terminated other than for Cause,
or a Director Investor's status a director of the Company is terminated, prior
to equity securities of the

26
<PAGE>

Company having been registered under the Securities Act, then such Management
Investor or Director Investor shall have the right for a period of 45 days after
the Date of Termination to sell all or any portion of his shares of Common Stock
to the Company and the Company shall be obligated to purchase such shares. The
Management Investor or Director Investor may exercise such right by giving
notice thereof (the "Put Notice") to the Company prior to the expiration of such
period. The purchase price applicable to such shares of Common Stock shall be:
(i) if the Management Investor's employment with the Company is terminated
involuntarily other than for Cause, the greater of (A) the amount paid (or
deemed to have been paid) by such Management Investor for such shares and (B)
the Fair Market Value of such shares as of the Date of Termination; (ii) if the
Management Investor's employment with the Company is terminated voluntarily, the
lesser of (A) the amount paid (or deemed to have been paid) by such Management
Investor for such shares and (B) the Fair Market Value of such shares as of the
Date of Termination; (iii) if the Director Investor's status as a director of
the Company is terminated involuntarily, the greater of (A) the amount paid (or
deemed to have been paid) by such Director Investor for such shares and (B) the
Fair Market Value of such shares as of the Date of Termination; or (ii) if the
Director Investor's status as a director of the Company is terminated
voluntarily, the lesser of (A) the amount paid (or deemed to have been paid) by
such Director Investor for such shares and (B) the Fair Market Value of such
shares as of the Date of Termination.

Section 6.4. Put Notices. The Put Notice shall specify the number of
-----------
shares owned by the Management Investor or Director Investor as to which he is
exercising his put right pursuant to Section 6.3 and shall contain an
irrevocable offer to purchase such shares at a price equal to the price required
to be paid by the Company pursuant to Section 6.3.

Section 6.5. Method of Payment. Upon any exercise by the Company of its
-----------------
call right or the Management Investor or Director Investor of his put right
under Section 6, the Company shall pay the applicable purchase price by a
certified check or checks or in cash; provided, however, that, at the election
-------- -------
of the Company, the purchase price may be paid by a certified check or checks
for 25% of the appropriate amount, plus a note of the Company in the principal
amount of 75% of the purchase price, payable in three equal annual installments
commencing on the first anniversary of the issuance thereof and bearing interest
payable annually at the rate then paid by the Company on its bank debt or other
senior debt as determined by the Board of Directors. If the Company is
prohibited by any agreement from making a payment contemplated by this Section 6
or if any Subsidiary of the Company is prohibited from making a payment to the
Company to

27
<PAGE>

enable the Company to make such payment, such payment by the Company shall be
deferred until such time as such payments are permitted.

Section 6.6. Closing. The closing by the Company of any exercise of its
-------
call right under Section 6.1 or of any exercise by a Management Investor or
Director Investor of his put right under Section 6.3 shall take place at the
offices of the Company, or such other place as may be mutually agreed, not less
than 15 nor more than 30 days after the date such right is exercised, as
specified by the Company in its Call Notice or by the Management Investor or the
Director Investor in his Put Notice. At such closing, such Management Investor
or the Director Investor shall deliver certificates for the shares of Common
Stock to be sold to the Company duly endorsed, or accompanied by written
instruments to transfer in form satisfactory to the Company duly executed, by
such Management Investor or Director Investor, free and clear of any liens,
against payment by the Company of the applicable purchase price therefor.
Shares of Common Stock forfeited pursuant to Section 6.1 hereof shall be
transferred to, and reacquired by, the Company without payment of any
consideration by the Company, and neither the Management Investor or the
Director Investor nor any of his successors, heirs, assigns or personal
representatives shall thereafter have any further rights or interests in such
shares or certificates. If certificates containing restrictive legends shall
have theretofore been delivered to the Management Investor or the Director
Investor, such certificates shall be returned to the Company, complete with any
necessary signatures or instruments of transfer.

Section 7. Miscellaneous.
-------------

Section 7.1. Inspection Rights. Each Shareholder shall have the right,
-----------------
upon reasonable prior notice to the Company, to visit and inspect the properties
of the Company and its Subsidiaries and to examine and copy (at its own expense)
their books of record and accounts, and to discuss their affairs, finances, and
accounts with their officers and their current and prior independent public
accountants, all at such times (during normal business hours) as such
Shareholder may reasonably request. The foregoing rights are in addition to,
and are not intended to limit, any rights that the Shareholders may have under
the law of the State of Delaware, including Sections 219 and 220 of the Delaware
General Corporation Law.

Section 7.2. Confidentiality. All materials and information obtained by
---------------
any Shareholder pursuant to Section 7.1 hereof shall be kept confidential and
shall not be disclosed to any third party except (a) as has become generally
available to the public (other than through disclosure by such Shareholder in
contravention of this Agreement), (b) to such Shareholder's directors, officers,
trustees, partners, employees, agents, and professional consultants on a need to
know basis, (c) to any other holder of shares of

28
<PAGE>

Common Stock, (d) to any Person to which such Shareholder offers to sell or
transfer any shares of Common Stock, provided that the prospective transferee
--------
shall agree to be bound by the provisions of this Section 7.2, (e) in any
report, statement, testimony or other submission to any governmental authority
having or claiming to have jurisdiction over such Shareholder, or (f) in order
to comply with any law, rule, regulation, or order applicable to such
Shareholder, or in response to any summons, subpoena or other legal process or
formal or informal investigative demand issued to such Shareholder in the course
of any litigation, investigation or administrative proceeding.

Section 7.3. Successors and Assigns. Except as otherwise provided herein,
----------------------
all the terms and provisions of this Agreement shall be binding upon, shall
inure to the benefit of and shall be enforceable by the respective successors
and assigns of the parties hereto. No Shareholder may assign any of its rights
hereunder to any Person other than a transferee that has complied in all
respects with the requirements of this Agreement (including, without limitation,
Section 3.4 hereof). The Company may not assign any of its rights hereunder to
any other Person. If any transferee of any Shareholder shall acquire any shares
of Common Stock in any manner, whether by operation of law or otherwise, such
shares shall be held subject to all of the terms of this Agreement, and by
taking and holding such shares such Person shall be entitled to receive the
benefits of and be conclusively deemed to have agreed to be bound by and to
comply with all of the terms and provisions of this Agreement.

Section 7.4. Amendment and Modification: Waiver of Compliances; Conflicts.
------------------------------------------------------------

(a) This Agreement may be amended only by a written instrument duly
executed by all of the Shareholders. In the event of the amendment or
modification of this Agreement in accordance with its terms, the Shareholders
shall cause the Board of Directors to meet within 30 calendar days following
such amendment or modification or as soon thereafter as is practicable for the
purpose of adopting any amendment to the Certificate of Incorporation and By-
Laws that may be required as a result of such amendment or modification to this
Agreement, and, if required, proposing such amendments to the Shareholders
entitled to vote thereon, and the Shareholders agree to vote in favor of such
amendments.

(b) Except as otherwise provided in this Agreement, any failure of any of
the parties to comply with any obligation, covenant, agreement or condition
herein may be waived by the party entitled to the benefits thereof only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance

29
<PAGE>

with such obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.

(c) In the event of any conflict between the provisions of this Agreement
and the provisions of any other agreement, the provisions of this Agreement
shall govern and prevail.

Section 7.5. Notices. All notices and other communications provided for
-------
hereunder shall be in writing and delivered by hand or sent by first class mail
or sent by telecopy (with such telecopy to be confirmed promptly in writing sent
by first class mail), sent as follows:

(i) If to Capricorn, addressed to:

Capricorn Investors II, L.P.
30 East Elm Street
Greenwich, Connecticut 06830
Attention: Herbert S. Winokur, Jr.
Telecopy: (203) 861-6671

with a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Randall H. Doud
Telecopy: (212) 735-3636

(ii) If to a Management Investor, a Director Investor or an Other
Investor,addressed to such shareholder at the address set forth in the
stock records of the Company;

(iii) If to the Company, addressed to:

Mrs. Fields' Holding Company, Inc.
c/o Capricorn Investors II, L.P.
30 East Elm Street
Greenwich, Connecticut 06830
Attention: Herbert S. Winokur, Jr.

30
<PAGE>

Telecopy: (203) 861-6671

with a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Randall H. Doud
Telecopy: (212) 735-3636

(iv) If to Harvard, addressed to:

Harvard Private Capital Group, Inc.
600 Atlantic Avenue
26th Floor
Boston, Massachusetts 02210-2203
Attention: John Sallay
Telecopy: (617) 523-1063

with a copy to:

Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
Attention: Larry Rowe
Telecopy: (617) 951-7050

or to such other address or addresses or telecopy number or numbers as any of
the parties hereto may most recently have designated in writing to the other
parties hereto by such notice. All such communications shall be deemed to have
been given or made when so delivered by hand or sent by telecopy, or three
business days after being so mailed.

Section 7.6. Entire Agreement: Governing Law.
-------------------------------

(a) This Agreement and the other writings referred to herein or delivered
pursuant hereto which form a part hereof contain the entire agreement among the
parties hereto with respect to the subject transactions contemplated hereby and
supersede all prior oral and written agreements and memoranda and undertakings
among the parties hereto with

31
<PAGE>

regard to this subject matter. The Company represents to the Shareholders that
the rights granted to the holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted or obligations accepted under any
other agreement (including the Certificate of Incorporation) to which the
Company is a party. Neither the Company nor any Subsidiary of the Company will
hereafter enter into any agreement with respect to its equity or debt securities
which is inconsistent with the rights granted to any Shareholder under this
Agreement without obtaining the prior written consent of such Shareholder.

(B) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE (WITHOUT GIVING EFFECT TO THE CHOICE OF LAW
PRINCIPLES THEREOF).

Section 7.7. Injunctive Relief. The Shareholders acknowledge and agree
-----------------
that a violation of any of the terms of this Agreement will cause the
Shareholders irreparable injury for which an adequate remedy at law is not
available. Therefore, the Shareholders agree that each Shareholder shall be
entitled to, an injunction, restraining order or other equitable relief from any
court of competent jurisdiction, restraining any Shareholder from committing any
violations of the provisions of this Agreement.

Section 7.8. Availability of Agreement. For so long as this Agreement
-------------------------
shall be in effect, this Agreement shall be made available for inspection by any
Shareholder upon request at the principal executive offices of the Company.

Section 7.9. Headings. The section and paragraph headings contained in
--------
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.

Section 7.10. Recapitalizations, Exchanges, Etc. Affecting the Shares of
----------------------------------------------------------
Common Stock; New Issuances. The provisions of this Agreement shall apply, to
- ---------------------------
the full extent set forth herein with respect to the shares of Common Stock and
to any and all equity or debt securities of the Company or any successor or
assign of the Company (whether by merger, consolidation, sale of assets, or
otherwise) which may be issued in respect of, in exchange for, or in
substitution of, such equity or debt securities and shall be appropriately
adjusted for any stock dividends, splits, reverse splits, combinations,
reclassifications, recapitalizations, reorganizations and the like occurring
after the date hereof.

32
<PAGE>

Section 7.11. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

Section 7.12. Arbitration.
-----------

(a) Any disagreement, dispute, controversy or claim arising out of
or relating to this Agreement or the transactions contemplated hereby,
including, without limitation, the interpretation hereof and any breach,
termination or invalidity hereof, shall be settled exclusively and finally (i)
through good faith negotiation of the parties for a period not in excess of 30
days and (ii) in the event such negotiations do not yield a settlement within
such 30-day period, by arbitration (irrespective of the magnitude thereof, the
amount in controversy or whether such matter would otherwise be considered
justiciable or ripe by a court or arbitral tribunal).

(b) The arbitration shall be conducted in accordance with the
commercial arbitration rules of the American Arbitration Association (the
AArbitration Rules@), except as those rules conflict with the provisions of this
Section 7.12, in which event the provisions of this Section 7.12 shall control.

(c) The arbitral tribunal shall consist of three arbitrators chosen
in accordance with the Arbitration Rules. The arbitration shall be conducted in
New York City. Any submission of a matter for arbitration shall include joint
written instructions of the parties requiring the arbitral tribunal to render a
decision resolving the matters submitted within 60 days following the submission
thereof.

(d) Any decision or award of the arbitral tribunal shall be final and
binding upon the parties to the arbitration proceeding. The parties agree that
the arbitral award may be enforced against the parties to the arbitration
proceeding or their assets wherever they may be found and that a judgment upon
the arbitral award may be entered in any court having jurisdiction thereof.

(e) All out-of-pocket costs and expenses incurred by any party in
connection with the resolution of any disagreement, dispute, controversy or
claim pursuant to this Section 7.12, including, but not limited to, reasonable
attorney's fees and disbursements, shall be borne by the party incurring the
same; provided, however, that the arbitral tribunal shall have the discretion to
-------- -------
declare any party as the Aprevailing party@ with respect to one or more of the
issues that were the subject of the arbitration and to

33
<PAGE>

require the other parties to the arbitration to reimburse such Aprevailing
party@ for some or all of its costs and expenses incurred in connection with
such proceeding.

(f) The costs of the arbitral tribunal shall be divided evenly
between the parties, unless there is a Aprevailing party,@ in which case the
arbitral tribunal may allocate more or all of such costs to the party thereto
that is not the Aprevailing party@.

(g) This Section 7.12 shall not prohibit or limit in any way any
party from seeking or obtaining preliminary or interim injunctive or other
equitable relief from a court for a breach or alleged breach of any of the
covenants and agreements of another party contained in this Agreement.

34
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.

MRS. FIELDS' HOLDING COMPANY, INC.

By:__________________________
Name:
Title:

HARVARD PRIVATE CAPITAL HOLDINGS, INC.

By:___________________________
Name:
Title:

CAPRICORN INVESTORS II, L.P.
By Capricorn Holdings L.L.C.,
General Partner

By:___________________________
Name:
Title:

35
<PAGE>

MANAGEMENT INVESTORS:

________________________________
Larry A. Hodges

_________________________________
L. Timothy Pierce

______________________________
Michael R. Ward

______________________________
Garry Remington

______________________________
Pat W. Knotts

36
<PAGE>

DIRECTOR INVESTORS:

________________________________
Peter Mullin

________________________________
Richard Ferry

________________________________
Walker Lewis

________________________________
Gilbert Osnos

OTHER INVESTORS:

________________________________
Karen Mills

37
<PAGE>

TABLE OF CONTENTS
(Not Part of Agreement)

<TABLE>
<CAPTION>
Section Heading Page
- ------- ------- ----
<S> <C> <C>
1. Certain Definitions........................................... 2

2. Management.................................................... 7
2.1. Board of Directors; Shareholders...................... 7
2.2. Authority of Board of Directors....................... 8
2.3. No Conflict with Agreement............................ 8

3. Transfers of Shares of Common Stock .......................... 8
3.1. Restrictions on Transfer.............................. 8
3.2. Exceptions to Restrictions............................ 9
3.3. Endorsement of Certificates........................... 10
3.4. Improper Transfer..................................... 11

4. Rights of First Refusal; Drag-Along Rights; Tag-Along Rights.. 11
4.1. Transfers by Shareholders............................. 11
4.2. Transfer of Offered Securities to Third Parties....... 13
4.3. Purchase of Offered Securities........................ 13
4.4. Drag-Along Rights..................................... 14
4.5. Tag-Along Rights...................................... 16

5. Registration Rights........................................... 17
5.1. Demand Registration................................... 17
5.2. Piggyback Registrations............................... 20
5.3. Registration Procedures............................... 22
5.4. Indemnification....................................... 27
5.5. Contribution.......................................... 30
5.6. Rule 144.............................................. 31

6. Call Right of the Company; Put Right of Management Investors.. 32
6.1. Call Right; Purchase Price............................ 32
6.2. Call Notices.......................................... 32
6.3. Put Right; Sale Price................................. 32
</TABLE>

1
<PAGE>

<TABLE>
<S> <C>
6.4. Put Notices........................................... 33
6.5. Method of Payment..................................... 33
6.6. Closing............................................... 33

7. Miscellaneous.................................................. 34
7.1. Inspection Rights..................................... 34
7.2. Confidentiality....................................... 34
7.3. Successors and Assigns................................ 35
7.4. Amendment and Modification: Waiver of
Compliances; Conflicts............................... 35
7.5. Notices............................................... 36
7.6. Entire Agreement: Governing Law....................... 37
7.7. Injunctive Relief..................................... 38
7.8. Availability of Agreement............................. 38
7.9. Headings.............................................. 38
7.10. Recapitalizations, Exchanges, Etc.
Affecting the Shares of Common Stock; New Issuances.. 38
7.11. Counterparts.......................................... 38
7.12. Arbitration........................................... 39
</TABLE>

<PAGE>

SETTLEMENT AGREEMENT AND RELEASE

SETTLEMENT AGREEMENT AND RELEASE, dated as of June , 1998 (this
"Agreement"), by and among Mrs. Fields' Original Cookies, Inc., a Delaware
corporation ("Mrs. Fields"), Capricorn Investors II, L.P., a Delaware limited
partnership ("Capricorn"), Great American Cookie Company, Inc., a Delaware
corporation ("GACC"), Cookies USA, Inc., a Delaware corporation ("Cookies USA"),
The Jordan Company ("Jordan"), ____________ (the "Franchisee"), and
____________, the controlling investor in the Franchisee (the "Franchisee
Principal").

WHEREAS, Mrs. Fields proposes to enter into an agreement pursuant to which
it would acquire Cookies USA, the parent entity of GACC (the "Proposed GACC
Acquisition");

WHEREAS, Mrs. Fields, its indirect controlling shareholder Capricorn, GACC
and Jordan are defendants in an action brought by certain franchisees of GACC in
the Superior Court of New Jersey, Law Division, Mercer County, under the caption

Robert and Sheila Goldberg, et al, vs. Great American Cookie Company, et al (the
- ---------------------------------------------------------------------------
"Litigation"), in which the plaintiffs in the Litigation have made certain
claims, including claims relating to the Proposed GACC Acquisition;

WHEREAS, Mrs. Fields, without conceding that there is a legal basis for any
such claims, is prepared to address such claims by making certain undertakings
provided for in Sections 2 and 3 of this Agreement (the "Undertakings") if the
Proposed GACC Acquisition is consummated and as an inducement to franchisees of
GACC and the investors in such franchisees (the "GACC Franchisees") to waive and
release such claims and any other claims that they may have relating to their
status as franchisees of GACC on terms and conditions satisfactory to Mrs.
Fields (the "Necessary Releases");

WHEREAS, Mrs. Fields is only willing to complete the Proposed GACC
Acquisition if the Litigation is dismissed with prejudice and the Necessary
Releases are received from all of the GACC Franchisees who are selling stock or
franchises pursuant to or contemporaneously with the Proposed GACC Acquisition
and at least 80% of the other GACC Franchisees;

WHEREAS, Mrs. Fields is willing to provide the Undertakings upon the terms
and conditions of this Agreement but only to GACC Franchisees that provide the
Necessary Releases; and

WHEREAS, the Franchisee and the Franchisee Principal are willing to provide
the Necessary Releases upon the terms and conditions of this Agreement.

NOW, THEREFORE,

The parties to this Agreement hereby agree as follows:

1. The Release. (a) In consideration of the Undertakings and other
good and valuable consideration and to settle a dispute among the parties, the
receipt and sufficiency of which is hereby acknowledged, the Franchisee and the
Franchisee Principal, on behalf of themselves, any predecessor or other past,
current or future direct or indirect investors in or directors, officers and
employees of the Franchisee and each such person's successors and assigns
(collectively with the Franchisee and
<PAGE>

the Franchisee Principal, the "Releasor Group") hereby release any and all
rights, causes and actions, whether or not known or anticipated, that any member
of the Releasor Group may have, directly or indirectly, against Mrs. Fields,
Capricorn, Cookies USA, GACC or Jordan and any of their respective past, current
or future direct or indirect investors, lenders, affiliates, directors, officers
or employees or any such person's successors and assigns (collectively, the
"Releasees") arising out of or otherwise relating to, directly or indirectly,
the Releasor Group's franchising, lease and supplier relationships with GACC or
the Proposed GACC Acquisition (the "Released Matters"), except for any rights,
causes of action or claims that (i) arise out of the express terms of this
Agreement, (ii) arise out of any failure by GACC to remit to any lessor any
sublease payments received from the Franchisee that were required under the
related lease to be remitted to such lessor, (iii) arise out of product
liability for ingredients or products supplied by GACC to the Franchisee, or
(iv) otherwise arise following the completion of the Proposed GACC Acquisition,
or (y) arise out of inadvertent errors of fact in the ordinary course of
business. The Released Matters include but are not limited to the subject matter
of each and every right, cause of action or claim (A) relating to the offering
and purchase of the GACC franchises owned by the Franchisee, (B) relating to the
proximity of any Mrs. Fields owned or franchised stores to GACC owned or
franchised stores or (C) otherwise asserted against any of the Releasees by the
plaintiffs in the Litigation or the Association of Great American Cookie
Franchisees (the "GACC Franchisee Association") in a writing addressed to Mrs.
Fields, Cookies USA, GACC, Capricorn or Jordan.

(1) The members of the Releasor Group understand and agree that this
is a full and final release applicable to all unknown and unanticipated claims,
as well as those known or disclosed, and in consideration of and as an
inducement for the Undertakings, the members of the Releasor Group hereby
expressly waive all rights or benefits which they now have or may in the future
have against any of the Releasees under the provisions of Section 1542 of the
California Civil Code, which section provides that "a general release does not
extend to claims which the creditor does not know or suspect to exist in his
favor at the time of executing the release, which if known to him must have
materially affected his settlement with the debtor", or of provisions of similar
import under the laws of other jurisdictions.

(2) The Franchisee and the Franchisee Principal hereby represent and
warrant that (i) this Agreement has been approved by all necessary action
required to make it a valid and binding obligation of the Franchisee, the
Franchisee Principal and all the other members of the Releasor Group, as the
case may be, and

2
<PAGE>

(ii) this Agreement is the valid, binding and legal obligation of the
Franchisee, the Franchisee Principal and all other members of the Releasor
Group.

(3) Mrs. Fields, Capricorn, GACC, Jordan and their respective
successors and assigns, in consideration of the benefits afforded to them in
consequence of the execution of this Agreement, do hereby release and waive,
irrevocably, any and all rights, causes of actions, whether or not known or
anticipated, that they or any of them has or may have, directly or indirectly,
against the Franchisee, or the Franchisee Principal, or against the GACC
Franchisee Association and its officers, agents and directors (said Association
and its officers, agents and directors being intended beneficiaries of this
provision), arising out of or otherwise relating to, directly or indirectly the
assertion of claims in the Litigation or the Proposed GACC Acquisition; but
excluding claims arising out of or in relation to the execution and performance
of this Agreement.

2. Tag-Along Rights. (a) If following the consummation of the Proposed
GACC Acquisition (i) Mrs. Fields, its parent company Mrs. Fields' Holding
Company, Inc. or any parent company thereof of Mrs. Fields ("MFH") or GACC
proposes to sell, in a single transaction or a series of related transactions,
to an unaffiliated party substantially all of its rights as owner of the GACC
brand or as the franchisor of GACC (the "Franchise Sale"), (ii) Mrs. Fields or
MFH proposes to make a public offering of its common stock (the first such
public offering, the "Qualifying Public Offering") or (iii) Mrs. Fields or MFH
proposes to enter into a transaction that is not a Franchise Sale or a
Qualifying Public Offering but would effect a transfer of control of Mrs. Fields
or of MFH to an unaffiliated party (a "Change of Control" and, together with a
Franchise Sale or a Qualified Public Offering, the "Transaction"), Mrs. Fields
shall notify the Franchisee of the proposed Franchise Sale, the proposed
Qualifying Public Offering or the proposed Change of Control if at the time of
the notice the Franchisee is the franchisee of one or more stores franchising
the GACC, Mrs. Fields or Pretzel Time brands or any other brand or concept then
franchised by MFH or a subsidiary thereof (the "Stores"). In the case of the
proposed Franchise Sale or Change of Control, Mrs. Fields shall give 60 days'
written notice prior to the consummation of the proposed Franchise Sale, and, in
the case of the proposed Qualifying Public Offering, Mrs. Fields shall give not
less than 120 days' notice before the filing of the initial registration
statement prepared in connection with the proposed Qualifying Public Offering.

(1) If upon its receipt of a notice pursuant to Section 2(a) the
Franchisee is not a Qualifying Franchisee (as defined in Section 2(c)), it shall
have

3
<PAGE>

the right, subject to the completion of such proposed Franchise Sale, Qualifying
Public Offering or Change of Control and to the Franchisee then being in
compliance with its obligations under its franchising arrangements with GACC,
Mrs. Fields, Pretzel Time and any other subsidiary of MFH, upon notice to Mrs.
Fields within thirty (30) days of the right of sending of the notice by Mrs.
Fields, to receive, at Mrs. Fields' election, either the greater of $3,500 in
cash or $2,000 per store for each such Store (the "Payment Amount") or, if the
proposed Qualifying Public Offering is completed, shares of common stock of Mrs.
Fields or MFH (the "Shares") issued therein with a value not less than the
Payment Amount based on the initial offering price of such stock in such
Qualifying Public Offering, subject to such reasonable transfer restrictions as
Mrs. Fields determines to be advisable to ensure successful completion of such
Qualifying Public Offering. For purposes of Sections 2 and 3, the Franchisee
shall be deemed to be in compliance with its obligations under its various
franchising agreements if there are no uncured notices of material defaults by
the Franchisee during the period from the date by which a Qualifying Franchisee
must give a notice pursuant to Section 2(c) to exercise its rights through the
Payment Date (as defined in Section 2(e)). The delivery of the Franchisees
notice to Mrs. Fields pursuant to this Section 2(b) shall obligate Mrs. Fields,
within thirty (30) days after the completion of the Transaction, either (i) to
pay the Payment Amount to the Franchisee, or (ii) to deliver the Shares to the
Franchisee.

(2) If upon its receipt of a notice of election pursuant to this
Section 2(c) the Franchisee is the franchisee of five or more Qualifying Stores
or within 30 days after the date of the sending of such notice enters into a
binding agreement to acquire additional stores bringing its number to five or
more Qualifying Stores (as defined below) (a "Qualifying Franchisee"), and
wishes to exercise its rights under this Section 2 in connection with such
proposed Franchise Sale, Qualified Public Offering or Change of Control, it must
do so by providing written notice to Mrs. Fields within 30 days of the date of
the sending by Mrs. Fields of such notice. If the Franchisee is a Qualifying
Franchisee and fails to so notify Mrs. Fields within such 30 day period, it will
be deemed to have waived its rights hereunder. If the Franchisee is a Qualifying
Franchisee, provides such notice within such period and is in material
compliance with its obligations under its franchising arrangements with GACC,
Mrs. Fields, Pretzel Time and any other subsidiary of MFH, or for any other
concept franchised by GACC, Mrs. Fields, or MFH or any of their affiliates, the
Franchisee shall have the right to sell, at the Purchase Price (as defined
below), subject to the terms and conditions hereof, all, but not less than all,
of the Franchisee's Qualifying Stores to Mrs. Fields or a subsidiary thereof.
For purposes of this Section 2, a "Qualifying Store" is deemed to be a Store
which has had cash flow

4
<PAGE>

in the aggregate for the twelve fiscal months (or such fewer number of fiscal
months as it has been operating) most recently completed for which financial
information is available as of the date of the sending of the notice pursuant to
Section 2(a) that is both positive in the aggregate for such period and sales
not more than twenty (20%) percent below the twelve (12) fiscal month period
immediately preceding such period. The delivery of the Franchisee' notice to
Mrs. Fields pursuant to the provisions of this Section 2(c) shall create an
agreement between the Franchisee and Mrs. Fields whereby Mrs. Fields shall
purchase from the Franchisee, and the Franchisee shall sell to Mrs. Fields, the
Franchisee's Qualifying Stores for the Purchase Price and upon the other terms
and conditions contained in this Section 2.

(3) The aggregate purchase price (the "Purchase Price") for all of
the Qualifying Stores of a Qualifying Franchisee shall be (i) in the case of
Stores which have had at least twelve fiscal months of completed operations, 5 x
EBITDA (as defined below) for all such Stores for the twelve fiscal months most
recently completed for which financial information is available as of the date
of the sending of the notice pursuant to Section 2(a) attributable to such
Stores as of the end of the latest such fiscal month and (ii) in the case of
Stores which have had less than twelve fiscal months of completed operations,
the greater of the amount determined pursuant to clause (i) and the documented
development costs of the Franchisee with respect to such Store. "EBITDA" shall
mean, for any period of twelve fiscal months (or such fewer number of fiscal
months as it has been operating), the aggregate earnings before depreciation,
amortization, interest, income taxes and other income (expense) during such
period attributable to the Stores as to which the determination is being made,
as adjusted to reflect any increased annual lease payments necessitated by
reason of the sale of the Qualifying Stores. Mrs. Fields and the Franchisee
agree that the Purchase Price will be allocated to the assets acquired at their
book value with any residual amount allocated to goodwill.

(4) The Purchase Price shall be paid by wire transfer to an account
designated by written notice from the Franchisee at least three business days
before payment is due on the third business day after Mrs. Fields or MFH
receives the proceeds from the Franchise Sale or the Qualifying Public Offering,
as the case may be (the "Payment Date").

(5) Mrs. Fields' obligation to pay the Purchase Price shall be
subject to (i) completion of the Franchise Sale, the Qualifying Public Offering
or the Change of Control and the receipt by Mrs. Fields or MFH of the proceeds
therefrom, (ii) each Store being purchased having customary equipment, inventory
and

5
<PAGE>

smallwares as of the closing, (iii) any required consent to the assignment of
the leases relating to the Stores having been obtained and delivered to Mrs.
Fields in form and substance reasonably satisfactory to Mrs. Fields not later
than 30 days following the giving of the notice of exercise by the Franchisee
pursuant to Section 2(c), and (iv) the Qualifying Franchisee executing and
delivering to Mrs. Fields an asset purchase agreement contemplating a sale of
all the assets and, to the extent indicated below, the ordinary course
liabilities attributable to the Stores to be transferred and containing
representations and warranties, covenants, conditions and indemnification
arrangements as are customary to the purchases of stores from franchisees by
Mrs. Fields, and exemplified in an agreement in the form of the Asset Purchase
Agreement attached hereto. The asset purchase agreement will provide that Mrs.
Fields will assume and indemnify the Qualifying Franchisee against post-closing
leasehold obligations and liabilities and obtain the release of any related
personal guaranties and that the Qualifying Franchisee will retain
responsibility for and indemnify Mrs. Fields against all pre-closing leasehold
obligations and liabilities, all pre-closing taxes, all debt and all other pre-
closing fixed or contingent liabilities (including litigation). Unless otherwise
agreed to by Mrs. Fields in its sole discretion, any employment agreements or
other agreements or arrangements with the Franchisee Principal or affiliates
thereof that relate to the Stores purchased will be terminated on or prior to
the closing without liability or cost to the Store or Mrs. Fields.

3. Other Undertakings. As further consideration for the members of the
Releasor Group providing the release pursuant to Section 1, Mrs. Fields hereby
agrees for the benefit of the Franchisee as follows, each such undertaking to be
subject to the consummation of the Proposed GACC Acquisition and to the
Franchisee then being in compliance with its obligations under its franchising
arrangements with GACC, Mrs. Fields, Pretzel Time and any other subsidiary of
MFH:

(1) The margin that is presently in effect for batter that is
provided to the Franchisee by GACC for use in the Franchisee's Stores will not
be changed for at least three years following completion of the Proposed GACC
Acquisition. For purposes of the foregoing, it is agreed that (i) costs taken
into account shall consist only of ingredients, utilities and labor and other
direct or indirect costs (as defined by Arthur Andersen) and (ii) any and all
increases or decreases in ingredient prices or shipping costs (without respect
to inefficiencies brought about by lower volumes) will be passed through on a
dollar for dollar basis except to the extent that an increase is reasonably
determined by Mrs. Fields to have been caused primarily by

6
<PAGE>

actions of Mrs. Fields and that Mrs. Fields' compliance with this undertaking
will be subject to verification by Mrs. Fields' independent auditors in
connection with their annual audit of Mrs. Fields' financial statements.

(2) At the time that the license agreement relating to any of the
Stores owned by the Franchisee as of the date of this Agreement is next up for
renewal, the Franchisee will be permitted to extend its franchise relating to
such Store for a renewal period equal to the new term of its lease and otherwise
on the terms and conditions as are now applicable under the 1998 version of
GACC's license agreement.

(3) The Franchisee may elect to convert some or all of the Stores
owned by the Franchisee (if there is not an existing MFOC cookie store in the
mall) to Mrs. Fields franchises, subject to the Franchisee entering into Mrs.
Fields' standard form of franchising agreement as then in effect, paying the
difference, if any, between the initial franchise fee it originally paid and the
then current fee required under the new franchise agreement and paying the cost
of conversion in accordance with Mrs. Fields' current store design.

(4) The Franchisee will be eligible on an equal footing with
existing franchisees of Mrs. Fields to acquire new Mrs. Fields and, subject to
then-existing area development rights, Pretzel Time franchises as and when Mrs.
Fields determines to offer them to existing franchises in the geographical areas
where the Franchisee currently owns Stores. In any such cases in which Mrs.
Fields must choose between the Franchisee and other potential franchisees for
the same location, the location will be offered to the best franchisee for the
location that is in good standing, based on criteria that will be developed by
the GACC Franchisee Association (which Mrs. Fields agrees to recognize) and
approved by Mrs. Fields. The same procedures shall apply to any brand or concept
franchised by Mrs. Fields. The procedures set forth in this Section 3(d) shall
not apply to any proposed or potential site in a mall in which a franchisee has
developed or created the opportunity for through his or her own efforts. If a
second GACC franchise is to be developed in a mall where there is an existing
GACC franchised store, the terms of the existing GACC franchise agreement shall
apply.

(5) Mrs. Fields will maintain product development support and
marketing expense for GACC products at no less than their fiscal year 1997
levels.

7
<PAGE>

(6) Any material change made to the GACC franchise agreement will be
made with the involvement of the GACC Franchisee Association.

(7) Mrs. Fields agrees to recognize and discuss with the GACC
Franchisee Association on all material matters directly affecting the GACC
franchisees for so long as the GACC Franchisee Association continues to
represent a majority of the existing GACC franchise stores and its Board of
Directors is elected through democratic procedures.

(8) Unless otherwise agreed to by the GACC Franchisee Association,
Mrs. Fields agrees to maintain the GACC product and brand indefinitely.

4. Undertakings Not Transferable. The Undertakings of Mrs. Fields in
Section 2 are specific to the Franchisee and may not be transferred to any other
party without the prior written consent of Mrs. Fields in its sole and absolute
discretion, but Mrs. Fields shall allow a GACC franchisee's heirs or other
successors by operation of law to exercise the tag-along rights provided for in
Section 2. The benefits of the Undertakings in Section 3 are transferable to a
successor franchisee in conjunction with an assignment of the GACC franchise
agreement.

5. Miscellaneous. This Agreement may be executed in one or more
counterparts, may not be changed orally and is made and shall be governed by and
construed in all respects in accordance with the laws of the State of Delaware,
without regard to the principles of conflicts of laws thereof which might refer
such interpretation to the laws of a different state or jurisdiction. This
Agreement benefits and binds the parties hereto and, subject to Section 4, their
respective successors and assigns. Notices hereunder shall be in writing and
addressed to the address indicated below or to such other address as the
intended recipient has specified in writing, and (assuming actual receipt) are
deemed given when delivered in person, one business day after being sent by
telecopier or by overnight express mail service, or four business days after
being sent by mail. All disputes arising in connection with the interpretation,
performance and enforcement of this Agreement shall be resolved through binding
arbitration under the Federal Arbitration Act and conducted by the American
Arbitration Association under its rules for commercial arbitration, provided
that the arbitrator may award reasonable fees and costs to the prevailing party.
Arbitration shall take place in the state where the respondent's principal place
of business is located.

8
<PAGE>

6. Nonseverability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.

Mrs. Fields' Original Cookies, Inc. Capricorn Investors II, L.P.
By:_________________________________ By:_______________________________
Name:_______________________________ Name:_____________________________
Title:______________________________ Title:____________________________
Address: 2855 East Cottonwood Parkway, Suite 400
Address: 30 East Elm Street
Salt Lake City, Utah 84121 Greenwich, Connecticut
06830

Great American Cookie Company, Inc. The Jordan Company
By:_________________________________ By:_______________________________
Name:_______________________________ Name:_____________________________
Title:______________________________ Title:____________________________
Address: 4685 Frederick Drive, SW Address:
9 West 57th Street, Suite
4000
Atlanta, Georgia 30336 New York, New York
10019

Cookies USA, Inc.
By:_________________________________
Name:_______________________________
Title:______________________________
Address: 9 West 57th Street, Suite 4000
New York, New York 10019

9
<PAGE>

The Franchisee: The Franchisee Principal:
[_] ____________________________________
By:__________________________ Name:_______________________________
Name:________________________ Address:
Title:_______________________
Address:

<PAGE>

PENNANT
FOODS

March 30, 1998

Mrs. Fields Original Cookie Company
462 West Bearcat Drive
Salt Lake City, UT 84115

Re: Supply Agreement

Ladies and Gentlemen:

This letter sets forth the terms of the agreement between Mrs. Fields
Original Cookie Company ("Buyer") and LBI Acquisition Corp. d/b/a Pennant Foods
("Seller"), relating to the purchase by Buyer, and the sale by Seller, of cookie
dough and other bakery products, having the item codes and names listed on
attached Exhibit A, and "new bakery products" designated as such under Paragraph
5 below (collectively, "Products").

1.- Minimum Annual Purchase and Sale of the Products. Buyer agrees to
buy, and Seller agrees to sell, an amount not less than 23,000,000 pounds of the
Products during each of calendar years 1998, 1999, and 2000 (the "term").

2. Volume Incentives and Penalties.

(a) Rebate to Buyer. Within sixty (60) days after the end of
each calendar year during the term, Seller shall pay to Buyer a rebate for
purchases of the Products that exceed the minimum annual purchase obligation in
Paragraph 1 above. The amount of the rebate shall be determined by multiplying
the actual total pounds of the Products purchased by Buyer during the year by
the corresponding incentive payment rate listed in attached Exhibit B.

(b) Penalty Payment by Buyer. If Buyer fails to meet its
minimum annual purchase obligation under Paragraph 1, then, within sixty (60)
days after the end of the applicable calendar year during the term, Buyer shall
pay to Seller a penalty in an amount determined by multiplying 23,000,000 by the
per pound penalty rate listed in attached Exhibit C corresponding to the volume
of Products actually purchased by Buyer. The penalty is intended to compensate
Seller for its incremental unit cost of producing the lesser volume actually
purchased by the Buyer.
<PAGE>

Mrs. Fields Original Cookie Company
Page 2
March 30,1998

(c) Remedies For Failure to Meet Minimum. If Buyer's failure
to purchase the minimum annual quantities of the Products required under
Paragraph 1 is attributable to a decrease in requirements for the Products due
to declines in Buyer's business, then the penalty payment by Buyer under
Paragraph 2(b) is the Seller's exclusive remedy. However, if Buyer's failure to
make such purchases is attributable to Buyer's purchase of like products from an
alternative supplier, then, in addition to the penalty payment by Buyer under
Paragraph 2(b), Buyer shall pay Seller a sum determined by multiplying the
volume shortfall by an amount equal to the Seller's weighted average of the
conversion charges for the Products purchased, as set forth on Exhibit A, less
Seller's variable manufacturing costs not incurred.

3. (a) Distributor Purchases. Distributors designated by Buyer,
who are approved by Seller and who meet Seller's normal standards of
creditworthiness, may order and purchase the Products and otherwise act on
Buyer's behalf pursuant to this Agreement. Any such distributor purchases, or
any purchases by or on behalf of Buyer's franchisees or licensees shall be
governed by the terms of this Supply Agreement (except to the extent
inconsistent with any separate agreement between Seller and any such franchisee
or licensee) and shall be counted towards Buyer's minimum annual purchase
obligation under Paragraph 1.

(b) Recovery of increased Distribution Costs.

(i) All shipments from Seller to Buyer's distributor
(currently BlueLine Distribution) will be on a full truck load basis. Less than
truck load shipments will be approved by Buyer's Distributor and the cost
between actual cost and full truck rate will be paid by Buyer's Distributor. In
the event that Buyer changes distributors or if the current distributor changes
its destination points from the current "ship to" locations, Seller is entitled
to recalculate freight costs and adjust the total conversion costs accordingly.

(ii) Should a Force Majeure Event (as defined in
Section 20 (a)) occur which affects the cost of transportation, Seller is
entitled to recalculate the freight costs and adjust the conversion costs
accordingly.

4. Price.

(a) The price to be paid for the Products shall be an amount
equal to the Total Price ($ per lb.) as listed on the attached Exhibit A,
adjusted as may be provided in Paragraphs 4(b) through 4(e) below.

(b) Commodity Items - Price Adjustment. Commodity Items are
listed in Exhibit D and include bagged flour, bagged sugar, eggs, chocolate,
butter, nuts, oil and packaging ("Commodity Items"). Standards for Commodity
Items will be set at the beginning of the year based on a forecasted average
annual cost ("Commodity Standards"). These Commodity Standards will be evaluated
quarterly and adjusted to market conditions. At the end of each quarter, an
average of actual purchases costs paid during the quarter will be tallied
against the standard. If the aggregate for the quarter varies by at least
$50,000 (positively or negatively), the total variance will be applied to raw
material pricing across all
<PAGE>

Mrs. Fields Original Cookie Company
Page 3
February 12, 1998

products for the next quarterly pricing period. Aggregate amounts less than
$50,000 will be rolled forward and added into the aggregate of the next quarter.
This process will be settled at the end of each calendar year.

Volume (pounds) to be used for allocating the rate of the raw material
variances per quarter for re-pricing will be the minimum volume of 23,000,000
lbs. divided by the four quarters or 5,750,000 lbs. per quarter. (This is to
lessen the volume swings of seasonal business).

(c) Non-Commodity Items - Price Adjustment. Raw material and
packaging costs for non-commodity items will be adjusted by the Seller at the
end of each calendar year and applied to Products purchased in the following
year as follows:

All ingredients and packaging (except for Commodity
Items listed in 4(b)and Exhibit D) shall be adjusted to a standard cost which is
derived by using the last actual cost paid by Seller for the item. This cost
will be used for the subsequent calendar year.

(d) Labor and Energy Costs - Price Adjustment To enable
Seller to cover rising labor and energy costs during the term of this agreement,
Buyer agrees to the following annual increases to total conversion cost on all
manufactured items as follows:

(i) January 1, 1999 - $0.00333 per pound; and

(ii) January 1, 2000 - $0.00333 per pound.

(e) Price Rebates. At the end of each calendar quarter
Seller shall rebate to Buyer $0.071 for each pound of Product sold by Seller
during the calendar quarter. Seller shall rebate an additional $0.02 for each
pound of Product sold in accordance with the attached Schedule A.

Except as to Legacy Brands, Inc., the price under this Paragraph 4
shall not apply to purchases by any of Buyer's franchisees or licensees to the
extent inconsistent with any separate agreement between Seller and any such
franchisee or licensee unless Product can be priced to include any rebate.

5. New Bakery Products. If compatible with the normal operation
of Seller's business, Seller agrees to manufacture any new bakery products
designated as such by Buyer (whereupon they will be deemed "Products" for all
purposes under this agreement) pursuant to the directions, formulations and
recipes communicated by Buyer to Seller. Seller's obligation to supply new
bakery products to Buyer under this Paragraph 5 is subject to agreement between
Buyer and Seller on the initial price to be charged Buyer for the same. For
purposes of computing the price to be paid by Buyer under Paragraph 4, such
initial price shall be deemed to be the price as if listed on attached Exhibit
A. Seller agrees to cooperate and offer reasonable assistance to Buyer in the
development of new bakery products,
<PAGE>

Mrs. Fields Original Cookie Company
Page 4
February 12, 1998

provided in each case that Buyer agrees to compensate Seller for costs incurred.

6. Quantities and Orders.

(a) Buyer shall, prior to September 30 of each Calendar year
during the term, furnish Seller with a schedule forecasting monthly estimated
quantities of the specific Products to be purchased by Buyer during the
following calendar year.

(b) Buyer or its designated representative shall submit an
order to Seller on or prior to Wednesday of each week for Products to be
produced by Seller during the following week. Seller may decline to accept any
actual orders for Products during any quarter to the extent that such order
exceeds by more than twenty (20) percent of the amount of Products scheduled for
production during an average production week. Seller reserves the right to
decline any order which is less than a full batch size. Each order submitted by
Buyer for Products shall state that it is submitted pursuant to this Agreement,
shall be transmitted to Seller in writing, and shall include the quantity,
description, and item number of Products ordered, delivery points, delivery
schedules, shipping instructions, and such other information as Seller may
reasonably require. Each order shall be for a minimum of one batch of the
Products ordered, and shipping instructions shall correspond with the regional
delivery schedule provided from time to time by Seller. Seller shall confirm in
writing receipt of each order.

7. Delivery. Seller shall ship Products ordered by Buyer pursuant
to Paragraph 6 (b) hereof such that the Products are delivered to the
destination designated by Buyer by the dates specified for delivery, except that
the date specified for delivery shall be an approximate date for unloading
Products and shall allow for normal transportation delays. Seller shall notify
Buyer in writing of the date on which Products ordered have been shipped and all
related shipping information. Delivery of products shall be C.I.F. the
destination (within the 48 contiguous states) designated by Buyer in the notice
given pursuant to Paragraph 6 (b). Seller shall ship Products in refrigerated
containers at 0 degrees F. or below.

8. Payment The price for the Products shall be payable net cash
within 20 days from the date of invoice or shipment, whichever is earlier. Buyer
or its representative may dispute any invoice in good faith as long as Buyer or
its Representative shall pay all undisputed amounts in a timely manner. Buyer or
its Representative shall pay interest on all overdue accounts at the lessor of
(1) the "Prime Rate" (or any successor rate) as then published in the Wall
Street Journal plus 1% or (ii) the highest applicable legal rate (the "Penalty
Rate").

9. Sale of Products to Others. Seller will not sell or offer to
sell the Products or any bakery items produced from the Licensed Trade Secrets
(as hereinafter defined) or derived therefrom to any persons, entities, or
parties other than Buyer or any Licensee of Buyer. Nothing in this Agreement
shall be construed to limited Seller's right to sell to other customers items
which are of a similar type to the Products but which do not use the Licensed
Trade Secrets in their manufacture, production, formulation, or otherwise.
<PAGE>

Mrs. Fields Original Cookie Company
Page 5
February 12,1998

10. Purchase of Supplies. If Seller acquires raw materials or
supplies which are unique to the production of Products and which are not
customarily used in the production of other bakery items by Seller (the
"Supplies'), and the Supplies are not used in the production of Products ordered
by Buyer during the shelf life of the Supplies, and the Supplies cannot be used
by Seller in the manufacture of other bakery items in the normal course of
Seller's business, Buyer shall pay to Seller the actual costs of the Supplies
not used by Seller and all expenses incurred by Seller in the storage and any
disposal thereof. In addition, if Seller has produced Products to fill an order
received from Buyer pursuant to Paragraph 6 (b) hereof, and Buyer does not call
for delivery of the same before the expiration of the shelf life thereof, Seller
shall destroy the same and invoice Buyer for the price with respect thereto.

11. Duty To Examine. Upon receipt of the Products at their
destination, Buyer shall examine the Products for impurities, damage, spoilage,
and any and all other defects to such Products. Promptly upon discovery thereof
by Buyer, but in any event not later than thirty (30) days after receipt, Buyer
shall notify Seller of any products which are damaged, defective, opened or
improperly packaged. If Buyer has previously paid for defective Products, Buyer
shall be entitled to a refund of the portion of the Price attributable to such
defective Products within ten (10) days after the notice of the defect, unless
the same is disputed by Seller in good faith, except that if the amount to be
refunded does not exceed $1,000, such amount shall be a credit against the next
invoice. Seller shall pay Buyer interest on all overdue accounts calculated at
the Penalty Rate. If requested by Seller, Buyer shall promptly return defective
Products to Seller at Seller's expense. Buyer further agrees to take reasonable
steps at Seller's expense, for a period not to exceed ten (10) days after notice
to Seller of the defect, to preserve the rejected Products pending Seller's
instructions.

12. Replacement of Damaged Goods. If Seller discovers, upon
examination pursuant to Paragraph 11 hereof, that any of the Products delivered
to Buyer are spoiled, damaged or otherwise defective, Buyer shall have the right
to require Seller to replace such defective Products, provided that at least
five (5) percent (by price) of the total shipment of Products is spoiled,
damaged or otherwise defective. If Buyer so elects to have such Products
replaced, the shipment of any replacement products will have priority over
shipments by Seller to other customers of Seller, and will be effected within
seventy-two (72) hours (or three working days, if later). Seller shall, if
requested by Buyer, cause such replacement Products to be delivered to Buyer, at
Seller's expense, by the most rapid means of commercially feasible ground
transportation available.

13. Rotation of Finished Products. Seller agrees to rotate all
finished Products stored by Seller after production on a "first in-first out"
basis.

14. License. For purposes of this Agreement, "Licensed Trade
Secrets" means all transferable techniques, processes, methods of production and
know-how uniquely pertaining to and necessary for use in relation to the
formulation, composition and production of Products. Information which was
already in the possession of Seller, but which was not obtained in connection
with this transaction or past transactions with Buyer, or information which is
or becomes publicly available without breach of (i) this Agreement, (ii) any
agreement or instrument with Buyer to which Seller is a
<PAGE>

Mrs. Fields Original Cookie Company
Page 6
February 12,1998

party or beneficiary, or (iii) any duty owed Buyer by Seller or any other
subsidiary of Seller, shall be excluded from the definition of Licensed Trade
Secrets. Buyer hereby grants to Seller, and Seller accepts from Buyer, a
non-exclusive license to employ the Licensed Trade Secrets solely for the
purpose of producing the Products for sale to Buyer and Licensees of Buyer.

15. Confidentiality. Seller understands that the Licensed Trade
Secrets disclosed to Seller under this agreement are secret, proprietary and of
value to Buyer, which value may be impaired if the secrecy of such information
is not maintained. Seller will take reasonable security measures to preserve and
protect the secrecy of the Licensed Trade Secrets. Seller agrees to hold the
Licensed Trade Secrets in confidence and not to disclose any of the Licensed
Trade Secrets, either directly or indirectly, to any person or entity, including
any subsidiary or affiliate of Seller (or any director, officer, or employee
thereof) during the term of this agreement or at any time within five (5) years
following the expiration or termination hereof, except that Seller may disclose
the Licensed Trade Secrets to its key officers and employees to whom disclosure
is necessary for the manufacture of the Products pursuant to this agreement.
Seller shall exercise such other reasonable precautions to protect and safeguard
the secrecy of the Licensed Trade Secrets except that Seller shall not be
required to employ any more stringent measures than it employs in connection
with protection of its own confidential information.

16. Representations and Warranties of Seller. Seller represents,
warrants and agrees as follows:

(a) Conformity with Specifications. The Products will be
manufactured strictly in accordance with the standards, procedures,
specifications, formulations and recipes from time to time reasonably
established by Buyer. If at any time Buyer deems the quality of the Products to
be below such standards, Buyer may so notify Seller in writing, and Seller will
immediately bring such substandard Products up to the quality standards required
by this agreement. Buyer's right to oversee the quality of the Products shall
not in any way replace, supersede, or substitute for the quality control
required to be exercised by Seller hereunder. The exercise of any action of
quality control by Buyer shall be for its sole and exclusive benefit. If at any
time Seller adapts or modifies the Products in accordance with a request from
Buyer, Seller will produce and manufacture such alternate or modified Products
using the same quality control standards and procedures with respect to such
Products as Seller is required to observe in the manufacture of the Products.

(b) Compliance with Law. Seller will manufacture the
Products in compliance with all applicable federal, state and local laws or
regulations to which Seller is subject, except that Seller shall not be liable
to Buyer for any violation of any such laws or regulations if arising from the
adherence by Seller to the instructions of Buyer.

17. Indemnification.

(a) Seller agrees to indemnify and hold Buyer harmless from
and against any and all demands, liabilities, damages, expenses, causes of
action, suits, claims or judgments (including
<PAGE>

Mrs. Fields Original Cookie Company
Page 7
February 12, 1998

reasonable attorneys' fees) arising out of or in connection with (i) any damage
to property, injuries, illness or loss of life which occur on account of, or in
connection with the use or consumption of Products which were defective in
condition, quality or purity as of delivery to Buyer, whether such condition was
discovered at the time of delivery or at a later date, and (ii) any default by
Seller in the observation or performance of its covenants and agreements
contained herein. Buyer agrees to indemnify and hold Seller harmless from and
against any and all demands, liabilities, damages, expenses, causes of actions,
suits or judgments (including reasonable attorneys' fees) arising out of or in
connection with (i) the sale, distribution, handling or misuse of the Products
after delivery to Buyer except to the extent to which Buyer is indemnified by
Seller under this Paragraph 17, and (ii) any default by Buyer in the observance,
payment or performance of its covenants and agreements contained herein. Any
amounts payable by one party to the other pursuant to this Paragraph 17 shall be
limited to actual damages, and shall not include any amounts attributable to
incidental or consequential damages.

(b) Buyer represents to Seller that it has made and will
continue to make all required disclosures to its franchisees concerning rebates
or other payments by Seller to Buyer or its affiliates, and Buyer agrees to
defend, indemnify and hold Seller harmless from any claims, liabilities, or
damages, including attorneys' fees, arising out of any breach by Buyer of this
representation.

18. Termination.

(a) Seller's Rights. Seller, at its option, shall have the
right by notice to Buyer, in addition to any other remedy available at law, in
equity or pursuant to this agreement (including but not limited to an
injunction, specific performance and damages) to suspend or terminate Buyers
right to purchase, and Sellers obligation to supply Buyer with Products and any
other future right of Buyer pursuant to this agreement upon the happening and
during the continuance of any one or more of the following events:

(i) Buyer fails to pay any amount owing to
Seller hereunder within thirty (30) days from the date Buyer receives notice of
a default hereunder; and

(ii) Buyer defaults in the performance of any
other term, covenant,agreement or condition of this agreement and if within
sixty (60) days after notice from Seller describing the specific activities
constituting such default, Buyer shall fail to cure default, or if such default
cannot be cured with the exercise of due diligence within said sixty (60) day
period, shall fail thereafter to proceed to cure the same diligently and in
good faith, and in any case, to cure such default within one hundred-twenty
(120) days.

(b) Buyer's Rights. Buyer, at its option, shall have
the right by notice to Seller, in addition to any other remedy available by law,
in equity or pursuant to this agreement (including but not limited to the right
to an injunction, specific performance and damages) to terminate Buyers
obligation to purchase Products from Seller, and any other future right of
Seller pursuant to this agreement, if Seller defaults in the performance of any
material term, covenant, agreement or condition of this agreement, and if within
sixty (60) days after notice from Buyer describing the specific activities
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Mrs. Fields Original Cookie Company
Page 8
February 12, 1998

constituting such default, Seller shall fail to cure the default, or if such
default cannot be cured with the exercise of due diligence within a sixty (60)
day period, shall fail thereafter to proceed to cure the same diligently and in
good faith, and in any case, to cure such default within one hundred-twenty
(120) days;

(c) Remaining Obligations. The termination of this agreement
by either party pursuant to this Paragraph 18 shall not relieve (i) either party
of its obligation to pay all such sums owed to the other hereunder, (ii) Seller
of its obligation of confidentiality under Paragraph 16, and (iii) either party
of its respective obligations of indemnity contained herein.

19. Assignment. Buyer and Seller may, without the consent of the
other party, with notice to the other party, assign its rights and obligations
hereunder to a related entity, but shall remain liable therefor. For purposes of
this Paragraph 19, the term "related entity." shall mean any corporation,
partnership or joint venture which is fifty percent (5 0%) or more owned by
Buyer or Seller, as the case may be. Except as provided in this Paragraph 19,
Buyer and Seller may not assign their rights or obligations hereunder without
the prior written consent of the other party. Subject to the foregoing
limitation, all the terms and provisions of this agreement shall be binding
upon, and shall inure to the benefit of, the successors in interest or the
assigns of the parties hereto with the same effect as is mentioned in each
instance, or the party hereto is named or referred to, except that no
assignment, transfer, pledge or mortgage and violation of the provisions of this
agreement shall vest any rights and any assignee, transferee, pledgee, or
mortgagee.

20. Miscellaneous.

(a) Force Majeure. Neither party shall be deemed to be in
default under this agreement because of delays or inability to perform
occasioned by war, civil disturbance, strikes, boycotts, lock-outs, shortages,
transportation and communication problems, natural calamities such as fire,
flood, earthquake, storm, acts of God, governmental regulations or actions,
inability to obtain labor or materials from usual sources of supply, or. other
means beyond the parties' control (a "Force Majeure Event"). In case of a Force
Majeure Event affecting production of Products by Seller, (i) deliveries of
Products by Seller hereunder shall be allocated among Buyer and Seller's other
customers on a fair and reasonable basis and (ii) (a) Buyer's minimum annual
purchase obligation under paragraph I shall be reduced, for each month (or
fraction thereof that such Force Majeure Event continues, by an amount that
represents Buyer's monthly average purchases of Products during the preceding
twelve (12) months under this (or a predecessor) agreement; and (b) the amount
by which Buyer's minimum annual purchase obligation is decreased under clause
(a) of this subparagraph (ii) shall be added to the amount of Products actually
purchased by Buyer for purposes of determining any rebates due Buyer or
penalties payable by Buyer under paragraphs 2(a) or 2(b), respectively.

(b) Headings. Headings in this agreement are included for
convenience of reference only, and shall not constitute a part of this agreement
for any other purpose.
<PAGE>

Mrs. Fields Original Cookie Company
Page 9
February 12, 1998

(c) Notices. All notices provided by this agreement shall be
in writing and shall be given by facsimile transmission with the copy thereof
mailed by first class mail, postage prepaid, or by personal delivery, by one
party to the other, addressed to such other party at the applicable address set
forth, or to such other address as may be given for such purpose by such other
party by notice duly given hereunder. Notice shall be deemed properly given on
the date of facsimile transmission or on the date of delivery whichever applies.

To order Products:

Pennant Foods
2200 Cabot Drive
Suite 100
Lisle, Illinois 60532
Facsimile No.: (630) 955-5532

For all other Purposes:

LBI Acquisition Corp.
100 Northfield Street
Greenwich, Connecticut 06830
Facsimile No.: (203) 622-6976
Attention: Thomas C. Ewing

Mrs. Fields Original Cookie Company
462 West Bearcat Drive
Salt Lake City, Utah 84115
Facsimile No.: (801) 463-2223

(d) Applicable Law. This agreement shall be construed and
enforced in accordance with, and governed by the laws of the State of
Connecticut.

(e) Integration. This agreement represents the only
agreement and understanding between the parties and their affiliates with
respect to the subject matter hereof, and supersedes all prior negotiations,
representations and agreements made by the parties and their affiliates with
respect to the subject matter hereof. This agreement may be amended,
supplemented or changed, and any provision hereof waived, only by a written
instrument making specific reference to this agreement signed by the party
against whom enforcement of any such amendment, supplement or change or waiver
is sought. Waiver by either party of any breach or default hereunder by the
other party shall not operate as a waiver of any other breach or default,
whether similar to or different from the breach or default waived.

(f) Counterparts. This agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one of the same agreement,
binding upon all parties thereto, notwithstanding that all parties are not
signatories to the original or the same counterpart.
<PAGE>

Mrs. Fields Original Cookie Company
Page 10
February 12, 1998

(g) Severability. In the event any provision of this
agreement is found to be unenforceable or invalid, such provision shall be
severable from this agreement if it is capable of being identified with and
apportioned to reciprocal consideration or to the extent it is a provision which
is not essential and the absence of which would not have prevented the parties
from entering into this agreement. The unenforceability or invalidity of a
provision which has been performed shall not be grounds for invalidation of this
agreement under circumstances in which the true controversy between the parties
does not involve any such provision.

(h) Extension. This agreement may be extended beyond the
term upon such terms and conditions as the parties shall agree upon in writing.

If the foregoing accurately reflects our agreement, please so indicate
by having the original of this letter signed in the spaces provided below and
returning it to me; a copy is enclosed for your files.

Very truly yours,

LBI Acquisition Corp.
d/b/a Pennant Foods

By /s/ Gerald W. Hanna

Its: President

AGREED TO AND ACCEPTED.

MRS. FIELDS ORIGINAL COOKIE COMPANY

By: /s/ Larry A. Hodges

Its:
<PAGE>

January 1, 1998

<TABLE>
<CAPTION>
Raw MFC
Materials Total Req. Total
PROD & Packaging Conversion Add on Price
# DESCRIPTION ($ per lb.) ($ per lb.) ($ per lb.) ($ per lb.)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <S> <C> <C> <C> <C>
1553 MFC P.B. FILLING 0.7836 0.3340 0.0200 1.1376
1560 MFC BRAN MUFFIN 05 LB CHUB 0.6130 0.3005 0.0200 0.9334
1561 MFC ORANGE MFFN 05 LB CHUB 0.7463 0.3411 0.0200 1.1074
1563 MFC CORN MUFN 4X5 LB CHUB 0.5399 0.3031 0.0200 0.8630
1564 MFC PLAIN MUFN BATTR 05 CHUB 0.5520 0.2852 0.0200 0.8572
1565 MFC PUMPKIN MFN 05 CHUB 0.7470 0.3193 0.0200 1.0863
1666 MFC BANANA NUT MUFFIN 4X5 CHUB 0.8095 0.3067 0.0200 1.1362
2910 MFC DOUBLE FUDGE BROWNIE 0.6986 0.2738 0.0200 0.9924
2911 MFC WALNUT FUDGE BROWNIE 0.7522 0.2738 0.0200 1.0460
2912 MFC PECAN FUDGE BROWNIE 0.7523 0.2738 0.0200 1.0461
2913 MFC MACADAMIA FUDGE BROWNIE 0.8702 0.2738 0.0200 1.1640
2915 MFC PECAN PIE BROWNIE 0.8004 0,2792 0.0200 1.0997
3050 MFC CHOC CHIP COOKIE 0.6935 0,3342 0.0200 1.0477
3052 MFC MILK CHOC CHIP COOKIE 0.7035 0.3346 0,0200 1.0581
3054 MFC BUTTER TOFFEE COOKIE 0.8291 0.3252 0.0200 1.1743
3060 MFC BUTTER COOKIE 0.5663 0.3321 0.0200 0.9184
3061 MFC CHOC CHIP WALNUT COOKIE 0.8121 0.3297 0.0200 1.1618
3062 MFC WHITE CHUNK W/MAC COOKIE 1.1317 0.3288 0.0200 1.4805
3063 MFC COCO MAC COOKIE 1.1847 0.3435 0.0200 1.5482
3064 MFC TRIPLE CHOC COOKIE 0.7337 0.3346 0.0200 1.0883
3065 MFC OATMEAL RAISIN NUT COOKIE 0.7472 0.3449 0.0200 1.112l
3069 MFC MLK CHOC W/WALNT COOKIE 0.8262 0.3313 0.0200 1.1775
3075 MFC PEANUT BUTTER COOKIE 0.6185 0.3442 0.0200 0.9827
3079 MFC CHEWY CHOC COOKIE 0.7936 0.3268 0,0200 1.1404
3091 MFC MLK CHC CHP W/MC COOKIE 1.1146 0.3312 0.0200 1.4658
6350 MFC CHOCOLATE CHIP "COOKIE DOUGH" 0.6900 0,3342 0.0200 1.0442
6352 MFC MILK CHOCOLATE CHIP "COOKIE DOUGH" 0.7000 0.3346 0.0200 1.0546
6354 MFC BUTTER TOFFEE "COOKIE DOUGH" 0.8256 0.3252 0.0200 1.1708
6358 MFC PUMPKIN HARVEST "COOKIE DOUGH" 0.8401 0.3451 0.0200 1.2052
6360 MFC BUTTER "COOKIE DOUGH" 0.5628 0.3321 0.0200 0.9149
6361 MFC CHOCOLATE CHIP WALNUT COOKIE DOUGH" 0.8086 0.3297 0.0200 1.1583
6362 MFC WHITE CHUNK MAC. NUT COOKIE DOUGH" 1.1170 0.3288 0.0200 1.4658
6363 MFC COCNUT MAC. NUT "COOKIE DOUGH" 1.1693 0.3435 0.0200 1.5328
6364 MFC TRIPLE CHOCOLATE "COOKIE DOUGH" 0.7243 0.3346 0.0200 1.0789
6365 MFC OATMEAL RAISIN W/NUTS "COOKIE DOUGH" 0.7438 0.3449 0.0200 1.1087
6369 MFC MILK CHOCOLATE WALNUT "COOKIE DOUGH" 0.8145 0.3313 0.0200 1.1658
6375 MFC PEANUT BUTTER COOKIE DOUGH" 0.6150 0.3442 0.0200 0.9792
6379 MFC CHEWY CHOCOLATE FUDGE "COOKIE DOUGH" 0.7901 0.3268 0.0200 1.1369
6391 MFC MILK CHOCOLATE MAC NUT COOKIE DOUGH" 1.1000 0,3312 0.0200 1.4512
6392 MFC SEMI-SWEET CHUNK PECAN COOKIE DOUGH" 0.7933 0.3318 0.0200 1.1451
6650 MFC CHOCOLATE CHIP NIB COOKIE 0.6837 0.3348 0.0200 1.0385
6652 MFC MILK CHOCOLATE CHIP NIB COOKIE 0.7056 0.3348 0.0200 1.0604
6660 MFC BUTTER NIB COOKIE 0.5726 0.3417 0.0200 0.9343

</TABLE>
<PAGE>

January 1, 1998

Raw MFC
Materials Total Req. Total
PROD & Packaging Conversion Add on Price
# DESCRIPTION ($ per lb.) ($ per lb.) ($ per lb.) ($ per lb.)
- -------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C>
6662 MFC WHITE CHUNK MAC. NUT NIB COOKIE 1.0912 0.3283 0.0200 1.4395
6665 MFC OATMEAL RAISIN NIB COOKIE W/NUTS 0.7248 0.3451 0.0200 1.0899
6669 MFC MILK CHOCOLATE WALNUT NIB COOKIE 0.8278 0.3313 0.0200 1.1791
6675 MFC PEANUT BUTTER NIB COOKIE 0.6166 0.3537 0.0200 0.9903
7010 MFC MFC CASHEW FUDGE BROWNIE (INTL) 0.8137 0.3411 0.0200 1.1749
7030 MFC MFC DBLE FUDGE CHOC MUFFIN (INTL) 0.6363 0.3411 0.0200 0.9974
7050 MFC CHOC CHIP COOKIE (INTL) 0.6933 0.3342 0.0200 1.0475
7051 MFC WHITE CHIP COOKIE (INTL) 0.6749 0.3346 0.0200 1.0295
7052 MFC MILK CHOC COOKIE (INTL) 0.7033 0.3346 0.0200 1.0579
7054 MFC MFC BUTTER TOFFEE (INTL) 0.8298 0.3252 0.0200 1.1750
7060 MFC BUTTER COOKIE (INTL) 0.5661 0.3321 0.0200 0.9182
7062 MFC WHT CHK MAC COOK (INTL) 1.1369 0,3288 0.0200 1.4857
7063 MFC COCO/MACNUT COOK (INTL) 1.1845 0.3435 0.0200 1.5480
7064 MFC TRIPLE CHOC COOK (INTL) 0.7365 0.3346 0.0200 1.0911
7065 MFC OATM RAISIN COOK (INTL) 0.7470 0.3449 0.0200 1.1119
7066 MFC CC WLNT COOKIE (INTL) 0.1819 0.3297 0.0200 1.1616
7079 MFC CHEWY CHOC COOK (INTL) 0.7934 0.3268 0.0200 1.1402
7091 MFC CC MAC NUT COOKIE (INTL) 1.1144 0.3312 0.0200 1.4656
7092 MFC SS CHNK PEC COOK (INTL) 0.8045 0.3318 0.0200 1.1563
7094 MFC MFC MILK CHOC CHIP W/CASHEW (INTL) 0.9959 0.3422 0.0200 1.3581
7203 MFC SWEET FRENCH ROLLS 0.1206 0.3192 0.0200 0.4598
7401 MFC APPLE CROISSANT 0.5423 0.3484 0.0200 0.9107
7403 MFC BUTTER CROISSANT 0.5193 0.3704 0,0200 0.9097
7404 MFC CHOCOLATE CROISSANT 0.6932 0.3616 0.0200 1.0748
7410 MFC CHEESE CROISSANT 0.8415 0.3720 0.0200 1.2334
7447 MFC BUTTER COOKIE SHEETS 0.6527 0.3616 0.0200 1.0343
7450 MFC CINNAMON ROLL 0.2914 0.3596 0.0200 0.6710
7500 MFC EGG TWIST 0.1831 0.3052 0.0200 0.5083
7501 MFC NINE GRAIN 0.2048 0.2738 0.0200 0.4986
7503 MFC RAISIN NUT 0.4450 0.2744 0.0200 0.7394
7505 MFC RYE REGULAR 0.1794 0.2796 0,0200 0.4790
7506 MFC HONEYWHEAT BERRY 0.2487 0.2773 0.0200 0.5459
7552 MFC NEW SWT BAGT 0.1344 0.2779 0.0200 0.4323
7553 MFC NEW SWEET REGULAR 0.1317 0.2728 0.0200 0.4245
7570 MFC SOUR FRENCH REGULAR BREAD 0.1647 0.2828 0.0200 0.4675
7750 MFC ALMOND PASTE 1.3325 0.3102 0.0200 1.6627
7751 MFC MAPLE TOPPING 0.4044 0.2872 0.0200 0.7115
7754 MFC NEW STREUSEL 0.5302 0.2683 0.0200 0.8184
7782 MFC BUTTERCREME ICING 0.7123 0.3067 0.0200 1.0390
33330 INGR BULK PECANS (10 lbs.) 2.0000 0.1958 0.0200 2.2158
33332 INGR BULK FROZEN RASPBERRIES 1.4500 0.1958 0.0200 1.6658
33333 INGR BULK MACADAMIA NUTS 4.7100 0.1958 0.0200 4.9258
33334 INGR BULK FROZEN BLUEBERRIES 1.2800 0.1958 0.0200 1.4958
33335 INGR BULK SEMI SWEET CHOC CHIPS 0.9290 0,1958 0.0200 1.1448
</TABLE>
<PAGE>

January 1, 1998

Exhibit B
Rebate to Buyer

Annual Volume Rebate
(000's lbs.) ($ per lb.)
----------------- -----------
23,000 or less 0.0000
23,001 - 24,999 0.0100
25,000 - 26,999 0.0125
27,000 - 28,999 0.0150
29,000 - or more 0.0175
<PAGE>

Exhibit C
Penalty Payment by Buyer

Annual Volume Penalty
(QOQ's ) ($ per lb.)
---------------- -----------

23,000 - + 0.0000
21,000 - 21,999 0.0025
19,000 - 20,999 0.0050
17,000 - 18,999 0.0075
15,000 - 16,999 0.0100
13,000 - 14,999 0.0125
11,000 - 12,999 0.0150
9,000 - 10,999 0.0175
7,000 - 8,999 0.0200
5,000 - 6,999 0.0225
3,000 - 4,999 0.0250
1,000 - 2,999 0.0275
0 - 999 0.0300
<PAGE>

Exhibit D
Commodity Items

Butter
Chocolate
Eggs
Flour (bagged)
Milk / Milk Products
Nuts (Including but not limited to)
Macadamia Nuts
Pecans
Walnuts
Raisins
Shortening / Oils
Sugar(bagged)

Packaging
Corrugated
Roll Stock Film

<PAGE>

Exhibit 12

MRS. FIELDS AND PREDECESSORS
RATIO OF EARNINGS TO FIXED CHARGES
(dollars in thousands)
<TABLE>
<CAPTION>

The Original Cookie Company, Incorporated and
Mrs. Fields Inc. and Subsidiaries the Carved-out Portion of Hot Sam Company, Inc.
-------------------------------------------- -------------------------------------------
DECEMBER DECEMBER
FISCAL YEARS ENDED 31, 1995 FISCAL YEARS ENDED 31, 1995
-------------------------------- THROUGH -------------------------------- THROUGH
DECEMBER DECEMBER DECEMBER SEPTEMBER DECEMBER DECEMBER DECEMBER SEPTEMBER
31, 1993 31, 1994 30, 1995 17, 1996 31, 1993 31, 1994 30, 1995 17, 1996
-------------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Net loss .......................... $(2,243) $(5,320) $(2,368) $(2,304) $ (333) $(5,355) $(2,096) $(5,645)
Add: Income taxes ................. 215 191 241 205 213 224 263 --
Fixed charges ..................... 1,088 2,155 51 80 4,172 4,381 4,268 2,828
------- ------- ------- ------- ------- ------- ------- -------
Total loss ................... $ (940) $(2,974) $(2,076) $(2,019) $ 4,052 $ (750) $ 2,435 $(2,817)
======= ======= ======= ======= ======= ======= ======= =======
Fixed charges:
Total fixed charges ....... $ 1,088 $ 2,155 $ 51 $ 80 $ 4,172 $ 4,381 $ 4,268 $ 2,828
======= ======= ======= ======= ======= ======= ======= =======

Ratio of earnings to fixed charges (a) -- -- -- -- 0.97x -- 0.57x --
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

(a) 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 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.

<TABLE>
<CAPTION>
Mrs. Fields
- -----------------------------------------------------------------------------------------------------------------------------
SEPTEMBER FISCAL
18, 1996 YEAR 39 39
THROUGH ENDED PRO FORMA WEEKS ENDED WEEKS ENDED PRO FORMA
DECEMBER 28, JANUARY 3, JANUARY 3, SEPTEMBER 27, OCTOBER 3, OCTOBER 3,
1996 1998 1998 1997 1998 1998
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Income before provision for
income taxes ..................... $ 3,856 $ 463 $ (1,361) $ (2,767) $ (9,021) $(11,457)
Fixed charges .......................... 2,027 8,891 21,778 5,525 9,549 13,794
Exclude pref. dividends ................ (97) (644) (1,436) (276) (108) (620)
Full minority interest loss ............ -- (138) (307) (2) (268) (268)
-------- -------- -------- -------- -------- --------
Total earnings .................... $ 5,786 $ 8,572 $ 18,674 $ 2,480 $ 152 $ 1,449
======== ======== ======== ======== ======== ========
Fixed charges:
Interest expense ....................... $ 1,867 $ 7,830 $ 19,413 $ 5,070 $ 9,001 $ 12,402
Preferred stock dividends as
adjusted .......................... 160 1,061 2,365 455 548 1,392
-------- -------- -------- -------- -------- --------
Total fixed charges ............... $ 2,027 $ 8,891 $ 21,778 $ 5,525 $ 9,549 $ 13,794
======== ======== ======== ======== ======== ========

Ratio of earnings to fixed charges(a)...... 2.85x 0.96x 0.86x 0.45x 0.02x 0.11x
======== ======== ======== ======== ======== ========
</TABLE>

<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC.

SUBSIDIARY COMPANIES:

Great American Cookie Company, Inc.
Mrs. Fields Cookies (Canada) Ltd.
Mrs. Fields Cookies Australia
Mrs. Fields' Brand, Inc.
Mrs. Fields' Other Names, Inc.
Fairfield Foods, Inc.
Airport Cookies, Inc.
Pretzel Time, Inc.
Uvest
LV-H&M
H&M Concepts of Idaho, Inc.

<PAGE>

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.

ARTHUR ANDERSEN LLP

Salt Lake City, Utah
February 3, 1999

<PAGE>

Ex. 23.2

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Amendment No.1 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
February 2, 1999

<PAGE>

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 this Registration
Statement on Form S-4 and to the reference to our Firm under the caption
"Experts" in the Prospectus.

WEINSTEIN SPIRA & COMPANY P.C.

Houston, Texas
February 3, 1999

<PAGE>

[LOGO OF PRICWATERHOUSECOOPERS APPEARS HERE]

Exhibit 23.4

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. 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 references
to us under the heading "Experts" in such Prospectus.

PRICEWATERHOUSECOOPERS LLP

Atlanta, Georgia
February 1, 1999

<PAGE>

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
relating to the financial statements of Cookie Conglomerate, Inc. and its
Affiliates, which appears in such documents.

/s/ Habif, Arogeti & Wynne, P.C.
- ----------------------------------
Habif, Arogeti & Wynne, P.C.
Atlanta, Georgia 30309-3837
February 2, 1999

<PAGE>

[LETTERHEAD OF BDO SEIDMAN, LLP]

INDEPENDENT AUDITORS' CONSENT
-----------------------------

Pretzelmaker Holdings, Inc.
Denver, Colorado

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
February 4, 1999

<PAGE>

CONSENT OF INDEPENDENT CERTIFIED PUBLIC 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 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
February 3, 1999

<PAGE>

[LETTERHEAD OF MRS. FIELDS COOKIES APPEARS HERE]

Exhibit 23.9

Consent
-------

We hereby request your consent to refer to you as the Chief Operating and
Accounting Officer (prior management) of (GACC/CUSA) in referring to relevant
MD&A sections in the MFOC and MFH S-4 filings. We confirm that we have not made
changes to the MD&A prepared by you previously.

Consent /s/ David Barr Acknowledgement /s/ Tim Pierce
-------------------- -----------------------
David Barr Tim Pierce
President and CEO Chief Financial Officer
May 26, 1996 - August 24, 1998 Jan 30, 1999

CFO
May 31, 1994 - May 26, 1996

<PAGE>

================================================================================

FORM T-1

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE

CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [_]

__________________

THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)

New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)

One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)

__________________

MRS. FIELDS' ORIGINAL COOKIES, INC.
(Exact name of obligor as specified in its charter)

Delaware 87-0552899
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)

2855 East Cottonwood Parkway, Suite 400
Salt Lake City, Utah 84121
(Address of principal executive offices) (Zip code)

__________________

GREAT AMERICAN COOKIE COMPANY, INC.
(Exact name of obligor as specified in its charter)

Delaware 58-1295221
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)

2855 East Cottonwood Parkway, Suite 400
Salt Lake City, Utah 84121
(Address of principal executive offices) (Zip code)

__________________

THE MRS. FIELDS' BRAND, INC.
(Exact name of obligor as specified in its charter)

Delaware 87-0563472
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)

2855 East Cottonwood Parkway, Suite 400
Salt Lake City, Utah 84121
(Address of principal executive offices) (Zip code)

__________________

10-1/8% Series B Senior Notes due 2004
(Title of the indenture securities)

================================================================================
<PAGE>

1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:

(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Name Address
- -----------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203

Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045

Federal Deposit Insurance Corporation Washington, D.C. 20429

New York Clearing House Association New York, New York 10005
</TABLE>

(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.

Yes.

2. AFFILIATIONS WITH OBLIGOR.

IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.

None.

16. LIST OF EXHIBITS.

EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE 7A-
29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(D).

1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)

4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)

6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-
44051.)

7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.

-2-
<PAGE>

SIGNATURE

Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 9th day of November, 1998.

THE BANK OF NEW YORK

By: /s/ THOMAS C. KNIGHT
-------------------------------------------
Name: THOMAS C. KNIGHT
Title: ASSISTANT VICE PRESIDENT

Consolidated Report of Condition of

THE BANK OF NEW YORK

of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,

a member of the Federal Reserve System, at the close of business June 30, 1998,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.

<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin............................................ $ 7,301,241
Interest-bearing balances..................................... 1,385,944
Securities:
Held-to-maturity securities................................... 1,000,737
Available-for-sale securities................................. 4,240,655
Federal funds sold and Securities pur-
chased under agreements to resell............................. 971,453
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ..................................................... 38,788,269
LESS: Allowance for loan and
lease losses ............................................... 632,875
LESS: Allocated transfer risk
reserve..................................................... 0
Loans and leases, net of unearned
income, allowance, and reserve.............................. 38,155,394
Assets held in trading accounts................................. 1,307,562
Premises and fixed assets (including
capitalized leases)........................................... 670,445
Other real estate owned......................................... 13,598
</TABLE>
<PAGE>

<TABLE>
<S> <C>
Investments in unconsolidated
subsidiaries and associated
companies.................................................... 215,024
Customers' liability to this bank on
acceptances outstanding...................................... 974,237
Intangible assets.............................................. 1,102,625
Other assets................................................... 1,944,777
-----------
Total assets................................................... $59,283,692
===========

LIABILITIES
Deposits:
In domestic offices.......................................... $26,930,258
Noninterest-bearing ......................................... 11,579,390
Interest-bearing ............................................ 15,350,868
In foreign offices, Edge and
Agreement subsidiaries, and IBFs............................. 16,117,854
Noninterest-bearing ......................................... 187,464
Interest-bearing ............................................ 15,930,390
Federal funds purchased and Securities
sold under agreements to repurchase.......................... 2,170,238
Demand notes issued to the U.S.
Treasury..................................................... 300,000
Trading liabilities............................................ 1,310,867
Other borrowed money:
With remaining maturity of one year
or less.................................................... 2,549,479
With remaining maturity of more than
one year through three years............................... 0
With remaining maturity of more than
three years................................................ 46,654
Bank's liability on acceptances exe-
cuted and outstanding........................................ 983,398
Subordinated notes and debentures.............................. 1,314,000
Other liabilities.............................................. 2,295,520
-----------
Total liabilities.............................................. 54,018,268
-----------

EQUITY CAPITAL
Common stock................................................... 1,135,284
Surplus........................................................ 731,319
Undivided profits and capital
reserves..................................................... 3,385,227
Net unrealized holding gains
(losses) on available-for-sale
securities................................................... 51,233
Cumulative foreign currency transla-
tion adjustments............................................. ( 37,639)
-----------
Total equity capital........................................... 5,265,424
-----------
Total liabilities and equity
capital...................................................... $59,283,692
===========
</TABLE>

I, Robert E. Keilman, Senior Vice President and Comptroller of the above-
named bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.

Robert E. Keilman

-4-
<PAGE>

We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.

.
J. Carter Bacot .
Thomas A. Renyi . Directors
Alan R. Griffith .
.
_______________________________

<PAGE>

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 December 28, 1996 and January 3, 1998 and for the period from
inception (September 18, 1996) to December 28, 1996 and for the year ended
January 3, 1998 included in this registration statement and have issued our
report thereon dated June 10, 1998. 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.

Arthur Andersen LLP

Salt Lake City, Utah
June 10, 1998
<PAGE>

MRS. FIELDS' ORIGINAL COOKIES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

<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 Inception (September 18,
1996) through December 28, $ 269,000 119,000 - $ 388,000
1996...............................

Year Ended January 3, 1998............. 388,000 481,000 255,000 614,000

Period from January 3, 1998 through
July 4, 1998......................... 614,000 145,000 176,000 583,000

STORE CLOSURE RESERVE:
Period from Inception (September 18,
1996) through December 28, 1996...... 5,060,000 - 305,000 4,755,000

Year Ended January 3, 1998............. 4,755,000 3,257,000 2,546,000 5.466,000

Period from January 3, 1998 through
July 4, 1998......................... 5,466,000 - 1,157,000 4,309,000
</TABLE>