<PAGE>
 
                         BRUEGGER'S FRESH BAGEL BAKERY
                         -----------------------------

                             DEVELOPMENT AGREEMENT
                             ---------------------
<PAGE>
 
                         BRUEGGER'S FRESH BAGEL BAKERY
                         -----------------------------
                                        
                             DEVELOPMENT AGREEMENT
                             ---------------------
                                        
                               TABLE OF CONTENTS
                               -----------------

<TABLE> 
<CAPTION> 
Section                                                       Page
-------                                                       ----
<S>                                                           <C> 
1.  DEFINITIONS...............................................  4
2.  DEVELOPMENT RIGHTS AND OBLIGATIONS........................  5
3.  DEVELOPMENT FEE...........................................  9
4.  SITE SELECTION............................................ 10
5.  ADDITIONAL SERVICES....................................... 11
6.  SELECTION OF OPERATOR..................................... 12
7.  CONFIDENTIAL INFORMATION.................................. 12
8.  CORPORATE REQUIREMENTS; FINANCIAL STATEMENTS.............. 13
9.  TRANSFER OF INTEREST...................................... 14
10. DEFAULT AND TERMINATION................................... 17
11. COVENANTS................................................. 18
12. NOTICES................................................... 20
13. INDEPENDENT CONTRACTOR AND INDEMNIFICATION................ 20
14. APPROVALS AND WAIVERS..................................... 21
15. SEVERABILITY AND CONSTRUCTION............................. 22
16. ENTIRE AGREEMENT; APPLICABLE LAW.......................... 22
17. ACKNOWLEDGMENTS........................................... 24
</TABLE> 

     EXHIBIT A - PROPRIETARY MARKS
     EXHIBIT B - DEVELOPMENT AREA
     EXHIBIT C - DEVELOPMENT SCHEDULE
     EXHIBIT D - BRUEGGER'S FRESH BAGEL
                 BAKERY FRANCHISE AGREEMENT
     EXHIBIT E - ACCOUNTING SERVICES AGREEMENT
     EXHIBIT F - SOFTWARE LICENSING AND MAINTENANCE AGREEMENT
     EXHIBIT G - COMMISSARY ACCOUNTING SOFTWARE LICENSING AND
                 MAINTENANCE AGREEMENT
<PAGE>
 
                        BRUEGGER'S FRESH BAGELS BAKERY

                             DEVELOPMENT AGREEMENT

     THIS DEVELOPMENT AGREEMENT ("Agreement") is entered into on ____________,
19_____ (the "Effective Date") between BRUEGGER'S FRANCHISE CORPORATION, a
Delaware Corporation ("FRANCHISOR"), and DEVELOPER (as defined below):

Name:        ______________________________
             ______________________________
             ______________________________


     
Principal Address:
 
             ______________________________
             ______________________________
             ______________________________


                                   RECITALS

1.  Franchisor and its affiliates have developed a system relating to the
preparation and promotion of distinctive bagels and cream cheese and the
establishment and operation of restaurants specializing in the sale of the
bagels, cream cheese, and other food and beverage items (the "System");

2.  The distinguishing characteristics of the System include, without
limitation, the sale of bagels and cream cheese products prepared in accordance
with secret recipes and manufacturing processes owned by affiliates of
Franchisor or its affiliates; distinctive exterior and interior restaurant
design, decor, color scheme, fixtures, and furnishings; standards and
specifications for ingredients, food preparation, equipment, supplies, and
restaurant operations; and advertising and promotional programs; all of which
may be changed, improved, and further developed by Franchisor and its affiliates
from time to time;

3.  The System is identified by means of certain trade names, service marks,
trademarks, logos, emblems, and indicia of origin, including but not limited to
the mark "BRUEGGER'S," as set forth in Exhibit A to this Agreement, and such
other trade names, service marks, and trademarks as may hereafter be designated
by Franchisor in writing for use in the System (the "Proprietary Marks");
<PAGE>
 
4.   Developer wishes to obtain the right to develop restaurants under the
System and the Proprietary Marks within the territory defined in Exhibit B to
this Agreement (the "Development Area");

1.   DEFINITIONS

For purposes of this Agreement, the meanings of the following terms are as
follows. Certain other terms may be defined when they appear within the text of
the Agreement.

"Accounting Period" - One of thirteen periods of four consecutive weeks in each
fiscal year of the Franchisor that is designated by Franchisor as an accounting
period.

"Agreement Term" - The period commencing on the Effective Date and ending on the
earlier of: 1)__________________________________; or 2) the date that this
Agreement expires or terminates according to its terms.

"Bagel Store" - a food service business, including a Bakery, which derives a
significant portion of its revenue from the sale of bagels and/or bagel related
products or from any other product or service which is or hereafter becomes a
source of a significant portion of the revenue of a Bakery.

"Bakery" - A food service business that:

     1.   offers products for consumer consumption through on premises dining
          and carry-out;
     2.   operates using the System and the Proprietary Marks; and 
     3.   is either operated by Franchisor or pursuant to a valid Unit Franchise
          Agreement.

"Development Agreement" - An agreement between Franchisor and Developer
pursuant to which Developer is given the right to enter into Unit Franchise
Agreements for Bruegger's Fresh Bagel Bakeries within a geographic region
identified in the Development Agreement.

"Development Area" - The geographic area described in Exhibit B to this
Agreement.

"Development Quota" - The number of Bakeries required to be opened and operating
as required by the Development Schedule.

"Development Schedule" - The schedule of Bakeries required to be open and
operational at specified dates within the Development Area as set forth on
Exhibit C hereto.

"Excluded Location" - Any mall (an enclosed shopping facility which contains
100,000 square feet or more of enclosed space) or Institutional Location.

                                       4
<PAGE>
 
"Institutional Location" - Any public building, military base, airport,
hospital, educational institution factory, turnpike, toll road or highway or any
rest areas adjacent to any such location.

"Required Items" - Products required by the Franchisor, from time to time in its
sole discretion, for sale at or from the Bakeries, including bagels, bagel
related products, Franchisor's proprietary brand of cream cheese and other
spreads, sandwiches, soups, salads, baked goods, breakfast items, an assortments
of hot and cold beverages, teas (leaves, bags, dry mixes and related forms),
coffee (Franchisor's proprietary brand of coffee including beans, ground and
related forms), and other food products and merchandise, all of which are
subject to modification or discontinuation in Franchisor's sole discretion from
time to time and may include additional or substitute products.

"Unit Franchise Agreement" - The franchise agreement being granted by Franchisor
to Developers in the offering and granting of franchises for Bakeries (including
all exhibits, riders, addenda and attachments there), in either the form of
which is attached hereto as Exhibit D or the form which is adopted and used by
Franchisor from time to time in the offering and granting of franchises for
Bakeries.

2.   DEVELOPMENT RIGHTS AND OBLIGATIONS

     2.1  Developer has requested that Franchisor grant to Developer the right
to develop, own and operate certain Bakeries within the Development Area in
accordance with the Development Schedule. Provided that Developer is in full
compliance with all of the terms and conditions of this Agreement, including
without limitation, the development obligations set forth in Section 2.4 hereof,
and the Unit Franchise executed pursuant to this Agreement, Franchisor will
grant Developer during the Agreement Term, and in accordance with the provisions
hereof, the right to develop and operate the number of Bakeries specified in the
Development Schedule. Developer acknowledges and agrees that Developer's rights
hereunder are limited to the designated number of Bakeries and the schedule and
timing of store openings in the Development Area during the term of the
Development Schedule as set forth herein. Developer is not granted any rights to
develop or operate, and Developer will not develop or operate, Bakeries outside
of the Development Area, except pursuant to rights granted to Developer under
other written agreements entered into with Franchisor.

     2.2  Developer expressly acknowledges and agrees that it has no right to
renew its rights under this Agreement upon expiration of the Agreement Term.
Developer acknowledges and agrees that the execution and delivery of this
Agreement shall constitute notice to Developer of non-renewal for the purposes
of fulfilling the requirements of any applicable state or federal law governing
the non-renewal of franchise or development rights.

                                       5
<PAGE>
 
     2.3. Except as otherwise provided in the Agreement (including, without
limitation, Sections 2.6 and 2.7) and provided that Developer is in full
compliance with this Agreement and with all Unit Franchise Agreements between
Developer and Franchisor, Franchisor and its affiliates will not operate or
grant franchises for the operation of Bakeries within the Development Area.

     2.4  Developer agrees that during the Agreement Term, it will continuously
exert its best efforts to promote and enhance the development of Bakeries within
the Development Area. Without limiting the foregoing obligation, Developer
agrees to have open and operational, the number of units set forth in the
Development Schedule and as required under this Agreement by the opening dates
specified therein. Developer acknowledges that Franchisor makes no
representations or warranties that the Development Area can support, or that
there are sufficient sites for, the number of Bakeries specified in the
Development Schedule and represents that it has conducted its own internal and
market analysis and concluded that the obligations set forth hereunder are
reasonable and that it is capable of fulfilling same.
 
     2.5  Franchisor, on behalf of itself and its affiliates and designees,
retains all rights with respect to the System, the Proprietary Marks and the
sale of any products associated therewith, anywhere in the world, including but
not limited to:

          2.5.1  The right to establish and operate (directly or through an
affiliate), and to franchise others to establish and operate, one or more food
service businesses including, without limitation, Bakeries and Bagel Stores, and
to sell and distribute under the Proprietary Marks any of the Required Items, at
any location within or outside the Development Area, both during and upon
expiration or termination of this Agreement, and on such terms and conditions as
Franchisor, in its sole discretion, deems appropriate (subject to the rights
granted to Developer in Section 2.3 of this Agreement).

          2.5.2  The right, and the option to grant others (including any person
or entity related in any way to the Franchisor) the right, to develop,
manufacture, market sell and distribute food products including, but not
limited to, cream cheese products and other bagel spreads or any other product
or service under the "Bruegger's" name or under any other name, directly or
indirectly, through any channel of distribution, including, without limitation,
supermarkets, delicatessens, specialty food stores, convenience stores, and
other wholesale and retail food stores, at any location within and/or outside
the Development Area.

          2.5.3  In accordance with Sections 2.6 and 2.7 below, the right to
develop additional Bakeries and to acquire, operate and convert to a Bakery, any
business, including, without limitation, businesses operating one or more Bagel
Stores (other than Bakeries) or other food service businesses, located or
operating within and/or outside the Development Area.

                                       6
<PAGE>
 
          2.5.4  The right to establish and operate, and franchise others to
establish and operate a Bakery in or at any Excluded Location whether or not
such Excluded Locations are located inside or outside the Development Area.
Franchisor and Developer expressly acknowledge and agree that the right to
develop and operate Bakeries at the Excluded Locations shall not be subject to
Developer's rights as set forth in Sections 2.6 and 2.7 below.

     2.6  Notwithstanding anything to the contrary in this Agreement, if during
the term of this Agreement Franchisor locates one or more sites suitable for a
Bakery within the Development Area (a "Tactical Site"), Franchisor shall notify
Developer in writing of such Tactical Site if Franchisor intends that such
Tactical Site be developed and operated as a Bakery. Within ten (10) days after
Developer's receipt of Franchisor's notice regarding such Tactical Site
(including any relevant site-related materials in Franchisor's possession),
Developer shall notify Franchisor if Developer desires to develop and operate a
Bakery at such Tactical Site. If Developer fails to so notify Franchisor within
such time period, then Franchisor or its designee shall have the right to
develop and operate a Bakery at such Tactical Site.

     If Developer timely notifies Franchisor in writing that Developer desires
to develop and operate a Bakery at such Tactical Site and Franchisor has fully
negotiated a lease or purchase agreement for such Tactical Site, then Developer
shall: 1) obtain the consent of the landlord to enter into such lease and
execute and deliver same to landlord, if applicable; or 2) execute a purchase
agreement or an assignment of purchase agreement, if applicable; and 3) execute
Franchisor's then current form of standard unit franchise agreement containing
Franchisor's then current fees and expense requirements and such ancillary
documents as are then customarily used by Franchisor in the grant of franchises
for Bakeries (collectively, the "Franchise Documents") as modified for use in
connection with the Tactical Site, as necessary, and 4) pay Franchisor a site
location and negotiation fee (the "Site Location and Negotiation Fee") equal to
Ten Thousand Dollars ($10,000.00) plus Franchisor's reasonable out-of-pocket
expenses incurred in locating such Tactical Site and negotiating the lease or
purchase agreement, all within ten (10) business days after Franchisor's
delivery of the lease or purchase agreement, as the case may be, and the
Franchise Documents to Developer. The Site Location and Negotiation Fee is paid
to compensate Franchisor for the internal costs of the site location services it
provides. Franchisor shall fully cooperate with Developer in obtaining the
landlord's consent to execute such lease or the seller's consent to execute such
purchase agreement or assignment of purchase agreement as the case may be.

     If Developer timely notifies Franchisor in writing that Developer desires
to develop and operate a Bakery at such Tactical Site and Franchisor has not
fully negotiated a lease or purchase agreement for such Tactical Site, then
Developer will have thirty (30) days in which to negotiate and deliver to
Franchisor a lease or purchase agreement for such Tactical Site in form for
execution. If Franchisor disapproves the lease or purchase agreement for failure
to meet Franchisor's requirements, Developer will

                                       7
<PAGE>
 
have ten (10) business days within which to negotiate and deliver to Franchisor
a revised lease or purchase agreement for such Tactical Site in form for
execution. If Franchisor approves the lease or the purchase agreement for such
Tactical Site, then Developer will: 1) execute such lease or purchase agreement,
as applicable; 2) execute the Franchise Documents; and 3) pay to Franchisor its
reasonable out-of-pocket expenses in locating such Tactical Site and, to the
degree applicable, partially negotiating the lease or purchase agreement, all
within ten (10) business days after Franchisor's delivery of the Franchise
Documents to Developer.
 
     If Developer: 1) declines the option to develop the Tactical Site; 2) fails
to timely notify Franchisor of its election to develop the Tactical Site; or 3)
fails to timely execute the approved lease or purchase agreement and execute and
deliver to Franchisor the Franchise Documents and pay the applicable expenses as
provided herein, then Franchisor or its designee may develop and operate or
franchise others to operate a Bakery at such Tactical Site.
 
     Any Tactical Site for which Developer executes the Franchise Documents and
develops and opens a Bakery will count toward the Development Quota.
 
     2.7  If during the Agreement Term Franchisor acquires the shares or assets
(which may include, by way of illustration and not by way of limitation,
furniture, fixtures, equipment, leasehold improvements and/or leasehold
interest) of any business operating a Bagel Store at one or more sites located
within the Development Area which meets Franchisor's specifications and
standards as in effect from time to time for conversion to a Bakery (the
"Acquisition Site"), and Franchisor determines in its sole discretion to convert
such Acquisition Site to a Bakery, Franchisor agrees to offer to sell such
Acquisition Site to Developer for the price paid therefor by Franchisor. Such
price will include that portion of the direct and indirect costs and liabilities
incurred or assumed by Franchisor in making such acquisition and allocated to
such Acquisition Site, whether paid or owed to the seller of such Acquisition
Site, Franchisor, an affiliate of Franchisor or third parties, and other
expenses allocated or otherwise related to such Acquisition Site (including
losses, whether from continuing operations or closing acquired units) plus
interest at the Franchisor's cost of money on the balance of such amounts from
time to time, provided that:
 
               (1)  such sale will not conflict with any existing legal
          obligation of Franchisor or the business being acquired;
 
               (2)  such sale will not preclude the completion of the
          acquisition on the terms agreed to by Franchisor;
 
               (3)  such sale will not, in Franchisor's judgment, interfere with
          any other legal agreement, arrangement or combination or affect
          federal or state income tax 

                                       8
<PAGE>
 
          consequences arising from the acquisition in a manner adverse to any
          of the parties thereto; and

               (4) Developer agrees to: a) execute, concurrently with
          Developer's purchase the Franchise Documents, as modified
          for use in connection with an Acquisition Site, as necessary
          for each and every such Acquisition Site; b) convert each
          such Acquisition Site to a Bakery as soon as practicable
          thereafter (but in no event later than the date specified by
          Franchisor) in accordance with Franchisor's standards and
          specifications; and c) close or sell within a reasonable
          time period specified by Franchisor any of the acquired
          sites which are not suitable for conversion to Bakeries.

     Developer shall have thirty (30) days after receipt of Franchisor's offer
in which to accept or reject such offer by written notice to Franchisor.  If
accepted, Developer shall have thirty (30) days from the date of acceptance to
complete the acquisition.

     In the event Developer rejects or fails to timely accept Franchisor's offer
to sell such Acquisition Sites or Franchisor is unable to extend such offer for
any of the aforementioned reasons, Franchisor may operate, alter, modify,
refurbish, remodel, promote and market or franchise others to operate any such
Acquisition Site.  For purposes of this Section, all references to Franchisor
shall be deemed to include its affiliates.

Any Acquisition Site for which Developer executes the Franchise Documents and
develops and opens a Bakery shall count toward the Development Quota set forth
in the Development Schedule.

3.   DEVELOPMENT FEE

     In consideration of the development rights in the Development Territory
granted herein, Developer shall pay Franchisor a fully non-refundable
development fee of ______________________________________ Dollars ($___________)
(the "Development Fee"). Developer acknowledges that the Development Fee shall
be fully earned as of the date of this Agreement in consideration of the
administrative and other expenses incurred by Franchisor and Franchisor's lost
or deferred opportunity to enter into similar arrangements with others. The
Development Fee shall be payable upon execution and delivery of this Agreement.

                                       9
<PAGE>
 
4.   SITE SELECTION

     4.1  Developer, at its sole expense, shall identify and obtain a site for
each Bakery to be developed hereunder and, if applicable, for each bagel dough
manufacturing site. Before acquiring a site by lease or purchase, Developer
shall submit to Franchisor such information and materials as Franchisor may
reasonably request to evaluate the site along with the Site Selection Deposit of
seventeen thousand five hundred dollars ($17,500). The information and materials
requested by Franchisor in this regard may be changed from time to time in
Franchisor's sole discretion. No later than thirty (30) days after receipt of
all such information and materials required pursuant to this section 4.1,
Franchisor, in its sole discretion, shall approve or refuse to approve the
proposed site. Developer acknowledges and agrees that (1) Franchisor shall have
the right, in its sole discretion, to approve or disapprove a site and
Franchisor shall have no liability therefor; and (2) Franchisor's approval of a
site is not a representation or guarantee that such site will be successful as a
Bakery. No site shall be deemed to have received Franchisor's approval unless it
has been approved in writing by Franchisor. The site approved in writing by
Franchisor shall be the "Approved Location" referred to in the Franchise
Agreement.

     4.2  With respect to both Bakeries and bagel dough manufacturing sites,
Franchisor shall furnish to Developer the following:

          4.2.1     Site selection guidelines and criteria, which shall be
provided upon execution of this Agreement, and such site selection counseling
and assistance as Franchisor may deem advisable; and

          4.2.2     Such on-site evaluations, if any, as Franchisor may deem
advisable in response to Developer's request for Franchisor's approval of a
proposed site.

     4.3  If Developer will occupy the premises of a Bakery and/or a bagel dough
manufacturing site (if separate from the Bakery) under a lease, Developer shall,
prior to the execution of the lease, submit the lease to Franchisor for its
written approval.  Franchisor's approval of the lease may be conditioned
upon, but in no way limited to, inclusion in the lease of any or all
of the following terms and conditions, among which Franchisor may
change from time to time, in its sole discretion:

          4.3.1     That the lessor consents to Developer's use of such
Proprietary Marks and signage as Franchisor may prescribe for the Bakery or the
bagel dough manufacturing site, as the case may be;

          4.3.2     That the use of the premises be restricted solely to the
operation of the Bakery (or bagel dough manufacturing site, as the case may be)
during the term of the Franchise Agreement, as it may be extended in accordance
with its terms;

                                       10
<PAGE>
 
          4.3.3     That Developer be prohibited from subleasing or assigning
all or any part of its occupancy rights or from extending the term of or
renewing the lease without Franchisor's prior written consent;

          4.3.4     That the lessor provide to Franchisor copies of all notices
of default given to Developer under the lease;

          4.3.5     That Franchisor have the right to enter the premises to make
modifications necessary to protect the Proprietary Marks or the System or to
cure any default under the applicable Franchise Agreement or under the lease;

          4.3.6     That Franchisor (or Franchisor's designee) have the option,
upon default, expiration, or termination of the applicable Unit Franchise
Agreement, and upon notice to the lessor, to assume all of Developer's rights
under the lease, including any right to assign or sublease; and

          4.3.7     That the tenant under the lease have the right to remodel
the premises without the prior approval of the lessor.

     4.4  Developer shall furnish Franchisor with a copy of each executed lease
within ten (10) days after its execution.

     4.5  Franchisor shall offer Developer a franchise to operate a Bakery at
the Approved Location by delivering to Developer a Unit Franchise Agreement in
execution form provided that:

          4.5.1     Developer is then in full compliance with all of the terms
and conditions of this Agreement and any other agreement, Unit Franchise
Agreement or Development Agreement between Franchisor and Developer;

          4.5.2     Developer is in full compliance with the requirements of
Section 4.3 above;

          4.5.3     Developer has obtained legal possession of the Approved
Location;  and

          4.5.4     Developer, in Franchisor's opinion, has sufficient financial
and managerial resources to construct and operate the Approved Location in
accordance with Franchisor's then current standards and specifications for store
development and operation and to continue to meet Developer's obligations under
this Agreement and any other Agreement between Developer and Franchisor.


5.   ADDITIONAL SERVICES

                                       11
<PAGE>
 
     As a condition to entering into this Agreement, Franchisor may require
Developer to enter into separate agreements with Franchisor or its affiliates or
designees to provide accounting and administrative services and licenses to use
certain proprietary business management and accounting software. These
agreements (the "Accounting Services Agreement," "Software Licensing and
Maintenance Agreement" and "Commissary Software Licensing and Maintenance
Agreement" are attached hereto as Exhibits E, F and G respectively, and referred
to herein collectively, as, the "Service Agreements"). Developer acknowledges
that the Service Agreements are integral to the rights granted hereunder and
agrees to execute such agreements, in the form attached hereto, upon
Franchisor's request.


6.   SELECTION OF OPERATOR

     Before opening its first Bakery and throughout the Agreement Term,
Developer shall employ an individual who shall devote his or her full time and
best effort to and be responsible for the operations of all Bakeries developed
pursuant to this Agreement (the "Operator"). Developer may not hire an
individual as Operator without first obtaining Franchisor's written approval.
Franchisor shall have sole and absolute discretion in determining whether or not
to grant such approval.

7.   CONFIDENTIAL INFORMATION
 
     7.1    Except as hereinafter provided, Developer shall not, during the
Agreement Term or at any time thereafter, communicate, divulge, or use for the
benefit of any other person or entity any confidential information, knowledge,
trade secrets, or know-how which may be communicated to Developer or of which
Developer may be apprised by virtue of Developer's activities under this
Agreement. Developer may divulge such confidential information only: (i) to such
of its employees as deemed necessary by Developer; and (ii) to Developer's
contractors and prospective landlords with the prior written approval of
Franchisor. All information, knowledge, trade secrets, know-how, techniques, and
other data which Franchisor designates as confidential shall be deemed
confidential for purposes of this Agreement, except information which Developer
can demonstrate came to its attention by lawful means prior to disclosure
thereof by Franchisor, or which, at or after the time of disclosure by
Franchisor to Developer, had become or later becomes a part of the public
domain, through publication or communication by others.

     7.2    At Franchisor's request, Developer shall require its employees and
any other person to whom Developer wishes to disclose any confidential
information of Franchisor to execute covenants that they will maintain the
confidentiality of such information. Such covenants shall be in a form
satisfactory to Franchisor, including, 

                                       12
<PAGE>
 
without limitation, specific identification of Franchisor as a third-party
beneficiary with the independent right to enforce the covenants.

8.   CORPORATE REQUIREMENTS; FINANCIAL STATEMENTS

     8.1    If Developer is a corporation, Developer shall comply with the
following requirements during the Agreement Term:

            8.1.1   Developer shall furnish Franchisor with a copy of its
Articles or Certificate of Incorporation, Bylaws, and any other corporate
governing documents Franchisor may reasonably request, and any amendments
thereto;

            8.1.2   Developer shall confine its activities, and its governing
documents shall at all times provide that its activities are confined,
exclusively to the development and operation of the Bakeries to be developed
hereunder;

            8.1.3   Developer shall maintain stop transfer instructions against
the transfer on its records of any equity security, and shall issue no
securities upon the face of which the following printed legend does not legibly
and conspicuously appear:

     The transfer of ownership of shares represented by this Certificate is
     subject to the terms and conditions of an Agreement with Bruegger's
     Franchise Corporation.  Reference is made to the provisions of the
     Development Agreement and to the Articles and Bylaws of the Corporation.

          8.1.4     Developer shall maintain a current list of all owners
of record and all beneficial owners of any class of voting stock of Developer
and shall furnish the list to Franchisor upon request.

     8.2  If Developer is a partnership, Developer shall comply with the
following requirements during the Agreement Term:

          8.2.1     Developer shall furnish Franchisor with a copy of its
partnership agreement and such other governing documents as Franchisor may
reasonably request, and any amendments thereto.

          8.2.2     Developer shall include in its partnership certificate,
if any, filed with the state in which Developer was formed, a statement
that the transfer of ownership of a partnership interest is subject to the terms
and conditions of an Agreement with Bruegger's Franchise Corporation.

          8.2.3     Developer shall prepare and furnish to Franchisor, upon
request, a list of all general and limited partners in Developer.

                                       13
<PAGE>
 
     8.3   If Developer is a limited liability company, Developer shall comply
with the following requirements during the Agreement Term:

           8.3.1  Developer shall furnish Franchisor with a copy of its
Certificate of Formation, limited liability company operating agreement, and any
other entity governing documents as Franchisor might reasonably request, and any
amendments thereto;.

           8.3.2  Developer shall confine its activities, and its governing
documents shall at all times provide that its activities are confined,
exclusively to the development and operation of the Bakeries to be developed
hereunder;

           8.3.3  Developer's limited liability company operating agreement
shall include provisions that state that the transfer of shares is subject to
the terms and conditions of an Agreement with Franchisor; and

           8.3.4  Developer shall prepare and furnish to Franchisor, upon
request, a list of all members of Developer.

     8.4   Developer shall furnish to Franchisor, within ninety (90) days after
the end of each fiscal year of Developer, an income statement showing the
results of Developer's operations during such fiscal year and a balance sheet as
of the end of such fiscal year, both of which shall be prepared in accordance
with generally accepted accounting principles and reviewed by an independent
certified public accountant. If, however, the foregoing income statements and
balance sheets are audited by an independent certified public accountant, then
Developer shall furnish the audited income statements and balance sheets rather
than the reviewed income statements and balance sheets.


9.   TRANSFER OF INTEREST


     9.1   Franchisor shall have the right to transfer or assign this Agreement
or any part of its rights or obligations under this Agreement to any person or
legal entity. Developer agrees that Franchisor shall have no liability after the
effective date of such transfer or assignment for the performance of any
obligations hereunder.

     9.2   Developer understands and acknowledges that the rights and duties set
forth in this Agreement are personal to Developer and that Franchisor has
granted these rights in reliance on the business skill, financial capacity, and
personal character of Developer's present owners and management. Accordingly,
except as provided below in Section 9.3 and 9.4, neither Developer nor any
immediate or remote successor to any part of Developer's interest in this
Agreement, nor any individual, partnership, corporation, or other legal entity
which directly or indirectly owns any interest in Developer, shall, without the
prior express written consent of Franchisor: (i) sell, assign, transfer, convey,
pledge, encumber or give away any direct or indirect interest in this Agreement,
itself, the

                                       14
<PAGE>
 
Developer, or in all or substantially all of the assets of the Developer; or
(ii) offer or sell securities of itself or Developer.

     9.3   Subject to Franchisor's right of first refusal under Section 9.5, the
executor or personal representative of a person with an interest in Developer
may transfer his or her interest to a third party approved by Franchisor within
a reasonable time after the date of such person's death or declaration of such
person's mental incapacity. In the case of transfer by bequest, if the
beneficiaries are unable to meet the conditions of this Section 9, the executor
may transfer the decedent's interest to another party approved by Franchisor,
subject to all of the terms and conditions for transfers contained in this
Agreement. If an interest is not disposed of under this Section 9.3 within two
(2) years from the date of death or declaration of mental incapacity, Franchisor
may terminate this Agreement pursuant to Section 10.2.2 below.

     9.4   Subject to Franchisor's right of first refusal under Section 9.5, if
Developer is an entity, then the owner or owners of the equity of Developer may,
without Franchisor's prior written consent, sell, assign, transfer or give away
to employees of Developer during the Agreement Term, an aggregated amount of not
more than twenty percent (20%) of the outstanding equity of the Developer,
provided: (i) Franchisor receives written notice of such transfer not later than
thirty (30) days prior to the transfer, which notice shall identify the
transferee, describe the transferee's position of employment, and include a
calculation demonstrating that the planned transfer complies with this Section
9.4; and (ii) such transfer, when combined with all prior transfers of the
equity of Developer, does not result in a transfer of more than twenty percent
(20%) of the outstanding equity of Developer.

     9.5   Franchisor shall have the right, exercisable within thirty (30) days
after receipt of a written request for approval of a proposed transfer pursuant
to this Section 9, to purchase the interest proposed to be transferred. The
request for approval of transfer must include a true and complete copy of the
proposed purchase agreement and any ancillary agreements and not be subject to
financing or any other contingencies. Franchisor's thirty (30) day period for
determining whether or not to exercise its right of first refusal shall not
commence until transferor has provided all information and documentation
required hereunder in a form and substance satisfactory to Franchisor. If
Franchisor desires to exercise its right of first refusal, it shall do so by
providing written notice (the "Purchase Notice") to transferor that it intends
to purchase the interest on the same terms and conditions offered by the third
party. Closing on such purchase shall occur within sixty (60) days after the
date of transferor's receipt of the Purchase Notice. If the consideration,
terms, and/or conditions offered by the third party are such that Franchisor may
not reasonably be required to furnish the same consideration, terms, and/or
conditions, then Franchisor may purchase the interest proposed to be sold for
the reasonable equivalent in cash. If the parties cannot agree within thirty
(30) days of transferor's receipt of the Purchase Notice on the reasonable
equivalent in cash, an independent appraiser shall be designated by Franchisor
at Franchisor's expense, and the appraiser's determination shall be binding. Any
material change in the terms of the offer 

                                       15
<PAGE>
 
from a third party after Franchisor has elected not to purchase the seller's
interest shall constitute a new offer subject to the same rights of first
refusal by Franchisor as in the case of the third party's initial offer.

     9.6  If Franchisor elects not to exercise its right of first refusal under
Section 9.5, the proposed transferor may complete the transfer after obtaining
Franchisor's written consent as required under Section 9.2. In any event,
Franchisor's consent to any transfer shall be contingent on certain conditions
which shall be determined in Franchisor's sole discretion. The conditions may
include, but shall not be limited to, the following:

           9.6.1  That all of Developer's accrued monetary obligations and all
other outstanding obligations to Franchisor and its affiliates have been
satisfied;

           9.6.2  That Developer is not in default of any provision of this
Agreement, any amendment hereof or successor hereto, or any other agreement
between Developer and Franchisor or its affiliates or any Franchise Agreement
executed pursuant to this Agreement;

           9.6.3  The transferee (or, if the transferee is a corporation or
partnership, such owners of a beneficial interest in the transferee as
Franchisor may request) shall demonstrate to Franchisor's satisfaction that it
meets Franchisor's educational, managerial, and business standards; possesses a
good moral character, business reputation, and credit rating; has the aptitude
and ability to conduct the business contemplated hereunder (as may be evidenced
by prior related business experience or otherwise); and has adequate financial
resources and capital to complete development of the territory in a timely
manner;

           9.6.4  That the transferee enter into a written assignment, in a form
satisfactory to Franchisor, assuming and agreeing to discharge all of
Developer's obligations under this Agreement;

           9.6.5  That the transferor execute a general release, in a form
satisfactory to Franchisor, of any and all claims against Franchisor, its
affiliates and their respective officers, directors, shareholders, and
employees, in their corporate and individual capacities;

           9.6.6  That employees of the Developer who have not previously
completed a training program approved by Franchisor, at the Developer's expense,
complete any training programs then in effect for new Bruegger's Fresh Bagel
Bakery franchisees;

           9.6.7  That transferor pay a transfer fee of Five Thousand Dollars
($5,000) plus Franchisor's actual expenses for outside services associated with
reviewing the application to transfer, including, but not limited to, reasonable
attorneys' fees; and

                                       16
<PAGE>
 
           9.6.8  That the price and terms of the proposed transfer are not so
burdensome as to adversely affect or have a potentially adverse affect on the
Franchisor's rights and interest under this Agreement.

     9.7   Franchisor's consent to a transfer shall not constitute a waiver of
any claims Franchisor may have against the transferring party, nor shall it be
deemed a waiver of Franchisor's right to demand exact compliance by the
transferor, transferee or Developer with any of the terms of this Agreement by
the transferor or transferee.


10.  DEFAULT AND TERMINATION


     10.1  Developer shall be in default under this Agreement, and all rights
granted herein shall automatically terminate without notice to Developer, if
Developer becomes insolvent or makes a general assignment for the benefit of
creditors; if a petition in bankruptcy is filed by Developer or such a petition
is filed against Developer and not opposed by Developer; if Developer is
adjudicated as bankrupt or insolvent; if a bill in equity or other proceeding
for the appointment of a receiver of Developer or other custodian for
Developer's business or assets is filed and consented to by Developer; if a
receiver or other custodian (permanent or temporary) of Developer's assets or
property, or any part thereof, is appointed by any court of competent
jurisdiction; if proceedings for a composition with creditors under any state or
federal law is instituted by or against Developer; if a final judgment remains
unsatisfied or of record for thirty (30) days or longer (unless supersedeas bond
is filed); if Developer is dissolved; if execution is levied against Developer's
business or property; if suit to foreclose any lien or mortgage against the
premises or equipment of any Bakery developed hereunder is instituted against
Developer and not dismissed within thirty (30) days; or if the real or personal
property of any Bakery developed hereunder is sold after levy thereupon by any
sheriff, marshall, or constable.

     10.2  Franchisor shall have the right to terminate this Agreement,
effective immediately upon the receipt of written notice by Developer, if any of
the following events occurs:

           10.2.1 If Developer fails to satisfy the development obligations of
this Agreement as set forth in the Development Schedule;

           10.2.2 In the event of any transfer of an interest in Developer or in
this Agreement which does not comply with Section 9 of this Agreement, or any
transfer of an interest in Developer by intestate succession to an heir who is
unable to meet the conditions of Section 9;

                                       17
<PAGE>
 
           10.2.3 If Developer is in default under Section 10.3 three (3) times
within any twelve-month period, whether such defaults are of a similar or
different nature and whether or not any of them is cured after notice; or

           10.2.4 If Franchisor has delivered to Developer a final notice of
termination for any Unit Franchise Agreement, Development Agreement, Service
Agreement or any other agreement between Franchisor (or any of its affiliates)
and Developer (except for termination due to a permanent closing of a Bakery
with Franchisor's prior written consent).

     10.3  If Developer fails to cure any default of any other provision of this
Agreement within thirty (30) days after receiving written notice of default from
Franchisor, this Agreement shall terminate at the end of such thirty (30) day
period without further notice from Franchisor.

     10.4  Upon termination of this Agreement, Developer shall have no right to
establish or operate any Bakery for which a Franchise Agreement has not been
executed by the parties prior to termination; and Franchisor shall be entitled
to establish, and to franchise others to establish, Bakeries at any location in
the Development Area except as may be otherwise provided under the terms of any
Franchise Agreement which remains in effect between Franchisor and Developer.

     10.5  No right or remedy herein conferred upon or reserved to Franchisor is
exclusive of any other right or remedy provided or permitted by law or in
equity.


11.  COVENANTS


     11.1  Developer acknowledges that, pursuant to this Agreement, Developer
will receive valuable confidential information, including, without limitation,
information regarding the site selection, marketing, and food preparation
techniques of Franchisor and the System. Developer covenants that, during the
Agreement Term, Developer shall not, either directly or indirectly, for itself,
or through, on behalf of, or in conjunction with any person or legal entity:

           11.1.1 Divert or attempt to divert any present or prospective
business or customer of any Bakery to any competitor, by direct or indirect
inducement or otherwise, or do or perform, directly or indirectly, any other act
injurious or prejudicial to the goodwill associated with the Proprietary Marks
and the System;

           11.1.2 Employ or seek to employ any person who is at that time
employed by Franchisor or who was employed by Franchisor within the preceding
three (3) months, or otherwise directly or indirectly induce such person to
leave his or her employment with Franchisor; or

                                       18
<PAGE>
 
           11.1.3 Own, manage, operate, engage in, be employed by, provide any
assistance to, or have any interest in (as owner or otherwise) any other
business whose sales of fresh or packaged bagels and cream cheese are more than
five percent (5%) of its total sales by annual dollar value.

     11.2  Developer covenants that, except as otherwise approved in writing by
Franchisor, Developer shall not, for one (1) year after the expiration or
termination of this Agreement or the approved transfer of this Agreement to a
new developer, either directly or indirectly, for itself or through, on behalf
of, or in conjunction with any person or legal entity, own, maintain, operate,
engage in, be employed by, provide assistance to, or have any interest in any
business (i) whose sales of fresh or packaged bagels and cream cheese are more
than five percent (5%) of its total sales by annual dollar volume, and (ii)
which is, or is intended to be, located within the Development Area, except
pursuant to a Franchise Agreement with Franchisor.

     11.3  Sections 11.1.3 and 11.2 shall not apply to ownership by Developer of
a less than five percent (5%) beneficial interest in the outstanding equity
securities of any publicly-held corporation.

     11.4  Developer understands and acknowledges that Franchisor shall have the
right, in its sole discretion, to reduce the scope of any covenant set forth in
Sections 11.1 and 11.2 of this Agreement, or any portion thereof, without
Developer's consent, effective immediately upon receipt by Developer of written
notice thereof; and Developer agrees that it shall comply forthwith with any
covenant as so modified, which shall be fully enforceable notwithstanding the
provisions of Section 16.1 hereof.

     11.5  Developer agrees that the existence of any claims it may have against
Franchisor, whether or not arising from this Agreement, shall not constitute a
defense to the enforcement by Franchisor of the covenants in this Section 11.
Developer agrees to pay all costs and expenses incurred by Franchisor in
enforcing this Section 11, including, but not limited to, reasonable attorneys
fees.

     11.6  Developer acknowledges that Developer's violation of the terms of
this Section 11 would result in irreparable injury to Franchisor for which no
adequate remedy at law may be available, and Developer accordingly consents to
the issuance of an injunction prohibiting any conduct by Developer in violation
of the terms of this Section 11. Such injunctive relief shall be in addition to
any other remedies Franchisor may have.

     11.7  At Franchisor's request, Developer shall obtain and furnish
to Franchisor executed covenants similar in substance to those set forth in this
Section 11 (including covenants applicable upon the termination of an
individual's relationship with Developer) from any or all officers, directors,
and holders of a direct or indirect beneficial interest of five percent (5%) or
more of the securities of Developer.  Every covenant required by this Section
11.7 shall be in a form satisfactory to Franchisor, including, without
limitation, 

                                       19
<PAGE>
 
specific identification of Franchisor as a third party beneficiary with the
independent right to enforce the covenant.

     11.8  Franchisor agrees that it shall not employ or seek to employ any
person who is at the time employed by Developer or who was employed by Developer
within the preceding three (3) months, or otherwise directly or indirectly
induce such person to leave his or her employment with Developer.


12.  NOTICES

     All notices pursuant to this Agreement shall be in writing and shall be
personally delivered, sent by registered mail, or delivered or sent by another
method which affords the sender evidence of receipt or attempted delivery, to
the respective parties at the following addresses, unless and until a different
address has been designated by written notice to the other party:

 
     Notices to Franchisor:                     Bruegger's Franchise Corporation
                                                3820 Edison Lakes Parkway
                                                Mishawaka, IN  46545
                                                Attn:  President
 
     With a copy to:                            Bruegger's Franchise Corporation
                                                3820 Edison Lakes Parkway
                                                Mishawaka, IN  46545
                                                Attn:  General Counsel
 

     Notices to Developer:                      ________________________________
                                                ________________________________
                                                ________________________________
                                                Attn:___________________________
                                  
Any notice sent or delivered which affords the sender evidence of receipt or
attempted delivery shall be deemed to have been given and received at the date
and time of receipt or attempted delivery.

                                       20
<PAGE>
 
13.  INDEPENDENT CONTRACTOR AND INDEMNIFICATION

     13.1  It is understood and agreed by the parties that this Agreement does
not create a fiduciary relationship between them; that Developer is an
independent contractor; and that nothing in this Agreement is intended to make
either party an agent, legal representative, subsidiary, joint venturer,
partner, employee, or servant of the other for any purpose whatsoever.

     13.2  Developer shall hold itself out to the public to be an independent
contractor operating pursuant to this Agreement. Developer agrees to take such
actions as shall be necessary to that end.

     13.3  Nothing in this Agreement authorizes Developer to make any contract,
agreement, warranty, or representation on Franchisor's behalf, or to incur any
debt or other obligation in Franchisor's name. Franchisor shall in no event
assume liability for, or be deemed liable hereunder as a result of, any such
action, nor shall Franchisor be liable by reason of any act or omission of
Developer or any claim or judgment arising therefrom against Developer or
Franchisor. Developer shall hold harmless and indemnify Franchisor, its
affiliates, and their respective officers, directors, shareholders, and
employees against any claim arising directly or indirectly from, as a result of,
or in connection with Developer's activities hereunder, as well as the costs of
defending against any such claim.


14.  APPROVALS AND WAIVERS

     14.1  Whenever this Agreement requires the prior approval or consent of
Franchisor, Developer shall make a timely written request to Franchisor
therefor, and, except as may be otherwise expressly provided herein, such
approval or consent must be obtained in writing and signed by an officer of
Franchisor.

     14.2  Franchisor makes no warranties or guarantees upon which Developer may
rely and assumes no liability or obligation to Developer by providing any
waiver, approval, consent, or suggestion to Developer in connection with this
Agreement, or by reason of any neglect, delay, or denial of any request
therefor.

     14.3  No failure of Franchisor to exercise any right reserved to it in this
Agreement or to insist upon strict compliance by Developer with any obligation
or condition of this Agreement, and no custom or practice of the parties at
variance with the terms hereof, shall constitute a waiver of Franchisor's right
to exercise such right or to demand exact compliance with any of the terms of
this Agreement. Waiver by Franchisor of any particular default by Developer
shall not affect or impair Franchisor's rights with respect to any subsequent
default of the same, similar, or different nature; nor

                                       21
<PAGE>
 
shall any delay, forbearance, or omission of Franchisor to exercise any power or
right arising out of any breach or default by Developer of any of the terms,
provisions, or covenants of this Agreement affect or impair Franchisor's right
to exercise the same; nor shall such constitute a waiver by Franchisor of any
rights hereunder or rights to declare any subsequent breach or default and to
terminate this Agreement prior to the expiration of its term.


15.  SEVERABILITY AND CONSTRUCTION

     15.1  If, for any reason, any provision of this Agreement is determined to
be invalid and contrary to, or in conflict with, any existing or future law or
regulation by a court or agency having valid jurisdiction, such invalidity shall
not impair the operation of, or have any other effect upon, such other
provisions of this Agreement as may remain otherwise intelligible. The latter
shall continue to be given full force and effect and bind the parties hereto,
and the invalid provision(s) shall be deemed not to be a part of this Agreement.

     15.2  Except as expressly provided to the contrary herein, nothing in this
Agreement is intended, nor shall be deemed, to confer upon any person or legal
entity other than Developer, Franchisor, and such of their successors and
assigns as may be contemplated by Section 8 above, any rights or remedies under
or by reason of this Agreement.

     15.3  Any provision or covenant of this Agreement which expressly or by
reasonable implication imposes obligations after the expiration or termination
of this Agreement shall survive such expiration or termination.

     15.4  Developer agrees to be bound by any promise or covenant imposing the
maximum duty permitted by law which is subsumed within the terms of any
provision of this Agreement, as though it were separately articulated in and
made a part of this Agreement, that may result from (i) striking from any of the
provisions hereof any portion or portions which a court or agency having valid
jurisdiction may hold to be unreasonable and unenforceable in an unappealed
final decision to which Franchisor is a party, or (ii) reducing the scope of any
promise or covenant to the extent required to comply with such a court or agency
order.


16.  ENTIRE AGREEMENT; APPLICABLE LAW

     16.1  This Agreement, the documents referred to herein, and the Exhibits
attached hereto constitute the entire agreement between Franchisor and Developer
concerning the subject matter hereof and supersede all prior agreements,
negotiations, representations, and correspondence concerning the same subject
matter. Except for

                                       22
<PAGE>
 
those permitted to be made unilaterally by Franchisor hereunder, no amendment,
change, or variance from this Agreement shall be binding on either party unless
agreed to in writing by the parties and executed by their authorized officers or
agents.

     16.2  This Agreement shall be governed by the laws of the state in which
Franchisor has its principal place of business from time to time. In the event
of any conflict of law, the laws of such state shall prevail, without regard to
the application of such state's conflict of law rules.

     16.3  Any action (whether or not arising out of this Agreement) brought by
Developer against Franchisor in any court, whether federal or state, shall be
brought, and any action brought by Franchisor against Developer may be brought,
within the judicial district in which Franchisor has its principal place of
business. The parties hereby waive all questions of personal jurisdiction or
venue for the purpose of carrying out this provision.

     16.4  No right or remedy conferred upon or reserved to Franchisor or
Developer by this Agreement is intended to be, nor shall be deemed, exclusive of
any other right or remedy herein or by law or equity provided or permitted, but
each shall be cumulative of every other right or remedy.

     16.5  Nothing herein contained shall bar Franchisor's right to obtain
injunctive relief against threatened conduct that will cause it loss or damages,
under the usual equity rules, including the applicable rules for obtaining
restraining orders and preliminary injunctions.

     16.6  Any and all claims and actions arising out of or relating to this
Agreement or the relationship of Developer and Franchisor, brought by either
party against the other, shall be commenced within eighteen (18) months from the
occurrence of the facts giving rise to such claim or action, or such claim or
action shall be barred.

     16.7  Developer and Franchisor irrevocably waive trial by jury in any
action, proceeding, or counterclaim brought by either of them against the other.
Developer and Franchisor hereby waive to the fullest extent permitted by law any
right to, or claim of, any punitive or exemplary damages against the other and
agree that, in the event of a dispute between them, each shall be limited to the
recovery of any actual damages sustained by it.

     16.8  If Developer shall consist of two or more persons or entities at any
time during the Agreement Term, their obligations hereunder to Franchisor shall
be joint and several.

                                       23
<PAGE>
 
17.  ACKNOWLEDGMENTS

     17.1  Developer acknowledges that the success of the business venture
contemplated by this Agreement involves substantial business risks and is
largely dependent upon Developer's business skills and financial and other
resources. Franchisor expressly disclaims the making of, and Developer
acknowledges not having received, any warranty or guarantee, express or implied,
as to the potential volume, profits, or success of the business venture
contemplated by this Agreement.

     17.2  Developer acknowledges that Developer has received, read, and
understood this Agreement and the attached Exhibits, and that Developer has had
ample time and opportunity to consult with advisors of Developer's own choosing
about the potential benefits and risks of entering into this Agreement.

     17.3  Developer acknowledges that it received a complete copy of this
Agreement and the attached Exhibits at least five (5) business days prior to the
date on which this Agreement was executed. Developer further acknowledges that
it received the disclosure document required by the Trade Regulation Rule of the
Federal Trade Commission entitled "Disclosure Requirements and Prohibitions
Concerning Franchising and Business Opportunity Ventures" at least ten (10)
business days prior to the date on which this Agreement was executed.

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

FRANCHISOR                               DEVELOPER:

Bruegger's Franchise Corporation         _________________________________

By:_______________________________       By:______________________________

Title:____________________________       Title:___________________________

                                       24
<PAGE>
 
                                   EXHIBIT A

                                      to

                         BRUEGGER'S FRESH BAGEL BAKERY
                             DEVELOPMENT AGREEMENT

                               PROPRIETARY MARKS
                               -----------------
<TABLE> 
<CAPTION> 
                                        Date
Registered Marks             Type       Registered     Reg. No.       
----------------             ----       ----------     --------       
<S>                          <C>        <C>            <C>            
BRUEGGER'S                   TM          11/22/88       1,513,741
                                                                              
THE BEST THING ROUND         SM          6/15/93        1,776,884      
                                                                              
BRUEGGEROONS                 TM          7/13/93        1,781,622      
                                                                              
BRUEGGER'S LAST NIGHT'S                                                       
BAGELS AND DESIGN            TM          7/13/93        1,781,629      
                                                                              
BRUEGGER'S BAGEL BAKERY                                                       
FRESH BAGELS AND DESIGN      SM          8/31/93        1,790,827      
                                                                              
BRUEGGER'S FRESH BAGEL                                                        
BAKERY AND DESIGN            SM          8/31/93        1,790,828      
                                                                              
BRUEGGER'S                   SM          9/7/93         1,792,050       

<CAPTION>
                             APPLICATIONS PENDING
                             --------------------

                                        Date Sent      Application
Marks                        Type       for Filing             No.
-----                        ----       ----------     -----------       
<S>                          <C>        <C>            <C>         
BRUEGGER'S BAGELS/
BAKED FRESH AND DESIGN       SM          1/16/96        75,046,205
 
TOTALLY COMPLETELY
OBSESSED WITH FRESHNESS      SM/TM       10/16/95       75,007,530
(Class No. 29 & 30)

TOTALLY COMPLETELY
OBSESSED WITH FRESHNESS      SM/TM       10/16/95       75,007,532
(Class No. 42)
 
JAVAHH!                      TM          7/3/95         75,697,540
 
SINGLE BAKER/SINGLE
BAGEL @ HEARTH DESIGN        SM          1/16/96        75,046,199
</TABLE>
<PAGE>
 
                                   EXHIBIT B

                                      to

                         BRUEGGER'S FRESH BAGEL BAKERY
                             DEVELOPMENT AGREEMENT



                               DEVELOPMENT AREA
                               ----------------

The Development Area shall be as follows:
<PAGE>
 
                                   EXHIBIT C

                                      to

                         BRUEGGER'S FRESH BAGEL BAKERY
                             DEVELOPMENT AGREEMENT



                             DEVELOPMENT SCHEDULE
                             --------------------

                                       2
<PAGE>
 
                                   EXHIBIT D

                                      to

                         BRUEGGER'S FRESH BAGEL BAKERY
                             DEVELOPMENT AGREEMENT



                              FRANCHISE AGREEMENT
                              -------------------


The attached form of Franchise Agreement shall be used for all Bakeries to be
developed during the Agreement Term.

                                       3
<PAGE>
 
                         BRUEGGER'S FRESH BAGEL BAKERY
                              FRANCHISE AGREEMENT
<PAGE>

 
                         BRUEGGER'S FRESH BAGEL BAKERY
                         -----------------------------

                              FRANCHISE AGREEMENT
                              -------------------


<TABLE>
<S>                                                                          <C>
1.DEFINITIONS..................................................................2
2.GRANT........................................................................3
3.TERM AND SUCCESSOR FRANCHISE AGREEMENTS......................................6
4.DUTIES OF FRANCHISOR.........................................................8
6.CONSTRUCTING AND OPENING THE BAKERY..........................................9
8.DUTIES OF FRANCHISEE........................................................12
9.PROPRIETARY MARKS AND COPYRIGHTS............................................16
10.OPERATIONS MANUALS.........................................................19
12.ACCOUNTING AND RECORDS.....................................................20
13.ADVERTISING AND PROMOTION..................................................21
14.INSURANCE..................................................................24
15.TRANSFER OF INTEREST.......................................................25
16.DEFAULT AND TERMINATION....................................................28
18.COVENANTS..................................................................32
19.ORGANIZATION OF FRANCHISEE.................................................34
20.TAXES, PERMITS, AND INDEBTEDNESS...........................................35
21.INDEPENDENT CONTRACTOR AND INDEMNIFICATION.................................36
23.NOTICES....................................................................37
24.ENTIRE AGREEMENT...........................................................38
25.SEVERABILITY AND CONSTRUCTION..............................................38
26.APPLICABLE LAW; ARBITRATION................................................39
27.ACKNOWLEDGMENTS............................................................41
</TABLE>

     EXHIBIT A  -  PROPRIETARY MARKS
     EXHIBIT B -   APPROVED LOCATION
<PAGE>
 
                         BRUEGGER'S FRESH BAGEL BAKERY
                              FRANCHISE AGREEMENT


     THIS AGREEMENT is entered into on __________, 19_____ by and between
BRUEGGER'S FRANCHISE CORPORATION, a Delaware corporation ("Franchisor") and
"Franchisee" (as defined below):

Name:                 __________________________________
                      __________________________________
                      __________________________________

Principal Address:    __________________________________   
                      __________________________________
                      __________________________________   


     WHEREAS, Franchisor and its affiliates have developed a system relating to
the preparation and promotion of distinctive bagels and cream cheese and the
establishment and operation of restaurants specializing in the sale of the
bagels, cream cheese, and other food and beverage items (the "System");

     WHEREAS, the distinguishing characteristics of the System include, without
limitation, the sale of bagels and cream cheese products prepared in accordance
with secret recipes and manufacturing processes owned by affiliates of
Franchisor; distinctive exterior and interior restaurant design, decor, color
scheme, fixtures, and furnishings; standards and specifications for ingredients,
food preparation, equipment, supplies, and restaurant operations; and
advertising and promotional programs; all of which may be changed, improved, and
further developed by Franchisor and its affiliates from time to time;

     WHEREAS, the System is identified by means of certain trade names, service
marks, trademarks, logos, emblems, and indicia of origin, including but not
limited to the mark "BRUEGGER'S", as set forth in Exhibit A to this Agreement,
and such other trade names, service marks, and trademarks as may hereafter be
designated by Franchisor in writing for use in the System (the "Proprietary
Marks");

     WHEREAS, Franchisee wishes to obtain the right to establish and operate a
Bruegger's Fresh Bagel Bakery at the location specified in this Agreement;

     WHEREAS, Franchisor and Franchisee are parties to a Bruegger's Fresh Bagel
Bakery Development Agreement dated December 18, 1996 (the "Development
Agreement") under which Franchisee has the right and obligation to develop
Bakeries (as defined below) within a specific geographic territory that
includes the location specified in this Agreement, and pursuant to which the
parties are entering into this Agreement,

                                      -1-
<PAGE>
 
     NOW, THEREFORE, the parties agree as follows:

1.   DEFINITIONS

For purposes of this Agreement, the meanings of the following terms are as
follows. Certain other terms may be defined when they appear within the text of
the Agreement.

"Approved Location" or "Premises" - The location of the Bakery as set forth in
Exhibit B hereto.

"Bagel Store" - a food service business, including a Bakery, which derives a
significant portion of its revenue from the sale of bagels and/or bagel related
products or from any other product or service which is or hereafter becomes a
source of a significant portion of the revenue of a Bakery.

"Bakery" - A food service business that:

     1.   offers products for consumer consumption through on premises dining
          and carry-out;

     2.   operates using the System and the Proprietary Marks; and

     3.   is operated by Franchisor or pursuant to a valid Unit Franchise
          Agreement.

"Exclusive Area" - the smaller of:

     1. an area determined by drawing a circle around the Approved Location,
which circle shall have the Approved Location as its center, and which shall be
the smaller of the following:

          a.  a circle with a one and one-half (1.5) mile radius; or

          b.  a circle that contains a population of thirty thousand persons,
the radius of which circle shall be determined at such time or times as
Franchisor communicates to Franchisee an intent to establish a Bakery or
franchise others to establish a Bakery within one and one-half (1.5) miles of
the Bakery. For purposes of this Agreement, the population used to determine the
size of the Exclusive Area shall be the greater of the daytime population or the
residential population; or

     2.   the circle described in 1 above less any portion of that circle which
extends outside of the Development Area as described in the Development
Agreement

                                      -2-
<PAGE>
 
"Required Items" - Products required by the Franchisor, from time to time in its
sole discretion, for sale at or from the Bakeries, including bagels, bagel
related products, Franchisor's proprietary brand of cream cheese and other
spreads, sandwiches, soups, salads, baked goods, breakfast items, an assortments
of hot and cold beverages, teas (leaves, bags, dry mixes and related forms),
coffee (Franchisor's proprietary brand of coffee including beans, ground and
related forms), and other food products and merchandise, all of which are
subject to modification or discontinuation in Franchisor's sole discretion from
time to time and may include additional or substitute products.


2.   GRANT

     2.1  Franchisor grants to Franchisee the exclusive right, except as
provided in Section 2.4, 2.5 and 2.6 hereof, and Franchisee undertakes the
obligation, on the terms and conditions set forth in this Agreement, to
establish and operate a Bakery and to use the Proprietary Marks and the System
solely in connection therewith. Franchisor further grants to Franchisee, subject
to Section 8.5 below, the right to use certain trade secrets of Franchisor's
affiliates to manufacture bagel dough, solely for use in the Bakery.

     2.2  Franchisee shall operate the Bakery only at the the Approved Location.

     2.3  Except as provided in this Agreement (including without limitation
Section 2.4, 2.5 and 2.6), Franchisor shall not, during the Agreement Term,
establish a Bakery or franchise others to establish a Bakery within the
Exclusive Area.

     2.4  Franchisor, on behalf of itself and its affiliates and designees,
retains all rights with respect to the System, the Proprietary Marks and the
sale of any products associated therewith, anywhere in the world, including but
not limited to:

          2.4.1  The right to establish and operate (directly or through an
affiliate), and to franchise others to establish and operate, one or more food
service businesses including, without limitation, Bakeries and Bagel Stores, and
to sell and distribute under the Proprietary Marks any of the Required Items, at
any location within or outside the Exclusive Area, both during and upon
expiration or termination of this Agreement, and on such terms and conditions as
Franchisor, in its sole discretion, deems appropriate (subject to the rights
granted to Franchisee in Section 2.3 of this Agreement.)

          2.4.2  The right and the option to grant others (including any person
or entity related in any way to the Franchisor ) the right to develop,
manufacture, market sell and distribute food products including, but not limited
to, cream cheese products and other bagel spreads or any other product or
service, under the "Bruegger's" name or under any other name, directly or
indirectly, through any channel of distribution, including, without limitation,
supermarkets, delicatessens, specialty food stores, convenience stores, 

                                      -3-
<PAGE>
 
and other wholesale and retail food stores, at any location within and/or
outside the Exclusive Area.

          2.4.3 In accordance with Sections 2.5 and 2.6 below, the right to
develop additional Bakeries and to acquire, operate and convert to a Bakery, any
business, including, without limitation, businesses operating one or more Bagel
Stores (other than Bakeries) or other food service businesses, located or
operating within and/or outside the Exclusive Area.

          2.4.4     The right to establish and operate, and franchise others
to establish and operate a Bakery in any mall, military base, airport, hospital,
educational institution or highway rest area ("Excluded Locations"), whether or
not such Excluded Locations are located inside or outside the Exclusive Area.
For purposes of this Section 2.4.4 "mall" shall be defined as any enclosed
shopping facility which contains 100,000 square feet or more of enclosed space.
Franchisor and Franchisee expressly acknowledge and agree that the right to
develop and operate Bakeries at the Excluded Locations shall not be subject to
Franchisee's rights as set forth in Sections 2.5 and 2.6 below.

     2.5    Notwithstanding anything to the contrary in this Agreement, if
during the term of this Agreement Franchisor locates a site suitable for a
Bakery within the Exclusive Area (a "Tactical Site"), Franchisor shall notify
Franchisee in writing of such Tactical Site if Franchisor intends that such
Tactical Site be developed and operated as a Bakery. Within ten (10) days after
Franchisee's receipt of Franchisor's notice regarding such Tactical Site
(including any relevant site-related materials in Franchisor's possession),
Franchisee shall notify Franchisor if Franchisee desires to develop and operate
a Bakery at such Tactical Site. If Franchisee fails to so notify Franchisor
within such time period, then Franchisor or its designee shall have the right to
develop and operate a Bakery at such Tactical Site.

     If Franchisee timely notifies Franchisor in writing that Franchisee desires
to develop and operate a Bakery at such Tactical Site and Franchisor has fully
negotiated a lease or purchase agreement for such Tactical Site, then Franchisee
shall: 1) obtain the consent of the landlord to enter into such lease and
execute and deliver same to landlord, if applicable; or 2) execute a purchase
agreement or an assignment of purchase agreement, if applicable; and 3) execute
Franchisor's then current form of standard unit franchise agreement containing
Franchisor's then current fees and expense requirements and such ancillary
documents (including guarantees) as are then customarily used by Franchisor in
the grant of franchises for Bakeries (collectively, the "Franchise Documents") 
as modified for use in connection with the Tactical Site, as necessary, and (4)
pay Franchisor a site location and negotiation fee (the "Site Location and
Negotiation Fee") equal to Ten Thousand Dollars ($10,000.00) plus Franchisor's
reasonable out-of-pocket expenses incurred in locating such Tactical Site and
negotiating the lease or purchase agreement, all within ten (10) business days
after Franchisor's delivery to Franchisee of the lease or purchase agreement, as
the case may be, and the Franchise documents. the site location and Negotiation
Fee is paid to compensate Franchisor for
                                      
                                      -4-
<PAGE>
 
the internal costs of the site location services it provides. Franchisor shall
fully cooperate with Franchisee in obtaining the landlord's consent to execute
such lease or the seller's consent to execute such purchase agreement or
assignment of purchase agreement as the case may be.

     If Franchisee timely notifies Franchisor in writing that Franchisee desires
to develop and operate a Bakery at such Tactical Site and Franchisor has not
fully negotiated a lease or purchase agreement for such Tactical Site, then
Franchisee will have thirty (30) days in which to negotiate and deliver to
Franchisor a lease or purchase agreement for such Tactical Site in form for
execution. If Franchisor disapproves the lease or purchase agreement for failure
to meet Franchisor's requirements, Franchisee will have ten (10) business days
within which to negotiate and deliver to Franchisor a revised lease or purchase
agreement for such Tactical Site in form execution. If Franchisor approves the
lease or the purchase agreement for such Tactical Site, then Franchisee will: 1)
execute such lease or purchase agreement, as applicable; 2) execute the
Franchise Documents; and 3) pay to Franchisor its reasonable out-of-pocket
expenses in locating such Tactical Site and, to the degree applicable, partially
negotiating the lease or purchase agreement, all within ten business (10) days
after Franchisor's delivery of the Franchise Documents to Franchisee.

     If Franchisee: 1) declines the option to develop the Tactical Site; 2)
fails to timely notify Franchisor of its election to develop the Tactical Site;
or 3) fails to timely execute the approved lease or purchase agreement, execute
and deliver to Franchisor the Franchise Documents and pay the applicable
expenses as provided herein, then Franchisor or its designee may develop and
operate or franchise others to operate a Bakery at such Tactical Site.

     Any Tactical Site for which Franchisee executes the Franchise
Documents and develops and opens a Bakery will count toward the Development
Quota set forth in the Development Agreement.
     
     2.6  If during the Agreement Term Franchisor acquires the shares or assets
(which may include, by way of illustration and not by way of limitation,
furniture, fixtures, equipment, leasehold improvements and/or leasehold
interest) of any business operating a Bagel Store at one or more sites located
within the Exclusive Area which meets Franchisor's specifications and standards
as in effect from time to time for conversion to a Bakery (the "Acquisition
Site"), and Franchisor determines in its sole discretion to convert such
Acquisition Site to a Bakery, Franchisor agrees to offer to sell such
Acquisition Site to Franchisee for the price paid therefor by Franchisor. Such
price will include that portion of the direct and indirect costs and liabilities
incurred or assumed by Franchisor in making such acquisition and allocated to
such Acquisition Site, whether paid or owed to the seller of such Acquisition
Site, Franchisor, an affiliate of Franchisor or third parties, and other
expenses allocated or otherwise related to such Acquisition Site (including
losses, whether from continuing operations or closing acquired units) plus

                                      -5-
<PAGE>
 
interest at the Franchisor's cost of money on the balance of such amounts from
time to time, provided that:

               (1)  such sale will not conflict with any existing legal
          obligation of Franchisor or the business being acquired;
          
               (2)  such sale will not preclude the completion of the
          acquisition on the terms agreed to by Franchisor;
               
               (3)  such sale will not, in Franchisor's judgment, 
          interfere with any other legal agreement, arrangement or 
          combination or affect federal or state income tax 
          consequences arising from the acquisition in a manner 
          adverse to any of the parties thereto; and

               (4)  Franchisee agrees to execute, concurrently with
          Franchisee's purchase: a) the Franchise Documents, as
          modified for use in connection with an Acquisition Site, 
          as necessary for each and every such Acquisition Site; b) 
          convert each such Acquisition Site to a Bakery as soon as 
          practicable thereafter (but in no event later than the date 
          specified Franchisor) in accordance with Franchisor's standards 
          and specifications; and c) close or sell within a reasonable
          time period specified by Franchisor any of the acquired sites 
          which are not suitable for conversion to Bakeries.

Franchisee shall have thirty (30) days after receipt of Franchisor's offer
in which to accept or reject such offer by written notice to Franchisor.  If
accepted, Franchisee shall have thirty (30) days from the date of acceptance to
complete the acquisition.

     In the event Franchisee rejects or fails to timely accept Franchisor's
offer to sell such Acquisition Sites or Franchisor is unable to extend such
offer for any of the aforementioned reasons, Franchisor may operate, alter,
modify, refurbish, remodel, promote and market or franchise others to operate
any such Acquisition Site. For purposes of this Section, all references to
Franchisor shall be deemed to include its affiliates.
     
     Any Acquisition Site for which Franchisee executes the Franchise Documents
and develops and opens a Bakery shall count toward the Development Quota set
forth in the Development Schedule.

                                      -6-
<PAGE>
 
3.   TERM AND SUCCESSOR FRANCHISE AGREEMENTS 

     3.1  Unless sooner terminated as provided herein, the initial term of this
Agreement (the "Agreement Term") commences on the date the Bakery opens for
business under this Agreement (the "Commencement Date") and expires twenty (20)
years from the Commencement Date, unless sooner terminated, in accordance with
the provisions of this Agreement.

     3.2  Franchisee shall have, exercisable upon expiration of the Agreement
Term, and upon expiration of each agreement term thereafter, an option to obtain
a successor Franchise Agreement (the "Successor Agreement") for the Bakery, for
an additional terms of the lesser of ten (10) years or the remaining term
(including any extensions) of the lease for the premises of the Bakery (the
"Premises"), subject to the following conditions:

          3.2.1  Franchisee shall have given Franchisor written notice of
Franchisee's election to exercise its option not less than six (6) months nor
more than nine (9) months before the end of the then current term;

          3.2.2  Franchisee shall not be in default of any provision of this
Agreement, or any Successor Agreement, any amendment hereof or successor hereto,
or any other agreement between Franchisee and Franchisor or its affiliates, and
Franchisee shall have substantially complied with such agreements throughout
their respective terms;

          3.2.3  Franchisee shall have satisfied all monetary obligations owed
by Franchisee to Franchisor and its affiliates, and shall have timely met those
obligations throughout Agreement Term and the terms of any Successor Agreement;

          3.2.4  Franchisee shall make or provide for, in a manner satisfactory
to Franchisor, such renovation and modernization of the Bakery as Franchisor may
reasonably require, including, without limitation, installation of new equipment
and renovation of signs, furnishings, fixtures, and decor to reflect the then-
current standards and image of the System;

          3.2.5  Franchisee shall execute Franchisor's then-current form of
Successor Agreement, which shall supersede this Agreement in all respects;

          3.2.6  Franchisee shall execute a general release, in a form
prescribed by Franchisor, of any and all claims against Franchisor, its
affiliates, and their respective officers, directors, shareholders, and
employees, in their corporate and individual capacities;

                                      -7-
<PAGE>
 
          3.2.7  Franchisee shall comply with Franchisor's then-current
qualification and training requirements for new Bruegger's Fresh Bagel Bakery
franchisees; and.

          3.2.8  Franchisee shall pay Franchisor a fee equal to the then-current
initial franchise fee being charged for new franchises.


4.   DUTIES OF FRANCHISOR

     4.1  Franchisor shall provide to Franchisee one set of Franchisor's
representative plans for the construction and layout of a Bakery.

     4.2  Franchisor shall provide to Franchisee, on loan, one set of
Franchisor's confidential operations manuals (the "Manuals").

     4.3  Franchisor shall provide to Franchisee, on loan, only upon written
request pursuant to Section 8.5.2 below, one copy of Franchisor's confidential
Bagel Production Manual (the "Bagel Production Manual").

     4.4  Franchisor shall provide a training program prescribed by Franchisor,
for the persons required or permitted to attend training under Section 7 of this
Agreement.

     4.5  Franchisor shall provide such pre-opening and opening supervision and
assistance as Franchisor deems advisable.

     4.6  Franchisor shall designate at least one supplier of Bruegger's Cream
Cheese and license such supplier or suppliers to use the secret recipes
necessary to produce Bruegger's Cream Cheese.

     4.7  In addition to the advertising and promotional materials produced by
the advertising fund established by Franchisor for the System (the "Fund," as
further described in Section 13 of this Agreement), Franchisor shall make
available to Franchisee such advertising and promotional materials as Franchisor
may elect to produce with Franchisor's own funds. Franchisor may charge a
purchase price for such non-Fund materials equal to the costs to produce them.

     4.8  Franchisor shall provide to Franchisee from time to time, as
Franchisor deems appropriate, advice and written materials concerning techniques
of managing and operating the Bakery.

                                      -8-
<PAGE>
 
5.   FEES

     5.1  In consideration of the rights granted herein, Franchisee has paid to
Franchisor an initial franchise fee of Thirty Five Thousand Dollars ($35,000),
receipt of which is hereby acknowledged, which is fully earned and non-
refundable in consideration of the administrative and other expenses incurred by
Franchisor and Franchisor's lost or deferred opportunity to enter into similar
arrangements with others. The initial franchise fee, less the Site Selection
Deposit of Seventeen Thousand Five Hundred Dollars ($17,500), shall be paid to
the Franchisor on or before the date that the Bakery commences operation.

     5.2  Franchisee shall pay Franchisor a weekly royalty fee in an amount
equal to five percent (5%) of the Gross Sales of the Bakery for the preceding
week. As used in this Agreement, "Gross Sales" means the full retail selling
price of all products sold and all other income of every kind related to the
Bakery or received at the Premises (including, without limitation, any proceeds
from business interruption insurance and premiums), whether for cash or credit,
(and regardless of collection in the case of credit) and without any deduction
for any discounts, coupons or other promotional activities which reduce the
everyday retail selling price of any products or services sold from the Bakery.
Gross Sales shall not include any sales taxes or other taxes collected from
customers by Franchisee and paid directly to the appropriate taxing authority.
For purposes of this Agreement, unless otherwise designated by Franchisor in
writing, a week begins on Monday and ends on the following Sunday.

     5.3  Franchisee shall contribute weekly to the Fund the amount specified in
Section 13.1 below (the "Advertising Fund Contribution").

     5.4  Franchisee shall designate an account at a commercial bank of its
choice (the "Account") for the payment of weekly royalty fees and the
Advertising Fund Contribution. Franchisee shall furnish the bank with such
authorizations as may be necessary to permit Franchisor to make withdrawals from
the Account by electronic funds transfer. On Thursday of each week, Franchisor
shall transfer from the Account an amount equal to the royalty fees and
Advertising Fund Contribution due from Franchisee based on Gross Sales for the
preceding week. Franchisor shall furnish Franchisee with a written confirmation
of each such transfer. Franchisee agrees to maintain sufficient funds in the
Account at all times to cover all royalty fees and Advertising Fund
Contribution payable to Franchisor. If funds in the Account are insufficient to
cover the amounts payable at the time Franchisor makes its weekly electronic
funds transfer, the amount of the shortfall shall be deemed overdue, and
Franchisee shall pay Franchisor, on demand, in addition to the overdue amount,
daily interest on such amount from the date it was due until paid, at the rate
of eighteen percent (18%) per annum or the maximum rate permitted by law,
whichever is less. Entitlement to such interest shall be in addition to any
other remedies Franchisor may have.

                                      -9-
<PAGE>
 
6.   CONSTRUCTING AND OPENING THE BAKERY

     6.1  Franchisor shall furnish to Franchisee a copy of Franchisor's
representative plans and specifications for construction of a Bakery and, if
applicable, a bagel dough manufacturing site, including exterior and interior
design and layout plans.

     6.2  Franchisee shall construct and equip the Bakery and any facility in
which Franchisee manufactures bagel dough pursuant to Section 8.5.2 below at
Franchisee's own expense. Before commencing construction of the Bakery,
Franchisee, at its expense, shall employ a qualified architect or engineer to
prepare preliminary and final architectural and engineering drawings and
specifications for the Premises consistent with Franchisor's representative
plans for a Bakery. As requested by the Franchisor, the preliminary and final
drawings and specifications shall be submitted to Franchisor for approval. If
Franchisor has not approved or rejected the drawings and specifications within
thirty (30) days after receipt of a complete set of drawings and specifications,
then Franchisor's approval shall be deemed received. Once approved by
Franchisor, the drawings and specifications shall not be changed or modified
without the prior written consent of Franchisor.

     6.3  Franchisee shall obtain, at Franchisee's expense, all zoning
classifications, permits, and clearances (including, but not limited to,
certificates of occupancy and mall or strip center clearances) which may be
required by federal, state, or local laws, ordinances, or regulations.

     6.4  During the entire period of construction of the Bakery, Franchisee
shall permit Franchisor and its agents to inspect the site at all reasonable
times. Franchisee shall complete construction and installation of all furniture,
fixtures, equipment, and signs in accordance with the final plans and
specifications approved by Franchisor under Section 6.1 above, and shall notify
Franchisor of the anticipated construction completion date.

     6.5  Franchisee shall open the Bakery within one (1) year after the date of
this Agreement. The parties agree that time is of the essence in the opening of
the Bakery.

7.   TRAINING; MANUALS

     [IF THIS AGREEMENT RELATES TO THE FIRST BAKERY TO BE OPENED BY FRANCHISEE
PURSUANT TO THE DEVELOPMENT AGREEMENT, THEN THE FOLLOWING ALTERNATIVE FORM OF
SECTION 7.1 SHALL APPLY:]

     7.1  Within sixty (60) days before the Bakery opens for business, the
manager, and two bakers designated by Franchisee, together with the individual
who shall be

                                     -10-
<PAGE>
 
responsible for the operations of all Bakeries operated by Franchisee (the
"Operator") shall attend and complete Franchisor's training program to
Franchisor's satisfaction.

     [IF THIS AGREEMENT RELATES TO ANY BAKERY SUBSEQUENT TO THE FIRST BAKERY
OPERATED BY FRANCHISEE PURSUANT TO THE DEVELOPMENT AGREEMENT, THEN THE FOLLOWING
ALTERNATIVE VERSION OF SECTION 7.1 SHALL APPLY:]

     7.1  Franchisee shall provide a training program to its own personnel.
Except as otherwise provided in this Section 7, within sixty (60) days before
the Bakery opens for business, the manager and two bakers designated by
Franchisee together with the individual who shall be responsible for the
operations of all Bakeries operated by Franchisee (the "Operator"), shall attend
and complete the training program conducted by Franchisee, unless such
individuals previously completed training to Franchisor's satisfaction. The
content and administration of Franchisee's training program must be at least
equal to those of Franchisor's training program and must be approved in advance
by Franchisor. Franchisor will provide Franchisee with the materials and, to the
extent Franchisee deems its necessary or appropriate, assistance in designing
and developing Franchisee's own training program. Franchisor shall have the
right to review Franchisee's training program periodically to ensure its quality
and to verify that managers, and bakers are being trained in a timely and
satisfactory manner. Franchisor shall notify Franchisee of any deficiencies in
the training program. Franchisee shall promptly cure such deficiencies. If
Franchisee fails to cure such deficiencies within a reasonable time, Franchisor
may require all Operators, Bakery managers and bakers to attend training
conducted by Franchisor at Franchisee's expense, until such time as the
deficiencies in Franchisee's program have been corrected to Franchisor's
satisfaction.

     7.2  Similarly, within sixty (60) days before a bagel dough manufacturing
site opens for business, the manager of such facility shall attend and complete
Franchisor's training program to Franchisor's satisfaction, or, if applicable,
shall attend and complete a training program conducted by Franchisee and
approved by Franchisor pursuant to the Development Agreement.

     7.3  After the Bakery opens for business:

          7.3.1     Any person employed by Franchisee to serve as Operator, as
manager or baker of the Bakery, or as manager of a bagel dough manufacturing
site, before commencing his or her duties, shall attend and satisfactorily
complete the training program referred to in Section 7.1; and

          7.3.2     Such of Franchisee's employees as Franchisor may reasonably
designate shall attend and complete, to Franchisor's satisfaction, such
additional training programs as Franchisor may reasonably require from time to
time.

     7.4  All training conducted by Franchisor shall be held at a location
designated by Franchisor. Franchisor shall provide instructors, training
facilities, and training

                                     -11-
<PAGE>
 
materials for all such training at no charge to Franchisee. Franchisee shall be
responsible for all other expenses for training of its employees, including, but
not limited to, the costs of transportation, lodging, meals, and wages.

     7.5  Franchisor shall provide to Franchisee, on loan, one set of Manuals.
The Manuals shall remain the sole property of Franchisor and shall be kept in a
secure place at all times. Franchisee shall not photocopy, duplicate, record, or
otherwise reproduce the Manuals or any of its contents without the prior written
consent of Franchisor.


8.   DUTIES OF FRANCHISEE

     8.1  In order to protect the reputation and goodwill of Franchisor and to
maintain high standards of operation under the System, Franchisee shall operate
the Bakery in strict conformance with the methods, standards, and specifications
prescribed by Franchisor from time to time in the Manuals or otherwise in
writing. If Franchisee, pursuant to Section 8.5.2 below, produces its own bagel
dough for the Bakery, Franchisee shall manufacture such bagel dough in strict
conformance with the methods, standards, and specifications prescribed by
Franchisor from time to time in the Bagel Production Manual. Franchisee shall
not deviate from such standards, specifications, and procedures without
Franchisor's prior written consent.

     8.2  Franchisee shall use the Premises solely for the operation of the
Bakery, shall keep the Bakery open and in normal operation for the minimum hours
and days specified in the Manuals and as permitted by applicable laws, and shall
refrain from using or permitting the use of the Premises for any other purpose
or activity at any time without first obtaining the written consent of
Franchisor.

     8.3  Except to the extent provided in Section 6 of the Development
Agreement, Franchisee shall be solely responsible for all employment decisions
and functions of the Bakery, including, without limitation, those related to
hiring, firing, training, wage and hour requirements, recordkeeping,
supervision, and discipline of employees. Franchisee shall maintain a competent,
conscientious, trained staff with enough members to operate the Bakery in an
efficient and competent manner. Franchisee shall take such steps as are
necessary to ensure that its employees preserve good customer relations; render
competent, prompt, courteous, and knowledgeable service; and meet such minimum
standards as Franchisor may establish from time to time in the Manuals.

     8.4  Franchisee shall offer for sale in the Bakery all products and
services which are designated as core products by Franchisor from time to time
in the Manuals as Required Items. Franchisee may also offer for sale any
non-required items and services which have been approved by Franchisor in the
Manuals for sale in a Bakery, but Franchisee shall not offer or sell any other
products or services without Franchisor's prior written consent. All products
shall be sold only in the weights, sizes, forms, and packages approved by

                                     -12-
<PAGE>
 
Franchisor. Franchisee shall discontinue selling or offering for sale any
products or services which Franchisor, in its sole discretion, disapproves in
writing at any time. Franchisee shall have sole discretion as to the prices of
all products and services offered and sold by it to its customers.

     8.5  A principal purpose of the relationship created by this Agreement is
to enable Franchisee to sell bagels prepared from dough made in accordance with
the proprietary recipe and manufacturing process owned by Bruegger's
Corporation, an affiliate of Franchisor ("Bruegger's Bagels"), and to sell
varieties of a special cream cheese product ("Bruegger's Cream Cheese") made in
accordance with proprietary recipes owned by Bruegger's Corporation. In order to
protect the ownership interests of Franchisor's and its affiliates in the
proprietary recipes and processes and to ensure the quality, uniformity, and
distinctiveness of Bruegger's Bagels and Bruegger's Cream Cheese, Franchisee
agrees that:

          8.5.1     All of Franchisee's requirements of Bruegger's Cream Cheese
shall be purchased by Franchisee from a supplier designated by Franchisor; and

          8.5.2     All of Franchisee's requirements of bagel dough shall either
be: (i) manufactured by Franchisee in strict conformance with the standards and
procedures set forth by Franchisor from time to time in the Bagel Production
Manual; or (ii) purchased by Franchisee from a supplier designated by
Franchisor. Franchisor shall furnish one (1) copy of the Bagel Production Manual
to Franchisee within one (1) week after receipt of written notification from
Franchisee that Franchisee intends to produce its own bagel dough for the
Bakery, unless Franchisee has previously received a copy of the Bagel Production
Manual pursuant to another Bruegger's Fresh Bagels Bakery Franchise Agreement,
in which case Franchisor shall have no obligation to furnish an additional copy.
Franchisee's written notice shall explicitly acknowledge Franchisee's obligation
to hold the Bagel Production Manual and its contents in strict confidence at all
times pursuant to Section 10 of this Agreement.

     8.6  In addition to the restriction's regarding purchase of bagel dough and
Bruegger's Cream Cheese, as provided in Section 8.5, Franchisee shall purchase
all other products and services for the Bakery solely from suppliers who
demonstrate to Franchisor's continuing reasonable satisfaction the ability to
meet Franchisor's standards and specifications; possess adequate quality
controls and capacity to supply Franchisee's needs promptly and reliably; and
have been approved by Franchisor in the Manuals or otherwise in writing. For
purposes of Sections 8.5 and 8.6, "supplier" means any source of products or
services, including, but not limited to, manufacturers, wholesalers, and
distributors. If Franchisee desires to purchase products or services from an
unapproved supplier, Franchisee shall submit to Franchisor a written request to
approve the proposed supplier, together with such information as Franchisor may
reasonably require. Franchisor shall have the right to require that its
representatives be permitted to inspect the supplier's facilities, and that
samples from the supplier be delivered for evaluation and testing either to
Franchisor or to an independent testing facility designated by Franchisor.

                                     -13-
<PAGE>
 
A charge not to exceed the reasonable cost of the evaluation and testing shall
be paid by Franchisee, whether or not the supplier is approved. Within thirty
(30) days after its receipt of Franchisee's request and completion of evaluation
and testing (if required by Franchisor), Franchisor shall notify Franchisee in
writing of its approval or disapproval of the proposed supplier. Approval shall
not be unreasonably withheld. Franchisee shall not purchase, sell, or offer for
sale any products or services of the proposed supplier until Franchisor's
written approval of the proposed supplier is received. Franchisor may revoke its
approval of particular suppliers from time to time if Franchisor determines, in
its sole judgment, that such suppliers or their products or services no longer
meet Franchisor's standards. Upon receipt of written notice of revocation,
Franchisee shall cease to purchase from the disapproved supplier and, in the
case of revocation based on failure of products to meet Franchisor's standards,
Franchisee shall dispose of its remaining inventory of such products as directed
by Franchisor.

     8.7  Franchisee shall acquire and install in the Bakery, at Franchisee's
expense, point of sale equipment and software that Franchisor approves in
writing prior to installation and use. Franchisee shall maintain electronic
connection of its point of sale systems with those of Franchisor; shall use the
point of sale systems in accordance with the policies and operational procedures
issued by Franchisor from time to time; shall transmit data to Franchisor or
permit Franchisor to poll Franchisee's systems at the times specified by
Franchisor; shall maintain its point of sale systems in good working order at
all times; and shall ensure that Franchisee's employees are adequately trained
in the use of such systems and the related policies and procedures of
Franchisor. Franchisee shall bear all costs of installation, operation, and
maintenance of the point of sale systems, except for toll charges incurred by
Franchisor in accessing Franchisee's systems.

     8.8  In addition to the requirements of Section 8.7, Franchisee shall
acquire and install in the Bakery and any facility in which Franchisee
manufactures bagel dough, at Franchisee's expense, such fixtures, furnishings,
equipment, decor, and signs as Franchisor may reasonably direct from time to
time. Franchisee shall not install or permit to be installed on or about the
Premises, without Franchisor's prior written consent, any fixtures, furnishings,
equipment, decor, signs, or other items not previously approved by Franchisor.

     8.9  Franchisee shall permit Franchisor and its agents to enter the Bakery
and any facility in which Franchisee manufactures bagel dough at any time during
normal business hours to conduct inspections; shall cooperate with such
inspections by rendering such assistance as Franchisor's representatives may
reasonably request; and, upon notice from Franchisor or its agents, shall
immediately begin such steps as may be necessary to correct any deficiencies
noted during any such inspection.

     8.10 Franchisee shall maintain the Premises (including adjacent public
areas) in a clean, orderly condition and in excellent repair. Franchisee, at its
own expense, shall make such additions, alterations, repairs, and replacement as
may be required for that purpose (but no others without Franchisor's prior
written consent).

                                     -14-
<PAGE>
 
     8.11 At Franchisor's request, but not more often than once every five (5)
years, unless sooner required by Franchisee's lease, Franchisee shall refurbish
the Bakery to conform to the then-current design and service system, trade
dress, and color schemes for a new Bakery. Such refurbishment may require
expenditures by Franchisee on, among other things, structural changes,
installation of new equipment, remodeling, redecoration, and modifications to
existing improvements. Franchisor shall consider the useful life of the capital
improvements in developing its standards for regular refurbishment.

     8.12 Franchisee shall participate in special promotional activities which
Franchisor may prescribe generally for the System, including but not limited to
an annual "Bruegger's Birthday" promotion, provided that Franchisee shall always
have sole discretion as to the prices charged to its customers. If Franchisor
prescribes any such activities, Franchisee shall bear its own costs of
conducting such activities for the Bakery.

     8.13 Franchisee shall not implement any change in the System without the
prior written consent of Franchisor. Franchisee shall notify Franchisor in
writing of any change in the System which Franchisee desires to implement, and
shall provide to Franchisor such information as Franchisor requests regarding
the proposed change. Franchisee acknowledges and agrees that Franchisor shall
have the right to incorporate the change into the System and thereupon obtain
all right, title, and interest of Franchisee therein, without compensation to
Franchisee.

     8.14 Franchisee acknowledges that the System may be unilaterally
supplemented, improved, and otherwise modified from time to time by Franchisor.
Franchisee agrees to comply with all reasonable requirements of Franchisor in
that regard, including, without limitation, offering and selling new types of
products or services as specified by Franchisor.

     8.15 Franchisee shall comply with all terms of its lease or sublease for
the Premises and all other agreements affecting the operation of the Bakery.
Franchisee shall undertake best efforts to maintain a good working relationship
with its landlord and shall refrain from any activity which may jeopardize
Franchisee's right to remain in possession of, or to renew the lease or sublease
for, the Premises.

     8.16 Franchisee shall operate the Bakery in full compliance with all
applicable municipal, county, state and federal laws, rules, regulations and
ordinances, including, without limitation, all government regulations relating
to occupational hazard and health, worker's compensation insurance, unemployment
insurance and withholding and payment of federal and state income taxes, social
security taxes and sales taxes. Within ten (10) days after receipt thereof by
Franchisee, Franchisee shall forward to Franchisor copies of any and all
reports, warnings, notices of violation or other evidence reflecting less than
full compliance by Franchisee with any applicable laws, rules, regulations or
ordinances.

                                     -15-
<PAGE>
 
     8.17 Franchisee shall at all times employ a manager who shall devote his or
her full time and best efforts to the operation of the Bakery and who has been
trained in accordance with the provisions of Section 7 of this Agreement.


9.   PROPRIETARY MARKS AND COPYRIGHTS

     9.1  Franchisor represents that Bruegger's Corporation has granted
Franchisor a license to use, and to license others to use, the Proprietary
Marks; that, subject to any common law rights of others, Franchisor has the
right to license Franchisee to use the Proprietary Marks; and that Franchisor
has taken and will take all steps reasonably necessary to preserve and protect
the validity of the Proprietary Marks and its right to license others to use
them.

     9.2  Franchisee acknowledges and agrees that Franchisor or its affiliates
are the owners of certain copyrighted or copyrightable works (the "Copyrights")
and that the Copyrights are valuable property of the Franchisor or its
affiliates. Franchisor authorizes the Franchisee to use the Copyrights on the
condition that Franchisee complies with all of the terms and conditions of this
Section 9.2. Franchisee acknowledges and agrees that the Franchisor may create,
acquire or obtain licenses for certain additional copyrights in various works of
authorship used in connection with the operation of a Bakery, including, but not
limited to, all categories of works eligible for protection under the United
States Copyright law, all of which shall be deemed to be part of the Copyrights,
as that term is defined herein. The Copyrights include, but are not limited to,
the Manuals, advertisements, promotional materials, labels, menus, posters
coupons, gift certificates, signs and store designs, plans and specifications
and may include all or part of the Proprietary Marks or other trade dress used
as part of the System. Franchisee acknowledges that this Agreement does not
confer any interest in the Copyrights on Franchisee, other than the right to use
them in the operation of a Bakery in compliance with the terms of this
Agreement. If Franchisee prepares any adaptation, translation or work derived
from the Copyrights, including, but not limited to, advertisements, promotional
materials, labels, menus or posters, whether or not such adaptation was
authorized by the Franchisor, Franchisee agrees that such material shall be the
property of Franchisor and Franchisee hereby assigns all its right, title and
interest therein to the Franchisor (or a person designated by Franchisor).
Franchisee agrees to execute any documents, in recordable form, which Franchisor
deems necessary to reflect or perfect such ownership. Franchisee shall submit
all such adaptation, translation or derivative works to Franchisor for approval
prior to use.

                                     -16-
<PAGE>
 
     9.3  Franchisee agrees that:

          9.3.1   Franchisee shall use only the Proprietary Marks and
Copyrights designated by Franchisor and shall use them only in the manner
authorized by Franchisor;

          9.3.2   Franchisee shall use the Proprietary Marks and Copyrights only
for the operation of the Bakery and only at the Approved Location or in
advertising for the Bakery;

          9.3.3   Unless otherwise authorized or required by Franchisor,
Franchisee shall operate and advertise the Bakery only under the name
"BRUEGGER'S BAGELS" or such other name or mark as may be designated by
Franchisor, shall use all Proprietary Marks without prefix or suffix, and shall
not use the Proprietary Marks as part of its corporate or legal name;

          9.3.4   Franchisee shall ensure that all advertising and promotional
materials, packaging, signs, decorations, and other items which may be specified
by Franchisor bear the Proprietary Marks in the form, color, size, and location
prescribed by Franchisor;

          9.3.5   Franchisee, as directed by Franchisor, shall identify itself
as the owner of the Bakery in conjunction with any use of the Proprietary Marks,
including, but not limited to, on invoices, order forms, receipts, and business
stationery, as well as at such conspicuous locations on the Premises as
Franchisor may designate in writing;

          9.3.6   Franchisee's right to use the Proprietary Marks and Copyrights
are limited to such uses as are authorized under this Agreement, and any
unauthorized use shall constitute an infringement of Franchisor's rights and the
rights of Bruegger's Corporation;

          9.3.7   Franchisee shall not use the Proprietary Marks to incur any
obligation or indebtedness on behalf of Franchisor or Bruegger's Corporation;

          9.3.8   Franchisee shall comply with Franchisor's instructions in
filing and maintaining any requisite trade name or fictitious name
registrations, and shall execute any documents deemed necessary by Franchisor to
obtain protection for the Proprietary Marks and Copyrights or to maintain
their continued validity and enforceability; 

          9.3.9   During the term of this Agreement and after its expiration or
termination, Franchisee shall not directly or indirectly contest the validity
of, or take any other action which tends to jeopardize the rights of Franchisor
or its affiliates to the ownership of or right to use and to license others to
use the Proprietary Marks; and

                                     -17-
<PAGE>
 
          9.3.10  Franchisee shall ensure that the Proprietary Marks and the
Copyrights shall bear the ("R"), "TM","SM" or copyright notice, respectively,
as may be prescribed by the Franchisor from time to time.

     9.4  Franchisee acknowledges that:
 
          9.4.1   The Proprietary Marks and Copyrights are valid and serve to
identify the System and those who are authorized to operate under the System;

          9.4.2   Franchisee's use of the Proprietary Marks and Copyrights
pursuant to this Agreement does not give Franchisee any ownership interest or
other interest in the Copyrights or Proprietary Marks;

          9.4.3   Any and all goodwill arising from Franchisee's use of the
Proprietary Marks and Copyrights shall inure exclusively to the benefit of
Franchisor and Bruegger's Corporation, and upon expiration or termination of
this Agreement, no monetary amount shall be assigned as attributable to any
goodwill associated with Franchisee's use of the System, the Proprietary
Marks, or the Copyrights; and

          9.4.4   The license to use the Proprietary Marks and Copyrights
granted hereunder is nonexclusive.

     9.5  Franchisee shall promptly notify Franchisor of any unauthorized use of
the Proprietary Marks or Copyrights or any challenge to the validity of the
Proprietary Marks or Copyrights, the ownership by Franchisor or Bruegger's
Corporation of the Proprietary Marks or Copyrights or Franchisor's right to use
and to license others to use, or Franchisee's right to use the Proprietary Marks
or Copyrights. Franchisee acknowledges that Franchisor and Bruegger's
Corporation have the right to direct and control any administrative proceeding
or litigation involving the Proprietary Marks or Copyrights, including any
settlement thereof. Franchisor and Bruegger's Corporation have the right, but
not the obligation, to take action against uses by others that may constitute
infringement of the Proprietary Marks or Copyrights. Franchisor shall defend or
cause the defense of Franchisee against any third-party claim, suit, or demand
arising out of Franchisee's use of the Proprietary Marks or Copyrights.
Franchisor shall bear the cost of such defense (including the cost of any
judgment or settlement) if Franchisee has used the Proprietary Marks or
Copyrights in accordance with this Agreement, but otherwise Franchisee shall
bear the cost of such defense (including the cost of any judgment or
settlement). Franchisee shall execute any and all documents and do such acts as
Franchisor deems necessary to carry out the defense or prosecution of any
litigation involving the Proprietary Marks or Copyrights, including, but not
limited to, becoming a nominal party to any legal action. Except to the extent
that such litigation is the result of Franchisee's use of the Proprietary Marks
or Copyrights in a manner inconsistent with the terms of this Agreement,
Franchisor agrees to reimburse Franchisee for its out-of-pocket costs in doing
such acts.

                                     -18-
<PAGE>
 
     9.6   Franchisor reserves the right to modify or require Franchisee to
discontinue use of any of the Proprietary Marks and Copyrights and/or to
substitute different service marks, trademarks or copyrighted
material for use in identifying the System and the businesses operating
thereunder. When required by Franchisor, Franchisee shall promptly discontinue
use of such Proprietary Marks or Copyrights or implement any modification or
substitution of same at Franchisee's sole cost and expense. Franchisor shall
have no obligation or liability to Franchisee as a result of such modification
or substitution.

10.  OPERATIONS MANUALS


     10.1  Franchisee shall treat the Manuals, the Bagel Production Manual, any
other manuals approved by Franchisor for use in connection with the Bakery, and
all information contained therein as confidential, and shall maintain such
information in strict secrecy. Franchisee shall not copy, duplicate, record, or
otherwise reproduce the foregoing materials, in whole or in part, or otherwise
make them available to any unauthorized person, except as required by law.

     10.2  The Manuals and the Bagel Production Manual shall remain the sole
property of Franchisor and shall at all times be kept in a secure place in the
Bakery or, in the case of the Bagel Production Manual, in the facility where
Franchisee manufactures bagel dough.

     10.3  Franchisor may from time-to-time revise the contents of the Manuals
and the Bagel Production Manual. Franchisee agrees to update its Manuals and
Bagel Production Manual and to comply with each new or changed standard upon
reasonable notice thereof from Franchisor. In the event of a dispute about the
contents of the Manuals or Bagel Production Manual, the master copies maintained
by Franchisor at its principal offices shall be controlling.

11.  CONFIDENTIAL INFORMATION

     11.1  Franchisee shall not, during the term of this Agreement or at any
time thereafter, communicate, divulge, or use for the benefit of any other
person or entity any confidential information, knowledge, trade secrets, or 
know-how which may be communicated to Franchisee or of which Franchisee may be
apprised by virtue of Franchisee's activities under this Agreement. Franchisee
may divulge such confidential information only: (i) to such of its employees as
must have access to it in order to operate the Bakery; and (ii) to Franchisee's
contractors and the landlord of the Premises with the prior written approval of
Franchisor. All information, knowledge, trade secrets, know-how, techniques, and
other data which Franchisor designates as confidential shall be deemed
confidential for purposes of this Agreement, except information which

                                     -19-
<PAGE>
 
Franchisee can demonstrate came to its attention by lawful means prior to
disclosure thereof by Franchisor, or which, at or after the time of disclosure
by Franchisor to Franchisee, had become or later becomes a part of the public
domain, through publication or communication by others.

     11.2  At Franchisor's request, Franchisee shall require its employees,
landlord, contractors, and any other person to whom Franchisee wishes to
disclose any confidential information of Franchisor to execute covenants that
they will maintain the confidentiality of such information. Such covenants shall
be in a form satisfactory to Franchisor, including, without limitation, specific
identification of Franchisor as a third-party beneficiary with the independent
right to enforce the covenants.

12.  ACCOUNTING AND RECORDS

     12.1  Franchisee shall prepare, and shall preserve for at least three (3)
years from the dates of their preparation, complete and accurate books, records,
and accounts, in accordance with generally accepted accounting principles.
 
     12.2  All Gross Sales and all sales tax and other charges collected on
behalf of third parties shall be recorded by Franchisee in accordance with the
procedures prescribed in the Manuals on such point of sale systems as Franchisor
may specify pursuant to Section 8.7 above.

     12.3  Franchisee shall submit to Franchisor, at Franchisee's expense, in
the form prescribed by Franchisor:

           12.3.1  By no later than Monday of each week, a complete and accurate
report of Gross Sales for the preceding week, and such other weekly data as
Franchisor may reasonably require;

           12.3.2  Within ninety (90) days after the end of each fiscal year of
Franchisee, an income statement showing the results of Franchisee's operations
during such fiscal year and a balance sheet as of the end of such fiscal year,
both of which shall be audited by an independent certified public accountant;
and

           12.3.3  Interim unaudited income statements and balance sheets, not
less often than quarterly, within forty-five (45) days after the end of the
period to which the statements relate.

     12.4  Franchisor and its designated agents shall have the right to examine
and copy, at Franchisor's expense, on reasonable notice and during normal
business hours, the books, records, accounts, and sales tax returns of
Franchisee. Franchisor shall also have the right, at any time, to have an
independent audit made of the books of Franchisee. If

                                     -20-
<PAGE>
 
an inspection or audit reveals that any payment to Franchisor has been
understated, Franchisee shall immediately pay to Franchisor the amount owed,
together with daily interest from the date such amount was due until paid at the
rate of eighteen percent (18%) per annum or the maximum rate permitted by law,
whichever is less. If an inspection or audit reveals any underpayment by
Franchisee of two percent (2%) or more, Franchisee shall, in addition to payment
of monies owed with interest, reimburse Franchisor for all costs connected with
the inspection or audit (including, without limitation, expenses for travel,
lodging and wages, and reasonable accounting and legal costs). The foregoing
remedies shall be in addition to any other remedies Franchisor may have.

13.  ADVERTISING AND PROMOTION

     Recognizing the value of advertising and promotion and the importance of
the standardization of advertising and promotion to the furtherance of the
goodwill and public image of the System, the parties agree as follows:

     13.1  Franchisee shall contribute weekly to the advertising Fund
established by Franchisor for the System four percent (4%) of the Gross Sales of
the Bakery. The percentage of Gross Sales Franchisee is required to contribute
may be increased, at Franchisor's sole discretion, by up to one quarter of one
percent (.25%) per calendar year during each year of the Agreement Term, but in
no event shall the required contribution during the Agreement Term exceed eight
percent (8%) of Franchisee's Gross Sales. Contributions shall be made by
electronic funds transfer, as specified in Section 5.4. Franchisor shall use all
Fund monies received from Franchisee in any manner consistent with Section 13.3
below. Franchisor, or its affiliates, shall contribute a like percentage for
each Bakery that Franchisor, or its affiliates, operate.

     13.2  In addition to its contributions to the Fund, Franchisee shall spend
monthly for local advertising and promotion two percent (2%) of the Gross Sales
of the Bakery. Franchisee expressly acknowledges and agrees that neither all nor
any portion of this required expenditure for local advertising and promotion may
be satisfied by giving away products of any kind. All local advertising and
promotion must be approved by Franchisor pursuant to Section 13.9 below.

     13.3  The Franchisor shall direct all advertising, media placement,
marketing and public relations programs and activities financed by the Fund,
with sole discretion over strategic direction, creative concepts, materials and
endorsements used therein, and the geographic, market and media placement and
allocation thereof. Franchisee acknowledges and agrees that the Fund may be used
to pay various costs and expenses as Franchisor may determine in its sole
discretion, including by way of example and without limitation: preparing and
producing video, audio and written advertising materials; interest on borrowed
funds; sponsorship of sporting, charitable, or similar events;

                                     -21-
<PAGE>
 
reasonable salaries and expenses of employees of Franchisor or its affiliates
working for or on behalf of the Fund or on advertising, marketing, public
relations materials, programs, or activities or promotions prepared, planned or
undertaken on behalf of the Fund and administrative costs and overhead of
Franchisor or its affiliates incurred in activities reasonably related to the
administration and activities of the Fund; administering advertising programs,
including, without limitation, purchasing direct mail and other media
advertising and employing advertising agencies to assist therewith; and
supporting public relations, marketing and consumer research and other
advertising, promotional and marketing activities, including testing and test
marketing programs, fulfillment charges, and development and implementation and
testing of trade dress and design prototypes. Franchisee agrees to participate
in all advertising, marketing, promotions, research, and public relations
programs instituted by the Franchisor, whether or not such is paid for by
proceeds from the Fund.

     13.4  Franchisee acknowledges that the Fund and all contributions thereto,
and any earnings thereon, shall be used is intended to maximize general public
recognition, acceptance, and use of the System, and that Franchisor is not
obligated, in administering the Fund, to make expenditures for Franchisee which
are equivalent or proportional to Franchisee's contribution, or to ensure that
any particular franchisee benefits directly or pro rata from expenditures by the
                                               --- ---- 
Fund. Franchisee acknowledges that its failure to derive any such benefit will
not serve as a basis for a reduction or elimination of its obligation to
contribute to the Fund. Franchisee further acknowledges and agrees that the
failure (whether with or without Franchisor's permission) of any other
franchisee to make the appropriate amount of contributions to the Fund shall not
in any way release Franchisee from or reduce Franchisee's obligations under this
Section 13.4, such obligations being separate and independent obligations of
Franchisee under this Agreement. Except as expressly provided in this Section
13.4, Franchisor assumes no direct or indirect liability or obligation to
Franchisee with respect to maintenance, direction, or administration of the
Fund.

     13.5  Nothing in this Agreement shall be construed to create a trust or
fiduciary relationship of any kind or nature whatsoever among the parties as it
relates to the Fund or Franchisor's actions with respect thereto including, but
not limited to, collection of payments, maintenance of the bank account,
bookkeeping, and disbursement of monies from the Fund.

     13.6  In addition to its contributions to the Fund and the required monthly
expenditure for local advertising and promotion, Franchisee shall conduct grand
opening marketing activities pursuant to the then current grand opening
marketing plan prescribed by Franchisor. Franchisor may require Franchisee to
expend up to Fifteen Thousand Dollars ($15,000) to conduct such grand opening
marketing activities.

     13.7  Franchisor shall have the right, in its sole discretion, to designate
geographic areas for purposes of establishing local or regional advertising
cooperatives ("Cooperatives"). If the Bakery is within the territory of an
existing Cooperative at the

                                     -22-
<PAGE>
 
time the Bakery opens for business, Franchisee shall immediately begin
participating in the Cooperative comprised of the Bakeries located within such
geographic area. If a Cooperative applicable to the Bakery is established during
the term of this Agreement, Franchisee shall begin participating no later than
thirty (30) days after the date approved by Franchisor for the Cooperative to
commence operation. In no event shall more than one Cooperative be applicable to
the Bakery. Franchisor (or its affiliate, as the case may be,) shall become a
member in any Cooperatives established for a geographic region that includes a
Bakery owned by Franchisor (or its affiliate). The following provisions shall
apply to each Cooperative:

           13.7.1   Each Cooperative shall be organized and governed in a form
and manner, and shall commence operations on a date, approved in advance by
Franchisor in writing. Franchisor reserves the right to change, in its sole
discretion, the form and manner of the organization and governance of any
Cooperative and Franchisee hereby agrees to implement any such change
immediately upon notice from Franchisor. No changes in the bylaws or other
governing documents of a Cooperative shall be made without Franchisor's prior
written consent.

           13.7.2   Each Cooperative shall be organized for the exclusive
purpose of administering regional advertising programs and developing, subject
to Franchisor's approval, promotional materials for use by the members in local
advertising.

           13.7.3   No advertising or promotional plans or materials may be used
by a Coopeerative or furnished to its members without prior approval of
Franchisor pursuant to Section 13.8 below.

           13.7.4   Franchisee and each other member of the Cooperative shall
contribute every fourth Monday to the Cooperative, commencing with the first
Monday after the Cooperative commences operations, all or any portion of the
local advertising expenditure required pursuant to Section 13.2 above, as
determined by the membership. Said amount may not exceed two percent (2%) of the
Gross Sales of each Bakery operated by the members unless approved by a
unanimous vote of eligible members. Franchisee's obligation to make local
advertising expenditures under Section 13.2 above shall be reduced by the amount
of Franchisee's contributions to the Cooperative. Each required contribution
shall be based on Gross Sales for the preceding four week period, and shall be
submitted together with such statements or reports as may be required by
Franchisor, or by the Cooperative with Franchisor's prior written approval.

           13.7.5   Franchisor, in its sole discretion, may grant to any
franchisee an exemption for any length of time from the requirement of
membership in a Cooperative, and/or from the obligation to contribute thereto
(including a reduction, deferral or waiver of such contribution), upon written
request of such franchisee stating sufficient reasons to support such exemption.
Franchisor's decision concerning any request for exemption shall be final. If an
exemption is granted to a franchisee, the franchisee shall be required

                                     -23-
<PAGE>
 
to spend on local advertising the amount the franchisee otherwise would have
been required to contribute to the Cooperative.

           13.7.6   Franchisor and its designated agents shall have the right to
examine and copy, at Franchisor's expense, on reasonable notice and during
normal business hours, the books, records, and accounts of any Cooperative.
Franchisor shall also have the right, at any time, to have an independent audit
made of the books of any Cooperative.

     13.8  All advertising and promotion by Franchisee and by Cooperatives shall
be in such media and of such type and format as Franchisor may approve, shall be
conducted in a dignified manner, and shall conform to such standards and
requirements as Franchisor may specify. Franchisee or the Cooperative shall
submit written samples of all proposed advertising and promotional plans and
materials to Franchisor for its approval (except with respect to prices to be
charged) at least thirty (30) days before their intended use, unless such plans
and materials were prepared by Franchisor or have been approved by Franchisor
within the last twelve (12) months. Proposed advertising plans or materials
shall be deemed to have been approved if they have not been disapproved by
Franchisor within fifteen (15) days after their receipt by Franchisor.

     13.9  At Franchisor's request, Franchisee shall furnish Franchisor with
copies of invoices and other appropriate documentation of Franchisee's
compliance with Sections 13.2 and 13.6 above.

     13.10 Franchisee, at its own expense, shall obtain listings in the white
pages and yellow pages of local telephone directories. Franchisee acknowledges
that any expense incurred with respect to obtaining such listings shall be in
addition to, and not in lieu of, any other expenditures required to be made
pursuant to this Section 13.

14.  INSURANCE


     14.1  Before commencing any activities under this Agreement, Franchisee
shall procure, and thereafter shall maintain in full force and effect at all
times during the term of this Agreement, at Franchisee's expense, an insurance
policy or policies protecting Franchisee, Franchisor, Franchisor's affiliates,
and their respective officers, directors, shareholders, and employees against
any demand or claim with respect to personal injury, death, or property damage,
or any loss, liability, or expense whatsoever arising or occurring at or in
connection with the Bakery or any bagel dough manufacturing site, including, but
not limited to, comprehensive general liability insurance, property and casualty
insurance, statutory workers' compensation insurance, employer's liability
insurance, product liability insurance, and business interruption insurance.
Such policy or policies shall be written by a responsible carrier or carriers
acceptable to Franchisor,

                                     -24-
<PAGE>
 
shall name Franchisor as an additional insured as specified by Franchisor, and
shall provide at least the types and minimum amounts of coverage specified in
the Manuals.

     14.2  Franchisee's obligation to obtain and maintain the policy or policies
in the amounts specified in the Manuals shall not be limited in any way by
reason of any insurance which may be maintained by Franchisor, nor shall
Franchisee's performance of that obligation relieve it of liability under the
indemnity in Section 21.2 of this Agreement.

     14.3  All public liability and property damage policies shall contain a
provision that Franchisor, although named as an insured, shall nevertheless be
entitled to recover under such policies on any loss occasioned to Franchisor or
its servants, agents, or employees by reason of the negligence of Franchisee or
its servants, agents, or employees.

     14.4  Before commencing any operations under this Agreement, and thereafter
at least thirty (30) days prior to the expiration of any policy, Franchisee
shall deliver to Franchisor certificates of insurance evidencing the proper
types and at least the minimum amounts of coverage specified in the Manuals. All
such certificates shall expressly provide that no less than thirty (30) days'
prior written notice shall be given Franchisor in the event of material
alteration to or cancellation of the coverage evidenced by such certificates.

     14.5  Should Franchisee, for any reason, fail to procure or maintain the
insurance required by this Agreement, as such requirements may be revised from
time to time by Franchisor in the Manuals or otherwise in writing, Franchisor
shall have the right (but not the obligation) to procure such insurance and to
charge its cost to Franchisee, which charges, together with a reasonable fee for
Franchisor's services, shall be payable by Franchisee immediately upon demand.
The foregoing remedies shall be in addition to any other remedies Franchisor may
have.

15.  TRANSFER OF INTEREST


     15.1  Franchisor shall have the right to transfer or assign this Agreement
or any part of its rights or obligations under this Agreement to any person or
legal entity. Franchisee agrees that Franchisor shall have no liability after
the effective date of such transfer or assignment for the performance of any
obligations hereunder.

     15.2  Franchisee understands and acknowledges that the rights and duties
set forth in this Agreement are personal to Franchisee and that Franchisor has
granted these rights in reliance on the business skill, financial capacity, and
personal character of Franchisee's present owners and management. Accordingly,
except as provided below in Section 15.3 and 15.4, neither Franchisee nor any
immediate or remote successor to any

                                     -25-
<PAGE>
 
part of Franchisee's interest in this Agreement, nor any individual,
partnership, corporation, or other legal entity which directly or indirectly
owns any interest in Franchisee, shall, without the prior express written
consent of Franchisor: (i) sell, assign, transfer, convey, pledge, encumber or
give away any direct or indirect interest in this Agreement or itself, or in all
or substantially all of the assets of the Franchisee; or (ii) offer or sell
securities of itself.

     15.3 Subject to Franchisor's right of first refusal under Section 15.5, the
executor or personal representative of a person with an interest in Franchisee
may transfer his or her interest to a third party approved by Franchisor within
a reasonable time after the date of such person's death or declaration of such
persons mental incapacity. In the case of transfer by bequest, if the
beneficiaries are unable to meet the conditions of this Section 15, the executor
may transfer the decedent's interest to another party approved by Franchisor,
subject to all of the terms and conditions for transfers contained in this
Agreement. If an interest is not disposed of under this Section 15.3 within two
(2) years from the date of death or declaration of mental incapacity, Franchisor
may terminate this Agreement pursuant to Section 16.2.6 below.

     15.4 Subject to Franchisor's right of first refusal under Section 15.5, if
Franchisee is an entity, then the owner or owners of the equity of Franchisee
may, without Franchisor's prior written consent, sell, assign, transfer or give
away to employees of Franchisee during the Agreement Term, an aggregated amount
of not more than twenty percent (20%) of the outstanding equity of the
Franchisee, provided: (i) Franchisor receives written notice of such transfer
not later than thirty (30) days prior to the transfer, which notice shall
identify the transferee, describe the transferee's position of employment, and
include a calculation demonstrating that the planned transfer complies with this
Section 15.4; and (ii) such transfer, when combined with all prior transfers of
the equity of Franchisee, does not result in a transfer of more than twenty
percent (20%) of the outstanding equity of Franchisee.
     
     15.5 Franchisor shall have the right, exercisable within thirty (30) days
after receipt of a written request for approval of a proposed transfer pursuant
to this Section 15, to purchase the interest proposed to be transferred. The
request for approval of transfer must include a true and complete copy of the
proposed purchase agreement and any ancillary agreements and not be subject to
financing or any other contingencies. Franchisor's thirty (30) day period for
determining whether or not to exercise its right of first refusal shall not
commence until transferor has provided all information and documentation
required hereunder in a form and substance satisfactory to Franchisor. If
Franchisor desires to exercise its right of first refusal, it shall do so by
providing written notice (the "Purchase Notice") to transferor that it intends
to purchase the interest on the same terms and conditions offered by the third
party. Closing on such purchase shall occur within sixty (60) days after the
date of transferor's receipt of the Purchase Notice. If the consideration,
terms, and/or conditions offered by the third party are such that Franchisor may
not reasonably be required to furnish the same consideration, terms, and/or
conditions, then Franchisor may purchase the interest proposed to be sold for
the

                                     -26-

<PAGE>
 
reasonable equivalent in cash. If the parties cannot agree within thirty (30)
days of transferor's receipt of the Purchase Notice on the reasonable equivalent
in cash, an independent appraiser shall be designated by Franchisor at
Franchisor's expense, and the appraiser's determination shall be binding. Any
material change in the terms of the offer from a third party after Franchisor
has elected not to purchase the interest sought to be transferred shall
constitute a new offer subject to the same rights of first refusal by Franchisor
as in the case of the third party's initial offer.

     15.6  If Franchisor elects not to exercise its right of first refusal under
Section 15.5, the proposed transferor may complete the transfer after obtaining
Franchisor's written consent as required under Section 15.2. In any event,
Franchisor's consent to any transfer shall be contingent on certain conditions
which shall be determined in Franchisor's sole discretion. The conditions may
include, but shall not be limited to, the following:

          15.6.1    That all of Franchisee's accrued monetary obligations and
all other outstanding obligations to Franchisor and its affiliates have been
satisfied;

          15.6.2    That Franchisee is not in default of any provision of this
Agreement, any amendment hereof or successor hereto, or any other agreement
between Franchisee and Franchisor or its affiliates or any Franchise Agreement
executed pursuant to this Agreement;

          15.6.3    The transferee (or, if the transferee is a corporation or
partnership, such owners of a beneficial interest in the transferee as
Franchisor may request) shall demonstrate to Franchisor's satisfaction that it
meets Franchisor's educational, managerial, and business standards; possesses a
good moral character, business reputation, and credit rating; has the aptitude
and ability to conduct the business contemplated hereunder (as may be evidenced
by prior related business experience or otherwise); and has adequate financial
resources and capital to complete fulfill its obligations hereunder in a timely
manner;

          15.6.4    That the transferee enter into a written assignment, in a
form satisfactory to Franchisor, assuming and agreeing to discharge all of
Franchisee's obligations under this Agreement;

          15.6.5    That the transferor execute a general release, in a form
satisfactory to Franchisor, of any and all claims against Franchisor, its
affiliates and their respective officers, directors, shareholders, and
employees, in their corporate and individual capacities;

          15.6.6    That employees of the Franchisee who have not previously
completed a training program approved by Franchisor, at the Franchisee's 
expense, complete any training programs then in effect for new Bruegger's Fresh
Bagel Bakery franchisees;

                                     -27-
<PAGE>
 
          15.6.7    That transferor pay a transfer fee of Five Thousand Dollars
($5,000) plus Franchisor's actual expenses for outside services associated with
reviewing the application to transfer, including, but not limited to, reasonable
attorneys' fees; and

          15.6.8    That the price and terms of the proposed transfer are not so
burdensome as to adversely affect or have a potentially adverse affect on the
Franchisor's rights and interest under this Agreement.

     15.7 Franchisor's consent to a transfer shall not constitute a waiver of
any claims Franchisor may have against the transferring party, nor shall it be
deemed a waiver of Franchisor's right to demand exact compliance by the
transferor, transferee or Franchisee with any of the terms of this Agreement by
the transferor or transferee.


16.  DEFAULT AND TERMINATION


     16.1 Franchisee shall be deemed to be in default under this Agreement, and
all rights granted to Franchisee herein shall automatically terminate without
notice to Franchisee, if Franchisee becomes insolvent or makes a general
assignment for the benefit of creditors; if a petition in bankruptcy is filed by
Franchisee or is filed against and not opposed by Franchisee; if Franchisee is
adjudicated a bankrupt or insolvent; if a bill in equity or other proceeding for
the appointment of a receiver of Franchisee or other custodian for Franchisee's
business or assets is filed and consented to by Franchisee; if a receiver or
other custodian (permanent or temporary) of Franchisee's assets or property, or
any part thereof, is appointed by any court of competent jurisdiction; if
proceedings for a composition with creditors under any state or federal law are
instituted by or against Franchisee; if a final judgment against Franchisee
remains unsatisfied or of record for thirty (30) days or longer (unless
supersedeas bond is filed); if Franchisee is dissolved; if execution is levied
against Franchisee's business or property; if suit to foreclose any lien or
mortgage against the Premises or equipment of the Bakery is instituted against
Franchisee and not dismissed within thirty (30) days; or if the real or personal
property of the Bakery is sold after levy thereupon by any sheriff, marshal, or
constable.

     16.2 If any of the following events of default occurs, Franchisor, at its
option, may terminate this Agreement without affording Franchisee any
opportunity to cure the default, effective immediately upon receipt of written
notice by Franchisee:

          16.2.1    If Franchisee fails to construct and open the Bakery within
the time specified in Section 65.5 of this Agreement;

          16.2.2    If Franchisee at any time ceases to operate or otherwise
abandons the Bakery, loses the right to possession of the Premises, or otherwise
forfeits the right to do or transact business in the jurisdiction where the
Bakery is located. However, if,

                                     -28-
<PAGE>
 
through no fault of Franchisee, the Premises are damaged or destroyed by an
event such that repairs or reconstruction cannot be completed within sixty (60)
days thereafter, then Franchisee shall have thirty (30) days after the event in
which to apply for Franchisor's approval to relocate and/or reconstruct the
Bakery, which approval shall not be unreasonably withheld;

          16.2.3    If Franchisee or any principal officer of Franchisee is
convicted of a felony, a crime involving moral turpitude, or any other crime or
offense that Franchisor believes is reasonably likely to have an adverse effect
on the System, the Proprietary Marks, the goodwill associated therewith, or
Franchisor's interest therein;

          16.2.4    If a threat or danger to public health or safety results
from the construction, maintenance, or operation of the Bakery or any facility
in which Franchisee manufactures bagel dough and the Franchisee knew or should
have known of the threat or danger to public health or safety resulting from the
construction, maintenance, or operation of the Bakery;

          16.2.5    If any person or entity with an interest referred to in
Section 15 purports to transfer such interest other than in accordance with
Section 15;

          16.2.6    If an approved transfer is not effected within two (2) years
following death or mental incapacity, as required by Section 15, or if any
transfer by intestate succession is made to an heir who is unable to meet the
conditions of Section 15;

          16.2.7    If Franchisee fails to comply with the covenants in Section
18.1 below;

          16.2.8    If Franchisee discloses or divulges any contents of the
Manuals, the Bagel Production Manual, or other confidential information of
Franchisor, except as permitted under Section 11 hereof;

          16.2.9    If Franchisee knowingly maintains false books or records or
knowingly submits any false reports to Franchisor;

          16.2.10   If Franchisee refuses to permit Franchisor to inspect the
premises, books, records, or accounts of the Bakery or of any facility in which
Franchisee manufactures bagel dough, as provided herein;

          16.2.11   If Franchisee, after curing a default pursuant to Section
16.4 hereof, commits the same default again within one (1) year, whether or not
cured after notice; 

          16.2.12   If Franchisee is in default under Section 16.4 three (3)
times within any twelve-month period, whether such defaults are of a similar or
different nature and whether or not any of them is cured after notice; or

                                     -29-
<PAGE>
 
          16.2.13   If Franchisor has delivered to Franchisee a final notice of
termination for any Unit Franchise Agreement, the Development Agreement or any
other agreement between Franchisor (or any of its affiliates) and Franchisee
(except for termination due to a permanent closing of a Bakery with Franchisor's
prior written consent).

     16.3  If Franchisee fails, refuses, or neglects to pay any monies owing
to Franchisor or its affiliates, or fails to submit financial or other
information required under this Agreement, within seven (7) days after receipt
of notice of default from Franchisor, this Agreement shall terminate at the end
of such seven-day period without further notice from Franchisor.

     16.4  Except as provided in Sections 16.1 through 16.3, Franchisor may
terminate this Agreement only in the event of a default by Franchisee, and only
by giving Franchisee written notice of termination stating the nature of the
default at least thirty (30) days prior to the effective date of termination. If
the default is not cured to Franchisor's reasonable satisfaction within the
thirty (30) day period (or such longer period as applicable law may require or
as shall be required to complete the cure, provided such cure shall be commenced
within said thirty (30) day period, and such cure is diligently prosecuted to
completion), this Agreement shall terminate without further notice to
Franchisee, effective at the end of such cure period. Any material failure to
comply with the requirements imposed by this Agreement (as it may from time to
time reasonably be supplemented by the Manuals) shall be a default under this
Section 16.4 including, but not limited to, the following events:

           16.4.1   If Franchisee sells any unapproved products or otherwise
fails to maintain or observe any of the standards or procedures prescribed by
Franchisor in this Agreement, the Manuals, or otherwise in writing;

           16.4.2   If Franchisee misuses or makes any unauthorized use of the
Proprietary Marks, Copyrights or any other identifying characteristics of the
System, or otherwise materially impairs the goodwill associated therewith or
Franchisor's rights therein; or

           16.4.3   If Franchisee fails, refuses, or neglects to obtain
Franchisor's prior written approval or consent as required by this Agreement
(other than consent to a transfer under Section 15, the breach of which is
addressed in Section 16.2.5).

                                     -30-
<PAGE>
 
17.  OBLIGATIONS UPON TERMINATION OR EXPIRATION

     Upon termination or expiration of this Agreement, all rights granted
hereunder to Franchisee shall immediately terminate, and:

     17.1  Franchisee shall immediately cease to operate the Bakery; shall
not thereafter, directly or indirectly, represent itself to the public or hold
itself out as a present or former franchisee of Franchisor; and, if applicable,
shall immediately cease production of any bagel dough using trade secrets or
know-how furnished by Franchisor.

     17.2  Franchisee shall immediately and permanently cease to use in any
manner whatsoever the confidential methods, procedures, and techniques
associated with the System; the "BRUEGGER'S" mark; the "BRUEGGER'S BAGELS" name;
and all other Copyrights and Proprietary Marks, distinctive forms, slogans,
signs, symbols, and devices associated with the System.

     17.3  Franchisee shall take such action as may be necessary to cancel any
assumed name registration or equivalent registration obtained by Franchisee
which contains the name "BRUEGGER'S" or any other Proprietary Marks, and shall
furnish evidence satisfactory to Franchisor of compliance with this obligation
within five (5) days after termination or expiration of this Agreement.
Franchisee hereby appoints Franchisor its attorney-in-fact to carry out the
requirements of this Section 17.3, if Franchisee fails to do so within such five
(5) day period.

     17.4  At Franchisor's option, Franchisee shall assign to Franchisor
Franchisee's interest in the lease or sublease for the Premises and, also at
Franchisor's option, Franchisee's interest in the lease or sublease for the
property in which Franchisee manufactures bagel dough. If Franchisor elects not
to exercise its option to acquire either or both of such leases or subleases,
Franchisee shall make such modifications or alterations to the Premises and
bagel dough manufacturing site (including, without limitation, changing or
assigning the telephone number to Franchisor) immediately upon termination or
expiration of this Agreement as may be necessary to distinguish the Premises and
bagel dough manufacturing site from those of a Bakery or related facility, and
shall make such specific additional changes as Franchisor may reasonably request
for that purpose. If Franchisee fails or refuses to comply with the requirements
of this Section 17.4, Franchisor shall have the right to enter the Premises and
bagel dough manufacturing site, without being guilty of trespass or any other
tort, for the purpose of making or causing to be made such changes as may be
required, at the expense of Franchisee, which expense Franchisee agrees to pay
on demand.

     17.5  Franchisee shall not use any reproduction, counterfeit, copy, or
colorable imitation of the Proprietary Marks, or the Copyrights, either in
connection with such other business or the promotion thereof, which in
Franchisor's sole discretion is likely to cause confusion, mistake, or deception
or to dilute Franchisor's rights in and to the Proprietary Marks or Copyrights.
Franchisee shall not use any designation of origin or

                                     -31-
<PAGE>
 
description or representation which, in Franchisor's sole discretion, falsely
suggests or represents an association or connection with Franchisor.

     17.6    Franchisee shall promptly pay all sums owing to Franchisor and its
affiliates. In the event of termination for default by Franchisee, such sums
shall include all damages, costs, and expenses incurred by Franchisor as a
result of the default, including, but not limited to, reasonable attorneys'
fees.

     17.7    Franchisee shall pay to Franchisor all damages, costs, and expenses
(including, but not limited to, reasonable attorneys' fees) incurred by
Franchisor subsequent to the termination or expiration of this Agreement in
obtaining injunctive or other relief for the enforcement of any provisions of
this Section 17.

     17.8    Franchisee shall immediately deliver to Franchisor the Manuals, the
Bagel Production Manual, and all other records, correspondence, and instructions
containing confidential information relating to the System or the operation of a
Bakery, all of which are acknowledged to be the property of Franchisor.

     17.9    Franchisor shall have the right, exercisable by written notice
within thirty (30) days after expiration or termination, but not the obligation,
to purchase from Franchisee any or all of the furnishings, equipment, signs, and
fixtures of the Bakery and of the facility in which Franchisee manufactures
bagel dough, if any, at fair market value or at Franchisee's depreciated book
value based upon a seven (7) year straight line depreciation schedule, whichever
is less, and to purchase any or all inventory and supplies of the Bakery at fair
market wholesale value. If the parties cannot agree on the price of any such
items within a reasonable time, an independent appraiser shall be appointed by
Franchisor at Franchisor's expense, and the appraiser's determination shall be
binding on both parties. If Franchisor exercises any option to purchase provided
herein, Franchisor shall have the right to set off all amounts due from
Franchisee against any payment.

     17.10   Franchisee shall comply with the post-term covenants contained in
Section 18.2 of this Agreement.


18.  COVENANTS


     18.1    Franchisee specifically acknowledges that Franchisee will receive 
vaulable, specialized training and confidential information regarding the
manufacturing, operational, sales, promotional, and marketing methods and
techniques of Franchisor and the System. Franchisee covenants that, during the
term of this Agreement, except as otherwise approved in writing by Franchisor,
Franchisor shall not, either directly or indirectly, for itself or through, on
behalf of, of in conjunction with any person or legal entity:

                                     -32-
<PAGE>
 
            18.1.1   Divert or attempt to divert any present or prospective
business or customer to any competitor, by direct or indirect inducement or
otherwise, or do or perform, directly or indirectly, any other act injurious or
prejudicial to the goodwill associated with the Proprietary Marks and the
System;

            18.1.2   Employ or seek to employ any person who is at that time
employed by Franchisor, or who has been employed by Franchisor within the
preceding three (3) months, or otherwise directly or indirectly induce such
person to leave his or her employment with Franchisor; or

            18.1.3   Own, maintain, operate, engage in, be employed by, provide
any assistance to, or have any interest in any other business whose sales of
fresh or packaged bagels and cream cheese are more than five percent (5%) of its
total sales by annual dollar volume, except pursuant to another Franchise
Agreement with Franchisor.


     18.2   Franchisee covenants that, except pursuant to another Franchise
Agreement with Franchisor, or as otherwise approved in writing by Franchisor,
Franchisee shall not, for two (2) years after the expiration or termination of
this Agreement or the approved transfer of this Agreement to a new franchisee,
either directly or indirectly, for itself or through, on behalf of, or in
conjunction with any person or legal entity, own, maintain, operate, engage in,
be employed by, provide assistance to, or have any interest in any business
whose sales of bagels and cream cheese are more than five percent (5%) of its
total sales by annual dollar volume, and which is, or is intended to be, located
(i) within ten (10) miles of the Approved Location, or (ii) within five (5)
miles of any other Bakery.


     18.3   Sections 18.1.3 and 18.2 shall not apply to ownership by Franchisee
of less than five percent (5%) beneficial interest in the outstanding equity
securities of any publicly-held corporation.

     18.4   Franchisor shall have the right, in its sole discretion, to
reduce the scope of any covenant set forth in Sections 18.1 and 18.2,
or any portion thereof, without Franchisee's consent, effective immediately upon
receipt by Franchisee of written notice thereof.  Franchisee agrees to comply
with any covenant as so modified, which shall be fully enforceable
notwithstanding the provisions of Section 24 hereof.

     18.5   Franchisee agrees that the existence of any claims it may have
against Franchisor, whether or not arising from this Agreement, shall not
constitute a defense to the enforcement by Franchisor of the covenants in this
Section 18. Franchisee agrees to pay all costs and expenses incurred by
Franchisor in enforcing this Section 18, including, but not limited to
reasonable attorneys' fees.

     18.6   Franchisee acknowledges that Franchisee's violation of the terms of
this Section 18 would result in irreparable injury to Franchisor for which no
adequate remedy 

                                     -33-
<PAGE>
 
at law may be available, and Franchisee accordingly consents to the issuance of
an injunction prohibiting any conduct by Franchisee in violation of the terms of
this Section 18. Such injunctive relief shall be in addition to any other
remedies Franchisor may have.

     18.7   At Franchisor's request, Franchisee shall obtain and furnish to
Franchisor executed covenants similar in substance to those set forth in this
Section 18 (including covenants applicable upon the termination of a person's
relationship with Franchisee) from any or all of the following persons: (i) all
personnel employed by Franchisee who have received or will receive training from
Franchisor; and (ii) all officers, directors, and holders of a direct or
indirect beneficial interest of five percent (5%) or more of the securities of
Franchisee. Each covenant required by this Section 18.7 shall be in a form
approved by Franchisor, including, without limitation, specific identification
of Franchisor as a third party beneficiary with the independent right to enforce
the covenant.

19.  ORGANIZATION OF FRANCHISEE


     19.1    If Franchisee is a corporation, Franchisee shall comply with the
following requirements:

     19.1.1  Franchisee's charter shall at all times provide that its activities
are confined exclusively to developing and operating Bakeries.

             19.1.2   Franchisee shall promptly furnish to Franchisor copies
of its articles of incorporation, bylaws, and other governing documents, and any
amendments thereto, including the resolution of Franchisee's board of directors
authorizing entry into this Agreement.

             19.1.3   Franchisee shall maintain stop-transfer instructions
against the transfer on its records of any equity securities. Each stock
certificate of Franchisee shall conspicuously display on its face the following
printed legend:


             The transfer of ownership of shares represented
             by this certificate is subject to the terms and
             conditions of an Agreement with Bruegger's
             Franchise Corporation. Reference is made to the
             provisions of the Agreement and to the Articles
             and Bylaws of the Corporation.

             19.1.4   Franchisee shall maintain a current list of all owners
of record and all beneficial owners of any class of voting securities of
Franchisee and shall furnish the list to Franchisor upon request.

                                     -34-
<PAGE>
 
     19.2    If Franchisee is a partnership, Franchisee shall comply with the
following requirements:

             19.2.1   Franchisee shall furnish Franchisor with a copy of its
partnership agreement and such other governing documents as Franchisor may
reasonably request, and any amendments thereto;

             19.2.2   Franchisee shall include in its partnership certificate,
if any, filed with the state in which Franchisee was formed a statement that the
transfer of ownership of a partnership interest is subject to the terms and
conditions of an Agreement with Bruegger's Franchise Corporation; and.

             19.2.3   Franchisee shall prepare and furnish to Franchisor
from time to time, upon request, a list of all general and limited partners in
Franchisee.

     19.3    If Franchisee is a limited liability company, Franchisee shall
comply with the following requirements during the term of this Agreement:

             19.3.1   Franchisee shall furnish Franchisor with a copy of its
Certificate of Formation, limited liability company operating agreement, and any
other entity governing documents as Franchisor might reasonably request, and any
amendments thereto;

             19.3.2   Franchisee shall confine its activities, and its governing
documents shall at all times provide that its activities are confined,
exclusively to the development and operation of the Bakeries to be developed
hereunder;

             19.3.3   Franchisee's limited liability company operating
agreement shall include provisions that state that the transfer of shares is
subject to the terms and conditions of an Agreement with Bruegger's Franchise
Corporation; and

             19.3.4   Franchisee shall prepare and furnish to Franchisor, upon
request, a list of all members of Franchisee.

20.  TAXES, PERMITS, AND INDEBTEDNESS


     20.1    Franchisee shall promptly pay when due all taxes levied or
assessed, including, without limitation, unemployment and sales taxes, and all
accounts and other indebtedness of every kind incurred by Franchisee in the
operation of the Bakery. Franchisee shall pay to Franchisor an amount equal to
any sales tax, gross receipts tax, or similar tax (other than income tax)
imposed on Franchisor with respect to any payments to Franchisor required under
this Agreement.

     20.2    In the event of any bona fide dispute as to Franchisee's liability
for taxes assessed or other indebtedness, Franchisee may contest the validity or
the amount of the 

                                     -35-

<PAGE>
 
tax or indebtedness in accordance with procedures of the taxing authority or
applicable law, but in no event shall Franchisee permit a tax sale or seizure by
levy or execution or similar writ or warrant, or attachment by a creditor, to
occur against the Bakery.

     20.3  Franchisee shall comply with all federal, state, and local laws,
rules, and regulations and shall timely obtain any and all permits,
certificates, or licenses necessary for the proper conduct of the Bakery,
including, without limitation, licenses to do business, fictitious name
registrations, sales tax permits, and fire clearances.

     20.4  Franchisee shall immediately notify Franchisor in writing of the
commencement of any action, suit, or proceeding and of the issuance of any
order, writ, injunction, award, or decree of any court, agency, or other
governmental instrumentality which may adversely affect the operation or
financial condition of the Bakery.


21.  INDEPENDENT CONTRACTOR AND INDEMNIFICATION


     21.1  It is understood and agreed by the parties that this Agreement does
not create a fiduciary relationship between them, that Franchisee shall be an
independent contractor, and that nothing in this Agreement is intended to make
either party an agent, legal representative, subsidiary, joint venturer,
partner, employee, or servant of the other for any purpose whatsoever. During
the term of this Agreement, Franchisee shall hold itself out to the public as an
independent contractor operating the Bakery pursuant to a franchise agreement
from Franchisor. Franchisee agrees to take such action as may be necessary to do
so, including, without limitation, exhibiting a notice, the content of which
Franchisor reserves the right to specify, in a conspicuous place at the
Premises.

     21.2  Nothing in this Agreement authorizes Franchisee to make any contract,
agreement, warranty, or representation on Franchisor's behalf or to incur any
debt or other obligation in Franchisor's name. Franchisor shall in no event
assume liability for or be deemed liable as a result of any such action, nor
shall Franchisor be liable by reason of any act or omission of Franchisee in its
operation of the Bakery, or for any claim or judgment arising therefrom against
Franchisee or Franchisor. Franchisee shall hold harmless and indemnify
Franchisor, its affiliates, and their respective officers, directors, and
employees against any claims, losses, costs, expenses, liabilities, and damages
arising directly or indirectly from, as a result of, or in connection with
Franchisee's operation of the Bakery, as well as the costs of defending against
such claims (including reasonable attorneys' fees).

                                     -36-
<PAGE>
 
22.  APPROVALS AND WAIVERS

     22.1  Whenever this Agreement requires the prior approval or consent of
Franchisor, Franchisee shall make a timely written request to Franchisor
therefor, and such approval or consent must be obtained in writing and signed by
an officer of Franchisor.

     22.2  Franchisor makes no warranties or guarantees upon which Franchisee
may rely and assumes no liability or obligation to Franchisee by providing any
waiver, approval, consent, or suggestion to Franchisee in connection with this
Agreement, or by reason of any neglect, delay, or denial of any request
therefor.

     22.3  No delay or failure of Franchisor to exercise any right under this
Agreement or to insist upon strict compliance by Franchisee with any obligation
or condition hereunder, and no custom or practice of the parties at variance
with the terms hereof, shall constitute a waiver of Franchisor's right to
exercise such right or to demand exact compliance by Franchisee with any of the
terms hereof. Waiver by Franchisor of any particular default of Franchisee shall
not affect or impair Franchisor's rights with respect to any subsequent default
of the same, similar, or a different nature. Subsequent acceptance by Franchisor
of any payments due to it hereunder shall not be deemed to be a waiver by
Franchisor of any preceding breach by Franchisee of any of the terms, covenants,
or conditions of this Agreement.


23.  NOTICES


     All notices pursuant to this Agreement shall be in writing and shall be
personally delivered, sent by registered mail, or sent by other means which
affords the sender evidence of delivery or attempted delivery, to the respective
parties at the following addresses unless and until a different address has been
designated by written notice to the other party:

     Notices to Franchisor:   Bruegger's Franchise Corporation
                              3820 Edison Lakes Parkway
                              Mishawaka, IN 46545  
                              Attn:  President

     With a copy to:          Bruegger's Franchise Corporation
                              3820 Edison Lakes Parkway
                              Mishawaka, IN  46545
                              Attn:  General Counsel
 
     Notices to Franchisee:   All notices to be sent to the Franchisee at the
                              address set forth on page 1 of this Agreement
                              Attn:  Manager

                                     -37- 
<PAGE>
 
Any notice by a means which affords the sender evidence of delivery or attempted
delivery shall be deemed to have been given and received at the date and time of
receipt or attempted delivery.


24.  ENTIRE AGREEMENT


     This Agreement and the documents referred to herein constitute the entire
Agreement between Franchisor and Franchisee concerning the subject matter hereof
and supersede all prior agreements, negotiations, representations, and
correspondence concerning the same subject matter.  Except for those permitted
to be made unilaterally by Franchisor hereunder, no amendment, change, or
variance from this Agreement shall be binding on either party unless agreed to
by the parties in a writing executed by their authorized officers or agents.

25.  SEVERABILITY AND CONSTRUCTION


     25.1  If, for any reason, any provision of this Agreement is determined to
be invalid or in conflict with any existing or future law or regulation by a
court or agency having valid jurisdiction, such invalidity shall not impair the
operation of or have any other effect upon such other provisions as may remain
otherwise intelligible. The latter shall continue to be given full force and
effect, and the invalid provisions shall be deemed not to be a part of this
Agreement.

     25.2  All covenants and obligations which expressly or by reasonable
implication are to be performed, in whole or in part, after the expiration or
termination of this Agreement shall survive such expiration or termination.

     25.3  Except as explicitly provided to the contrary herein, nothing in this
Agreement is intended or shall be deemed to confer upon any person or legal
entity other than Franchisee, Franchisor, Franchisor's officers, directors, and
employees, and such of Franchisor's and Franchisee's successors and assigns as
may be contemplated by Section 14 hereof, any rights or remedies under or by
reason of this Agreement.

     25.4  Franchisee agrees to be bound by any promise or covenant imposing the
maximum duty permitted by law which is subsumed within the terms of any
provision hereof, as though it were separately articulated in and made a part of
this Agreement, that may result from (i) striking from any provision of this
Agreement any portion or portions which a court or agency having valid
jurisdiction may hold to be unreasonable and unenforceable in an unappealed
final decision to which Franchisor is a party, or (ii) reducing the scope of any
promise or covenant to the extent required to comply with such a court or agency
order.

                                     -38-
<PAGE>
 
26.  APPLICABLE LAW; ARBITRATION


     26.1  This Agreement shall be governed by the laws of the state in which
Franchisor has its principal place of business from time to time. In the event
of any conflict of law, the laws of such state shall prevail, without regard to
the application of such state's conflict-of-law rules.

     26.2  Except as provided in Sections 26.3 and 26.9, any claim or
controversy arising out of or related to this Agreement (including but not
limited to any claim that the Agreement or any of its provisions is invalid,
illegal, or otherwise voidable or void), the relationship between Franchisor and
Franchisee, or Franchisee's operation of the Bakery shall be submitted to
arbitration pursuant to the then-prevailing rules of the American Arbitration
Association, except as such rules may be modified by the following:

           26.2.1   Franchisor and Franchisee shall each select one arbitrator.
The arbitrators selected by Franchisor and Franchisee shall jointly select a
neutral third arbitrator, who shall chair the panel and shall be an attorney in
good standing with substantial expertise and experience in commercial disputes
involving franchising or trade regulation.

           26.2.2   The arbitrators shall determine, consistent with the
parties' objectives to avoid undue expense and delay, the types, amount, and
timing of discovery to be provided by the parties.

           26.2.3   The arbitrators shall not entertain or permit any class or
consolidated proceeding.

           26.2.4   The arbitrators' fees shall be borne equally by the parties.
Except as provided in Section 26.2.5, all other costs and expenses in
connection with the arbitration shall be borne by the party who incurs such
expense or who requests a service (such as, but not limited to, a transcript of
the arbitration proceeding).

           26.2.5   The decision of a majority of the arbitrators shall be final
and binding on the parties, and the arbitrators' award shall be the exclusive
remedy between the parties with respect to all claims, counterclaims, and issues
presented or pled to the panel. The arbitrators may award injunctive relief as
well as damages, but they shall have no authority to award punitive or exemplary
damages. Any monetary award shall be paid promptly, without deduction or offset.
Judgment upon the award may be entered in any court having jurisdiction thereof.
If the award is upheld by a court of competent jurisdiction in a proceeding by
either party to enforce the award or to challenge the award, the party
challenging the award or resisting its enforcement shall pay, to the extent
permitted by law, all reasonable costs, legal fees, and expenses incurred by the
party defending the award or seeking its enforcement.

                                     -39-
<PAGE>
 
           26.2.6 The decision of the arbitrators shall have no collateral
estoppel effect with respect to any person or entity who is not a party to the
arbitration proceeding.

     26.3  Unless otherwise agreed by Franchisor and Franchisee at the time of
the dispute, Section 26.2 shall not apply to: (i) any claim or dispute
involving actual or threatened disclosure or misuse of the contents of the
Manuals, the Bagel Production Manual, or any other confidential information or
trade secrets of Franchisor and its affiliates; (ii) any claim or dispute
involving the ownership, validity, use of, or right to use or license the
Proprietary Marks; (iii) any action by Franchisor to enforce the covenants set
forth in Section 18 of this Agreement; or (iv) any action by Franchisor to
stop or prevent any threat or danger to public health or safety resulting from
the construction, maintenance, or operation of the Bakery or any facility in
which Franchisee manufactures bagel dough.

     26.4  Any issue regarding arbitrability or the enforcement of Section
26.2 shall be governed by the Federal Arbitration Act and the federal common law
of arbitration.

     26.5  Any arbitration proceeding or other action, whether or not arising
out of this Agreement, brought by Franchisee against Franchisor shall be
brought, and any arbitration proceeding or other action brought by Franchisor
against Franchisee may be brought, in the judicial district in which Franchisor
has its principal place of business. The parties hereby waive all questions of
personal jurisdiction and venue for the purpose of carrying out this provision.

     26.6  Except as otherwise provided in this Section 26, no right or remedy
conferred upon or reserved to Franchisor or Franchisee by this Agreement is
exclusive of any other right or remedy provided herein or permitted by law or
equity, but each shall be cumulative of every other right or remedy.

     26.7  Any and all claims and actions arising out of or relating to this
Agreement, the relationship of Franchisee and Franchisor, or Franchisee's
operation of the Bakery brought by either party against the other, whether in
arbitration or any other proceeding, shall be commenced within eighteen (18)
months from the occurrence of the facts giving rise to such claim or action, or
such claim or action shall be barred.

     26.8  Franchisor and Franchisee irrevocably waive trial by jury in any
action, proceeding, or counterclaim brought by either of them against the other.
Franchisor and Franchisee hereby waive to the fullest extent permitted by law
any right to, or claim of, any punitive or exemplary damages against the other
and agree that, in the event of a dispute between them, each shall be limited to
the recovery of any actual damages sustained by it.

     26.9  Nothing in this Agreement shall bar Franchisor's right to obtain
injunctive relief against threatened conduct that will cause it loss or damage,
under the usual equity 



                                     -40-



<PAGE>
 
rules, including the applicable rules for obtaining specific performance,
restraining orders, and preliminary injunctions.


27.  ACKNOWLEDGMENTS


     27.1  Franchisee acknowledges that it has conducted an independent
investigation of the business franchised hereunder, and recognizes that the
business venture contemplated by this Agreement involves business risks and that
its success will be largely dependent upon the ability of Franchisee as an
independent business. Franchisor expressly disclaims the making of, and
Franchisee acknowledges that it has not received, any warranty or guarantee,
express or implied, as to the potential sales, income, profits, or success of
the business venture contemplated by this Agreement.

     27.2  Franchisee acknowledges that it received a complete copy of this
Agreement, the attachments hereto, and agreements relating thereto, if any, at
least five (5) business days prior to the date on which this Agreement was
executed.  Franchisee further acknowledges that it received the disclosure
document required by the Trade Regulation Rule of the Federal Trade Commission
entitled "Disclosure Requirements and Prohibitions Concerning Franchising and
Business Opportunity Ventures" at least ten (10) business days prior to the date
on which this Agreement was executed.

     27.3  Franchisee acknowledges that it has read and understood this
Agreement, the attachments hereto, and agreements relating thereto, if any, and
that Franchisor has accorded Franchisee ample time and opportunity to consult
with advisors of Franchisee's own choosing about the potential benefits and
risks of entering into this Agreement.

     27.4  ACKNOWLEDGMENT OF ARBITRATION:

  I UNDERSTAND THAT THIS AGREEMENT CONTAINS AN AGREEMENT TO ARBITRATE CERTAIN
  SPECIFIC ISSUES.  AFTER SIGNING THIS DOCUMENT, I UNDERSTAND THAT I WILL NOT BE
  ABLE TO BRING A LAWSUIT CONCERNING ANY DISPUTE THAT MAY ARISE WHICH IS COVERED
  BY ONE OF THESE ARBITRATION AGREEMENTS, UNLESS IT INVOLVES A QUESTION OF
  CONSTITUTIONAL OR CIVIL RIGHTS.  INSTEAD, I AGREE TO SUBMIT ANY SUCH DISPUTE
  TO AN IMPARTIAL ARBITRATOR AS SET FORTH IN THIS AGREEMENT.

                                     -41-

<PAGE>
 
     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the date first above written.


FRANCHISOR                              FRANCHISEE:

Bruegger's Franchise Corporation        ___________________________________


By: _____________________________       By:________________________________
 

Title: __________________________       Title:_____________________________

                                     -42-
<PAGE>
 
                                   EXHIBIT A

                                      to

                        BRUEGGER'S FRESH BAGELS BAKERY
                              FRANCHISE AGREEMENT

                               PROPRIETARY MARKS
                               -----------------

<TABLE>
<CAPTION>
                                           Date
Registered Mark             Type           Registered    Reg. No.
---------------             ----           ----------    -------- 
<S>                         <C>            <C>           <C>      
BRUEGGER'S                  TM             11/22/88      1,513,741 
                                                                   
THE BEST THING ROUND        SM             6/15/93       1,776,884 
                                                                   
BRUEGGEROONS                TM             7/13/93       1,781,622 
                                                                   
BRUEGGER'S LAST NIGHT'S                                            
BAGELS AND DESIGN           TM             7/13/93       1,781,629 
                                                                   
BRUEGGER'S BAGEL BAKERY                                            
FRESH BAGELS AND DESIGN     SM             8/31/93       1,790,827 
                                                                   
BRUEGGER'S FRESH BAGEL                                             
BAKERY AND DESIGN           SM             8/31/93       1,790,828 
                                                                   
BRUEGGER'S                  SM             9/7/93        1,792,050  
</TABLE>

                              APPLICATIONS PENDING
                              --------------------

<TABLE>
<CAPTION>
                                               Date Sent  Application
Marks                                Type      for Filing          No.
-----                                ----      ---------  ------------- 
<S>                                  <C>       <C>        <C>          
BRUEGGER'S BAGELS/
BAKED FRESH AND DESIGN               SM        1/16/96    75,046,205 
 
TOTALLY COMPLETELY
OBSESSED WITH FRESHNESS              SM/TM     10/16/95   75,007,530
(Class No. 29 & 30)

TOTALLY COMPLETELY
OBSESSED WITH FRESHNESS              SM/TM     10/16/95   75,007,532
(Class No. 42)
 
JAVAHH!                              TM        7/3/95     75,697,540
 
SINGLE BAKER/SINGLE
BAGEL @ HEARTH DESIGN                SM        1/16/96    75,046,199
</TABLE>

                                     -43-
<PAGE>
 
                                   EXHIBIT B
                                      
                                      to
                                      
                         BRUEGGER'S FRESH BAGEL BAKERY
                              FRANCHISE AGREEMENT


                                     

                               APPROVED LOCATION
                               -----------------

                                      -2-
<PAGE>
 
                                   EXHIBIT E

                                      to

                         BRUEGGER'S FRESH BAGEL BAKERY
                             DEVELOPMENT AGREEMENT






                         ACCOUNTING SERVICES AGREEMENT

                                       4


<PAGE>
 
                         ACCOUNTING SERVICES AGREEMENT


          This Accounting Services Agreement ("Agreement") is made this _____
day of _________, 19___, by and between Bakery Capital Company, Inc.,
("Operating Partner") and Bruegger's Corporation, a Delaware corporation
("Company").

                                   RECITALS

          1.  Operating Partner and Bruegger's Franchise Corporation, a Delaware
corporation which is an affiliate of Company ("BFC"),  have entered into a
Development Agreement dated ______________ _____, 19___ (as amended from time to
time, the "Development Agreement"), and have entered into or propose to enter
into one or more franchise agreements (each a "Franchise Agreement"), each
granting to Operating Partner the right to operate one Bruegger's Bagel Bakery
("Bakery").

          2.  Pursuant to the Development Agreement and/or the Franchise
Agreements, Operating Partner is required to maintain certain accounting records
and provide to BFC certain periodic financial reports and other data.

          3.  Upon the terms and subject to the conditions hereinafter provided,
Operating Partner and Company desire to enter into an agreement pursuant to
which Company would assist Operating Partner in maintaining certain accounting
records and preparing certain financial reports required under the Development
Agreement and/or the Franchise Agreements.

                                  AGREEMENTS

          NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, as well as other good and valuable consideration,
the sufficiency and receipt of which are hereby acknowledged, the parties hereby
agree as follows:

1.  ACCOUNTING SERVICES.

          1.1  Upon the terms and subject to the conditions set forth in this
Agreement, Company shall provide the following accounting services (the
"Services") to Operating Partner for each Bakery, for each Bruegger's Bagel
Bakery commissary operated by Operating Partner ("Commissary"), and for
Operating Partner and each corporation, limited liability company or other legal
entity which is controlled by Operating Partner (each, including Operating
Partner, an "Operating Partner Entity"):

          (a) Calculation of revenue and expenses by accounting category
     according to Company's standard chart of accounts and calculation of Gross
     Sales and Royalty Fees (as each term is defined in the Franchise
     Agreements);
                                      -1-
<PAGE>
 
          (b) Administration and maintenance of Operating Partner Entity
     payroll, and administration of the processing of payroll and calculation of
     applicable tax and other withholdings relating to the Bakeries or
     Commissaries through Company's designated payroll service bureau;

          (c) Administration of accounts payable (including check generation);

          (d) Administration of recurring cash transfers between Operating
     Partner's applicable Bakery, Commissary and Operating Partner Entity bank
     accounts;

          (e) Administration and maintenance, for each Operating Partner Entity,
     of a general ledger trial balance, balance sheet, income statement and
     certain other Operating Partner Entity, Bakery or Commissary reports by
     accounting category according to Company's standard chart of accounts and
     consistent with periodic reports Company customarily prepares in the normal
     course of business to manage its financial affairs, and periodic
     distribution of such reports to Operating Partner;

          (f) Maintenance of all accounting records supporting each Operating
     Partner Entity's financial statements (consistent with Company's record
     retention program) in reasonable fashion separate and discrete from the
     accounting records of Company; and

          (g) Preparation of period end reconciliations and associated period
     end journal entries for all Operating Partner Entity balance sheet
     accounts.

          1.2  The Services shall not include (with respect to any Bakery,
Commissary or Operating Partner Entity) any of the following, each of which is
the sole responsibility of Operating Partner:

          (a) Except as provided in Section 1.3 of this Agreement, selection of
     accounting policies to be applied to Operating Partner's books and records;
     provided, however, that Company will consistently apply the appropriate
     policies selected by Operating Partner;

          (b) Negotiation of terms and conditions between Operating Partner and
     its suppliers, vendors, and others, such as remittance due dates and
     discounts;

          (c) Quarterly review and edit of Operating Partner's vendor masterfile
     for current and accurate data; provided, however, that Company will
     appropriately apply updates to the vendor masterfile as directed by
     Operating Partner;
                                      -2-
<PAGE>
 
          (d) Signature and final release of trade accounts payable disbursement
     checks in excess of $200,000;

          (e) Final review and approval of annual financial statements;

          (f) Cash investment activities; provided, however, that Company will
     initiate and manage repetitive and/or fixed cash management activities as
     directed in writing by Operating Partner;

          (g) Approval and coding of invoices for disbursement;

          (h) Preparation of budgets (except that Company will develop a budget
     process and calendar to facilitate the preparation of annual budgets by
     Operating Partner, which Operating Partner agrees to adopt and adhere to);
     and

          (i) Preparation, filing, or signing of any tax returns required to be
     filed by Operating Partner, with the exception of sales and use tax returns
     which will be prepared by Company but will not be filed or signed by
     Company.

          1.3  Operating Partner agrees to effectively apply any and all
accounting policies and procedures communicated by Company to Operating Partner,
as the same may be modified and updated from time to time, on a timely basis,
which actions and compliance shall be a condition to Company's obligations
hereunder.

          1.4  Operating Partner agrees to utilize auditors and tax consultants
designated by Company for annual audit and tax return preparation activities.

          1.5  Operating Partner agrees to utilize Company's designated bankers
(except for Bakery and Commissary bank accounts) and credit card processors for
all corporate cash management activities.

          1.6  Operating Partner agrees to supply Company all information,
materials, data, and documents necessary or advisable to properly perform the
Services in such form, format, or media as Company may reasonably request, to
make available the officers of Operating Partner to answer any inquiries in
connection therewith, and to cooperate with Company in the performance of its
duties.

2.   FEES FOR SERVICES AND EXPENSE REIMBURSEMENT.

          2.1  In consideration of the Services, Operating Partner agrees to pay
to Company, in addition to any fee otherwise payable under the Development
Agreement or any Franchise Agreement or other agreement between Company (or its
affiliates) and Operating Partner, the accounting and administrative services
fees set forth below:
                                      -3-
<PAGE>
 
          (a) A fee of $4,000 per Operating Partner Entity for each four-week
     accounting period of Company ("Accounting Period")  for each Operating
     Partner Entity in existence during all or any portion of such Accounting
     Period;
          (b) A fee of $500 per Bakery for each Accounting Period for each
     Bakery open and operating during all or any portion of such Accounting
     Period; and

          (c) A fee of $1,000 per Commissary for each Accounting Period for each
     Commissary open and operating during all or any portion of such Accounting
     Period.

          Operating Partner agrees that the foregoing accounting and
administrative services fees may be increased cumulatively by not more than 10%
per Company fiscal year at the sole discretion of Company effective upon written
notice thereof.

          2.2  In addition to the payment of fees as specified in Section 2.1 of
this Agreement, Operating Partner shall reimburse Company for all reasonable,
non-ordinary, out-of-pocket expenses incurred by Company or its affiliates in
connection with the Services rendered by them hereunder, including, but not
limited to, travel expenses, legal fees, fees of experts, audit fees, tax fees
and payroll service fees.  Expenses payable under this Section 2.2 shall be paid
promptly in the manner specified in Section 3.1 of this Agreement.

3.   PAYMENT OF AMOUNTS DUE HEREUNDER; LIABILITY.

          3.1  Company will calculate and Operating Partner hereby authorizes
Company to collect through electronic funds transfer, at the end of each
Accounting Period, the total dollar amount of all accounting and administrative
services fees and expenses then due to Company hereunder.

          3.2  Company shall not be liable for any cost, damage, expense, or
loss of any Operating Partner Entity or its owners, partners, shareholders,
officers, members, directors, employees, suppliers, or vendors, or any other
person or entity arising or resulting, directly or indirectly, from (i) the
failure of Company to perform any of the Services or the misperformance of any
such Services, except to the extent such failure to perform or such
misperformance is the result of Company's willful misconduct or gross
negligence, in which event Company's liability shall not exceed its fee for such
hereunder for the Accounting Period in question, or (ii) reliance by Operating
Partner, its owners, partners, shareholders, officers, members, directors,
employees, suppliers, or vendors, or any other person or entity on any data or
advice Company may provide pursuant to this Agreement. In no event will Company
be liable for indirect, incidental, consequential, special, speculative,
exemplary, or punitive damages (including, but not limited to, loss of revenue
or profit).

          3.3  COMPANY MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR
IMPLIED, WITH RESPECT TO THE SERVICES PROVIDED
                                      -4-
<PAGE>
 
HEREUNDER, INCLUDING, BUT NOT LIMITED TO, THEIR ADEQUACY, QUALITY, PERFORMANCE,
MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE.

4.   TERM OF SERVICES.

          4.1  The term of this Agreement shall commence on the date of this
Agreement and continue indefinitely until termination of all Development
Agreements and Franchise Agreements between Operating Partner and BFC; and
provided further that Company may terminate this Agreement without notice and
cease rendering the Services, also without notice, upon any non-payment by
Operating Partner of the fees and expenses provided for herein when such fees
and expenses are due and payable.

          4.2  Termination of this Agreement shall terminate Company's
obligations to provide the Services.  Upon termination of this Agreement,
Operating Partner shall pay to Company the fees due Company in accordance with
Section 2.1 hereof for the Services rendered by Company through the date of
termination and reimburse Company in accordance with Section 2.2 hereof for
expenses incurred by Company in connection with the Services rendered by Company
through the date of termination.

5.   MISCELLANEOUS.

          5.1  In performing the Services set forth in this Agreement, Company
will have neither express nor implied power to execute agreements on behalf of
Operating Partner or in any manner bind Operating Partner as to any matter not
within the scope of this Agreement.

          5.2  All notices, requests, waivers and other similar communications
required or permitted to be given pursuant to this Agreement shall be in writing
and shall be deemed to have been duly given if delivered personally or sent by
overnight express or facsimile transmission or registered or certified mail,
return receipt requested, postage prepaid, and properly addressed as follows:

          If to Operating Partner:           Bakery Capital Company, Inc.
                                             _________________________
                                             _________________________
                                             Attention:  Chief Executive Officer
                                             Facsimile:  ________________

          If to Company:                     Bruegger's Corporation
                                             3820 Edison Lakes Parkway
                                             Mishawaka, Indiana  46545
                                             Attention:  President
                                             Facsimile:  (219) 243-4377
                                      -5-
<PAGE>
 
                    with a copy to:   Bruegger's Corporation          
                                      3820 Edison Lakes Parkway                
                                      Mishawaka, Indiana  46545                
                                      Attention:  General Counsel              
                                      Facsimile:  (219) 243-4393               

or to such other address as either party shall designate by proper notice.
Notices will be deemed to have been received as of the earlier of the date of
actual receipt or, in the case of notices sent via U.S. Mail, three (3) days
after mailing.  A signed receipt shall be obtained where a notice is delivered
in person.

          5.3  This Agreement shall be governed by and construed and enforced in
accordance with the laws of the state of Delaware applicable to contracts made
and to be performed therein without regard to the conflict of law provisions
thereof.

          5.4  The failure by any party at any time to require performance of
any provision hereof shall not affect its right later to require such
performance.  No waiver in any one or more instance shall (except as otherwise
stated therein) be deemed to be a further or continuing waiver of any such
condition or breach in any other instances or a waiver of any other condition or
breach of any other term, covenant, representation or warranty.

          5.5  In the event that any term or provision of this Agreement is held
by a court of competent jurisdiction to be invalid, void or unenforceable in
whole or in part, the remainder of this Agreement or the application of such
term or provision to circumstances other than those as to which it is held
invalid, void or unenforceable shall not be affected thereby and every term and
provision of this Agreement shall be valid and enforced to the fullest extent
permitted by law.

          5.6  This Agreement may be amended or modified only by a written
instrument signed by each of the parties hereto.

          5.7  This Agreement is the entire agreement, and supersedes all prior
agreements and understandings, written and oral, among the parties hereto or any
of them with respect to the subject matter hereof.

          5.8  This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.

          5.9  The captions in this Agreement are inserted only as a matter of
convenience and are not intended to define, limit, construe or describe the
scope or intent of any provision of this Agreement.
                                      
                                      -6-
<PAGE>
 
          5.10 Nothing contained in this Agreement is intended, nor shall it be
construed, to create any rights in any person not a party to this Agreement.

          5.11 Operating Partner shall not assign any of its interest in this
Agreement without the prior written consent of Company.

          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

                              BRUEGGER'S CORPORATION


                              By:     __________________________________

                              Title:  __________________________________


                              BAKERY CAPITAL COMPANY, INC.

                              By:     _________________________________,
                                   Its Chief Executive Officer


                              By:     __________________________________

                              Title:  __________________________________

                                      -7-
<PAGE>
 
                                   EXHIBIT F

                                      to

                         BRUEGGER'S FRESH BAGEL BAKERY
                             DEVELOPMENT AGREEMENT




                 SOFTWARE LICENSING AND MAINTENANCE AGREEMENT

                                       5
<PAGE>
 
                            SOFTWARE LICENSING AND
                             MAINTENANCE AGREEMENT


          This Software Licensing and Maintenance Agreement (the "Agreement") is
made this ____ day of ___________, 19____, by and between Bakery Capital
Company, Inc. ("Licensee") and Bruegger's Corporation, a Delaware corporation
("Licensor").

                                   RECITALS

          1.     Licensee and Bruegger's Franchise Corporation, a Delaware
corporation which is an affiliate of Licensor ("BFC"), have entered into a
Development Agreement dated _____________ ______, 19___ (as amended from time to
time, the "Development Agreement") and have entered into or propose to enter
into one or more franchise agreements (each a "Franchise Agreement"), each
granting to Licensee the right to operate one Bruegger's Bagel Bakery.

          2.     Pursuant to the Development Agreement and/or the Franchise
Agreements, Licensee is required to use certain software which is owned by
Licensor and to use certain other software which is owned by a third party.

          3.     Upon the terms and subject to the conditions hereinafter
provided, Licensee and Licensor desire to enter into an agreement pursuant to
which Licensor would license certain software to Licensee and assist Licensee in
maintaining such software, and Licensee would license certain other software
from the third party.

                                  AGREEMENTS

          In consideration of the mutual covenants contained herein, and other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto hereby agree:

          1.     DEFINITIONS.
                 ------------

          As used in this Agreement, the following terms shall have the meanings
hereinafter defined:

          1.1    "Affiliate" shall mean with respect to either party, any 
                  ---------     
     company, any individual, corporation, partnership, association, joint
     venture, trust, estate, limited liability company, or other legal
     entity that now or hereafter directly, or indirectly through one or
     more intermediaries, controls, or is controlled by, or is under common
     control with such party. The term "control," including the terms
     "controlling," "controlled by," and "under common control with," means
     the possession, direct or indirect, of the power to direct or cause
     the direction of the
<PAGE>
 
     management and policies of a person, whether through the ownership of
     voting shares, by contract or otherwise.

          1.2    "Bakery" shall mean each Bruegger's Bagel Bakery operated by
                  ------
     Licensee pursuant to a Franchise Agreement.
     
          1.3    "Commissary" shall mean each Bruegger's Bagel Bakery
                  ----------
     commissary operated by Licensee as a franchisee of Licensor.
     
          1.4    "Enhancement" means any and all changes to the Licensed
                  -----------
     Products that (a) improve the operating performance but do not alter
     the basic function of the Licensed Products; (b) incorporate fixes or
     bypasses for errors; or (c) are offered to any of the Other Users,
     whether at no additional charge or otherwise.
     
          1.5    "Installed Location" shall mean each Bakery and Commissary,
                  ------------------                 
     and each office of an Operating Partner Entity, in which the Licensed
     Products are used on one or more computers or computer terminals.
     
          1.6    "Intellectual Property Rights" means any and all
                  ----------------------------
     exclusionary rights existing from time to time anywhere in the world
     under patent law, copyright law, trade-secret law, trademark law,
     unfair competition law, or otherwise.

          1.7    "Licensed Products" shall mean the Licensed Software, and
                  -----------------
     the User Documentation, Specifications, Upgrades and Enhancements, if
     any are supplied pursuant to this Agreement, each reproduction of the
     foregoing made pursuant to this Agreement, and any one or more of
     them.

          1.8    "Licensed Software" means the computer software programs
                  -----------------   
     identified in Exhibit A attached to this Agreement, applicable to
     various environments, in human readable source code form and machine
     executable object code form, and all related Specifications,
     applications, and design documents, together with all related know how
     and all related Documentation.

          1.9    "Operating Partner Entity" means Licensee and each
                  ------------------------
     corporation, limited liability company or other legal entity which is
     controlled by Licensee.

          1.10    "Other Users" means the other parties who have obtained the
                   -----------
     licensed right to use the Licensed Products.

          1.11   "Release" means an update of the Licensed Products that may
                  -------
     incorporate any Enhancements or other changes made by Licensor,
     including patches and bypasses previously furnished to any of its
     Other Users.

                                   -2-
<PAGE>
 
          1.12   "Specifications" shall mean all specifications for, and
                  -------------- 
     descriptions of the functional capabilities of, the Licensed Software
     provided by Licensor to Licensee, whether included in the User
     Documentation, descriptive documents or materials provided by Licensor
     to Licensee in tangible, intangible, written or oral form, with
     respect to the Licensed Products.

          1.13   "Third Party Software" means the third party-owned computer
                  --------------------   
     software programs identified in Exhibit A and related specifications,
     documentation materials, modifications, enhancements, interfaces, and
     associated know-how, which together or separately are not owned by
     Licensor.

          1.14   "Upgrade" means all improvements in the Licensed Products
                  -------   
     that (a) add to or alter the basic functions of such Licensed
     Products; or (b) may be offered to Other Users.

          1.15   "User Documentation" means all documentation and any
                  ------------------
     succeeding changes thereto relating to installation, maintenance and
     operation of the Licensed Software. User Documentation may, but need
     not, include all documents, functional specifications, users manuals
     and instructions, flow diagrams, file descriptions and definitions,
     and job control procedures developed by or for Licensor in connection
     with the Licensed Software, and all Releases and Enhancements thereto.


          2.     GRANT OF LICENSE.
                 -----------------

          2.1    Licensor hereby grants to Licensee a nonexclusive right and
     license to use the Licensed Products in accordance with the terms and
     conditions of this Agreement.

          2.2    Licensor hereby grants Licensee the right to use the
     Licensed Products at each Installed Location set forth on Exhibit B
     attached to this Agreement, with one or more computers, computer
     terminals and/or other devices which allow users to access the
     Licensed Software. Exhibit B shall be amended from time to time to
     include any additional Installed Locations which do not exist on the
     date of this Agreement.

          2.3    Other than as expressly set forth herein, Licensor owns all
     right, title and interest in and to the Licensed Products and the
     Intellectual Property Rights pertaining thereto.

          3.     TERM OF LICENSE.  This Agreement shall commence upon the date
                 ---------------
of this Agreement and shall terminate according to the provisions of Section 12
hereof or upon 

                                      -3-
<PAGE>
 
termination of all Development Agreements and Franchise Agreements between
Licensee and BFC.

          4.     DELIVERABLES.
                 -------------

          4.1    Upon receipt from Licensee of a fully executed original of
     this Agreement and written evidence that Licensee has obtained the
     license(s) referenced in Section 11 herein, Licensor shall deliver
     magnetic media containing the Licensed Software and such number of
     copies of User Documentation as are set forth in Exhibit A. Licensor
     will install the Licensed Software at one Installed Location and
     Licensee shall install the Licensed Software at all other Installed
     Locations.

          4.2    Licensee may copy the Licensed Software, in whole or in
     part, for Licensee's internal use and for purposes of back-up or
     archiving. Licensee may reproduce the User Documentation or other
     written materials supplied with respect to the Licensed Products for
     Licensee's internal use.

          4.3    Licensee will not alter, deface, remove, cover up, or
     mutilate in any manner whatsoever any copyright or other proprietary
     notice which Licensor may incorporate in or attach or affix to the
     Licensed Products, or on copies it makes in whole or in part thereof.

          5.     MAINTENANCE.  Licensor will deliver to Licensee, during the 
                 -----------
term of this Agreement, all Releases or Upgrades (collectively, the "Software
Maintenance"), to the extent that the same are offered to any of the Other
Users.

          6.     SUPPORT. Licensor shall provide software support service and
                 -------
consultation accessibility by telephone during Licensor's regular business hours
and, in addition, the following special software support services (collectively,
the "Software Support") to each of the Installed Locations:

         6.1     Morning and Evening Help Desk. A morning and evening "Help
                 ----------------------------- 
     Desk" whereby Licensee's employees may call Licensor's [Management
     Information Services Department] concerning any questions or problems
     pertaining to the use or operation of the Licensed Software arising
     after [7:00] a.m. until 8:00 a.m. and after 5:00 p.m. until [8:59]
     p.m. (EST), Monday through Friday; and


          6.2    Weekend Help Desk. A weekend "Help Desk" whereby Licensee's
                 -----------------    
     employees may call Licensor's [Management Information Services
     Department] concerning any questions or problems pertaining to the use
     or operation of the Licensed Software arising after [7:00] a.m. until
     [8:59] p.m. (EST) on Saturday and Sunday.

                                   -4-
<PAGE>
 
          7.     LICENSE AND MAINTENANCE FEES.
                 -----------------------------

          7.1    As compensation to Licensor for the License granted to
     Licensee hereunder, Licensee shall pay Licensor a license purchase fee
     in the amount of $10,000 per Installed Location, which shall be due
     and payable to Licensor (a) with respect to each Bakery and
     Commissary, upon execution of the Franchise Agreement relating thereto
     between Licensee and BFC, and (b) with respect to each office of an
     Operating Partner Entity, (i) upon execution of this Agreement for
     each such office then listed on Exhibit B and (ii) upon commencement
     of the operations of each such office, for each such office later
     added to Exhibit B, as amended from time to time.

          7.2    In consideration of the Software Maintenance and Software
     Support provided to Licensee hereunder, Licensee shall pay Licensor a
     software maintenance fee in the amount of $500 per Installed Location
     for each four-week accounting period of Licensor ("Accounting Period")
     for each Installed Location open and operating during all or any
     portion of such Accounting Period.

          8.     TAXES.  Licensee shall pay all federal, state and local sales,
                 -----        

excise, use, or similar taxes based upon payments to be made by it hereunder or
otherwise based on the receipt of the license rights granted herein (excluding,
however, any tax on the income of Licensor).


          9.     PAYMENT OF FEES.
                 ----------------

          9.1    Licensee will pay the license purchase fees, at the times
     provided in Section 7.1 hereof, by wire transfer or certified check, or by
     such other means as may be agreed upon by Licensor and Licensee.

          9.2    Licensor will calculate and Licensee hereby authorizes Licensor
     to collect through electronic funds transfer, at the end of each Accounting
     Period, the total dollar amount of all software maintenance fees then due
     to Licensor hereunder.

          10.    LIABILITY.
                 ----------

          10.1   The Licensed Products, including, but not limited to, all
     Licensed Software, Enhancements, User Documentation, Specifications,
     Releases, and Upgrades, are furnished by Licensor to Licensee under 
     this Agreement without any oral or written representation concerning 
     the operation or suitability of such items, and are provided AS IS.

                                       -5-
<PAGE>
 
          10.2   LICENSOR MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR
     IMPLIED, WITH RESPECT TO THE LICENSED PRODUCTS, INCLUDING, BUT NOT LIMITED
     TO, THEIR ADEQUACY, QUALITY, PERFORMANCE, MERCHANTABILITY, OR FITNESS FOR A
     PARTICULAR PURPOSE.

          10.3   NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY
     CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES, INCLUDING, BUT NOT LIMITED
     TO, LOSS OF ANTICIPATED PROFITS, RESULTING FROM THE PARTY'S
     PERFORMANCE OR NONPERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT,
     EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
     DAMAGES.

          11.    RIGHTS TO THIRD PARTY SOFTWARE. It shall be Licensee's
                 -------------------------------
responsibility to obtain, directly from the licensor(s) thereof, any and all
license(s) necessary for Licensee to use all Third Party Software identified in
Exhibit A. Exhibit A shall be amended from time to time to include any
additional Third Party Software which is added after the date of this Agreement.

          12.    MODIFICATIONS.  Licensee shall not have the right to
                 --------------
independently modify, or merge with any other products, the Licensed Software
through the services of its own employees or of any independent contractor.


          13.    TERMINATION.
                 ------------

          13.1   The right and license granted hereunder may be canceled by
     Licensor if Licensee is in default of any amount due under this
     Agreement for a period of 30 days and may be canceled by either party
     at any time upon default by the other party of any provision of this
     Agreement if such default is not corrected within 30 days after
     receipt of written notice thereof.

          13.2   Licensee agrees to pay all applicable costs and attorney's
     fees, to the extent permitted by law, for the collection of payments
     and other charges due under this Agreement.

          13.3   Within 60 days after the termination of this Agreement and
     within 30 days after the cancellation for default of this Agreement
     for any reason, Licensee shall deliver to Licensor any and all
     portions of the Licensed Products and any information, documents, flow
     charts, logic diagrams, source code, test materials source code, or
     the like relating thereto and all copies thereof in whatever form,
     including partial copies, whether or not the same have been modified
     by Licensee or Licensor.

                                   -6-
<PAGE>
 
          14.    CONFIDENTIALITY.
                 ----------------

          14.1   Any information, whether or not protected by a patent or
     copyright, which has been provided (i) in writing by one party to the
     other party pursuant to this Agreement and is identified by a legend
     thereon as being proprietary or confidential, or (ii) orally by one
     party to the other party pursuant to this Agreement, is designated as
     confidential at the time of disclosure and is reduced to a written
     summary (identified by a legend thereon as being proprietary or
     confidential) (hereinafter "Confidential Information") shall be
     treated by the receiving party as being the proprietary information of
     the other, and shall be protected by the same security procedures as
     are used by the receiving party in protecting its own trade secrets
     and other confidential data.

          14.2   The Licensed Products shall be deemed the Confidential
     Information of Licensor.

          14.3   With respect to all such Confidential Information to be
     kept confidential pursuant to this Section, each party agrees (a) not
     to provide or make available any of the other party's Confidential
     Information in any form to any person other than those employees,
     agents or representatives of the receiving party who have a need to
     know consistent with the authorized use of such Confidential
     Information; (b) not to reproduce such Confidential Information except
     for use reasonably necessary to the performance of this Agreement; (c)
     not to exploit or use the other party's Confidential Information
     except as permitted by this Agreement and (d) to return or destroy all
     such Confidential Information which is in written or graphic form at
     the conclusion of its use or termination of this Agreement.

          14.4   A party in receipt of the other party's Confidential
     Information shall not be liable (subject to any patent rights or
     registered copyrights of the disclosing party) for any use or
     disclosure of the other party's Confidential Information which:

                 (a)     was in the public domain prior to the
          receipt of same by the receiving party, or has
          subsequently become part of the public domain by
          publication or otherwise except by the receiving
          party's wrongful act;

                 (b)     was in the receiving party's possession
          or known to the receiving party prior to its receipt
          hereunder, and was not acquired directly or indirectly
          from the disclosing party;

                 (c)     was independently developed by the receiving party;

                                   -7-
<PAGE>
 
                (d)  was received by the receiving party from a third
          party which the receiving party reasonably believed had no
          obligation of secrecy with respect thereto;

                (e)  consists solely of generalized data processing
          ideas, concepts, know-how or techniques; or

                (f)  is disclosed pursuant to court order.

          15.   PROPRIETARY RIGHTS. Nothing herein shall convey to Licensee any
                ------------------
right in the Licensed Products other than those rights expressly granted herein.
Licensee acknowledges that the Licensed Products are proprietary products
developed by Licensor for its restaurant business and that the Licensed Products
shall be used by Licensee only in connection with the operation of the Bakeries
and the Commissaries (the "Permitted Use"). Other than in connection with the
Permitted Use, Licensee shall not use the Licensed Products for any other
purpose, including, but not limited to, the purpose of assisting Licensee in the
operation of any restaurant other than the Bakeries.

          16.   INDEMNIFICATION.
                ---------------

          16.1  Licensee shall indemnify and hold harmless Licensor and its
     Affiliates against any and all losses, liabilities, judgments, awards,
     settlements, damages and cost (including legal fees and expenses) for
     any claims against Licensor arising out of or related to the use of
     the Licensed Products or other related materials by Licensee or
     Licensee's Affiliates.

          16.2  Licensor shall indemnify and defend Licensee against any
     claim of patent or copyright infringement arising out of Licensee's
     use of the Licensed Products; provided, however, that Licensor is
     notified promptly in writing of such claim and is given complete
     authority and information required for defending or settling any claim
     of patent or copyright infringement or suit resulting therefrom, and
     further provided that Licensee is not in default of any of the
     provisions of this Agreement.

          17.   NOTICES.  All notices, requests, waivers and other similar
                -------   
communications required or permitted to be given pursuant to this Agreement
shall be in writing and shall be deemed to have been duly given if delivered
personally or sent by overnight express or facsimile transmission or registered
or certified mail, return receipt requested, postage prepaid, and properly
addressed as follows:

                                      -8-
<PAGE>
 
          If to Licensee:    Bakery Capital Company, Inc.
                             ____________________________________
                             ____________________________________
                             Attention:  Chief Executive Officer
                             Facsimile:  ________________________

          If to Licensor:     Bruegger's Corporation
                              3820 Edison Lakes Parkway
                              Mishawaka, Indiana 46545
                              Attention:  President
                              Facsimile:  (219) 243-4377

          with a copy to:     Bruegger's Corporation
                              3820 Edison Lakes Parkway
                              Mishawaka, Indiana 46545
                              Attention:  General Counsel
                              Facsimile:  (219) 243-4393

or to such other address as either party shall designate by proper notice.
Notices will be deemed to have been received as of the earlier of the date of
actual receipt or, in the case of notices sent via U.S. Mail, three (3) days
after mailing. A signed receipt shall be obtained where a notice is delivered in
person.

          18.   GOVERNING LAW.  This Agreement shall be governed by and 
                -------------  
construed and enforced in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed therein without regard to the
conflict of law provisions thereof.

          19.   NO WAIVER.  The failure by any party at any time to require
                ---------
performance of any provision hereof shall not affect its right later to require
such performance. No waiver in any one or more instance shall (except as
otherwise stated therein) be deemed to be a further or continuing waiver of any
such condition or breach in any other instances or a waiver of any other
condition or breach of any other term, covenant, representation or warranty.

          20.   SEVERABILITY.  In the event that any term or provision of this
                ------------  
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable in whole or in part, the remainder of this Agreement or the
application of such term or provision to circumstances other than those as to
which it is held invalid, void or unenforceable shall not be affected thereby
and every term and provision of this Agreement shall be valid and enforced to
the fullest extent permitted by law.


          21.   AMENDMENT. This Agreement may be amended or modified only by a
                ---------
written instrument signed by each of the parties hereto.

                                      -9-
<PAGE>
 
          22.    ENTIRE AGREEMENT.  This Agreement is the entire agreement, and
                 ----------------                   
supersedes all prior agreements and understandings, written and oral, among the
parties hereto or any of them with respect to the subject matter hereof.

          23.    COUNTERPARTS.  This Agreement may be executed in one or more
                 ------------   
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.

          24.    CAPTIONS.  The captions in this Agreement are inserted only 
                 --------  
as a matter of convenience and are not intended to define, limit, construe or
describe the scope or intent of any provision of this Agreement.

          25.    NO THIRD PARTIES.  Nothing contained in this Agreement is
                 ----------------
intended, nor shall it be construed, to create any rights in any person not a
party to this Agreement, other than the Affiliates of Licensor.

          26.    ASSIGNMENT.  Licensee shall not assign any of its interest in
                 ----------
this Agreement without the prior written consent of Licensor.

          27.    SURVIVAL.  The rights and obligations of parties set forth in
                 --------
Sections 10, 11, 13, 14, 15 and 16 shall survive the termination or expiration
of this Agreement.


          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above. 


BRUEGGER'S CORPORATION                 BAKERY CAPITAL COMPANY,INC.

By:     __________________________     _______________________________________

Title:  _______________________        By:     _______________________________
                                               Its Chief Executive Officer

                                       By:     _______________________________

                                       Title:  _______________________________

                                     -10-




 





 





 



 



 
<PAGE>
 
                                   EXHIBIT A



Description of Licensed Software:






Copies of Documentation: ______






Description of Third-Party Software:

                                     -11-




<PAGE>
 
                                   EXHIBIT B



Installed Locations of Licensee
-------------------------------


A.   Bakeries:






B.   Commissaries:






C.   Offices of Operating Partners Entities:

                                     -12-


<PAGE>
 
                                   EXHIBIT G

                                      to

                         BRUEGGER'S FRESH BAGEL BAKERY
                             DEVELOPMENT AGREEMENT





                        COMMISSARY ACCOUNTING SOFTWARE
                      LICENSING AND MAINTENANCE AGREEMENT



<PAGE>
 
                   COMMISSARY ACCOUNTING SOFTWARE LICENSING
                           AND MAINTENANCE AGREEMENT


          This Commissary Accounting Software Licensing and Maintenance
Agreement (the "Agreement") is made this ____ day of ___________, 19___, by and
between Bakery Capital Company, Inc.,  ("Licensee") and Bruegger's Corporation,
a Delaware corporation ("Licensor").

                                 RECITALS

          1.     Licensee and Bruegger's Franchise Corporation, a Delaware
corporation which is an affiliate of Licensor ("BFC"), have entered into a
Development Agreement dated ______________, 19___ (as amended from time to time,
the "Development Agreement") and have entered into or propose to enter into one
or more franchise agreements (each a "Franchise Agreement"), each granting to
Licensee the right to operate one Bruegger's Bagel Bakery.

          2.     Pursuant to the Development Agreement and/or the Franchise
Agreements, Licensee is required to use certain commissary accounting software
which is owned by Licensor and to use certain other software which is owned by a
third party.

          3.     Upon the terms and subject to the conditions hereinafter
provided, Licensee and Licensor desire to enter into an agreement pursuant to
which Licensor would license certain commissary accounting software to Licensee
and assist Licensee in maintaining such software, and Licensee would license
certain other software from the third party.

                                  AGREEMENTS

          In consideration of the mutual covenants contained herein, and other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto hereby agree:

          1.     DEFINITIONS.
                 ------------

          As used in this Agreement, the following terms shall have the meanings
hereinafter defined:

          1.1    "Affiliate" shall mean with respect to either party, any 
                  ---------
     company, any individual, corporation, partnership, association, joint
     venture, trust, estate, limited liability company, or other legal entity
     that now or hereafter directly, or indirectly through one or more
     intermediaries, controls, or is controlled by, or is under common control
     with such party. The term "control," including the terms "controlling,"
     "controlled by," and "under common control with," means the possession,
     direct or indirect, of the power to direct or cause the direction of the

                                      -1-
<PAGE>
 
     management and policies of a person, whether through the ownership of
     voting shares, by contract or otherwise.

          1.2    "Bakery" shall mean each Bruegger's Bagel Bakery operated by
                  ------
     Licensee pursuant to a Franchise Agreement.

          1.3    "Commissary" shall mean each Bruegger's Bagel Bakery commissary
                  ----------
     operated by Licensee as a franchisee of Licensor.

          1.4    "Enhancement" means any and all changes to the Licensed 
                  -----------
     Products that (a) improve the operating performance but do not alter the
     basic function of the Licensed Products; (b) incorporate fixes or bypasses
     for errors; or (c) are offered to any of the Other Users, whether at no
     additional charge or otherwise.

          1.5    "Installed Location" shall mean each Commissary in which the
                  ------------------
     Licensed Products are used on one or more computers or computer terminals.

          1.6    "Intellectual Property Rights" means any and all exclusionary
                  ----------------------------
     rights existing from time to time anywhere in the world under patent law,
     copyright law, trade-secret law, trademark law, unfair competition law, or
     otherwise.

          1.7    "Licensed Products" shall mean the Licensed Software, and the
                  -----------------
     User Documentation, Specifications, Upgrades and Enhancements, if any are
     supplied pursuant to this Agreement, each reproduction of the foregoing
     made pursuant to this Agreement, and any one or more of them.

          1.8    "Licensed Software" means the computer software programs
                  -----------------
     identified in Exhibit A attached to this Agreement, applicable to various
     environments, in human readable source code form and machine executable
     object code form, and all related Specifications, applications, and design
     documents, together with all related know how and all related
     Documentation.

          1.9    "Other Users" means the other parties who have obtained the
                  -----------
     licensed right to use the Licensed Products.

          1.10   "Release" means an update of the Licensed Products that may
                  -------
     incorporate any Enhancements or other changes made by Licensor, including
     patches and bypasses previously furnished to any of its Other Users.

          1.11   "Specifications" shall mean all specifications for, and
                  --------------
     descriptions of the functional capabilities of, the Licensed Software
     provided by Licensor to Licensee, whether included in the User
     Documentation, descriptive documents or 

                                      -2-
<PAGE>
 
     materials provided by Licensor to Licensee in tangible, intangible, written
     or oral form, with respect to the Licensed Products.
     
          1.12   "Third Party Software" means the third party-owned computer
                  --------------------
     software programs identified in Exhibit A and related specifications,
     documentation materials, modifications, enhancements, interfaces, and
     associated know-how, which together or separately are not owned by
     Licensor.

          1.13   "Upgrade" means all improvements in the Licensed Products that
                  -------
     (a) add to or alter the basic functions of such Licensed Products; or (b)
     may be offered to Other Users.

          1.14   "User Documentation" means all documentation and any succeeding
                  ------------------
     changes thereto relating to installation, maintenance and operation of the
     Licensed Software.  User Documentation may, but need not, include all
     documents, functional specifications, users manuals and instructions, flow
     diagrams, file descriptions and definitions, and job control procedures
     developed by or for Licensor in connection with the Licensed Software, and
     all Releases and Enhancements thereto.

          2.     GRANT OF LICENSE.
                 -----------------

          2.1    Licensor hereby grants to Licensee a nonexclusive right and
     license to use the Licensed Products in accordance with the terms and
     conditions of this Agreement.

          2.2    Licensor hereby grants Licensee the right to use the Licensed
     Products at each Installed Location set forth on Exhibit B attached to this
     Agreement, with one or more computers, computer terminals and/or other
     devices which allow users to access the Licensed Software.  Exhibit B shall
     be amended from time to time to include any additional Installed Locations
     which do not exist on the date of this Agreement.

          2.3    Other than as expressly set forth herein, Licensor owns all
     right, title and interest in and to the Licensed Products and the
     Intellectual Property Rights pertaining thereto.

          3.     TERM OF LICENSE.  This Agreement shall commence upon the date 
                 ---------------
of this Agreement and shall terminate according to the provisions of Section 12
hereof or upon termination of all Development Agreements and Franchise
Agreements between Licensee and BFC.

                                      -3-
<PAGE>
 
          4.     DELIVERABLES.
                 -------------

          4.1    Upon receipt from Licensee of a fully executed original of this
     Agreement and written evidence that Licensee has obtained the license(s)
     referenced in Section 11 herein, Licensor shall deliver magnetic media
     containing the Licensed Software and such number of copies of User
     Documentation as are set forth in Exhibit A.  Licensor will install the
     Licensed Software at one Installed Location and Licensee shall install the
     Licensed Software at all other Installed Locations.

          4.2    Licensee may copy the Licensed Software, in whole or in part,
     for Licensee's internal use and for purposes of back-up or archiving.
     Licensee may reproduce the User Documentation or other written materials
     supplied with respect to the Licensed Products for Licensee's internal use.

          4.3    Licensee will not alter, deface, remove, cover up, or mutilate
     in any manner whatsoever any copyright or other proprietary notice which
     Licensor may incorporate in or attach or affix to the Licensed Products, or
     on copies it makes in whole or in part thereof.

          5.     MAINTENANCE.  Licensor will deliver to Licensee, during the 
                 -----------
term of this Agreement, all Releases or Upgrades (collectively, the "Software
Maintenance"), to the extent that the same are offered to any of the Other
Users.

          6.     SUPPORT.  Licensor shall provide software support service and
                 -------
consultation accessibility by telephone during Licensor's regular business hours
and, in addition, the following special software support services (collectively,
the "Software Support") to each of the Installed Locations:

          6.1    Morning and Evening Help Desk.  A morning and evening "Help 
                 -----------------------------
     Desk" whereby Licensee's employees may call Licensor's [Management
     Information Services Department] concerning any questions or problems
     pertaining to the use or operation of the Licensed Software arising after
     [7:00] a.m. until 8:00 a.m. and after 5:00 p.m. until [8:59] p.m. (EST),
     Monday through Friday; and

          6.2    Weekend Help Desk.  A weekend "Help Desk" whereby Licensee's
                 -----------------
     employees may call Licensor's [Management Information Services Department]
     concerning any questions or problems pertaining to the use or operation of
     the Licensed Software arising after [7:00] a.m. until [8:59] p.m. (EST) on
     Saturday and Sunday.

                                      -4-
<PAGE>
 
          7.     LICENSE AND MAINTENANCE FEES.
                 -----------------------------

          7.1    As compensation to Licensor for the License granted to Licensee
     hereunder, Licensee shall pay Licensor a license purchase fee in the amount
     of $10,000 per Installed Location, which shall be due and payable to
     Licensor with respect to each Installed Location upon commencement of the
     operations of each such Installed Location.

          7.2    In consideration of the Software Maintenance and Software
     Support provided to Licensee hereunder, Licensee shall pay Licensor a
     software maintenance fee in the amount of $500 per Installed Location for
     each four-week accounting period of Licensor ("Accounting Period") for each
     Installed Location open and operating during all or any portion of such
     Accounting Period.

          8.     TAXES.  Licensee shall pay all federal, state and local sales,
                 -----
excise, use, or similar taxes based upon payments to be made by it hereunder or
otherwise based on the receipt of the license rights granted herein (excluding,
however, any tax on the income of Licensor).

          9.     PAYMENT OF FEES.
                 ----------------

          9.1    Licensee will pay the license purchase fees, at the times
     provided in Section 7.1 hereof, by wire transfer or certified check, or by
     such other means as may be agreed upon by Licensor and Licensee.

          9.2    Licensor will calculate and Licensee hereby authorizes Licensor
     to collect through electronic funds transfer, at the end of each Accounting
     Period, the total dollar amount of all software maintenance fees then due
     to Licensor hereunder.

          10.    LIABILITY.
                 ----------

          10.1   The Licensed Products, including, but not limited to, all
     Licensed Software, Enhancements, User Documentation, Specifications,
     Releases, and Upgrades, are furnished by Licensor to Licensee under this
     Agreement without any oral or written representation concerning the
     operation or suitability of such items, and are provided AS IS.

          10.2   LICENSOR MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR
     IMPLIED, WITH RESPECT TO THE LICENSED PRODUCTS, INCLUDING, BUT NOT LIMITED
     TO, THEIR ADEQUACY, QUALITY, PERFORMANCE, MERCHANTABILITY, OR FITNESS FOR A
     PARTICULAR PURPOSE.

                                      -5-
<PAGE>
 
          10.3   NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY
     CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES, INCLUDING, BUT NOT LIMITED TO,
     LOSS OF ANTICIPATED PROFITS, RESULTING FROM THE PARTY'S PERFORMANCE OR
     NONPERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT, EVEN IF SUCH PARTY
     HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

          11.    RIGHTS TO THIRD PARTY SOFTWARE.  It shall be Licensee's
                 ------------------------------
responsibility to obtain, directly from the licensor(s) thereof, any and all
license(s) necessary for Licensee to use all Third Party Software identified in
Exhibit A.  Exhibit A shall be amended from time to time to include any
additional Third Party Software which is added after the date of this Agreement.

          12.    MODIFICATIONS.  Licensee shall not have the right to
                 -------------
independently modify, or merge with any other products, the Licensed Software
through the services of its own employees or of any independent contractor.

          13.    TERMINATION.
                 -----------

          13.1   The right and license granted hereunder may be canceled by
     Licensor if Licensee is in default of any amount due under this Agreement
     for a period of 30 days and may be canceled by either party at any time
     upon default by the other party of any provision of this Agreement if such
     default is not corrected within 30 days after receipt of written notice
     thereof.

          13.2   Licensee agrees to pay all applicable costs and attorney's
     fees, to the extent permitted by law, for the collection of payments and
     other charges due under this Agreement.

          13.3   Within 60 days after the termination of this Agreement and
     within 30 days after the cancellation for default of this Agreement for any
     reason, Licensee shall deliver to Licensor any and all portions of the
     Licensed Products and any information, documents, flow charts, logic
     diagrams, source code, test materials source code, or the like relating
     thereto and all copies thereof in whatever form, including partial copies,
     whether or not the same have been modified by Licensee or Licensor.

          14.    CONFIDENTIALITY.
                 ----------------

          14.1   Any information, whether or not protected by a patent or
     copyright, which has been provided (i) in writing by one party to the other
     party pursuant to this Agreement and is indentified by a legend thereon as
     being proprietary or confidential, or (ii) orally by one party to the other
     party pursuant to

                                      -6-
<PAGE>
 
     this Agreement, is designated as confidential at the time of disclosure and
     is reduced to a written summary (identified by a legend thereon as being
     proprietary or confidential) (hereinafter "Confidential Information") shall
     be treated by the receiving party as being the proprietary information of
     the other, and shall be protected by the same security procedures as are
     used by the receiving party in protecting its own trade secrets and other
     confidential data.

          14.2   The Licensed Products shall be deemed the Confidential
     Information of Licensor.

          14.3   With respect to all such Confidential Information to be kept
     confidential pursuant to this Section, each party agrees (a) not to provide
     or make available any of the other party's Confidential Information in any
     form to any person other than those employees, agents or representatives of
     the receiving party who have a need to know consistent with the authorized
     use of such Confidential Information; (b) not to reproduce such
     Confidential Information except for use reasonably necessary to the
     performance of this Agreement; (c) not to exploit or use the other party's
     Confidential Information except as permitted by this Agreement and (d) to
     return or destroy all such Confidential Information which is in written or
     graphic form at the conclusion of its use or termination of this Agreement.

          14.4   A party in receipt of the other party's Confidential
     Information shall not be liable (subject to any patent rights or registered
     copyrights of the disclosing party) for any use or disclosure of the other
     party's Confidential Information which:

                 (a) was in the public domain prior to the receipt of same by
          the receiving party, or has subsequently become part of the public
          domain by publication or otherwise except by the receiving party's
          wrongful act;

                 (b) was in the receiving party's possession or known to the
          receiving party prior to its receipt hereunder, and was not acquired
          directly or indirectly from the disclosing party;

                 (c) was independently developed by the receiving party;

                 (d) was received by the receiving party from a third party
          which the receiving party reasonably believed had no obligation of
          secrecy with respect thereto;

                                      -7-
<PAGE>
 
                 (e) consists solely of generalized data processing ideas,
          concepts, know-how or techniques; or

                 (f) is disclosed pursuant to court order.

          15.    PROPRIETARY RIGHTS.  Nothing herein shall convey to Licensee 
                 ------------------
any right in the Licensed Products other than those rights expressly granted
herein. Licensee acknowledges that the Licensed Products are proprietary
products developed by Licensor for its restaurant business and that the Licensed
Products shall be used by Licensee only in connection with the operation of the
Commissaries (the "Permitted Use"). Other than in connection with the Permitted
Use, Licensee shall not use the Licensed Products for any other purpose,
including, but not limited to, the purpose of assisting Licensee in the
operation of any restaurant other than the Bakeries.

          16.    INDEMNIFICATION.
                 ----------------

          16.1   Licensee shall indemnify and hold harmless Licensor and its
     Affiliates against any and all losses, liabilities, judgments, awards,
     settlements, damages and cost (including legal fees and expenses) for any
     claims against Licensor arising out of or related to the use of the
     Licensed Products or other related materials by Licensee or Licensee's
     Affiliates.

          16.2   Licensor shall indemnify and defend Licensee against any claim
     of patent or copyright infringement arising out of Licensee's use of the
     Licensed Products; provided, however, that Licensor is notified promptly in
     writing of such claim and is given complete authority and information
     required for defending or settling any claim of patent or copyright
     infringement or suit resulting therefrom, and further provided that
     Licensee is not in default of any of the provisions of this Agreement.

          17.    NOTICES.  All notices, requests, waivers and other similar
                 -------
communications required or permitted to be given pursuant to this Agreement
shall be in writing and shall be deemed to have been duly given if delivered
personally or sent by overnight express or facsimile transmission or registered
or certified mail, return receipt requested, postage prepaid, and properly
addressed as follows:

          If to Licensee:     Bakery Capital Company, Inc.
                              ___________________________________
                              ___________________________________
                              Attention:  Chief Executive Officer
                              Facsimile:  _______________________

                                      -8-
<PAGE>
 
          If to Licensor:     Bruegger's Corporation
                              3820 Edison Lakes Parkway
                              Mishawaka, Indiana  46545
                              Attention:  President
                              Facsimile:  (219) 243-4377

          with a copy to:     Bruegger's Corporation
                              3820 Edison Lakes Parkway
                              Mishawaka, Indiana 46545
                              Attention:  General Counsel
                              Facsimile:  (219) 243-4393

or to such other address as either party shall designate by proper notice.
Notices will be deemed to have been received as of the earlier of the date of
actual receipt or, in the case of notices sent via U.S. Mail, three (3) days
after mailing.  A signed receipt shall be obtained where a notice is delivered
in person.

          18.    GOVERNING LAW.  This Agreement shall be governed by and
                 -------------
construed and enforced in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed therein without regard to the
conflict of law provisions thereof.

          19.    NO WAIVER.  The failure by any party at any time to require
                 ---------
performance of any provision hereof shall not affect its right later to require
such performance.  No waiver in any one or more instance shall (except as
otherwise stated therein) be deemed to be a further or continuing waiver of any
such condition or breach in any other instances or a waiver of any other
condition or breach of any other term, covenant, representation or warranty.

          20.    SEVERABILITY.  In the event that any term or provision of this
                 ------------
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable in whole or in part, the remainder of this Agreement or the
application of such term or provision to circumstances other than those as to
which it is held invalid, void or unenforceable shall not be affected thereby
and every term and provision of this Agreement shall be valid and enforced to
the fullest extent permitted by law.

          21.    AMENDMENT.  This Agreement may be amended or modified only by a
                 ---------
written instrument signed by each of the parties hereto.

          22.    ENTIRE AGREEMENT.  This Agreement is the entire agreement, and
                 ----------------
supersedes all prior agreements and understandings, written and oral, among the
parties hereto or any of them with respect to the subject matter hereof.

                                      -9-
<PAGE>
 
          23.   COUNTERPARTS.  This Agreement may be executed in one or more
                ------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.

          24.    CAPTIONS.  The captions in this Agreement are inserted only as
                 --------
a matter of convenience and are not intended to define, limit, construe or
describe the scope or intent of any provision of this Agreement.

          25.    NO THIRD PARTIES.  Nothing contained in this Agreement is
                 ----------------
intended, nor shall it be construed, to create any rights in any person not a
party to this Agreement, other than the Affiliates of Licensor.

          26.    ASSIGNMENT.  Licensee shall not assign any of its interest in
                 ----------
this Agreement without the prior written consent of Licensor.

          27.    SURVIVAL.  The rights and obligations of parties set forth in
                 --------
Sections 10, 11, 13, 14, 15 and 16 shall survive the termination or expiration
of this Agreement.

          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.

BRUEGGER'S CORPORATION                       BAKERY CAPITAL COMPANY, INC.

By:  __________________________              __________________________________

Title:  _______________________              By:  _____________________________

                                                  Its Chief Executive Officer  

                                             By:  _____________________________
 
                                             Title  ___________________________

                                     -10- 
<PAGE>
 
                                   EXHIBIT A


Description of Licensed Software:



Copies of Documentation:  _______



Description of Third-Party Software:

                                     -11-
<PAGE>
 
                                   EXHIBIT B


Installed Location of Licensee
------------------------------

A.   Commissaries:

                                     -12-