PROGRAM AGREEMENT

         PROGRAM AGREEMENT, dated this 10th day of February, 1997, by and
between FRANCHISE MORTGAGE ACCEPTANCE COMPANY LLC, a California limited
liability company, having an office at Five Greenwich Office Park, Greenwich,
Connecticut 06831 ("FMAC"); and BAB Systems, INC., an Illinois corporation with
its principal place of business at 8501 W. Higgins Road, Suite 320, Chicago,
Illinois 60631 ("BAB");


                              W I T N E S S E T H :

         WHEREAS, BAB is engaged in the business of franchising Big Apple Bagel
Stores ("Stores") to franchisees ("Franchisees") throughout the continental
United States of America ("Territory"); and

         WHEREAS, FMAC is engaged in the business of financing the use and
acquisition of personal property to franchisees in the Territory.

         WHEREAS, FMAC and BAB desire to create a program (the "Program") to
facilitate the development of additional Stores for existing BAB Franchisees;
and

         NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, FMAC and BAB intending to be legally bound, hereby agree as
follows:


         1. The Program.

         FMAC shall develop one or more proprietary finance programs for BAB to
facilitate the development of Stores for qualified existing BAB Franchisees. The
terms of the initial Program are set forth on Schedule 1 hereto. BAB shall
promote the Program to its Franchisees at sales meetings and by promotional
materials and agree to offer only the FMAC Program to Franchisees seeking to
finance an additional Store or Stores. Nothing contained herein is intended to
restrict a Franchisees right to obtain any other financing or for BAB to furnish
financing for its franchisees.


         2. Loan Availability; Use of Proceeds; Documents.

         Pursuant to the Program FMAC shall make available to qualified
Franchisees loans ("Loans")and/or lease financing ("Leases")(each a "Program
Financing") for a term, at rates and other terms set forth on Schedule 1 hereto.
The proceeds of the Program Financing will be used to finance the cost of
equipment ("Equipment") for improvements ("Improvements") to the Franchisee's
additional Store(s) as provided in Schedule 1. All Loans and Leases, including
advances thereon if any, made to Franchisees, will be subject to the Required
Payments and Net Loss provisions of Section 5 hereof. The documents related to
or used in connection with each Program Financing, including but not limited to
the note, security agreement, mortgage, if any, equipment lease or other
documents are hereinafter referred to collectively as the "Documents".


         3. Approval Process.

         (a) FMAC will require the following with respect to applications for
each Program Financing:

                  (i) a fully completed Franchise Credit Application in the form
of Exhibit A hereto,

                  (ii) the Location of the Store(s) for which the Program
Financing is to be used ("Premises"),

                  (iii) the cost of the Equipment ("Equipment Cost") and/or
Improvements ("Improvements Cost") and if advances are required (each an
"Advance") the amount and timing thereof,

                  (iv) the form of financing i.e. true lease, finance lease or
loan,

                  (v) the term of the financing,

                  (vi) the Franchisee's financial statements and tax returns for
the two (2) fiscal years preceding the Franchise Credit Application,

                  (vii) interim financial statements with comparable prior year
data if the full year statement is more than 90 days old,

                  (viii) personal financial statements and latest tax returns
for each of the principals of the Franchisee,

                  (ix) the location of Franchisee's existing Store(s) and

                  (x) such additional information as FMAC shall request (the
foregoing items shall hereinafter be referred to as the "Application Package").

         (b) FMAC shall review the creditworthiness of each Franchisee and may
approve or reject any Franchisee or proposed Program Financing in its sole and
absolute discretion. Notwithstanding the FMAC approval no Program Financing
shall be made without the written approval of BAB. FMAC will use its best
efforts to evaluate each application for Program Financing within five (5)
business days after receipt of the Franchisee's completed Application Package at
FMAC's office in Greenwich, Connecticut. The approved amount of a Program
Financing is hereinafter referred to as the "Maximum Financing".

         (c) FMAC will, with respect to a proposed Program Financing, advise BAB
of the name of the Franchisee, the Equipment Cost and Improvement Cost, the term
and amount of the requested financing and such additional information as BAB
reasonably requests. BAB will advise FMAC, in writing within five (5) business
days following its receipt of such information, of its approval or rejection of
such proposed Program Financing in the form of Exhibit B hereto.

         (d) Upon its approval of the proposed Program Financing and its receipt
of BAB's written approval FMAC will issue an approval letter to the Franchisee
(the "FMAC Approval") which will contain an approval number. Each FMAC Approval
will be effective for a period of one hundred twenty (120) days from the date of
the FMAC Approval, after which period such FMAC Approval shall be deemed
withdrawn.

         4. Program Financing Processing.

         FMAC will fund an approved Program Financing upon receipt by FMAC of

         (a) a fully completed Request for Advance, if applicable, in form of
Exhibit C hereto (the "Request for Advance"),

         (b) with respect to a loan (i) an executed advance or permanent note in
the form of Exhibit D or E hereto (the "Advance Note" or "Permanent Note") and
(ii) executed security agreement in the form of Exhibit F hereto (the "Security
Agreement"),

         (c) With respect to a Lease, (i) an executed Lease in the form of
Exhibit G hereto and (ii) if Advances are required, an executed progress payment
agreement in the form of Exhibit H hereto (the "Progress Payment Agreement"),

         (d) such executed Uniform Commercial Code-1 financing statements, as
FMAC deems necessary or desirable to perfect its security or other interest in
the property which is the subject of the Security Agreement, each in form and
substance satisfactory to FMAC,

         (e) any additional Documents or other information or materials required
by the terms of the FMAC Approval each in form and substance satisfactory to
FMAC,

         (f) with respect to the portion of the Program Financing covering the
Equipment Cost (i) an invoice from the suppliers thereof, and (ii) a delivery
and acceptance certificate satisfactory to FMAC acknowledging the receipt,
satisfactory installation and acceptance of the Equipment by the Franchisee in
the form of Exhibit I hereof ("Delivery and Acceptance Certificate") and

         (g) with respect to the portion of the Program Financing covering the
Improvements Cost,(i) an invoice or contract from the contractor providing the
Improvements setting forth, if required, the advance payments to be made to such
contractor; and (ii) with respect to the only or final payment to a contractor a
Completion Certificate with respect to the Improvements in the form of Exhibit J
hereto and (iii) if required by FMAC a lien release from such contractor.

         (h) In addition to the provisions set forth above, if FMAC has made
Advances to or for the Franchisee for which an Advance Note was executed, on the
date the Advance becomes a Permanent Financing, (as defined below) Franchisee
shall, at the request of FMAC, execute and deliver to FMAC a replacement note
("Replacement Note") in the form of Exhibit K hereto.

         (i) Payments under a Permanent Financing (as defined below) shall
commence (i) with respect to a Lease on the first day of the month (the "First
Lease Payment Date") following the earlier of the date the Equipment Cost is
funded or the date the Franchisee accepts the Equipment (the "Commencement
Date") provided interim rent shall be paid by the Franchisee for the period
between the Commencement Date and the First Lease Payment Date as provided in
the Lease, or (ii) with respect to a Loan on the first day of the second month
(the "First Loan Payment Date") following the date that the Loan becomes a
Permanent Financing (the "Loan Commencement Date"). If the Program Financing
involves a Lease and Advances are made, interim rent will be payable as provided
in the Progress Payment Agreement. If the Program Financing involves a Loan and
Advances are made, interest will be payable as provided in the Advance Note;

         (j) The term "Permanent Financing" means a Loan or Lease with respect
to which (i) the Advances made to or for the Franchisee equal the Maximum
Financing, or (ii) the Advances made to or for the Franchisee outstanding on the
Outside Date for Advances set forth in the FMAC Approval if such Advances are
less than the Maximum Financing.


         5. BAB Required Payments; Net Loss.

         (a) Subject to the Maximum Loss limitation set forth herein, BAB agrees
to bear any Net Loss (hereinafter defined) which FMAC may suffer as a result of
a payment or other default by a Franchisee under a Program Financing. If a
Franchisee under a Program Financing defaults and such default remains uncured
for thirty (30) days (a "Defaulted Program Financing"), BAB shall, within ten
(10) days of FMAC's written demand, pay to FMAC the monthly Lease or Loan
payment due FMAC (or part thereof if a partial payment has been made) on such
Defaulted Program Financing (but excluding late charges, default interest and
similar charges) until the earlier of (v) eighteen (18) months from the date of
default (w) the date the Franchisee cures the default or has made other
arrangements for payment satisfactory to FMAC (x) the assumption of the Program
Financing by a replacement Franchisee acceptable to FMAC (y) the assumption of
the Program Financing by BAB (z) the date BAB advises FMAC that a location is
not viable and it desires to pay FMAC its Net Loss. FMAC shall advise BAB of any
Franchisee that is past due in payment for twenty (20) days.

         If none of the foregoing (w), (x) or (y) occurs then at the earlier of
the expiration of such eighteen (18) month period or the date BAB so advises
FMAC, BAB shall pay FMAC its Net Loss for the Defaulted Program Financing;
provided in no event shall BAB's obligation to pay FMAC its Net Loss resulting
from Defaulted Program Financings funded during a Pool Year (as hereinafter
defined) exceed an amount equal to ten (10%) percent of the aggregate Program
Financings funded by FMAC in such Pool Year (the "Maximum Loss"). Required
Payments made by BAB will be charged against BAB's Maximum Loss and will reduce
BAB's obligation to pay Net Losses. FMAC may, in its discretion, defer demand
for payment of the Required Payment or Net Loss and no such delay shall
constitute a waiver of its right to payment. Notwithstanding the cure,
satisfactory payment arrangement or assumption of such Defaulted Program
Financing by a replacement Franchisee or BAB, BAB shall remain responsible and
in the event of a future default under such cured, replaced or assumed Program
Financing.

         (b) FMAC shall use its customary efforts to collect payments on
Defaulted Program Financings or the accelerated balance due thereunder to the
same degree employed by FMAC in collecting its other leases or loans, including
where determined by FMAC to be appropriate, to institute legal proceedings
against the Franchisee or any collateral.

         Upon the payment by BAB to FMAC of FMAC's Net Loss, FMAC shall, if
requested by BAB, assign its interest in the Documents relating to such
Defaulted Program Financing to BAB. If BAB elects to have a Defaulted Program
Financing assigned to it and prior thereto, FMAC has commenced an action against
the Franchisee, so long as no claims have been asserted against FMAC in such
action, BAB shall amend the pleadings to substitute BAB for FMAC and continue
the action with counsel of its choosing provided in such event, BAB shall pay
FMAC for all fees or expenses incurred by FMAC prior to such Assignment with
respect to such Defaulted Program Financing. If a claim has been made against
FMAC in such action or is thereafter made and notwithstanding the change of
counsel, FMAC may continue to designate counsel to represent its interest in
such action at FMAC's expense.

         (c) "Net Collection" means the amounts recovered by FMAC with respect
to a Defaulted Program Financing (including from the disposition of collateral)
less all of FMAC's expenses incurred in connection with the collection of such
amounts. Net Collections shall be reported to BAB monthly and paid to BAB
monthly to the extent BAB has paid the Required Payments or Net Loss for such
Defaulted Program Financing and BAB is not otherwise in default hereunder. Net
Collections paid to BAB shall increase, dollar for dollar, the amount of Net
Losses available for payment to FMAC for the related Pool Year.

         (d) "Net Loss" means: (i) with respect to a Loan, the unpaid principal
balance thereof plus interest accrued to the date of payment and FMAC's legal
expenses, if any, incurred in connection with such Loan and (ii) with respect to
a Lease, the unpaid balance of payments due and to become due thereunder less a
rebate of unearned lease charges computed to the date of default under the
actuarial method using the implicit rate used to compute the Lease payments plus
interest from such date to the date of payment at such implicit interest rate
and FMAC's legal expense, if any, incurred in connection with such defaulted
Lease.

         (e) "Pool Year" means for the first Pool Year the period commencing on
the date the first Program Financing is funded and ending on the last day of the
month twelve months thereafter; the second Pool Year shall commence on the first
day following the end of the first Pool Year and end twelve months thereafter,
provided, that, if the effective date of termination of this Agreement occurs
other than on the last day of a Pool Year, the Pool Year shall end on the
effective date of termination.

         (f) Any legal expenses incurred by FMAC in collecting payments on a
Defaulted Program Finance to the extent not recovered from the Franchisee or Net
Collections shall be borne by BAB whether the Program Financing was assigned to
BAB or retained by FMAC and if requested shall be paid to FMAC quarterly upon
receipt of itemized invoices therefore.

         (g) BAB agrees to cooperate with FMAC in connection with FMAC's
collection efforts including, without limitation,

                  (i) if BAB deems it appropriate in its sole judgment to assume
the operation of the Store(s) of the defaulting Franchisee and the obligations
to FMAC

                  (ii) to obtain a qualified replacement Franchisee acceptable
to FMAC (which acceptance will not be unreasonably withheld) to assume the
Defaulted Program Financing. Notwithstanding any assumed Program Financing BAB
shall not be relieved of its obligation to make Required Payments or Net Loss
payments if a subsequent default occurs

                  (iii) if the Equipment is retaken from a defaulting Franchisee
to assist in the remarketing of the Equipment to the next available Franchisee
acceptable to FMAC.


         6. Program Priority.

         FMAC will promote the Program as a Tier One Priority "National Account"
within its organization. FMAC shall designate a person at its principal office
in Greenwich, Connecticut to administer the Program for FMAC (the "FMAC Program
Administrator"). FMAC shall also designate a person at its principal office in
Greenwich, Connecticut to provide daily assistance to Franchisees in connection
with the application and documentation process (the "FMAC Program Coordinator").
A designated group of sales, credit and "Franchise Support" personnel will also
be available on an as needed basis to assist BAB in marketing the Program and in
evaluating the credit and financial capability of Franchisees. FMAC shall
provide BAB with the name and toll free telephone number of the FMAC Program
Administrator and FMAC Program Coordinator. The FMAC Program Administrator will
be familiar with the Program generally, and be available to respond to inquiries
concerning the overall operations, implementation and marketing of the Program.
The FMAC Program Coordinator will be available during regular business hours to
respond to inquiries regarding and assist in completing the processing and
documenting of any proposed transaction.


         7. Reporting.

         FMAC shall provide BAB:

         (a) monthly, not later than the tenth (10th) day of each month, with a
written report containing the following information:

                  (i) an aging of all Program Financing listing, among other
things, the term and balance of the term thereof;

                  (ii) a list of all proposed transactions indicating those
awaiting further documentation;

                  (iii) a list of all proposed transactions which were rejected
during the prior month;

                  (iv) a list of all approved transactions awaiting
documentation ;

                  (v) a list of all Defaulted Program Financings and Required
Payments to be made by BAB;

                  (vi) a list of all Defaulted Program Financings requiring a
payment to FMAC of the Net Loss and the amount thereof;

                  (vii) a list of all Net Collections made on Defaulted Program
Financings and amounts due BAB;

                  (viii) such other reports as agreed to by FMAC and BAB.


         8. Administrative Fee.

         FMAC shall pay to BAB or as BAB directs, an administrative fee of one
(1%) percent of the funds advanced by FMAC hereunder on the date of the final
advances or permanent funding hereunder to compensate for its administrative and
other duties hereunder.


         9. Independent Contractor Relationship.

         Nothing contained in this Agreement shall be deemed to constitute any
officer, employee or other personnel of either party to be the agent of the
other. It is the intention of BAB and FMAC that the relationship between them
shall be that of an independent contractor. No officer, employee or other person
associated with a party shall represent by his or her conduct or otherwise that
he or she is an agent or employee of the other party or authorized to speak for
or on behalf of the other party unless such action has previously been
authorized in writing by the other party.


         10. Damages Limitation.

         In no event shall FMAC or BAB be liable to the other under this
Agreement or any Document, or otherwise, for any lost profits or for any
special, indirect, incidental, exemplary or consequential damages for any reason
whatsoever. Nothing contained herein is intended to limit any parties right to
recover damages from the other for breach of this Agreement to any extent
permitted by applicable law.


         11. Term of Agreement; Termination.

         Unless sooner terminated this Agreement shall remain in full force and
effect for a period ended on the last day of the month falling twenty four
months from the date of the funding of the first Program Financing. This
Agreement may be terminated by either party upon the occurrence of a material
breach by the other party, which material breach is not cured within twenty (20)
days after delivery of written notice thereof from the non-defaulting party or;
(ii) if the volume of applications is insignificant and uneconomical to continue
or (iii) by BAB if FMAC's approved rate is unreasonably low. Notwithstanding
such termination, this Agreement shall remain in force with respect to any
Program Financing or any application for Program Financing which thereafter
results in a Program Financing or the obligations of BAB hereunder to make
Required Payments, Net Loss payment or pay or perform its other obligations
hereunder and FMAC's collection and other obligation hereunder with respect of
any Program Financing entered into prior to or if an application is pending,
after termination.


         12. Notices.

                  Any notice required under this Agreement shall be deemed
sufficient if sent by (a) the United States mail, certified mail, postage
prepaid, return receipt requested, addressed to the addresses set forth at the
beginning of this Agreement or to such other address as directed by the parties
during the term of this Agreement, or (b) receipted facsimile transmission. Any
such notice shall be deemed to have been given if sent by mail, on the third
business day after the day duly deposited in the mail, or in the case of
facsimile transmission, on the day sent. Att: President.


         13. Assignment; Binding Effect.

         Neither party may assign or transfer, or attempt to assign or transfer,
all or any part of this Agreement except in connection with the sale of all or a
substantial part of the assets of the party in which sale the assignee agrees to
assume all of the obligations of the assignor provided that notwithstanding any
such assignment and assumption the assigning party shall continue to be liable
as if such assignment had not occurred. Notwithstanding the foregoing, FMAC may
assign its rights under the Documents and grant a security interest therein or
in the Equipment and/or the Improvements in connection with any financing or
securitization of the Documents. This Agreement is binding upon and shall inure
to the benefit of the parties and their respective permitted successors and
assigns.


         14. Entire Agreement.

         This Agreement, including the Exhibits and Schedules hereto, constitute
the entire agreement of the parties with respect to the subject matter hereof.
Neither FMAC nor BAB shall be bound by, nor shall be deemed to have made any
representation, warranty or covenant, except as contained herein. Any amendment
or modification of this Agreement must be in writing and signed by both parties
hereto.


         15. Governing Law.

         This Agreement shall be governed by and construed in accordance with
the laws of the State of Connecticut.


         16. Confidentiality

         During the existence of this Agreement, and for a period of one (1)
year thereafter, FMAC shall treat as confidential the names and financial
information of BAB's franchises whether or not FMAC enters into a Program
Financing with such franchisee.


         17. No Third Party Beneficiaries

         This Agreement is entered into solely for the benefit of FMAC and BAB
and their respective successors and permitted assigns and no other person, firm,
entity or corporation (including, without limitation, any Franchisee) shall have
any right, benefit or interest under or because of the existence of this
Agreement.

         IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered on the day and year first above written.

                                     FRANCHISE MORTGAGE ACCEPTANCE
                                     COMPANY LLC


                                     By: /s/ John Rinaldi
                                         --------------------------------------
                                         John Rinaldi

                                     Title: Sr. VP
                                            -----------------------------------


                                     BAB SYSTEMS, INC.


                                     By: /s/ Theodore P. Noncek
                                         --------------------------------------
                                         Theodore P. Noncek

                                     Title: Chief Financial Officer
                                            -----------------------------------