<PAGE>
                                                                   EXHIBIT 10.35

                        COLLECTIVE BARGAINING AGREEMENT


                                    between


                             LENDER'S BAGEL BAKERY


                                      and


                       BAKERY, CONFECTIONERY and TOBACCO

                              WORKERS OF AMERICA

                                  LOCAL #429


                     SEPTEMBER 1, 1998 to AUGUST 31, 2001
<PAGE>

                               TABLE OF CONTENTS
                               -----------------

Article                                                                 Page
-------                                                                 ----

   1.  Recognition_________________________________________________________1
   2.  Hours of Work_______________________________________________________2
   3.  Holidays____________________________________________________________3
   4.  Night Premium_______________________________________________________5
   5.  Lunch & Relief Periods______________________________________________5
   6.  Rest Hours__________________________________________________________5
   7.  Wages for Higher Classification Work________________________________6
   8.  Vacations___________________________________________________________6
   9.  Job Posting and Bidding_____________________________________________8
  10.  Seniority__________________________________________________________10
  11.  Uniforms___________________________________________________________12
  12.  Death in Family____________________________________________________12
  13.  Jury Duty__________________________________________________________13
  14.  Physical Examinations______________________________________________13
  15.  Union Label________________________________________________________13
  16.  Union Business_____________________________________________________13
  17.  Selective Service Act______________________________________________14
  18.  Grievance Procedure________________________________________________14
  19.  No Strike Clause___________________________________________________16
  20.  Benefits Package___________________________________________________16
  21.  Pension____________________________________________________________17
  22.  Sick Leave_________________________________________________________18
  23.  Checkoff___________________________________________________________19
  24.  Leaves of Absence__________________________________________________19
  25.  Rights of Management_______________________________________________20
  26.  Executive or Management Work_______________________________________20
  27.  Nondiscrimination Clause___________________________________________21
  28.  Miscellaneous______________________________________________________21
  29.  Posting of Work Schedule___________________________________________23
  30.  Severance Pay______________________________________________________23
  31.  Scope of Agreement and Separability________________________________23
  32.  Termination________________________________________________________24
  33.  Political Contributions____________________________________________24
  34.  Americans With Disabilities Act____________________________________25
  35.  Part-Time Employees________________________________________________25
  36.  Alternative Work Schedule__________________________________________25
  37.  Substance Abuse Policy_____________________________________________26
       Schedule "A"_______________________________________________________35
       Attachment: Memorandum of Agreement
<PAGE>

                                   AGREEMENT
                                   ---------

     THIS AGREEMENT made and executed this 1st day of September, 1998, as of
September 1, 1998, between LENDER'S BAGEL BAKERY with its offices at 75 Empire
Drive, West Seneca, New York, 14224, hereinafter referred to as the Employer and
the BAKERY, CONFECTIONERY & TOBACCO WORKERS' INTERNATIONAL UNION OF AMERICA,
LOCAL 429, with its offices at 1560 Harlem Road, Cheektowaga, New York, 14206,
hereinafter referred to as the Union.


                                  WITNESSETH:
                                  -----------

     This Agreement as to hours, wages and working conditions is entered into
and shall be binding on the parties hereto and their successors and assigns from
September 1, 1998 until terminated as hereinafter provided.


                            ARTICLE 1 - RECOGNITION
                            -----------------------

     Section 1. The Employer recognizes the Union as the collective bargaining
     ---------
agent for all of his Employees, in all Lender's Bagel Bakery production,
shipping, packing, maintenance and sanitation, including regular part-time
Employees, but excluding store clerks, office and clerical Employees, route
salesmen, drivers and supervisors.

     Section 2.  It shall be a condition of employment that all of the
     ---------
Employer's Employees in the contractual bargaining unit who are members of the
Union in good standing on either the effective date or the execution date of the
Agreement, whichever is later, shall remain members in good standing for the
term of the Agreement; those Employees in the unit who are not members on the
latter of those two dates, shall become Union members on the 31st day following
either the effective date or the execution date of this Agreement, whichever is
later, and remain good standing members for the term of the Agreement; all new
Employees in the unit shall become Union members on the 31st day following the
beginning of such employment, and remain good standing members for the term of
the Agreement.

                 It is agreed that the Employer shall retain in his employ only
such Employees covered by this Agreement who are dues paying members in good
standing of the Bakery Confectionery & Tobacco Workers' International Union of
America.  Good

                                                                               1
<PAGE>

standing members are those owing not more that two (2) months dues.  The
Employer shall have sixty (60) calendar days to determine if the new Employee
qualifies to do the work before he/she shall be considered regular full-time
during which time the Employee may be discharged without recourse, unless the
Union and Employer agree in writing to extend the period for a term not to
exceed three (3) weeks.


                           ARTICLE 2 - HOURS OF WORK
                           -------------------------

     Section 1.   Minimum wages and classification shall be as agreed upon in
     ---------
negotiation conferences and as set forth in Schedule 'A', a copy of which is
annexed hereto and made a part hereof, and is to be identified by the signature
of the Employer and the Union.

     Section 2.   The normal work day for full-time Employees shall be seven and
     ---------
one-half (7.5) hours and the normal work week shall consist of five (5) days or
thirty-seven and one-half (37.5) hours, which need not be worked consecutively,
being the normal times worked at straight time rates.  A part-time Employee is
one who works less than thirty-seven and one-half (37.5) hours per week.  The
normal work week shall commence on a Sunday or any other day which shall be
selected at the option of the Employer.  This section is intended only to
provide a basis for the calculation of overtime and it should not be construed
as a guarantee of work per day or per week.

      Section 3.   All regular full-time Employees asked to report for work
      ---------
shall be guaranteed seven and one-half (7.5) hours per day and all part-time
Employees asked to report for work shall be guaranteed four (4) hours per day,
except those voluntarily agreeing to work less hours.

      Section 4.   All hours worked in excess of seven and one half (7.5) hours
      ---------
in any one day and/or thirty-seven and one-half (37.5) hours per week, shall be
compensated for at the rate of time and one-half the straight time hourly
classification rate.

     Section 5.   Time and one-half the straight time hourly classification rate
     ---------
shall be paid for all hours on the sixth (6th) day and double time on the
seventh (7th) consecutive day of any one work week. For the purposes of this
section the day is defined as no less than seven and one half (7.5) hours
worked, with the exception of those voluntarily agreeing to work less hours.

     Section 6.   Overtime is to be calculated on either the daily or weekly
     ---------
basis, whichever is greater, but not on both.

                                                                               2
<PAGE>

     Section 7.   Except in the event of an emergency, no Employee may be
     ---------
required to work more than ten (10) hours in any one day.  As far as possible
the distribution of available overtime shall be equally divided among all
Employees, subject, however, to the qualifications of such Employee to do the
required work. For the purpose of this Agreement, emergency shall be defined as
a malfunction in the production line or plant support, and unavoidable absence
with regard to which the Employer was not notified within a reasonable time or
an injury occurring during the work day with regard to whose station no
replacement can be reasonable found.


                  When Employees are required to work overtime, they shall be so
notified at least one (1) hour before the completion of their scheduled shift,
except in cases of emergency.

     Section 8.   The parties agree that it is the spirit and intent of this
     ---------
Agreement for all Employees to enjoy a five (5) day work week.  The Union
recognizes however, that occasions may arise when it might become necessary for
an Employer to request that work be performed on the sixth (6th) day and/or
seventh (7th) consecutive day.  The Union, therefore, agrees that if under such
circumstances, it cannot supply qualified workers as needed by the Employer, the
Employees will work the extra day or days unless they have a valid reason for
not doing so.  The Shop Committee and Management will resolve any questions
concerning the validity of any such excuse.


                              ARTICLE 3-HOLIDAYS
                              ------------------

     Section 1.
     ---------

            (a)   The following days shall be observed as holidays.  All
observances shall be as prescribed by the Federal Government.

            New Year's Day                  Labor Day
            Martin Luther King Day          Thanksgiving Day
            Easter Monday                   Christmas Eve
            Memorial Day                    Christmas Day
            Independence Day

            (b)   An Employee's birthday shall be considered a holiday, provided
that the Employee has so notified the Employer in writing at least two weeks
prior thereto, each year of the term of this Agreement.  In the event two or
more Employees' birthdays fall on the same day, seniority shall prevail.

                                                                               3
<PAGE>


   Section 2. To be eligible for a particular unworked holiday, an Employee must
   ---------
meet all of the following requirements:

          (a) The Employee must have thirty (30) days of service as full-time.

          (b) In the case of a full-time Employee, he/she must have worked seven
and one-half (7.5) hours on his/her scheduled shift the day preceding the
holiday and seven and one-half (7.5) hours on his/her scheduled shift the day
following the holiday.

              Eligible Employees shall receive seven and one half (7.5) hours
pay for each holiday in the case of a full-time Employee. In the event an
Employee is prevented from reporting to work because of inclement weather
conditions, this factor may be considered by the Employer in determining whether
the Employee reported for work during said week, but said factor need not be
conclusive.

   Section 3. Time and one-half the straight time hourly classification rate
   ---------
shall be paid for all hours worked on the fifth (5th) day in a holiday week. In
the event Employees are required to work on the sixth (6th) and seventh (7th)
day in a holiday week, they shall be entitled to double the straight time hourly
classification rate for hours worked on such days.

   Section 4. In the event an Employee is laid off during a holiday week, if
   ---------
employed over one year prior to being laid off, said Employee shall be entitled
to holiday pay as described in Section 2 hereof. Wherever practicable, there
shall be no Employee training during said week.

   Section 5. In the case of sickness or accident on an Employee's last
   ---------
scheduled day before a holiday or first scheduled day after a holiday, the
Employee can receive holiday pay. However, the Employee affected must have a
Doctor's Certificate. The Employer will have the right to check on the Doctor's
Certificate. The Union will cooperate with the Employer if the Employer has any
problems on the above. Employees who are receiving Disability or Workers'
Compensation payments will not be eligible for holiday pay.

   Section 6. No production work will be performed on the holidays. However, no
   ---------
overtime shall be earned by Employees facilitating the shutdown prior to a
holiday day or reopening it subsequent thereto. Rest periods are deemed waived
for this purpose.

   Section 7. Time and one-half the straight time hourly classification rate
   ---------
shall be paid for all hours worked on the holiday except no overtime shall be
earned by Employees facilitating the shutdown prior to a holiday day or
reopening it subsequent thereto.

                                                                               4
<PAGE>

        Section 8. The Company and the Union agree that normally holidays will
        ---------
be scheduled to begin at 10:00 P.M. the day before the holiday and end at 10:00
P.M. on the holiday. However, it is understood the Company and the Union may
change this time frame by mutual agreement.

                            ARTICLE 4-NIGHT PREMIUM
                            -----------------------

        A night premium of twenty cents ($.20) per hour will be paid to
employees regularly assigned to second and third shifts. Night premium will be
included in the overtime computation for the assigned second and third shift
employees.

                       ARTICLE 5-LUNCH & RELIEF PERIODS
                       --------------------------------

        Not less than or more than thirty (30) minutes lunch period shall be
granted to all Employees in the middle of the work day, which shall not be paid
for nor included in the regular working hours.

        Employees scheduled to work seven and one-half (7.5) hours or more shall
receive two (2) ten (10) minute relief periods, one (1) period before and one
(1) period after lunch. If the work day is more than seven and one half (7.5)
hours, a fifteen (15) minute relief period shall be granted after the seven and
one-half (7.5) hours. Additional ten (10) minute relief periods will be granted
for every additional two (2) hours of work. These relief periods shall be
considered as time worked and compensated for. For the purpose of company
meetings only, any employee required to attend a company meeting shall receive a
rest period only if the meeting will require more than one hour to attend.

                             ARTICLE 6-REST HOURS
                             --------------------

        There shall be a minimum of twelve (12) hours of rest for all Employees
between daily shifts; and a minimum of thirty-six (36) hours of rest during
their regular scheduled day off; and sixty (60) hours rest between shifts when a
double holiday or double day off occurs. The sixty (60) hours rest shall be the
maximum circumstance for which the following premium pay guidelines shall apply.
<PAGE>

        Any Employee called in to work before the expiration of the
aforementioned rest hour shall be compensated for all such hours worked at
double his/her straight time hourly classification rate, and such hours worked
shall be considered a part of the daily guarantee and shall also be used towards
the seven and one-half (7.5) hour daily overtime calculation.  It is understood
that overtime is calculated on either the daily or weekly basis, whichever is
greater, but not on both.

                ARTICLE 7 - WAGES FOR HIGHER CLASSIFICATION WORK
                ------------------------------------------------

        Section 1. In the event an Employee works in a higher paid
        ---------
classification than his/her own, he/she will receive the higher classification
rate for such hours worked, provided however, if such Employee works in excess
of four (4) hours on any one (1) shift, he/she shall be paid the higher
classification rate for the entire shift. If an Employee works twenty (20) hours
or more per week, he/she will receive the higher classification rate for the
entire week.

        Section 2. Any Employee receiving a higher hourly rate than specified in
        ---------
this Agreement shall not be reduced, provided his/her classification of work is
not changed on a permanent basis.

                              ARTICLE 8 - VACATIONS
                              ---------------------

        Section 1. All full-time Employees covered by this Agreement shall
        ---------
receive vacation according to the following schedule:

                Continuous Service                    Vacation
                ------------------                    -------
                1 year, but less than 2 years         1 week
                2 years, but less than 5 years        2 weeks
                5 years, but less than 14 years       3 weeks
                14 years, but less than 20 years      4 weeks
                20 years or more                      5 weeks

        Section 2. Full-time Employees on vacation shall receive as vacation pay
        ---------
thirty-seven and one-half (37.5) hours pay for one (1) weeks vacation, seventy-
five (75) hours pay for two (2) weeks vacation, one hundred-twelve and one-half
(112.5) hours pay for three (3) weeks vacation, one hundred-fifty (150) hours
pay for four (4) weeks vacation and one hundred-eighty seven and one-half
(187.5) hours pay for five (5) weeks vacation. A full-time Employee who shows a
pattern of night work three (3) weeks prior to taking a vacation will receive
night premium pay in their vacation pay.

                                                                               6
<PAGE>

        Section 3. The regular vacation period shall be from the 1st day of
        ---------
January until the 31st day of December and shall be distributed in accordance
with seniority during such period of time. All vacation polling will be
completed by March 1st. A minimum of one (1) person per shift shall be entitled
to vacation during the regular vacation period (two [2] in packing). Should a
single down week occur, all Employees not scheduled to work that week will be
required to take one (1) week of vacation during that time. Should two (2)
successive down weeks occur, all Employees not scheduled to work those weeks
will be required to take a maximum of two (2) weeks of vacation during that
time. All Employees will be excluded from this provision if the shutdown is
outside the last week of June, the entire months of July and August.
Notification of Plant down week(s) will take place not later than February 1st.

        Section 4. Qualified relief must be available to the Employer during the
        ---------
Employee's vacation period.

        Section 5. Full-time Employees eligible for vacation must take their
        ---------
vacation, except that an Employee who loses time at work, due to illness or
unforeseen emergency, may, subject to approval by the Employer and the Union,
work during his/her vacation period and receive the extra compensation.

                   Any regular, Full-Time Employee with one (1) year of service
will receive their vacation according to the following schedule:

              Hours Worked                   Percent of Vacation
              ------------                   -------------------
      1275 Hours or more                             100%
      Less than 1275 but more than 975                75%
      Less than 975 but more than 487.5               50%
      Less than 487.5                                -0-%

                    For purposes of calculating hours worked the following will
be included: paid sick time, jury duty, time off for Union business, vacation,
military duty (up to two (2) weeks per year), and overtime (one hour worked
equals one hour of credit).

        Section 6. The seniority list of Employees shall be posted at least
        ---------
thirty (30) days prior to the start of the vacation period. The vacation
schedule shall be posted and remain posted throughout the vacation period.
Employees shall choose their time of vacation within two (2) weeks after the
posting of the seniority list.

                                                                               7
<PAGE>

                       ARTICLE 9 - JOB POSTING AND BIDDING
                       -----------------------------------

        Section 1. In all cases of filling of regular full-time vacancies which
        ---------
are required to be posted, the length of continuous service shall be the
governing factor (seniority). However, the Employee must also have the ability
and physical fitness to perform the work and must have a good work record
including attendance, tardiness, and job performance. In determining an
Employee's ability and physical fitness to perform the normal requirements of
the new job, consideration will be given to job experience, related job
experience, education, and/or ability.

        Section 2. A job, other than a supervisory one, becoming open as a
        ---------
regular full-time vacancy shall be posted on the appropriate bulletin board for
a period of three (3) working days by the Employer and assigned to the senior
qualified bidder.

        Section 3. A standard form of posted notice shall be used for
        ---------
advertising such job vacancy and shall contain the following information:
department, date of posting notice, description and rate of job that is vacant.
Such bids shall be in writing and submitted by the Employee to the Employer.

        Section 4. The following rules for bidding shall apply:
        ---------
                (a) In the event of a transfer to the production department, the
applicant must have a minimum of six (6) months seniority and a good work
record, including attendance, tardiness, and performance.

                (b) Anyone not making claim or refusing the job within
seventy-two (72) hours after notice is posted shall forfeit any claim to the job
unless it again becomes available.

                (c) Where no one signs the bid, the Employer will assign the
work to either a new Employee or to one of the part-time Employees most fitted
for the job.

                (d) With respect to hourly pay rates, the following applies. Up
bidding can take place at any time.  If an Employee bids up, laterally or down,
and is placed in the new job, he/she cannot bid laterally or down for a six (6)
month period. Within five (5) working days on the job, if the Employee shall so
elect, he/she shall be permitted to return to his/her former job, but will not
be permitted to lateral or down bid for a six (6) month period. If within
fifteen (15) working days on the job, the Employee is adjudged as having failed
to perform satisfactorily, he/she shall be permitted to return to his/her former
job and his/her replacement shall return to his/her former job. If an Employee
is returned to his/her former job because he/she failed to perform
satisfactorily, he/she will

                                                                               8
<PAGE>

not be permitted to rebid into that department, from which he/she was
disqualified, for a period of six (6) months.

                (e) With respect to shift preference, the following applies.
Notwithstanding the foregoing in Section 4(d), an Employee may bid to a
preferred shift within his/her present department and job for which he/she is
qualified and requires no additional training.

                    When the Employee is awarded and accepts the new shift
he/she, at the time this choice is made, waives his/her five (5) day trial
period, and will not be permitted to return to his/her former shift. Shift
preference bidding, as described in this section, will be allowed only once in
any six (6) month period.

                (f) When an Employee accepts a job which has been posted, before
his/her trial period begins, his/her name will be removed from all other active
bid sheets. If more than one Employee signs a bid sheet, when that bid sheet is
removed from the bulletin board, it remains active until the job is filled. If
the senior qualified Employee on a multi-signed bid refuses or is disqualified
from the job, as outline in Section 4(d), the 2nd senior qualified Employee will
be given the opportunity to fill the open job. If the 2nd senior Employee
refuses or is disqualified from the job, then the 3rd senior qualified Employee
is given the opportunity to fill the job. This procedure is followed until the
job opening is filled or until all names on the bid sheet have been exhausted,
at which time the bid sheet becomes inactive.

                (g) It is understood by both the Company and the Union that an
Employee, who bids into and is awarded a job in the production department, will
be required to accept training and become qualified in all production department
jobs. It is also understood that the fifteen (15) day trial period outlined in
Section 4(d) does not allow adequate time for an Employee to become fully
qualified in all production jobs. If, after the fifteen (15) day trial period,
the Employee is awarded the job, but does not actively and willingly accept
training or, after receiving adequate training, does not become qualified in all
production department jobs, his/her performance will be brought to the Union's
attention before remedial action is taken by the Company. In any case, he/she
will not be able to bump the Employee who filled his/her former job.

        Section 5. An Employee who claims a job which has been posted need not
        ---------
be transferred by the Employer to the posted job if the transfer will affect the
progress of an unusually important job or if there is an emergency which
requires the Employee's retention on his/her present job. Nor shall he/she be
transferred until a replacement has been secured for him/her. The Company will
aggressively seek a replacement for any Employee who is waiting to be
transferred.

                                                                               9
<PAGE>

                A person who successfully bids on a job must be moved within six
(6) weeks or he/she should receive the rate of pay (if higher), but still
receives five (5) days to adjust, and your time period starts after two (2)
weeks for purposes of bidding rights. Awarded job bid is to be posted within
seventy-two (72) hours of job being taken down. This time period may be extended
from six (6) weeks to eight (8) weeks due to unforeseen circumstances upon
mutual agreement between the Company and the Union.

        Section 6. In the event a part-time Employee works thirty seven and
        ---------
one-half (37.5) hours or more on job for a period of six (6) weeks, not
including replacement for vacation or absence of Employees, the job shall be
considered a full-time position, subject to posting and bidding.

        Section 7. Employees who are absent from the plant with a reasonable
        ---------
excuse, shall be eligible to have their name placed on a bid which is posted
during their absence, if they complete and turn into the Company a bid
preference request which indicates any job positions for which they wish to be
considered during such absence.

        Section 8. Notwithstanding the foregoing an Employee holding a bid
        ---------
position, whose bid position has been eliminated and subsequently recreated
within three (3) months, has the right to first refusal of the original job.
This applies only to the Employee whose job was eliminated.

        Section 9. In the event of a significant change in the packing
        ---------
department workforce needs (e.g.: five (5) day v. six (6) day production
schedule), seniority will be a determining factor in job assignments.  As always
performance must be maintained at an acceptable level.

                             ARTICLE 10 - SENIORITY
                             ----------------------

        Section 1. The Employer and the Union believe in the principles and
        ---------
doctrines of seniority, but in individual cases shall take into consideration,
the efficiency, needs and industry of the Employee affected.

        Section 2. The Employer agrees to notify the Union, once a week, of the
        ---------
names and classifications of new Employees hired during that week.

        Section 3. When reductions in the working force become necessary, the
        ---------
Employer shall give proper recognition to the length of the Employee's service.
Seniority is the right of preference in the event of permanent layoff and
recall. When layoffs become necessary, the full time Employee with the least
amount of seniority

                                                                              10
<PAGE>

shall be laid off first, and in recalling Employees, the last Employees laid off
shall be the first to be recalled, except that the right of preference for
maintenance department Employees shall be limited to the maintenance department
and the right of preference for all other plant Employees shall be limited to
the production, packing, sanitation and shipping departments. However, it is
understood that part time Employees shall be laid off first wherever practical.

        Section 4.  Seniority right shall terminate if an Employee:
        ---------
                (a) Voluntarily quits.

                (b) Is discharged for just cause.

                (c) Fails to return to work within three (3) days after notice
by registered or certified mail to his/her last known address. A copy of such
notice shall also be served by mail upon the Local Union.

                (d) Is laid off for the following period of time:

                    (1) Employees with less than one year continuous service:
forty-five (45) days. However, non probationary Employees rehired within sixty
(60) days from date of layoff will have their seniority reinstated to their
original hire date after working a period equal to the amount of time such
Employee was on layoff.

                    (2) Employees with less than two (2) years continuous
service: one hundred twenty (120) days.

                    (3) Employees with less than three (3) years continuous
service: two hundred forty (240) days.

                    (4) Employees with less than four (4) years continuous
service: three hundred forty (340) days.

                    (5) Employees with less than five (5) years continuous
service: four hundred eighty-five (485) days.

                    (6) Employees with more than five (5) years of continuous
service: seven hundred thirty (730) days.

                                                                              11
<PAGE>

          (e) Absences of two (2) years or more, excluding layoff, shall
terminate seniority. Extensions may be granted by mutual agreement between the
Employer and the Union. This applies to cases occurring on or after September 1,
1998. The Company agrees to notify the Union and the Employee, in writing, each
month for the three (3) months preceding the expiration of the two (2) year time
frame about the impending termination of seniority.

          (f) Voluntarily transfers from full time to part time.


                             ARTICLE 11 - UNIFORMS
                             ---------------------


     The Employer agrees to furnish hair nets and caps, and to furnish and
launder and keep in repair, aprons, shirts and trousers for the Employees
covered by this Agreement.


                         ARTICLE 12 - DEATH IN FAMILY
                         ----------------------------

    In the event of a death in a full-time Employee's immediate family i.e.
father, mother, sister, brother, son, daughter, (includes adopted children) wife
or husband, mother-in-law, father-in-law, grandfather or grandmother, it is
recognized by the parties that the Employee may need time off to attend the
funeral service, from the day of death to and including the day of the funeral.
If any of these days off are the Employee's scheduled working days, the
Employer shall grant seven and one-half (7.5) hours pay at the straight time
hourly rate for each such full day lost, not to exceed a maximum of three
(3) full days. In the case of a part-time Employee, they will be paid
proportionately according to their schedule. In the event of the death of a
regular full-time employee's immediate brother-in-law or sister-in-law, it
is recognized that the Employee may need time off to attend the funeral service.
If this day is one of the Employee's scheduled work days, the Employee will be
granted seven and one-half hours pay at the straight time hourly rate for the
day. This applies to an employee's brother's or sister's spouse, or the
employee's spouse's brother or sister.

                                                                              12
<PAGE>

                      ARTICLE 13 - JURY DUTY
                      ----------------------

    The Employer agrees to pay a full seven and one-half (7.5) hours pay at
straight time hourly classification rate for each day that an Employee is
required to serve and does serve as a juror, provided his/her department is
scheduled to work on the day or days actually served on a jury. The Employee,
however, will be required to turn in to the Employer the jury fees in order to
receive the compensation above provided.


                      ARTICLE 14 - PHYSICAL EXAMINATIONS
                      ----------------------------------

    The Employer shall pay for all physical examinations of Employees with the
exception of pre-employment physical examinations that may be required by law,
city ordinance and the Employer.


                           ARTICLE 16 - UNION LABEL
                           ------------------------

    All bagels and bread shall bear the Union Label. Such bagels and bread
labels shall cost the Employer the current price. The Union shall claim the
right to withdraw the label at any time, in case of misunderstanding. As printed
packages become standardized for bagels and bread, they shall bear the Union
Label. The Union will furnish the Employer Shop Cards for his own stores.


                          ARTICLE 16 - UNION BUSINESS
                          ---------------------------

     Section 1. A representative of the Union shall be granted admission to
     ---------
the bakery during working hours, on notification to the Manager or his
representative, to interview members of the Union on Union business, provided it
does not interfere with the efficient operation of the Bakery.

     Section 2. The Employer shall provide in a conspicuous place, a bulletin
     ---------
board for the use of the Employees and the Union. All postings are to be
official Union business and/or approved by the local Human Resources Manager.

                                                                              13

<PAGE>

                      ARTICLE 17 - SELECTIVE SERVICE ACT
                      ----------------------------------

     The rights of an Employee under the Selective Service and Training Act are
recognized by both parties, and incorporated in this Agreement as if actually
written herein.


                       ARTICLE 18 - GRIEVANCE PROCEDURE
                       --------------------------------

     Should differences arise between the Employer and the Union as to the
meaning and application of this Agreement, an earnest effort shall be made to
settle such differences promptly by the following methods of procedure:

     (a) The Shop Chairman or Chairlady shall appoint a steward from each shift
to represent the Union and the Employees in the negotiation of any grievances or
disputes.

     (b) The Employee who believes he/she has suffered a grievance, together
with his/her department steward shall meet with his/her immediate supervisor and
attempt to adjust the difference. The supervisor will provide a verbal response
to the steward within twenty-four (24) hours after the conclusion of this
meeting. Complaints resolved in this step shall be non-precedent setting.

     (c) If no satisfactory settlement is reached in the preceding paragraph,
the Employee who believes he/she has suffered a grievance shall submit the same
in writing, signed by both the Employee and his/her steward, to the Employee's
immediate superior in an attempt to arrive at a satisfactory settlement within
three (3) working days after the inception of the acts or occurrences or
omissions constituting the basis of the grievances, or the right to make a
grievance is deemed to be waived.

     (d) If no satisfactory settlement is reached in the preceding paragraph
(c) within three (3) working days after its submission to the Employee's
immediate superior, the grievance shall then be discussed between the steward,
Employee's immediate superior, Employee and Employer's manager or representative
within three (3) working days after the expiration of the time period set forth
in the preceding subparagraph (c).

     (e) In the event that the parties in preceding paragraph (d) cannot settle
or adjust the grievances within three (3) working days after its submission, the
grievances shall then be discussed between the steward, Employee, Employee's
immediate superior, plant manager and business agent of the Union.

                                                                              14
<PAGE>

         (f) If the parties in preceding subparagraph (e) have not settled or
adjusted the grievance within five (5) working days after its being submitted to
them, then either the Employer or the Union can submit the matter to the New
York State Board of Mediation for purposes of arbitration as hereinafter set
forth, within seven (7) working days after the expiration of the aforementioned
five (5) day period. in the event the New York State Board of Mediation is
abolished the parties agree to use the services of the American Arbitration
Association. The seven working day period may be extended up to 30 calendar days
upon agreement of the Plant Manager and Union Business Agent. If the grievance
is settled, a written disposition shall be noted and filed by the parties.

         (g) Grievances shall be separately arbitrated and are not to be merged.

         (h) In the event of a dispute, the Employer may take the initiative
following its interpretation of the contract provisions in question, subject to
the grievance procedure.

                                  Arbitration
                                  -----------

         (a) Arbitration is available only to the Union and the Employer and
cannot be availed of until all the steps to be followed in the grievance
procedure have been complied with, at which time either party may submit the
controversy to arbitration as hereinabove sets forth.

         (b) It is expressly understood that in no event shall the arbitrator
have jurisdiction or authority to add to, subtract from, modify or in any way
change the provision of this Agreement.

         (c) Any issues involving interpretations and/or application of any
terms of this Agreement may be initiated by either party directly, i.e., the
Union or the Employer, with the other party. Upon the failure of the Union and
Employer to agree, it may then be submitted directly to the New York State Board
of Mediation for arbitration. In the event the New York State Board of Mediation
is abolished the parties agree to the use the services of the American
Arbitration Association. There shall be no strikes or lockouts while grievances
or arbitration procedures are pending. No Employee shall have the right to
compel arbitration, this right being reserved to the Union and the Employer.

                                                                              15
<PAGE>

                         ARTICLE 19 - NO STRIKE CLAUSE
                         -----------------------------

     The Union agrees that during the life of this Agreement, the Union will not
permit or cause its members to participate in any strike, slowdown, or stoppage
(total or partial) of work, or interfere directly or indirectly with the full
operation of the plant. The Employer shall have the right to discharge or
suspend any Employee participating in any action in violation of this section.
The Employer, on its part, agrees that there shall be no lockouts of any of its
Employees during the life of this Agreement.

                         ARTICLE 20 - BENEFITS PACKAGE
                         -----------------------------

Medical Benefits
----------------

     The Employer agrees to provide all regular full-time Employees coverage
under the independent Health Silver or Community Blue plans with riders for:
Prescription Drug Plan, Age 25 Dependent Coverage if full-time student,
Prosthetic Devices and Medical Appliances, and Inpatient Rehabilitation for
Substance Abuse.

     Medical coverage shall begin the first day of the month following
completion of the Employee's probationary period. Effective September 1, 1998,
the Company agrees to maintain Employee contributions to the medical plan at the
1998 contribution rate until January 1, 200O. Employees participating in the
medical benefits plan will be required to pay an Employee contribution equal
to ten percent (10%) of the premium cost effective January 1, 2000 for the
duration of the contract.

     These same medical plan provisions will be extended to all future Retirees
except for those Employees Grandfathered by Kraft Foods, Inc. for Retiree
Medical benefits. Those Employees include people who were age fifty-five
(55) or older with ten (10) or more years of service as of December 16, 1996.

     Employees leaving employment after age fifty-five (55) with less than
(10) years of service will be eligible to purchase the same medical
coverage at the group rate for themselves and eligible dependents.

     Medical benefits will be continued for one (1) year as a result of any
disability according to the provisions of the plan. In the event of a personal
leave of absence, medical benefits will cease at the end of the month in which
the Employee last worked.

                                                                              16

<PAGE>

Dental Benefits
---------------

     The Employer agrees to provide all regular full-time Employees dental
coverage under the Kellogg Company Welfare Benefit Plan. One (1) level of
coverage shall be available to the Employee and his/her qualified dependents,
including dependent children aged 19-25 if a full-time student.

Accident or Sickness
--------------------

     The Employer agrees to provide accident and sickness benefits under the
Kellogg Company Welfare Benefit Plan. This Plan will pay a weekly income benefit
of sixty-six and two-thirds percent (66-2/3%) of the Employee's basic weekly
wage, up to two hundred and fifty dollars ($250), for up to twenty-six
(26) weeks, beginning on the eighth (8th) calendar day of disability.

     Effective August 29, 1999, the Plan's weekly benefit maximum will increase
to two hundred and seventy-five dollars ($275), for up to twenty-six weeks,
beginning on the eighth (8th) calendar day of disability.

     This A&S benefit is not payable as a result of a work-related injury.

Life Insurance
--------------

    The Employer agrees to provide all regular, full-time Employees Company-Paid
Life Insurance under the Kellogg Company Welfare Benefit Plan on the first day
of the month following completion of the employee's probationary period. The
Employee will receive a life insurance benefit equal to one time their annual
base pay, calculated by base hourly rate x 2080.

                              ARTICLE 21-PENSION
                              ------------------

     1.  The Company agrees to provide pension benefits under the Eggo Company
Pension Plan. The Plan will provide all service benefits, offset by any
benefits accrued under the BC&T International Pension Plan and/or the Kraft
Foods Retirement Plan as a result of service with Lender's Bagel Bakery or its
predecessors.

                                                                              17
<PAGE>

     2.  Effective September 1, 1998 the New Pension benefit level will be
established at thirty-two dollars ($32) per month per year of service. This is
equivalent to eight hundred dollars ($800) per month after twenty-five (25)
years of service, or nine hundred sixty dollars ($960) per month benefit after
thirty (30) years of service, subject to the plan provisions, such as early
retirement.

     3.  No reductions in earned benefit amount will be made on or after age
sixty-two (62). Benefits reduced five percent (5%) per year between ages sixty-
two (62) and sixty (60), and six percent (6%) per year between ages sixty (60)
and fifty-five (55) (forty percent (40%) maximum reduction).

     4.  100% vesting at five (5) years.

                            ARTICLE 22 - SICK LEAVE
                            -----------------------

     Section 1.
     ---------

             (a) Employees with one (1) year service are entitled to three (3)
days sick leave per calendar year.

             (b) New Employees with less than one (1) year service are entitled
to sick leave as follows:

             Hired January 2 to April 30    Two (2) days
             Hired May 1 to September 1     One (1) day
             Hired after September 1        Zero (0) day

             (c) In the event entitled sick leave is not used within the
calendar year, pay for these unused sick days will be added to an Employee's
paycheck no later than December 15th. It is understood probationary Employees
are not eligible for sick leave.

     Section 2.  In the event an Employee is hurt on the job and is unable to
     ---------
complete his/her day's work, he/she shall receive wages for the entire day. When
such Employee returns to work, he/she must furnish a Doctor's Certificate that
he/she is capable of returning to work.

     Section 3.  An Employee who becomes ill while at work shall notify his/her
     ---------
immediate supervisor before leaving the plant. If the Employee becomes ill away
from work, he/she shall notify the Employer as soon as possible of the reason
for his/her absence.

                                                                              18
<PAGE>

     Section 4. Notwithstanding the provisions of Sections 1 and 2 of this
     ----------
Article, any Employee absent from work for three (3) days or more may not return
to work until the Employee has furnished to the Employer a Certificate from a
Doctor stating that he/she has been sick during such period of time.

                             ARTICLE 23 - CHECKOFF
                             ---------------------

     It is agreed that the Employer and the Union shall establish a checkoff
plan of Union initiation fees and dues for all Employees covered by this
Agreement. It is further agreed the Employees shall sign statements authorizing
the Employer to make proper deductions from the Employee's pay in accordance
with the checkoff plan. The Employer shall forward a copy of the signed checkoff
authorization to the Union office.

     The Company agrees to deduct Union dues on a weekly basis.

                        ARTICLE 24 - LEAVES OF ABSENCE
                        ------------------------------

     Section 1. Any member of the Union who is elected as a delegate or
     ---------
representative of the Union in any activity necessitating temporary absence from
his/her employment shall be granted such leave of absence without pay upon
adequate advance notice thereof to the Employer.

                For the purpose of Steward education, the Company will pay one-
half of one days wages, at the straight time hourly rate, per contract year. The
Union agrees to validate attendance at such training.

     Section 2. Any member of the Union who is elected to a full-time position
     ----------
with the Union necessitating lengthy absence from his/her employment shall be
granted a leave of absence not exceeding one (1) year in length without loss of
seniority and at the end of such service in the business of the Union he/she
shall be re-employed at his/her former wage rate, plus any increase or less any
reduction that may have become effective during his/her absence. Seniority shall
not accumulate during such absence.

     Section 3. Such leaves of absence by the joint and mutual consent and
     ----------
approval of both the Union and the Employer will be renewed and extended for
additional periods of one (1) year each, subject to the conditions set forth in
Paragraph 2 above.

                                                                              19
<PAGE>

    Section 4. Leaves of absence may be granted in special and extenuating
    ---------
circumstances on a case by case basis with prior approval from the Company.
Such requests must be sent, in writing, to the Plant Manager. The Union shall
be notified when such leaves are granted.


                       ARTICLE 25 - RIGHTS OF MANAGEMENT
                       ---------------------------------

    The Employer retains the sole right to manage its business including but not
limited to the rights to decide the number and location of plants, the number
and type of machinery and equipment to be used, the products to be produced, the
method and place of production, the schedules of production, the size and
composition of the working force, and the control of raw materials which may be
incorporated into the products produced; the right to shift product, processes
or types of work or methods in or out of the plant; plus the rights to hire,
assign, layoff, recall, transfer, and promote Employees, to maintain order and
efficiency in its plant operation; to discipline and discharge Employees for
just cause; to set job requirements and reasonably determine the individual
qualifications of all Employees; to determine the starting and quitting times
and the number of hours to be worked of all Employees; to discontinue all or any
part of its business operation; to control, regulate, or discontinue the use of
supplies, machinery, equipment and other property owned, used, possessed, or
leased by the Employer. Management shall have all other rights and prerogatives
subject only to those express restrictions on such rights as provided in this
Agreement.


                  ARTICLE 26 - EXECUTIVE OR MANAGEMENT WORK
                  -----------------------------------------

     Executive or Management Work - Non-Union supervisory Employees shall not
do work usually performed by the Employees covered by this Agreement, except:

       (a) Covering absent Employees until a replacement is secured.

       (b) For replacing ill or injured Employees pending replacement.

       (c) Providing physical relief for Employees.

       (d) For giving instructions or for the purpose of performing
experimental or research Work.

                                                                              20
<PAGE>

         (e) Emergency and Act of God, such as equipment failure, tire, flood,
etc.

                     ARTICLE 27 - NONDISCRIMINATION CLAUSE
                     -------------------------------------

    No Employee shall be discriminated against in hiring, promotion, or
continued employment because of their race, color, creed, national origin, sex,
age, or physical handicap. Neither the Employer nor the Union, in carrying out
their obligations under this agreement, shall discriminate in any manner
whatsoever against any Employee because of race, sex, religious affiliation,
nationality, age, or Vietnam Era Veteran status.


                           ARTICLE 28 - MISCELLANEOUS
                           --------------------------

    Employer to furnish and replace (upon fair wear and tear) Freezer Wear
Paraphernalia worn by Shipper and Freezer tenders such as: Insulated Chill
Factor Rated Gloves, Boots and Head Covering, also at the option of the wearer,
Cold Weather Masks.

    It is understood that the Company will supply, on an as-needed basis,
Company-owned rubber boots, gloves and protective clothing, when available. It
is also understood that in the event there is an unexpected shortage of any of
the above Company-owned articles, the necessary work assignments will be
completed as assigned.

    The Company agrees to provide a tool allowance of two hundred dollars
($200.00) net (after taxes) per contract year upon proof of purchase.


              SHOE PROGRAM FOR LENDER'S BAGEL BAKERY - WEST SENECA
              ----------------------------------------------------

I. PURPOSE.
   -------

     The Lender's Shoe Program is designed to help ensure the safety of its
Employees as they work within the confines of the bakery. The Program helps
prevent slips and falls which may be caused by water, raw materials or
ingredients spilled on the floor in the working area.

                                                                              21
<PAGE>

II. REQUIREMENTS OF THE PROGRAM
    ---------------------------

      A. All Lender's Employees who have work assignments that require them to
         access the bakery must wear shoes.

      B. All Employees affected by this Program will be required to wear shoes
         with an anti-slip sole (slip coefficient of friction of at least 0.5)
         as determined by the Company.

      C. The shoe payout is e maximum of one hundred dollars ($100.00) per year
         per employee on one (1) pair of shoes per year, paid out on proof of
         purchase and verification that the shoes meet Policy standards.

      D. Shoes shall be of sturdy construction to afford some impact protection.
         Only low-heeled leather/vinyl-type shoes are permitted. Shoe types
         prohibited are canvas, nylon, sandal-type, open heels, open toes,
         deep grooved  soles (1/4" or more). Suede is not permitted on shoes.

      E. Shoes will be kept clean, neat and in good repair.

      F. Shoes with a safety toe are highly recommended for all employees, but
         are not mandatory.

      G. Employees found not to be in compliance with the guidelines of the
         Policy will not be permitted to work until they comply.

      H. Employees involved in an accident which is related to a slip or fall,
         and who are not wearing shoes as outlined in the Policy, will be
         subject to Disciplinary Action up to and including Termination.

      I. Visitors and Contractors to the bakery who are taking a plant tour
         must comply with Item "D" of this Program. It is also highly
         recommended that these individuals be informed prior to their entry
         into the bakery of the hazards they may encounter.

      J. The Company will provide a list of shoe vendors and styles. Purchases
         outside of this approved list are the Employees' responsibility to
         ensure compliance with the Policy as listed above.

      K. Exceptions to this Policy will be made on a case-by-case basis and
         must be accompanied by medical documentation.

      L. All Employees will be in compliance by January 1, 1996.

                                                                              22
<PAGE>

                     ARTICLE 29 - POSTING OF WORK SCHEDULE
                     -------------------------------------

    A schedule of starting times for all Employees for the following week shall
be posted at least sixiy (60) hours in advance. In the event it is necessary to
change the Employee's starting time, he/she shall be notified by the Employer at
the completion of his/her work day. The only time a change can be made is in
case of emergency.


                           ARTICLE 30 - SEVERANCE PAY
                           --------------------------

   The Company has a responsibility to improve its competitive position through
equipment upgrades, technology advances, and work methods. The Company agrees to
offer training or education to Employees impacted by these changes.

    It is agreed that each full-time Employee who is displaced from his/her
employment by reason of the closing of the plant, shutdown of a department,
displacement from their job as a result of the introduction of labor saving
machinery, or to any full-time Employee who leaves his/her employment in the
event the Employer moves his shop to another place located thirty-five (35) or
more miles from his shops present location, shall be compensated by the Employer
or his/her predecessor for such displacement providing he/she has been actively
employed by the "Employer" for a period of at least two (2) years. An eligible
Employee's compensation for his/her displacement shall be on the basis of
thirty-seven and one-half hours (37.5) of severance pay (at his/her straight
time hourly rate of pay) for each full year of his/her actual employment,
commencing with the third (3rd) year thereof.


                ARTICLE 31 - SCOPE OF AGREEMENT AND SEPARABILITY
                ------------------------------------------------

   Section 1. It is agreed that this written Agreement reflects the entire
   ---------
Agreement between the Union and the Company. Amendments or clarification of
this Agreement, mutually agreed upon, shall be reduced to writing and become a
part this Agreement.

   Section 2. The Union and the Employer acknowledge that during the
   ---------
negotiations which resulted in this Agreement, each had the unrestricted right
and opportunity to present demands and proposals with respect to any matter
subject to collective bargaining. Therefore, this Agreement includes all
contracted matters related to wages, hours, benefits and conditions of
employment. All other matters related to wages, hours, benefits and conditions
of employment are expressly and unequivocally waived.

                                                                              23
<PAGE>

Further, the Employer and the Union freely agree that during the life of this
Agreement neither party shall be obligated to bargain with respect to any matter
or subject covered or not covered in this Agreement, except in the event the
Employer creates a new job classification, the Employer will notify and discuss
with the Union the wage rate of such new classification.

     Section 3. Should any part or provision of this Agreement be rendered or
     ---------
declared invalid by reason of any existing or subsequently enacted legislation
or by decree of a court of competent jurisdiction, such invalidation of such
part or provision of this Agreement shall not invalidate the remaining portions
of this Agreement and they shall remain in full force and effect.


                            ARTICLE 32 - TERMINATION
                            ------------------------

    This Agreement shall be in full force and effect from September 1, 1998 to
and including August 31, 200l and thereafter from year to year until terminated
by either party as hereinafter provided. Sixty (60) days prior to August 31,
200l or any subsequent annual expiration date, either party may notify the other
of its desire to negotiate a new Agreement. During negotiations, this Agreement
shall remain in full force and effect and the wage rate provisions of such new
Agreement, when consummated, shall be retroactive to August 31, 200l or any
subsequent annual expiration date. However, such retroactive provision shall not
be applicable to any Employee who has resigned or been discharged prior to the
time of the signing of this Agreement.

    In the event either party shall not be satisfied with the progress of the
negotiations, the Employer or the Union, Local #429 with the sanction of the
Bakery, Confectionery & Tobacco Workers International Union of America, may
terminate this Agreement, after any expiration date, upon forty-eight (48) hours
notice to the other party.


                     ARTICLE 33 - POLITICAL CONTRIBUTIONS
                     ------------------------------------

   Effective upon thirty (30) days notice from the Union, the Employer agrees to
honor contribution deduction authorization from its Employees for the BCT - PAC.
It is understood that the authorization is voluntarily made by the Employees and
such deduction shall be on a monthly basis.

                                                                              24
<PAGE>

                 ARTICLE 34 - AMERICANS WITH DISABILITIES ACT
                 --------------------------------------------

    The parties recognize that each of them have obligations pursuant to the
Americans With Disabilities Act to employ and, in some cases, to accommodate,
disabled persons. The parties further acknowledge that the Employer may take
whatever action is necessary to comply with the provisions of that Act and that
nothing in this agreement is intended to interfere with, or impede, the Employer
in meeting these obligations.

    The parties hereto recognize and agree to comply with the Family Medical
Leave Act as such applies to the Employees of the Employer.


                       ARTICLE 35 - PART-TIME EMPLOYEES
                       --------------------------------

  a)  The part-time workforce will not exceed six percent (6%) of the regular,
      full-time workforce.

  b)  Part-time Employees will not be eligible for holiday or vacation pay.

  c)  Part-time Employees will be eligible for funeral leave as stated in
      Article 12.

  d)  Part-time Employees who become regular, full-time Employees will be
      eligible for holiday pay provided they have thirty (30) days of service as
      part-time Employees.

  e)  Part-time Employees who become regular, full-time Employees will become;
      eligible for medical benefits on the first of the month following their
      move to regular, full-time status, provided they have sixty (60) days of
      service as part-time.

  f)  This language applies only to part-time Employees hired after 9/1/95.


                  ARTICLE 35 - ALTERNATIVE WORK SCHEDULE
                  --------------------------------------

     In addition to the provisions of the Agreement, the Employer may establish
an Alternative Work Schedule. Such Alternative Work Schedule shall be subject to
agreement with a full-time Officer and Shop Committee of the Union.

                                                                              25
<PAGE>

                      ARTICLE 37 - SUBSTANCE ABUSE POLICY
                      -----------------------------------

SUBSTANCE ABUSE POLICY
----------------------

   Kellogg Company (Kellogg) recognizes the growing problem of drug and alcohol
abuse in society, while also realizing that drug and alcohol dependency and
abuse can be treated and controlled. Kellogg desires to provide a safe work
environment for all of its employees. To this end, the purpose of this policy is
to provide a work environment that is free of illegal drugs and alcohol by
offering programs concerned with awareness, intervention and rehabilitation.

   Kellogg will offer assistance to all employees for the treatment of drug and
alcohol abuse through programs authorized by the Company for this purpose.
Employees are encouraged to voluntarily acknowledge a problem before any
disciplinary action is initiated and to undertake a Company-approved treatment
program. If no other Company policies are violated, employees who successfully
complete the program will not place their jobs in jeopardy.

The elements of this program are:

1. The sale, use or possession of alcohol or illegal drug or controlled
   --------------------------------------------------------------------
   substances are prohibited. Violation of this rule will result in disciplinary
   -----------------------------------------------------------------------------
   action up to and including termination.
   --------------------------------------

   a)  Using, selling or possessing illegal narcotics, drugs or controlled
       substances (including, but not limited to, marijuana, cocaine, crack,
       PCP, heroin, LSD, amphetamines and barbiturates) while on the job-or on
       Company-owned or Company-leased property (including vehicles). In
       addition, any illegal substances will be turned over to the appropriate
       law enforcement agency and may result in criminal prosecution.

    b) Bringing or consuming alcohol on any Company-owned or Company-leased
       property (including vehicles), unless specifically authorized by a senior
       Kellogg manager.

    c) If an employee is subject to discipline or termination for cause under
       existing rules, separate and apart from any impairment related to
       substance abuse (i.e. plant rules or attendance policies), such employee
       shall not utilize the substance abuse policy to circumvent other policies
       or practices to avoid discipline or termination. Disciplinary actions
       other than those specified under this policy shall follow the time limits
       and principles of progressive discipline and, where applicable, the
       collective bargaining agreement, and bargaining unit employees shall have
       recourse to the grievance and arbitration procedure therein.

                                                                              26
<PAGE>

    d) Working with a level of prohibited drugs in one's system above cutoff
       level. Prohibited drugs include both illegal substances and prescription
       drugs that have not been specifically prescribed by a registered
       physician for specific treatment purposes for the employee. Employees are
       required to report to work in a condition that allows them to perform
       their duties. Employees who appear to be unfit for work may be subject to
       a fitness-for-duty examination at a designated medical facility.

    e) Working while under the influence of alcohol.

 2. Voluntary Recognition of Substance Abuse/Dependency (Self-Identification)
    ------------------------------------------------------------------------

    a) Employees of the Company with drug and/or alcohol dependency/abuse
       problems are encouraged to come forward voluntarily.

    b) Employees will be strongly encouraged to seek and receive the services of
       the employee assistance program prior to any violations of this policy
       which causes disciplinary action to be initiated.

    c) Individuals who voluntarily seek assistance for substance abuse/chemical
       dependency (either directly or through a third party) will be eligible
       for the employee assistance program established by the Company.

    d) The concerned individual will be referred to a designated medical and/or
       counseling facility for evaluation of their problem/dependency. A
       recovery program will be outlined and submitted to the Plant Manager or
       other appropriate senior manager. If appropriate, that program may
       include a leave of absence of up to four (4) consecutive weeks for
       inpatient treatment and two (2) weeks outpatient treatment at a facility
       designated by the Company.

    e) Following completion of the leave of absence, the individual will be
       expected to return to their former position (with no loss of
       seniority) and complete continuing and/or follow-up rehabilitation
       treatment/counseling. To reinforce the treatment regimen, the Company
       reserves the right to require the affected employee to submit to
       drug/alcohol tests within the first year following referral for treatment
       on a random basis as determined by the Company. Refusal to be tested or
       comply with the approved treatment plan will result in termination.

    f) Employees who successfully complete the employee assistance program and
       their individual treatment plan agreements, return to work and
       subsequentiy relapse into substance abuse/dependency will be afforded a
       second and final opportunity to use the employee assistance program's
       services under the terms

                                                                              27
<PAGE>

       provided in this Section if they come forward voluntarily and prior to
       any violations of this policy which causes disciplinary action to be
       initiated.

3. Involuntary Recognition of Substance Abuse/Dependency
   -----------------------------------------------------

   Employees who do not voluntarily confront their alcohol/drug dependency/abuse
   problems will be subject to the following terms which differ from those
   outlined above:

   a) When a supervisor or manager (hereafter referred to as the "Employer") has
      reasonable suspicion to conclude that an employee has a substance abuse/
      chemical dependency problem, the Employer may attempt to meet with and
      counsel that employee to seek treatment and rehabilitation.

   b) When the Employer has reasonable suspicion to determine an employee's job
      performance is impaired by alcohol or drugs (hereafter referred to as
      "substance"), the Employer shall document these observations in writing
      and contact another Employer representative for purposes of confirming the
      observations.

      The Employer shall contact the Business Agent, Union Steward or other
      Union representative for the purpose of informing and involving the
      appropriate and available Union representative in the immediate situation.

      In the presence of the employee and the Union representative, the Employer
      shall present the observations establishing reasonable suspicion. The
      employee, shall, upon hearing the Employer's confirmed observations,
      receive counseling as to the policy and shall be presented with the
      opportunity to immediateiy enter the employee assistance program. If the
      employee agrees to enter the employee assistance program, at this point it
      will be treated as voluntary recognition and the aforementioned provision8
      of Section 2 shall apply. If the employee does not agree to enter the
      employee assistance program, the employee will be subject to drug/alcohol
      testing for substance abuse. The refusal to be tested will cause
      termination.

   c) Reasonable suspicion based on objective criteria means that based on
      specific personal observations which the Employer representative can
      describe concerning the appearance, behavior, speech or performance of the
      emploee, it is reasonable to conclude that because of drug or alcohol
      use the employee is unable to satisfactorily perform his or her job.
      Suspicion is not reasonable, and thus not a basis for testing, if it is
      based solely on third party observations and reports.

                                                                              28
<PAGE>

      The Employer may require that the employee immediately go to a medical
      facility to provide urine specimens for the purpose of testing and/or
      taking a breath test and to receive a fitness-for-work examination by a
      licensed physician.

   d) While the obervations of the Business Agent, Union Steward, or other
      bargaining unit employee may be solicited and are relevant in the context
      of the joint Employer/Union commitment to addressing the problem of
      substance abuse, Union representatives shall have no right to interfere
      with the Employer's decision to require testing or to take other
      management action.

4. Drug/Alcohol Test Procedures
   ----------------------------

   Drug/Alcohol testing shall be done at the medical facility using urine
   specimens/breathalyzer tests. With regard to alcohol, the cutoff level below
   which a test is presumed negative shall be that used by the State Police to
   conclude impairment in the operation of a motor vehicle.

   a) If required by the medical facility or testing lab the employee shall sign
      forms authorizing: (1) providing the medica1 facility a specimen of
      urine; (2) the testing laboratory to release the results of the testing
      indicating the presence or absence of a substance capable of causing
      impairment to the medical facility for a physician review and to the
      designated manager of the Company, and; (3) at the employee's
      discretion, he/she may authorize the same release as defined in
      (2 above) to the Union. An employee's refusal to sign the release shall
      constitute refusal to be examined and tested. Such refusal shall result
      in termination.

   b) The employee to be tested shall be taken to the medical facility by an
      Employer representative accompanied, at the request of the employee, by
      the Business Agent Union Steward or another employee.

   c) In an effort to protect individual privacy, employees will not be subject
      to direct observation while rendering urine samples. If the employee
      provides urine samples that contain confirmed evidence of any form of
      tampering or substitution, the employee shall be discharged.

   d) Urine samples shall be drawn; subject to the provisions set forth below.
      Upon receipt of the specimens by the laboratory one of three urine
      specimens (or subdivisions of a single specimen) will be placed
      immediately, unopened in a locked freezer for storage. A second sample
      will be used for the initial and confirming test. In the event of a
      positive initial test, within twenty-four (24) hours a second,
      independent, confirming test will be conducted at the laboratory site. The
      cost of the examination and initial and confirming test shall be borne by
      the Company. A negative result in the confirming test will prevail.

                                                                              29
<PAGE>

       A third sample will, at the employee's request, be transferred to a
       laboratory (meeting standards mutually agreed on by Company and
       Union) chosen by the Employer for an independent test. The employee shall
       bear all costs for this test.

    e) The examination and testing procedures and standards to be carried out by
       the medical facility personnel and testing laboratory shall be those
       adopted by the Employer and the Union and shall include the following
       general components:

       (e. 1) Medical Facilities:

       Medical facilities performing the examination must be under the direction
       of a licensed physician. The facility must employ at least one charge
       nurse who is a registered nurse, or a degreed, registered medical
       technician.

       A licensed physician must perform the fitness for work examination and
       review the laboratory reports. The physician must have knowledge of
       substance abuse disorders and must possess the appropriate medical
       training to interpret and evaluate all positive test results together
       with the employee's medical history, including medications used, and any
       other relevant biomedical information.

       The medical facility must possess all necessary personnel, materials,
       equipment, facilities, and supervision to provide for the collection,
       security, temporary storage, and transportation (shipping)of urine
       specimens to the testing laboratory.

       The medical facility must provide written assurances that the specimen
       collection space is secure; that chain of custody forms will be
       properly executed by authorized collection personnel upon receipt of
       specimens: that the handling and transportation of specimens from one
       authorized individual or place to another will be accomplished through
       the use of chain of custody procedures; and that no unauthorized
       personnel are permitted in any part of the specimen collection or storage
       spaces.

       (e. 2) Laboratory Facilities

       Laboratory facilities must comply with applicable provisions of any
       state licensing requirement and must meet the standards for accreditation
       promulgated by the National Institute on Drug Abuse and be an ongoing
       participant in a program of external quality assurance. These standards
       may be revised as recommended by the National institute on Drug Abuse.

                                                                              30
<PAGE>

    f) Specific specimen collection procedures that include safeguards to ensure
       the employee's right to privacy:

       (f.1) Authorized specimen collection personnel shall request that the
       employee show positive identification by providing a pictured
       identification card such as a driver's license, or being identified by
       accompanying Management or Union personnel, and shall assure that the
       employee signs the notice that explains the procedures for testing and
       reporting results. These personnel shall remove all articles and items
       from the collection space or bathroom, shall turn off the hot water valve
       under the sink, shall assure that the tamper-proof specimen collection
       kit is intact, and shall instruct the employee to wash and dry hands
       prior to entry.

       (f.2) Employees shall remove all coats, sweaters, jackets and similar
       excess clothing and leave belongings outside the bathroom and shall
       provide urine samples in multiple containers. Employees will not be
       subject to direct observation while rendering samples. Authorized
       specimen collection personnel shall, however, be present outside the
       bathroom and shall receive the containers, assure that the quantity is
       sufficient for testing, check color and measure the temperature of each
       container and record same. These personnel shall fill in specimen labels
       in the presence of the employee, shall cap and seal containers with
       evidence tape and shall secure the employee's initials on the tape.

    g) Flawless chain of custody procedures shall govern specimen handling
       throughout the testing process. Chain of custody procedures shall assure
       that urine samples shall not leave the sight of the employee until each
       vial has been sealed and initialed and that at least the following
       measures are taken by medical facility and laboratory staff:

       (g.1) Medical Facilities

       Personnel shall complete a chain of custody form and shall place the
       sealed and initialed specimens in the drug collection kit or box provided
       by the laboratory along with the chain of custody form and signed notice.
       The collection kit or box shall be sealed by authorized medical facility
       personnel and this seal or tape shall be initialed by these personnel.

       The medical facility shall make prior arrangements for courier pickup of
       the specimens and shall assure that all specimens are couriered or
       shipped to the testing laboratory as immediately as possible. The medical
       facility shall assure that no specimens will be shipped on a Friday or
       the day before a holiday and

                                                                              31
<PAGE>

    that any specimens held at the facility overnight shall be placed in a
    secured refrigerator until courier pickup.

    (g.2) Laboratory

    The testing laboratory shall assure that personnel authorized to receive
    specimens immediately open the package, inspect the sealing tape for
    initials, and open the kit or box. These personnel shall examine and inspect
    the chain of custody form, the specimen containers, and kit or box to assure
    that it conforms to the requirements of Subsection g.1 (above). If these
    requirements are not met, the laboratory personnel shall immediately notify
    the laboratory's scientific director and shall document any and all
    inadequacies in the chain of custody requirements. The laboratory's
    scientific director shall immediately notify the medical facility and the
    Company of the inadequacies and shall retain the specimens in a locked
    freezer pending disposition direction. Failure to maintain the secure chain
    of custody delineated will be the equivalent of a negative test result.

    If the requirements are met, authorized laboratory personnel shall sign on
    the appropriate line of the chain of custody form and deliver the specimen
    kit or box to authorized laboratory technologists for testing. Each
    technologist shall sign on the appropriate line of the chain of custody
    form.

    All positive samples shall be resecured with evidence tape, signed, and
    dated by an authorized technologist. Upon completion of testing procedures,
    testing reports shall be prepared and a signed by at least two authorized
    technologists for the review, approval, and signature of the scientific
    director.

    h) Established levels below which specimens are deemed negative:

              Drug Assay                     Cut-Off Level
              ----------                     -------------
         Cocaine Metaboiite                     300 ng/ml
         Phencyclidine                           25 ng/ml
         Opiates                                300 ng/ml
         Amphetamine                           1000 ng/ml
         Cannabinoids                           100 ng/ml

  i) Laboratory use of appropriate screening and confirmation procedures and
     technology:

     (i.1) The laboratory shall assure that each specimen in both initial and
     confirming tests (as well as tests paid for by the employee) will use gas

                                                                              32
<PAGE>

     chromatography/mass spectrometry. Both tests must be positive before a
     specimen is reported as positive.

  j) Procedures to assure the confidentiality of test results and the treatment
     of these records as confidential health information or data:

     (j.1) The laboratory shall ensure that alcohol and drug testing reports,
     including the original chain of custody form, are mailed only to the
     appropriate personnel at the medical facility, the designated manager of
     the Company and, if the employee so chooses, to the Union immediately. The
     lab shall ensure that, in the event that telephone reports of testing
     results are required, a security code system be used to establish that
     results are being verbally reported only to those individuals authorized by
     the medical facility, the employee and the Employer.

     (j.2) If an employee is taking a prescription or non-prescription
     medication in the appropriate manner, had noted such use, and the observed
     impairment in the opinion of the physician reviewing laboratory reports of
     tests could reasonably have been caused, in the absence of other
     substances, by the legal medication, then the employee will not be
     disciplined under this policy and will be returned to work or, at the
     Employer's discretion, given sick leave and/or disability for the duration
     of the medication's use.

     (j.3) All information other than positive or negative test results and
     fitness-for-work examination results are confidential and will be revealed
     only to the examining physician, employee and those authorized by him or
     her.

5. Status of Tested Employees and Penalties for Positive Results
   -------------------------------------------------------------

  a) Employees subject to the requirement for testing shall be suspended without
     pay, effective immediately after receipt of the fitness-for-work
     examination and rendering of samples for the period of time required to
     process, confirm and report test results.

  b) Employees whose test results are negative, and who pass the fitness-for-
     work examination, shall be reinstated and made whole for the period of
     suspension.

  c) Employees whose first alcohol/drug test results are positive shall not be
     eligible for reinstatement with back pay but shall be given a final
     opportunity to immediately enter the employee assistance program. Failure
     to enter the rehabilitation program and failure to abide by the terms of
     the treatment plan shall be grounds for discharge. This option will not be
     afforded to those who test positive for a second time.

                                                                              33
<PAGE>


   d) An employee who, on the basis of such random and mandatory tests as
      defined in this policy, provides samples that contain positive and
      confirmed evidence of substances at or above the stipulated levels, or
      confirmed evidence of tampering or substitution, shall be discharged.

6. Right of Search
   ---------------

   Kellogg does not intend to authorize indiscriminate searches of employee
   desks, lockers, vehicles or personal effects such as purses and lunch boxes,
   but the Company reserves the right to authorize searches for illegal drugs,
   alcohol or contraband, if warranted, by reasonable cause.


    IN WITNESS WHEREOF, the parties hereto have set their hands and seals the
day and year first above written.


LENDER'S BAGEL BAKERY                   BAKERY, CONFECTIONERY & TOBACCO
                                        WORKERS' INTERNATIONAL UNION OF
                                        AMERICA, LOCAL 429

 For the Company:                       For the Union:


/s/ Francis W. Furlong                  /s/ James T. Short
--------------------------              --------------------------------
Francis W. Furlong                      James T. Short, Business Agent
Human Resources Manager                 BC&T Local #429


/s/ Joseph C. Waryold                   /s/ Robert T. Giczkowski
--------------------------              --------------------------------
Joseph C. Waryold, Jr.                  Robert T. Giczkowski
Plant Manager                           President, BC&T Local #429


/s/ Stefon L. Martin                    /s/ Timothy C. Ahrens
--------------------------              --------------------------------
Stefon L. Martin                        Timothy C. Ahrens
Operations Manager                      Shop Chairman, BC&T Local #429


/s/ Francis J. Zajac                    /s/ Michael G. Kinsley, Sr.
--------------------------              --------------------------------
Francis J. Zajac                        Michael G. Kinsley, Sr.
Logistics Manager                       Committee Member, BC&T Local #429


/s/ Mark J. Coolican                    /s/ Edward J. Walsh
--------------------------              --------------------------------
Mark J. Coolican                        Edward J. Walsh
Director, Industrial Relations          Committee Member, BC&T Local #429
Kellogg Company

                                        /s/ Marcus A. Tatko
                                        --------------------------------
                                        Marcus A. Tatko
                                        Committee Member, BC&T Local #429

                                                                              34
<PAGE>

                       SCHEDULE "A" OF AGREEMENT BETWEEN
                           LENDER'S BAGEL BAKERY AND
                    BAKERY, CONFECTIONERY & TOBACCO WORKERS'
                   INTERNATIONAL UNION OF AMERICA, LOCAL 429
                         DATED AS OF SEPTEMBER 1, 1998

                                 WAGE SCHEDULE
                                 -------------
<TABLE>
<CAPTION>
                        Effective        Effective        Effective
    CLASSIFICATION       8/30/98          8/28/99          9/3/2000
    --------------       -------          -------          --------
   <S>                  <C>              <C>               <C>
    Maintenance          $13.83           $14.13            $14.43
    Employees

    Production           $12.77           $13.07            $13.37
    Employees

    Shippers             $12.17           $12.47            $12.77

    Packers, Sanitors    $11.92           $12.22            $12.52
    and Helpers
</TABLE>


    Any Employee receiving a higher rate than specified in this Agreement,
his/her hourly rate shall not be reduced for any condition.

    New, inexperienced Employees hired after August 31, 1995 shall be paid at
the rate of seventy percent (70%) of the job rate in the classification in which
the Employee is working for the first six (6) months, eighty percent (80%) of
the job rate for the second six (6) months, and ninety percent (90%) for the
third six (6) months. Thereafter, the Employee shall receive the rate of the
classification. If an Employee has worked in the industry and has completed the
necessary time requirements end leaves such company and resumes work with the
same company or another company in the industry and still maintains the skills
and ability, such Employee will not be required to meet the time requirements
again, and will receive the rate stated in the classification the Employee is
working.

                                                                              35
<PAGE>

                            MEMORANDUM OF AGREEMENT
                            -----------------------

Disability Pension
------------------

A collectively bargained Employee who was formerly employed by Lender's Bagels
at its West Seneca facility shall be entitled to receive a Disability Retirement
Pension under this Plan if he incurs a Disability and

   1) his Disability has continued for at least six months, and
   2) he has completed at least 15 years of Benefit Service

The monthly amount of a Pension payable in the form of a Life Only Pension shall
be equal to $32.00 multiplied by the Participant's years of Benefit Service up
to a maximum of 30 years of Benefit Service. If the Disability Retirement
Pension is not a whole dollar amount, it shall be rounded to the next higher
whole dollar amount.

The disabled Participant's Disability Retirement Pension shall be reduced by
l/4 of 1% for each month that he is younger than age 62, but in no event shall
the reduction exceed 50% of the Pension payable at age 62.

The disabled Participant's Disability Retirement Pension shall commence as of
the seventh month after the Participant incurs a Disability. The Disability
Retirement Pension payments shall be made to the Participant as long as the
Disability continues.

For the Company:                      For the Union:


/s/ Francis W. Furlong                /s/ James T. Short
---------------------------           ----------------------------------
Francis W. Furlong                    James T. Short, Business Agent
Human Resources Manager               BC&T Local #429


/s/ Joseph C. Waryold                 /s/ Robert T. Giczkowski
---------------------------           ----------------------------------
Joseph C. Waryold                     Robert T. Giczkowski
Plant Manager                         President, BC&T Local #429


/s/ Stefon L. Martin                 /s/ Timothy C. Ahrens
---------------------------           ----------------------------------
Stefon L. Martin                     Timothy C. Ahrens
Operations Manager                    Shop Chairman,


/s/ Francis J. Zejac                  /s/ Michael G. Kinsley, Sr.
---------------------------           ----------------------------------
Francis J. Zejac                      Michael G. Kinsley, Sr.
Logistics Manager                     Committee Member, BC&T Local #429


/s/ Mark J. Coolican                  /s/ Edward J. Walsh
---------------------------           ----------------------------------
Mark J. Coolican                      Edward J. Walsh
Director, Industrial Relations        Committee Member, BC&T Local #429
Kellogg Company

                                      /s/ Marcus A. Tatko
                                      ----------------------------------
                                      Marcus A. Tatko
                                      Committee Member, BC&T Local #429