<PAGE>   1
                                   EXHIBIT 2.1

                      IN THE UNITED STATES BANKRUPTCY COURT
                          FOR THE DISTRICT OF DELAWARE


IN RE:                                         )
                                               )        CHAPTER 11
                                               )
MAGIC RESTAURANTS, INC., ET AL.,               )        CASE NOS.  95-376
                                               )        THROUGH 95-392
         DEBTORS.                              )        AND CASE NOS. 95-674
                                               )        THROUGH 95-676 (HSB)


                              ORDER CONFIRMING THE
                      SECOND AMENDED PLAN OF REORGANIZATION

           Magic Restaurants, Inc. ("Magic" or "Debtor") and its affiliated
debtors and debtors-in-possession (collectively, the "Debtors") filed their
Second Amended Plan of Reorganization ("Amended Plan") and a disclosure
statement ("Disclosure Statement") with respect to the Amended Plan. This Court
approved the Disclosure Statement with respect to the Amended Plan, as modified.
A copy of the Amended Plan, the Disclosure Statement, and a ballot for accepting
or rejecting the Amended Plan was served in accordance with this Court's Order
upon all creditors whose Claims were impaired under the Amended Plan and who
were solicited to vote, with a notice ("Notice") advising such creditors of the
voting deadline and the date originally scheduled for the Confirmation Hearing.
The Confirmation Hearing was continued, pursuant to a Filed notice of
continuance and announcements made in open Court, to December 30, 1996, at 2:30
p.m.
<PAGE>   2
                  On or about December 5, 1996 and on December 30, 1996, the
Debtors filed certain technical modifications (the "Modifications") to the
Amended Plan (the Amended Plan, as modified by the Modifications and any other
amendments or modifications stated on the record of the hearing on December 30,
1996, is hereinafter referred to as the "Plan"). A copy of the Plan is attached
as Exhibit "A". Capitalized terms used but not defined herein have the meanings
set forth in the Plan. Notice of the Modifications Filed on December 5, 1996,
and the December 30, 1996 continued Confirmation Hearing was mailed to all
Creditors, and has been found appropriate pursuant to a separate Order of this
Court.

                  Based upon the entire record of this case and upon the
transcript and the proffer of evidence offered at the Confirmation Hearing and
all proceedings held before the Court; and after due deliberation and sufficient
cause appearing therefor, 

THE COURT HEREBY FINDS AS FOLLOWS:

                  A. This Court has jurisdiction over the Debtors and this
matter pursuant to 28 U.S.C. Section 1334 and venue is proper pursuant to 28
U.S.C. Section 1408. This is a core proceeding pursuant to 28 U.S.C. Section
157(b)(2)(L).

                  B. Any Person, entity or governmental authority required to
receive notice of the Confirmation Hearing has received due, proper and adequate
notice thereof;

                  C. The Modifications (i) do not cause the Plan to violate
Sections 1122, 1123, 1127 or any other provision of the Bankruptcy Code;
and (ii) do not affect the adequacy of the Disclosure Statement.

                  D. Notice of the Modifications was sufficient under the
circumstances.
<PAGE>   3
                  E. The Plan complies with all applicable provisions of Title
11, United States Code (the "Bankruptcy Code" or simply the "Code").

                  F. The Debtors, as proponents of the Plan, have complied with
all applicable provisions of the Bankruptcy Code.

                  G. The Plan specifies the Classes of Claims and Classes of
Interests impaired under the Plan and the treatment of each impaired Class.
Class 2 Creditors are not impaired under the Plan. Classes 1A through 1K, and
Class 3A and 3AA Creditors are impaired under the Plan.

                  H. The Plan provides the same treatment for each Claim or
Interest within each particular Class.

                  I. The classification of Claims under the Plan complies with
Section 1122 of the Code.

                  J. The Plan provides adequate means for the execution and
implementation of the Plan.

                  K. The Plan complies with Section 1123(a)(6) of the Bankruptcy
Code.

                  L. The treatment under the Plan of Claims (if any) of the type
specified in Sections 507(a)(1) of the Code complies with the provisions of
Section 1129(a)(9) of the Code, or the Holders of such Claims have agreed to
accept a different treatment.

                  M. The Plan has been proposed in good faith and not by any
means forbidden by law. The solicitation of acceptances and rejections of the
Plan was in good faith and in compliance with Section 1126(b) of the Code.
<PAGE>   4
                  N. The Debtors' objectives in proposing the Plan were to
reorganize the Debtors and to maximize payments to and recoveries by creditors.

                  O. The primary purpose of the Plan was not the avoidance of
taxes or the avoidance of the Securities Act of 1933.

                  P. Any payments made or promised by the Debtors for
professional services or for costs and expenses associated therewith in
connection with the Plan and incident to the Debtors' cases have been disclosed
to this Court and have been approved by or are subject to the approval of the
Court as reasonable.

                  Q. The Debtors have disclosed the identity and affiliations of
individuals proposed to serve, after confirmation of the Plan, as a director,
officer or voting trustee of the Reorganized Debtors, and the continuance in
such office of such individuals is consistent with the interests of the
creditors and equity security holders and with public policy. The Debtors have
disclosed the identity of any affiliate or insider that will be employed or
retained by it and the nature of any compensation for such affiliate or insider.

                  R. The Plan does not provide for any rate change which is
subject to the approval of a governmental regulatory commission.

                  S. The procedures by which the Ballots were distributed and
tabulated were fair and properly conducted.

                  T. The Ballot Certificate filed with the Court on December 30,
1996 is hereby approved and found to accurately reflect the result of the
balloting.

                  U. At or prior to the Confirmation Hearing, the Plan has been
accepted and approved by the requisite number of holders of Classes 1D, 1G, 1H
Claims. Holders of 
<PAGE>   5
Class 3AA Claims have previously accepted the Plan by requisite number and
amount, and the Modifications do not materially adversely affect the treatment
of Class 3AA creditors under the Plan.

                  Classes 1B, 1C, 1E, 1F, 1I, 1J, and 3A were each adversely
affected by the Modifications, and thus are deemed to have rejected the Plan.
The Plan is confirmable as to each of those Classes pursuant to 11 U.S.C.
Section 1129 of the Code.

                  V. Class 2 Claims are unimpaired under the Plan and are deemed
conclusively to have accepted the Plan pursuant to Section 1126(f) of the Code.

                  W. With respect to each Class, each holder of a Claim in such
Class has accepted the Plan, or will receive or retain under the Plan on account
of such Claim property of a value, as of the Effective Date, that is not less
than the amount that such holder would receive or retain if the Debtors were
liquidated under Chapter 7 of the Code on the same date.

                  X. The Plan is feasible. The Debtors have demonstrated that
there is a reasonable prospect of (i) their being able to obtain funds necessary
to pay for the obligations required to be paid under the Plan and being able to
meet the financial obligations imposed under the Plan without the need for
further financial arrangements or reorganization, and (ii) the Debtors being
able to execute and deliver, all documents, agreements and/or instruments
provided for under the Plan and/or required by applicable law to consummate the
transactions and conveyances contemplated by the Plan. Confirmation of the Plan
is not likely to be followed by the liquidation of the Reorganized Debtors.
<PAGE>   6
                  Y. The Plan provides for the payment of all fees payable under
28 U.S.C. Section 1930 on the Effective Date.

                  Z. With respect to all Classes of Equity Interests, the Plan
is fair and equitable, and does not discriminate unfairly with respect to any
Class of Claims or Interests.

                  AA. The Debtors have met their burden of showing their ability
to cure any defaults under the executory contracts to be assumed and assigned
under Article IV of the Plan.

                  BB. The parties to the executory contracts to be assumed by
the Debtors under the Plan and this Order (which contracts are listed on Exhibit
IV to the Plan) have received adequate assurances of future performance within
the meaning of Section 365(f)(2) of the Code.

                  WHEREFORE, IT IS HEREBY ORDERED:

                  1. The above findings are incorporated herein by reference as
if fully set forth herein.

                  2. The Plan is approved and confirmed pursuant to Section
1129(a) of the Bankruptcy Code and the terms of the Plan are incorporated
herein.

                  3. The Plan and its provisions shall be binding upon the
Debtors, the Reorganized Debtors, any entity acquiring property under the Plan,
any holder of a Claim or Interest against the Debtor, any federal, state or
local taxing authority, and any other party in interest regardless of whether
the Claim or Interest of such holder or right or obligation of any party in
interest is impaired under the Plan and whether or not such holder or party in
interest has accepted the Plan.
<PAGE>   7
                  4. Except as otherwise provided in the Plan and this Order and
in accordance with Sections 1141(b) and (c) of the Code, all assets of the
estates of MRI and the Subsidiaries shall automatically (without the need for
further action) vest in the respective Reorganized Debtors on the Effective
Date, free and clear of all Claims, liens, encumbrances and equities.

                  5. The Debtors and their respective directors, officers,
agents, attorneys and affiliates are hereby authorized to execute, deliver,
implement and perform each of the requirements of the Plan and to take such
other steps and perform such other acts as may be necessary to implement and
effectuate the Plan, and are further hereby authorized and directed to execute
and deliver any instrument and perform any other act that is necessary for the
consummation of the Plan.

                  6. The Debtor shall have the right, to the fullest extent
permitted under Section 1142 of the Bankruptcy Code, to apply to the Court for
an order directing any Person to execute and deliver any instrument or perform
any other act required under or pursuant to the Plan.

                  7. The Claims of the Holders of Postpetition Senior Secured
Notes against MRI and the Subsidiaries are hereby allowed in the amounts set
forth on Exhibit ____ of this Order, together with accrued and unpaid interest
incurred through the Effective Date. Each such Holder, and the Debtors, have
agreed that the allowed Claims of such Holders against MRI and the Subsidiaries
shall, upon the Effective Date, be converted into shares of New Common Stock in
accordance with Article III.A.1.c. of the Plan. Upon such conversion, all liens
previously granted to the holders of the Postpetition Senior Secured Notes in
and 
<PAGE>   8
to any property of MRI or the Subsidiaries shall be deemed released, with no
further action required by the Holders of such Claims, the Debtors, or the
Reorganized Debtors. The Claims of such Holders against Debtors that are not
Reorganized under the Plan are not released under this Order or the Plan.

                  8. The assumption by the Debtors of the executory contracts
listed on Exhibit IV to the Plan are approved as of the Effective Date.

                  9. All executory contracts and unexpired leases of MRI and the
Subsidiaries other than the executory contracts listed on Exhibit IV to the Plan
are rejected as of the date hereof.

                  10. Any Claim arising from the rejection of any executory
contract or unexpired lease involving any of the Debtors not filed with the
Court by the deadline for doing so set forth in the Plan shall be forever barred
from assertion against the Debtors, their estates, or otherwise.

                  11. The treatment of disputed claims pursuant to Article V.K
of the Plan is approved.

                  12. Objections to Claims shall be filed by the Reorganized
Debtors and served upon each Holder of each of the Claims to which objections
are made not later than twelve (12) months subsequent to the Effective Date or
within such other time period as may be fixed by the Court.

                  13. Any certificate or instrument, required or permitted by
law to be filed or recorded with any state official of any state to accomplish
any corporate purpose under the Plan, including without limitation the filing of
restated certificates of incorporation, 
<PAGE>   9
bylaws, certificates of merger, and certificates of dissolution, may be signed
and filed on behalf of any Reorganized Debtor under the Plan by such Reorganized
Debtor's president, any vice president, secretary or treasurer, without any
action by the board of directors or shareholder(s) of such entity.

                  14. From and after the Effective Date, in accordance with the
Plan, the Reorganized Debtors shall litigate to judgment, settle or withdraw
objections to Disputed Claims, in the sole discretion of the Reorganized Debtors
without notice to any party in interest with the exception of the party to whom
a claim objection is being interposed.

                  15. Distributions required to be made to the holders of Claims
against the Reorganized Debtors shall be made as provided in the Plan.

                  16. In the event that there exists any inconsistency between
the terms of the Plan and this Order, the terms of this Order shall control.

                  17. Pursuant to the Notice of (I) Order Approving the Debtors'
Disclosure Statement, (II) Setting Administrative Claims Bar Date, (III)
Confirmation Hearing, (IV) Cancellation of Stock Interests, and (V) Deadline for
Filing Objections to Second Amended Plan, and the Court's Order dated August 30,
1996, all administrative claims and entitlement to payment from the Debtors'
estates of the kind specified in Section 507(a)(1) of the Bankruptcy Code
(except for (i) Claims of professionals of the Debtors and the Creditors
Committee, (ii) Claims of Red Robin, (iii) Claims evidence by Postpetition
Senior Secured Notes, (iv) Claims of the IRS, and (v) Claims otherwise preserved
or allowed in this Order) that were not filed with the Court and served on
counsel for the Debtors by October 3, 1996 are forever barred from assertion
against the Debtors, the Reorganized Debtors, and their 
<PAGE>   10
estates. With respect to claims of professionals of the Debtors and the
Creditors Committee retained by Order of this Court, except as otherwise
provided in such Order, each professional shall file a fee application with this
Court covering the period from the commencement of this case through the date of
this Order by no later than forty-five (45) days after the Effective Date.
Professional fees incurred subsequent to the Confirmation Date shall be paid in
the Reorganized Debtors' ordinary course of business without further approval of
the Bankruptcy Court.

                  18. Except as otherwise expressly provided in the Plan or this
Order, from and after the Effective Date, all state and local governmental
agencies, entities or authorities are hereby jointly and severally restrained
and enjoined from commencing or continuing any action to collect, from the
Reorganized Debtors or their property, any stamp or similar tax within the
meaning of Section 1146(c) of the Code with respect to the transactions
contemplated or described in this Confirmation Order or the Plan.

                  19. Except as otherwise provided in the Plan, the Reorganized
Debtors and their estates shall be discharged and released from any and all
Claims and Interests of any nature whatsoever existing as of the Effective Date.
Except as otherwise provided in the Plan and the documents executed in
conjunction therewith, including without limitations this Order, from and after
the Effective Date, all Creditors shall be precluded from asserting against the
Reorganized Debtors, and their estates, Claims based on any act or omission,
transaction or other activity of any kind or nature that occurred prior to the
Effective Date.

                  20. The discharge and injunction set forth in Article V.H. of
the Plan is approved.
<PAGE>   11
                  21. Without limiting the effect or terms of Article X.G of the
Plan, the commencement or continuation of any action which seeks to assert a
claim for relief against the Debtors, the Debtors' affiliates, or the present or
past directors, officers, partners, employees, agents, nominees, representatives
and attorneys of the Debtors in respect of (a) any actions taken or not taken
during the course of this case, (b) the Plan or for any statements or
representations included in, or alleged omissions from the Disclosure Statement,
(c) the authorization for or the formulation, negotiation, confirmation or
consummation of the Plan, (d) any distributions, payments or transfers made
under the Plan, or (e) acts performed pursuant to the Plan, are forever
enjoined. This paragraph shall not prohibit or impair the Debtors or the
Reorganized Debtors from commencing proceedings in this Bankruptcy Court as
permitted under of the Plan to enforce, preserve and protect their respective
rights and benefits arising or preserved under, or related to, the Plan.

                  22. Except as otherwise provided in the Plan or in this Order,
the restraining provision of Section 362(a) of the Code shall continue in effect
as to all Debtors and their property until the Effective Date.

                  23. The Debtors' settlement of various claims and rights
involving Monolith Enterprises, Inc. ("Monolith") and its affiliates is hereby
approved in all respects (subject to the occurrence of the Effective Date) on
the terms set forth hereafter, and upon the Effective Date the Reorganized
Debtors are directed and authorized to consummate the following settlements in
all respects:

                           (a) W.R. Grace & Co. -- Conn. ("Grace") holds
                  administrative rent claims of $241,444.88, $5,000.00, and
                  $20,000.00 with respect to rental 
<PAGE>   12
                  payments made to the landlords at the Fair Oaks, HarborPlace,
                  Chevy Chase locations (the "Administrative Rent Claims"). In
                  full satisfaction of the Administrative Rent Claims Grace
                  shall be paid $95,000.00 cash by Reorganized MRI on the
                  Effective Date.

                           (b) The $171,444.88 balance of Grace's Administrative
                  Rent Claims, and Grace's general Unsecured Claim in the amount
                  of $482,748.13, shall be Allowed in the total amount of
                  $654,193.01 as an Unsecured Claim against MRI, and shall be
                  treated under Subclass 3A of the Plan.

                           (c) The claims of Grace Culinary Systems, Inc.
                  ("Grace Culinary") against the Debtors shall be allowed as a
                  general Unsecured Claim against MRI in the amount $165,323.94,
                  and shall be treated under Subclass 3A of the Plan.

                           (d) Monolith shall be paid, on the Effective Date,
                  $5,000.00, in full satisfaction of its Secured Claims with
                  respect to Collateral located at or used in the Tyson's Corner
                  restaurant. All other Collateral of Monolith, if any, shall be
                  treated as described in Subclass 1G of the Plan.

                           (e) All other claims of Monolith shall be fully
                  satisfied by an Allowed Unsecured Claim against MRI in the
                  amount of $2,719,571.45, which shall be treated pursuant to
                  Subclass 3A of the Plan.

                           (f) Monolith, Grace, and Grace Culinary may, on or
                  after this date, assign the claims allowed under this Order or
                  the right to receive distributions of New Common Stock under
                  Subclass 3A of the Plan to or among each 
<PAGE>   13
                  other, their affiliates, or third parties, upon written 
                  designation to Reorganized MRI.

                           (g) As a material condition of this compromise and
                  settlement, Monolith, Grace, and Grace Culinary shall receive
                  an interim distribution of 50,000 shares (total) of New Common
                  Stock from the MRI Share Allocation, within 60 days of the
                  Effective Date.

                           (h) Upon the occurrence of the Effective Date, Grace,
                  Grace Culinary, Monolith, and their affiliates, predecessors,
                  successors, and assigns (collectively, the "Grace Parties")
                  shall be deemed to and shall have in fact released all claims,
                  causes of actions and rights they may have against each of the
                  Debtors, the Reorganized Debtors, their assets, and their
                  properties, excepting only those claims and rights expressly
                  preserved in this paragraph of this Order.

                           (i) Upon the Effective Date the Debtors, the
                  Reorganized Debtors, and their affiliates, predecessors,
                  successors, and assigns shall be deemed to and shall have in
                  fact released all claims, causes of actions, and rights they
                  may have against any of the Grace Parties.

                  24. In accordance with but without limiting the terms of
Article V.G. of the Plan, the Debtors, and all of their attorneys, officers,
agents, and employees, have acted in good faith and in compliance with
applicable laws, including Sections 1125 and 1145 of the Code and the federal
securities laws. The Section 1145 exemption from registration applies to the New
Securities to be issued under the Plan.
<PAGE>   14
                  25. The name of Reorganized MRI shall be changed, without the
necessity for further corporate action, to "Redhead Bistro Bar, Inc," and the
name of each operational Reorganized Debtor that operates as a Redhead
restaurant after the Effective Date shall be changed, without further corporate
action, to "Redhead Bistro Bar at [location], Inc."

                  26. The Reorganized MRI Restated Certificate of Incorporation
and the Reorganized MRI Restated Bylaws attached as Exhibits __ and ___ are
approved in all respects, and shall constitute the constituent corporate
documents of Redhead Bistro Bar, Inc.

                  27. The model form Reorganized Other Debtor Restated
Certificate of Incorporation and the model form Reorganized Other Debtor
Restated Bylaws attached as Exhibits __ and ___ are approved in all respects,
and shall constitute the form of constituent corporate documents of each
operational Reorganized Debtor that operates, after the Effective Date, as a
"Redhead Bistro Bar at [location], Inc."

                  28. Irrespective of the terms on which the Reorganized Debtors
are authorized to issue New Preferred Stock in Exhibits ___ and ___, the terms
of the New Preferred Stock issued to Creditors under the Plan shall be as set
forth in Exhibits 1.A-1, 1.A-2, and 1.A-3 of the Plan, or as has been or may
otherwise be agreed between such Creditors and the Reorganized Debtors.

                  29. Notwithstanding anything to the contrary in the Plan, (a)
the Reorganized Debtors' first quarterly installment to the IRS on account of
its Tax Claims shall be made ninety (90) days after the Effective Date, (b) any
and all rights of setoff the 
<PAGE>   15
IRS may have pursuant to Bankruptcy Code Section 553 are preserved and not 
affected by the Plan.

                  30. The Class 1D Secured Claim of Keybro shall be treated as
                      follows:

                           (a) The subclass 1D Secured Claim of Keybro is hereby
                  Allowed in the amount of $764,572 (principal), plus simple
                  interest from April 5, 1995 through the Effective Date at the
                  rate of 12% per annum, less $12,000 in post-petition interest
                  paid during the pendency of the Reorganization Cases.

                           (b) Keybro shall be paid $100,000 in Cash upon the
                  Effective Date, in partial satisfaction of its Allowed Secured
                  Claim.

                           (c) The balance of the Keybro Secured Claim shall be
                  satisfied by the delivery to Keybro of New Preferred Stock
                  issued by Red Heads Bistro Bar at Levittown, Inc. under the
                  terms set forth on Exhibit I.A-2 to the Plan.

                           (d) Upon the occurrence of the Effective Date and the
                  payment to Keybro described in subparagraph (b) above, Keybro
                  will be deemed to and will in fact have released all of its
                  liens and security interests in all property of MRI or any of
                  the Reorganized Debtors.

                           (e) Keybro shall retain its liens and security
                  interests in the property of Magic Restaurant at Staten
                  Island, Inc. ("MRI Staten") and Magic Restaurant at
                  Sayreville, Inc. ("MRI Sayreville"), and such liens and
                  security interests (if any) shall continue in effect to secure
                  the Reorganized Debtors' obligations under the Plan. In the
                  event that any assets of MRI Staten or MRI Sayreville upon
                  which Keybro holds a lien or security interest are sold or
<PAGE>   16
                  liquidated after this date, the proceeds of the sale, after
                  payment of expenses of sale and satisfaction of any prior
                  perfected liens in or to those assets, shall be paid to Keybro
                  in Cash and applied to redeem the New Preferred Stock issued
                  to Keybro.

                           (f) The preceding treatment of Keybro is in full
                  satisfaction of all claims Keybro may hold against any of the
                  Debtors, whether Secured or Unsecured, as of this date.

                  31. All of the Collateral identified on Exhibit ____ (the
"Paramount Collateral") which is presently located at the Debtor's Staten
Island, New York restaurant and which secures the Secured Claim of Paramount
shall be abandoned to Paramount upon entry of this Order, in full satisfaction
of all of Paramount's claims, Secured or Unsecured, against any of the Debtors.
This abandonment is expressly subject to any valid and perfected liens, if any,
in the Paramount Collateral held by Keybro.

                  32. Reorganized MRI shall pay any Allowed Administrative rent
claims due the Rouse Companies (or their affiliates) from Magic Restaurant at
Staten Island, Inc. for the period ending December 31, 1996 by the later of (1)
sixty (60) days after the Effective Date, or (2) if the claim is Dispute, the
date the claim is Allowed.

                  33. Without limiting the effectiveness or terms of any other
provision of the Red Robin Settlement,

                           a. Nothing in the Plan, including Article X.G. of the
Plan, or in this Order shall discharge or release any current or former officer
or director of the Debtors from
<PAGE>   17
personal liability to Red Robin under any such officer's or director's guarantee
of any Debtor's indebtedness to Red Robin;

                           b. In accordance with Article IV.B.2 of the Plan,
upon and after the Effective Date, the Red Robin Settlement shall be fully
implemented and binding, upon its terms, upon the Reorganized Debtors, except as
modified under subsections (c) and (d) hereafter;

                           c. The 5333 shares of New Preferred Stock to be
issued to Red Robin on the Effective Date shall be issued by Redhead Bistro Bar
at Secaucus, Inc. (1778 shares), Redhead Bistro Bar at Levittown, Inc. (1778
shares), and Redhead Bistro Bar at Yonkers, Inc. (1777 shares), nothwithstanding
anything in the Red Robin Settlement to the contrary. The New Preferred Stock to
be issued by Redhead Bistro Bar at Levittown shall have the terms set forth in
Plan Exhibit 1.A.2; the New Preferred Stock issued by Redheads Bistro Bar at
Secaucus, Inc. and Redheads Bistro Bar at Yonkers, Inc. shall have the terms set
forth in Plan Exhibit 1.A.1.

                           d. The "Conversion Period" under the Red Robin
Settlement shall expire on September 30, 1997.

                           e. Red Robin's $975,000 Unsecured Claim shall be
treated under Subclass 3A of the Plan. No portion of the claim shall be treated
under Subclass 3AA.

                  34. The Court shall retain exclusive jurisdiction over the
Debtors' cases to the extent provided in this Order, and Article IX of the Plan,
including exclusive jurisdiction over all controversies, disputes, and suits
which may arise in connection with the interpretation or enforcement of the Plan
or this Confirmation Order.
<PAGE>   18
                  35. This Court hereby further retains jurisdiction of these
proceedings pursuant to and for the purposes of Sections 105(a), 1127 and 1142
of the Code and for such purposes as may be necessary or useful to aid the
confirmation and consummation of the Plan and implementation of the Plan.

                  32. Neither the filing of the Plan, nor any statement or
provision contained therein, nor the taking by the Debtors or any party in
interest of any action with respect to the Plan may (a) be or be deemed to be an
admission against interest, and (b) until the Effective Date, be or be deemed to
be a waiver of any rights the Debtors or any party in interest might have
against the Debtors or any Creditor or Interest holder, and until the Effective
Date all of such rights are specifically reserved. In the event that the
Effective Date does not occur, neither the Plan, nor any statement contained
therein, nor this Order may be used or relied upon in any manner in any suit,
action, proceeding or controversy within or outside of the Chapter 11 case
involving the Debtors.

                  33. The failure to reference or discuss any particular
provision of the Plan in this Order shall have no effect on the validity,
binding effect and enforceability of such provision and such provision shall
have the same validity, binding effect and enforceability as every other
provision of the Plan.

                  34. If any provision of this Order, or the application of any
provision of this Order to any person or circumstance, shall be held invalid or
contrary to the provisions of the Bankruptcy Code, the remainder of this Order,
or the application of the provisions of this Order other than those as to which
it is held invalid, shall not be affected thereby.
<PAGE>   19
                  35. Within five (5) business days of the entry of this Order,
the Debtors shall serve a notice of confirmation of Plan upon all Creditors, and
upon the parties to any executory contract listed on Exhibit IV to the Plan.

Dated:            Wilmington, Delaware
                  December        , 1996


                                           ------------------------------
                                                    Helen S. Balick
                                           United States Bankruptcy Judge
<PAGE>   20
                                  EXHIBIT _____

                   SERIES A DIP LENDERS, PRINCIPAL AND ACCRUED
                                    INTEREST



<TABLE>
<CAPTION>
                                                                                                                   ACCRUED
                                                                                                                   INTEREST  
                                                                                                                   THROUGH  
                                                                                                                   NOVEMBER  
NAME                                       ADDRESS                           DATE             PRINCIPAL            30, 1996   
----                                       -------                           ----             ---------            --------   
                                                                                                                    
<S>                                 <C>                                    <C>                <C>                    <C>    
Kamar Jamal                         2628 S. Glenhaven                       4/6/95            $100,000               $10,981
                                    Houston, Texas 77025

RehCam                                4900 Woodway #675                    Various            $200,000               $20,844
Investments                         Houston, Texas 77056

Mohammadali                            P. O. Box 3112                      Various            $400,000               $35,441
Hassanali                               Dubai, U.A.E.

Paul Micheal                      2909 Hillcroft, Suite 450                8/24/95             $50,000               $10,981
                                       Houston, Texas

Charles Cook                            3827 Kiamesha                      12/8/95             $50,000                $5,885
                                    Missouri City, Texas
                                            77549

Ali Khin                            1005 Gulf Blvd. #401                    1/4/96            $200,000               $21,764
                                     Indian Rock Beach,
                                        Florida 34635

Belaty                             Holland Intertrust N.V.                 Various            $800,000               $40,110
Corporation N.V.                    Landhusi Joonchi Kaya
                                   Richard J. Beaujon z/n
                                    Curacao, Netherlands
                                          Antilles
</TABLE>
<PAGE>   21
<TABLE>
<CAPTION>
                                                                                                                           ACCRUED 
                                                                                                                          INTEREST 
                                                                                                                           THROUGH 
                                                                                                                          NOVEMBER 
NAME                                              ADDRESS                           DATE             PRINCIPAL            30, 1996  
----                                              -------                           ----             ---------            --------  
<S>                                       <C>                                     <C>                <C>                  <C> 
                                                                                                                         
Chillington                               Holland Intertrust N.V.                 8/12/96            $150,000               $5,129
Corporation N.V.                           Landhusi Joonchi Kaya
                                          Richard J. Beaujon z/n
                                           Curacao, Netherlands
                                                 Antilles
John                                                                              8/31/96            $500,000               $14,959
McConnoughy
</TABLE>
<PAGE>   22
                      IN THE UNITED STATES BANKRUPTCY COURT
                          FOR THE DISTRICT OF DELAWARE


In re:                                             ) Chapter 11
                                                   )
MAGIC RESTAURANTS, INC., (Tax I.D. No. 95-         )
4169432), MAGIC ENTERPRISES INC., (Tax I.D. No.    ) Case Nos. 95-376 through
13-3256164), MAGIC RESTAURANT OF L.I. CORP.,       ) 95-392 and Case Nos. 95-674
(Tax I.D. No. 13-3276570), MAGIC RESTAURANT AT     ) through 95-676 (HSB)
SECAUCUS, INC., (Tax I.D. No. 13-3327446),  MAGIC  )
RESTAURANT AT SMITHHAVEN, INC., (Tax I.D.          ) (Jointly Administered under
No. 13-3353366), MAGIC RESTAURANT AT               ) Case No. 95-376)
YONKERS, CORP., (Tax I.D. No. 13-3370106), MAGIC   )
RESTAURANT AT WAYNE, INC., (Tax I.D. No. 13-       )
3536223), MAGIC RESTAURANT OF N.J. CORP.,          )
(Tax I.D. No. 13-3276574), MAGIC CARMELLA'S        )
RESTAURANT INC., (Tax I.D. No. 13-3661220),        )
MAGIC RESTAURANT AT SAYREVILLE, INC., (Tax         )
I.D. No. 22-33-4247), MAGIC RESTAURANT AT KEW      )
GARDENS, INC., (Tax I.D. No. 13-3549656), MAGIC    )
RESTAURANTS AT KINGS PLAZA, INC., (Tax I.D.        )
No. 13-3318650), MAGIC AMERICAN CAFE INC.,         )
(Tax I.D. No. 13-3744367), CARMELLA'S CAFE OF      )
GREECE, INC., (Tax I.D. No. 16-1363431), MAGIC     )
ROCK INC., (Tax I.D. No. 13-3687093), MAGIC ROCK   )
BEDFORD, INC., (Tax I.D. No. 13-3687094), 10       )
COLUMBIA CORPORATE CENTER, INC., (Tax I.D.         )
No. 22-3018095), MAGIC RESTAURANT OF NEW           )
YORK CORP., (Tax I.D. No. 13-3256167), MAGIC       )
RESTAURANT AT ELMSFORD, INC. and MAGIC             )
RESTAURANT AT STATEN ISLAND, INC.                  )
                           Debtors.


                 DEBTORS' SECOND AMENDED PLAN OF REORGANIZATION

                     (AS MODIFIED THROUGH DECEMBER 30, 1996)
<PAGE>   23
                                TABLE OF CONTENTS
     
<TABLE>
<CAPTION>
                                                                                                   PAGE

Exhibits

<S>                        <C>                                                                      
Exhibit I.A--1             Reorganized Magic Restaurants, Inc. -- Subsidiary Preferred
                                    Stock -- Summary of Principal Terms and Conditions

Exhibit I.A--2             Reorganized Magic Restaurants, Inc. -- Levittown Preferred
                                    Stock -- Summary of Principal Terms and Conditions

Exhibit I.A--3             Reorganized Magic Restaurants, Inc. -- Series B Notes MRI Preferred
                                    Stock -- Summary of Principal Terms and Conditions

Exhibit I.A--4             Red Head Plan

Exhibit IV.A               Schedule of Contracts to be Assumed

Exhibit IV.B               Schedule of Contracts to be Rejected
</TABLE>
<PAGE>   24
                                       I.

                                    PREAMBLE

         Magic Restaurants, Inc., Magic Enterprises, Inc., Magic Restaurant of
L.I. Corp., Magic Restaurant at Secaucus, Inc., Magic Restaurant at Smithhaven,
Inc., Magic Restaurant at Yonkers, Corp., Magic Restaurant at Wayne, Inc., Magic
Restaurant of N.J. Corp., Magic Carmella's Restaurant, Inc., Magic Restaurant at
Sayreville, Inc., Magic Restaurant at Kew Gardens, Inc., Magic Restaurants at
Kings Plaza, Inc., Magic American Cafe, Inc., Carmella's Cafe of Greece, Inc.,
Magic Rock, Inc., Magic Rock Bedford, Inc., 10 Columbia Corporate Center, Inc.,
Magic Restaurant at Staten Island, Inc., Magic Restaurant at Elmsford, Inc., and
Magic Restaurant of N.Y. Corp., debtors and debtors in possession in the
above-captioned jointly administered Reorganization Cases (collectively,
"Debtors" or the "MRI Group"), hereby propose the following "Debtors' Second
Amended Plan Of Reorganization" (this "Plan"). Reference is made to the
"Disclosure Statement Relating to the Debtors' Second Amended Plan Of
Reorganization" (the "Disclosure Statement") for a discussion of (i) the MRI
Group's businesses, (ii) their historical financial and operational information,
(iii) projections for the Reorganized Debtors, (iv) the Red Head Plan, and (v) a
summary and analysis of this Plan.

         A.       DEFINITIONS

         In addition to such other terms as are defined in the foregoing
Preamble or in other Sections of this Plan, the following terms (which appear in
this Plan or in the Disclosure Statement as capitalized terms) have the
following meanings as used in this Plan or the Disclosure Statement, as the case
may be:

         1. "Administrative Claim" means a Claim for costs and expenses of
administration Allowed under Bankruptcy Code Section 503(b) or 507(b).
Administrative Claims include, but are not limited to, fees payable under 28
U.S.C. Section 1930, and all Claims evidenced by Postpetition Senior Secured
Notes.

         2. "Affiliate" means any Person that is an "affiliate" of a Debtor
within the meaning of Bankruptcy Code Section 101(2).

         3. "Allowed" means, with respect to a Claim against or Equity Interest,
(a) that proof of such Claim or Equity Interest was filed within the applicable
period of limitation fixed by the Bankruptcy Court in accordance with Rule
3003(c)(3) of the Bankruptcy Rules, and either (i) no objection to the allowance
thereof has been interposed within the applicable period of limitation fixed by
this Plan, the Bankruptcy Code, the Bankruptcy Rules, or a Final Order or (ii)
an objection has been interposed, but such Claim or Equity Interest has been
allowed in whole or in part by a Final Order (and if in part, only to the extent
so allowed), (b) that no proof thereof was so filed, but that such Claim or
Equity Interest has been listed by such Debtor in its Schedules, as such
Schedules may be amended from time to time in accordance with Bankruptcy Rule
1009, as liquidated in amount and not disputed or contingent, (c) that such
Claim arises from the recovery of property 
<PAGE>   25
under Bankruptcy Code Section 550 or 553 and is allowed in accordance with
Bankruptcy Code Section 502(h), or (d) that such Claim is allowed under this
Plan. No Claim that is a Disputed Claim or subject to becoming a Disputed Claim
under this Plan will be deemed an Allowed Claim.

         4. "Applicable Tax Interest Rate" means, (a) with respect to Tax Claims
due the IRS, 8.5%, and (b) with respect to all other Tax Claims, the 5-year
United States Treasury bill rate as in effect on the Effective Date.

         5. "Ballot" means the form or forms distributed to each holder of an
Impaired Claim or Impaired Equity Interest on which is to be indicated
acceptance or rejection of this Plan and any election for treatment of such
Impaired Claim or Equity Interest in a particular manner under this Plan.

         6. "Ballot Date" means the date set by the Bankruptcy Court by which
all Ballots for acceptance or rejection of this Plan must be received.

         7. "Bankruptcy Code" means title 11 of the United States Code, as the
same may from time to time be amended and in effect and applicable to
proceedings in the Reorganization Cases.

         8. "Bankruptcy Court" means the United States Bankruptcy Court for the
District of Delaware or, in the event such court ceases to exercise jurisdiction
over the Reorganization Cases, such other court or adjunct thereof as exercises
jurisdiction over the Reorganization Cases.

         9. "Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure,
as the same may from time to time be amended and in effect and applicable to
proceedings in the Reorganization Cases.

         10. "Bar Date Orders" means the orders of the Bankruptcy Court
establishing (i) October 30, 1995 as the deadline for Filing proofs of Claim in
respect of Claims arising or deemed to have arisen prior to commencement of the
Reorganization Cases and (ii) establishing October 3, 1996 as the deadline for
filing requests for payment and allowance of certain Administrative Claims.

         11. "Big Apple" means Big Apple Family Fun Center, Inc.

         12. "Big Apple Prepetition Credit Agreements" means those certain
documents and agreements by and between Big Apple, or its predecessor in
interest, and certain Debtor(s), with respect to or evidencing certain
indebtedness from said Debtor(s) to Big Apple, including but not limited to all
promissory notes, security agreements, assignments, license agreements, and any
other agreements entered into or other documents executed in connection
therewith, or as an adjunct or supplement thereto or required thereby.



                                        2
<PAGE>   26
         13. "Board of Directors" means the board of directors (or any committee
thereof which, under applicable law, has the power of such board of directors)
of any member of the MRI Group or the Reorganized Debtors, as the context may
indicate.

         14. "Business Day" means any day, other than a Saturday, Sunday, "legal
holiday" (as defined in Bankruptcy Rule 9006(a)), or any other day on which
commercial banks in New York, New York are required or authorized by law or
executive order to close.

         15. "Carmella's Cafe of Greece, Inc." means Carmella's Cafe of Greece,
Inc., a New Jersey corporation, and one of the Debtors.

         16. "Cash" means legal tender of the United States of America. Any
payment made by wire or other transfer of immediately available funds shall be
deemed to have been made in Cash.

         17. "Claim" means a claim as that term is defined in Bankruptcy Code
Section 101(5).

         18. "Claimant" means the holder of a Claim.

         19. "Claims Bar Date" means the applicable bar date by which a proof of
Claim must be Filed, as established by a Final Order of the Bankruptcy Court,
including, without limitation, the Bar Date Order.

         20. "Claims Estimation Order" means an order of the Bankruptcy Court,
including, as applicable, the Confirmation Order, estimating any Claim or Claims
that are or may become Disputed Claims for purposes of distributions under this
Plan.

         21. "Class" means one of the classes of Claims or Equity Interests
established under Article II of this Plan pursuant to Bankruptcy Code Section
1122.

         22. "Collateral" means any property or interest in property of the
estate of any Debtor subject to an unavoidable Lien to secure the payment or
performance of a Claim.

         23. "Concept" means an integrated program or system for the operation
of casual dining restaurants under the name "REDHEADS" (the "Concept Name"), as
effected in restaurants currently operating under the Concept Name and
including, without limitation, the Concept Name, all trademarks, trade names,
patents, service marks, brand marks, brand names, industrial designs, trade
dress, copyrights and other items of intellectual property of whatever nature,
operating systems and procedures, menus, recipes and food preparation and
service guidelines, design elements (including, without limitation, design of
signage, logos, interior decor, furnishings, fixtures and equipment, employee
uniforms and badges, china, flatware, placemats and the like), advertising
materials (of whatever kind in whatever media), and all other items, of whatever
kind or description, whether similar or dissimilar to any of the foregoing, in
any way forming part of, related to, or used


                                        3
<PAGE>   27
or useful in connection with, such program or system (including the Concept
Name), or operations thereunder.

         24. "Confirmation" means the entry by the Clerk of the Bankruptcy Court
of the Confirmation Order.

         25. "Confirmation Date" means the date on which Confirmation occurs.

         26. "Confirmation Hearing" means the hearing held by the Bankruptcy
Court on confirmation of this Plan, as it may be adjourned or continued from
time to time.

         27. "Confirmation Order" means the order of the Bankruptcy Court
confirming this Plan.

         28. "Creditor" means a creditor as such term is defined in Bankruptcy
Code Section 101(10).

         29. "Creditors' Committee" means the Official Unsecured Creditors'
Committee appointed pursuant to Bankruptcy Code Section 1102 in the
Reorganization Cases, as constituted from time to time.

         30. "Davstar" means Davstar Managed Investment Corp.

         31. "Davstar Prepetition Credit Agreements" means those certain
documents and agreements by and between Davstar and certain Debtor(s), with
respect to or evidencing certain indebtedness from said Debtor(s) to Davstar,
including but not limited to all promissory notes, security agreements,
assignments, license agreements, and any other agreements entered into or other
documents executed in connection therewith, or as an adjunct or supplement
thereto or required thereby.

         32. "Debtors" has the meaning assigned to it in the Preamble of this
Plan, and "Debtors in Possession" means each Debtor in its capacity as a debtor
in possession under Sections 1107(a) and 1108 of the Bankruptcy Code.

         33. "Disbursing Agent" means any Person in its capacity as a disbursing
agent under this Plan.

         34. "Disclosure Statement" means the "Disclosure Statement Relating to
the Debtors' Second Amended Plan Of Reorganization" (and all Exhibits annexed
thereto or referenced therein), that relates to this Plan and that has been
approved by order of the Bankruptcy Court pursuant to Bankruptcy Code Section
1125.

         35. "Disputed Claim" means a Claim (a) as to which a proof of Claim has
been Filed or deemed Filed and as to which an objection has been timely Filed,
which objection has not been


                                        4
<PAGE>   28
withdrawn and has not been overruled or denied by a Final Order, and, (b) prior
to the deadline under this Plan for filing objections to Claims, as to which (i)
the amount of the Claim specified in the Filed proof of Claim exceeds the amount
of the Claim Scheduled by the MRI Group as other than disputed, contingent, or
unliquidated, (ii) the priority of the Claim specified in the Filed proof of
Claim is of a more senior priority than the priority of the Claim Scheduled by
the MRI Group, (iii) the Claim has been Scheduled as disputed, contingent, or
unliquidated, or (iv) the Claim has not been Scheduled.

         36. "Distribution Date" means the date a distribution of Cash or New
Common Stock is required to be made under this Plan.

         37. "Distribution Record Date" means the date fixed by the Bankruptcy
Court as the deadline for any Disbursing Agent to recognize assignments of
Allowed Claims or Equity Interests pursuant to Bankruptcy Rule 3001(e).

         38. "Effective Date" has the meaning set forth in Article VII of this
Plan.

         39. "Equity Holder" means a holder of an Allowed Equity Interest in any
of the Debtors.

         40. "Equity Interest" means any ownership interest in any of the
Debtors, evidenced by any share certificate or other instrument, whether or not
transferable or denominated "stock" (including, without limitation, interests
denominated as common stock or preferred stock), or similar security, and any
warrant or right (other than a right to convert) to purchase or subscribe to any
such ownership interest.

         41. "Estate" means the estate created in the Reorganization Cases for
each of the Debtors by Bankruptcy Code Section 541.

         42. "Existing Common Stock" means the issued and outstanding common
stock, par value $0.001, of MRI.

         43. "Existing Equity Interests" means all Equity Interests in MRI prior
to the Effective Date.

         44. "Existing Stock Options" means all contractual rights, existing on
the Effective Date, of any Person to purchase or acquire any common stock or
other Equity Interests in MRI.

         45. "Extebank" means Extebank, Inc.

         46. "Extebank Prepetition Credit Agreements" means those certain
documents and agreements by and between Extebank and certain Debtor(s), with
respect to or evidencing certain indebtedness from said Debtor(s) to Extebank,
including but not limited to all promissory notes, security agreements,
assignments, license agreements, and any other agreements entered into or other


                                        5
<PAGE>   29
documents executed in connection therewith, or as an adjunct or supplement 
thereto or required thereby.

         47. "Filed" means filed with the Bankruptcy Court in the Reorganization
Cases.

         48. "Final Order" means (a) an order of the Bankruptcy Court as to
which the time to appeal, petition for certiorari, or move for reargument or
rehearing has expired and as to which no appeal, petition for certiorari, or
other proceedings for reargument or rehearing shall then be pending or (b) an
order of the Bankruptcy Court as to which an appeal, writ of certiorari,
reargument, or rehearing thereof has been sought, but such order shall have been
affirmed by the highest court to which such order was appealed, or certiorari
shall have been denied or reargument or rehearing shall have been denied or
resulted in no modification of such order, and the time to take any further
appeal, petition for certiorari, or move for reargument or rehearing shall have
expired; provided, that the possibility that a motion under Rule 59 or Rule 60
of the Federal Rules of Civil Procedure, or any analogous rule under the
Bankruptcy Rules, may be filed with respect to such order shall not cause such
order not to be a Final Order.

         49. "Five Percent Cumulative Preferred Stock" means the Equity
Interests in MRI represented by its outstanding shares of 5% Cumulative
Preferred Stock.

         50. "Gallagher" means John M. Gallagher, one of the Red Head Debtors.

         51. "Governmental Unit" means a governmental unit as such term is
defined in Bankruptcy Code Section 101(27).

         52. "Impaired," with respect to the treatment of a Claim or an Equity
Interest, is used herein with the same meaning as in Bankruptcy Code Section
1124.

         53. "Impaired Class" means any Class of Claims or Equity Interests
whose treatment under this Plan satisfies the definition of "Impaired."

         54. "Insider" means an insider as defined in Bankruptcy Code Section
101(31).

         55. "Intercompany Affiliate" means any of the Debtors and any other
direct or indirect Subsidiary of MRI.

         56. "Intercompany Affiliate Claim" means any Unsecured Claim held by
any Intercompany Affiliate against any Debtor.

         57. "Intercompany Equity Interest" means any Equity Interest in a
Debtor held by another Debtor.



                                        6
<PAGE>   30
         58. "Internal Revenue Code" means Title 26 of the United States Code,
as now in effect or hereafter amended.

         59. "IRS" means the United States of America, Department of the
Treasury, Internal Revenue Service, in any and all capacities.

         60. "Issuing Subsidiaries" means the respective Reorganized Debtors or
other operating subsidiaries of Reorganized MRI that shall issue shares of New
Preferred Stock to holders of certain Allowed Secured Claims under this Plan;
and an individual Reorganized Debtor shall be an "Issuing Subsidiary" in respect
of the holder or holders of Allowed Secured Claims of the particular Subclass in
respect of which such Reorganized Debtor shall so issue shares of its New
Preferred Stock, as set forth in the following table:

        Subclass                    Issuing Subsidiary
        --------                    ------------------

        1B                          Redheads Bistro Bar at Secaucus, Inc.

        1C                          Redheads Bistro Bar at Yonkers, Inc.

        1D                          Redheads Bistro Bar at Levittown, Inc.


         61. "Keybro" means Keybro Enterprises, Inc.

         62. "Keybro Prepetition Credit Agreements" means those certain
documents and agreements by and between Keybro (or its assignors) and certain
Debtor(s), with respect to or evidencing certain indebtedness from said
Debtor(s) to Keybro, including but not limited to all promissory notes, security
agreements, assignments, license agreements, and any other agreements entered
into or other documents executed in connection therewith, or as an adjunct or
supplement thereto or required thereby.

         63. "Lien" has the meaning assigned to such term in Bankruptcy Code
Section 101(37).

         64. "Magic American Cafe, Inc." means Magic American Cafe, Inc., a
Maryland corporation, and one of the Debtors.

         65. "Magic American Cafe Unsecured Creditors" means Creditors holding
Unsecured Claims, classified in Subclass 3B of this Plan, against either of the
following entities: Magic American Cafe, Inc. and 10 Columbia Corporate Center,
Inc.

         66. "Magic Carmella's Restaurant Inc." means Magic Carmella's
Restaurant Inc., a New Jersey corporation, and one of the Debtors.



                                        7
<PAGE>   31
         67. "Magic Enterprises Inc." means Magic Enterprises Inc., a New York
corporation, and one of the Debtors.

         68. "Magic Restaurant at Elmsford, Inc." means Magic Restaurant at
Elmsford, Inc., a New York corporation, and one of the Debtors.

         69. "Magic Restaurant at Kew Gardens, Inc." means Magic Restaurant at
Kew Gardens, Inc., a New York corporation, and one of the Debtors.

         70. "Magic Restaurant at Sayreville, Inc." means Magic Restaurant at
Sayreville, Inc., a New Jersey corporation, and one of the Debtors.

         71. "Magic Restaurant at Secaucus, Inc." means Magic Restaurant at
Secaucus, Inc., a New Jersey corporation, and one of the Debtors.

         72. "Magic Restaurant at Smithhaven, Inc." means Magic Restaurant at
Smithhaven, Inc., a New York corporation, and one of the Debtors.

         73. "Magic Restaurant at Staten Island, Inc." means Magic Restaurant at
Staten Island, Inc., a New York corporation, and one of the Debtors.

         74. "Magic Restaurant at Wayne, Inc." means Magic Restaurant at Wayne,
Inc., a New Jersey corporation, and one of the Debtors.

         75. "Magic Restaurant at Yonkers, Corp." means Magic Restaurant at
Yonkers, Corp., a New York corporation, and one of the Debtors.

         76. "Magic Restaurant of L.I. Corp." means Magic Restaurant of L.I.
Corp., a New York corporation, and one of the Debtors.

         77. "Magic Restaurant of N.J. Corp." means Magic Restaurant of N.J.
Corp., a New Jersey corporation, and one of the Debtors.

         78. "Magic Restaurants at Kings Plaza, Inc." means Magic Restaurants at
Kings Plaza, Inc., a New York corporation, and one of the Debtors.

         79. "Magic Restaurants, Inc." means Magic Restaurants, Inc., a Delaware
corporation, and one of the Debtors.

         80. "Magic Restaurants of New York Corp." means Magic Restaurants of
New York Corp., a New York corporation, and one of the Debtors.


                                        8
<PAGE>   32
         81. "Magic Rock Bedford, Inc." means Magic Rock Bedford, Inc., a New
York corporation, and one of the Debtors.

         82. "Magic Rock Inc." means Magic Rock Inc., a New York corporation,
and one of the Debtors.

         83. "Maximum Rate" means 12% per annum simple interest, computed on the
basis of a 365- or 366-day year, as the case may be, and actual days elapsed.

         84. "Merchants" means Merchants Bank of New York.

         85. "Merchants Prepetition Credit Agreements" means those certain
documents and agreements by and between Merchants and certain Debtor(s), with
respect to or evidencing certain indebtedness from said Debtor(s) to Merchants,
including but not limited to all promissory notes, security agreements,
assignments, license agreements, and any other agreements entered into or other
documents executed in connection therewith, or as an adjunct or supplement
thereto or required thereby.

         86. "Model Redheads Location" means the restaurant location at
Levittown, Long Island, New York operated by MRI under the Concept Name pursuant
to a license granted to MRI in the Gallagher Bankruptcy Case.

         87. "Monolith" means Monolith Enterprises, Inc.

         88. "Monolith Collateral" means all property, real, personal or mixed,
of MRI subject to valid Liens or security interests in favor of Monolith and
constituting collateral security for the Allowed Secured Claim of Monolith under
the Monolith Prepetition Credit Agreements.

         89. "Monolith Prepetition Credit Agreements" means those certain
documents and agreements by and between Monolith and MRI, with respect to or
evidencing certain indebtedness from MRI to Monolith, including but not limited
to all promissory notes, security agreements, assignments, license agreements,
and any other agreements entered into or other documents executed in connection
therewith, or as an adjunct or supplement thereto or required thereby.

         90. "Monolith Settlement" means any stipulation of settlement of
disputes between the Debtors and Monolith approved by the Bankruptcy Court at or
prior to the Confirmation Hearing.

         91. "MRI" means Magic Restaurants, Inc., a Delaware corporation.

         92. "MRI Unsecured Creditors" means Creditors holding Unsecured Claims,
classified in Subclass 3A of this Plan, against the following entity: Magic
Restaurants, Inc.


                                        9
<PAGE>   33
         93. "MRI Subsidiary Unsecured Creditors" means Creditors holding
Unsecured Claims, classified in Subclass 3AA of this Plan, against any of the
Subsidiaries.

         94. "MRI Share Allocation" means 200,000 shares of New Common Stock.
MRI Unsecured Creditors shall receive a Pro Rata share of the MRI Share
Allocation of New Common Stock.

         95. "New Common Stock" means the new common stock of Reorganized MRI,
par value $0.001, issued on or after the Effective Date.

         96. "New Jersey Bankruptcy Court" means the United States Bankruptcy
Court for the District of New Jersey exercising jurisdiction over the Red Head
Reorganization Cases or, in the event such court ceases to exercise jurisdiction
over the Red Head Reorganization Cases, such other court or adjunct thereof as
exercises jurisdiction over the Red Head Reorganization Cases.

         97. "New Preferred Stock" means the new preferred stock of MRI and
Issuing Subsidiaries of Reorganized MRI having terms and conditions
substantially as set forth on Exhibits I.A--1 through 1.A--3 to this Plan,
issued on or after the Effective Date.

         98. "New Securities" means, collectively, the New Common Stock, the New
Warrants, and the New Preferred Stock.

         99. "New Warrants" mean the New $2.00 Warrants and the New $5.00
Warrants. The New Warrants will be issued pursuant to a warrant agreement that
will be Filed with the Bankruptcy Court at or prior to the Confirmation Hearing.

         100. "New $2.00 Warrants" mean the warrants to purchase up to 1.5
million shares of New Common Stock, at a price of $2.00 per share, for the three
(3) year period after the Effective Date, that will be issued to certain Holders
of Administrative Claims under the Plan.

         101. "New $5.00 Warrants" mean the warrants to purchase up to 1.5
million shares of New Common Stock, at a price of $5.00 per share, for the five
(5) year period after the Effective Date, that will be issued to certain Holders
of Administrative Claims under the Plan.

         102. "Order" means a judgment, order or decree entered by the
Bankruptcy Court, regardless of whether subject to appeal or reconsideration,
the effect of which has not been stayed.

         103. "Order Approving Disclosure Statement and Scheduling Confirmation
Hearing" means the order of the Bankruptcy Court approving the Disclosure
Statement and scheduling the Confirmation Hearing.

         104. "Paramount" means Paramount Restaurant Supply Corporation.


                                       10
<PAGE>   34
         105. "Paramount Prepetition Credit Agreements" means those certain
documents and agreements by and between Paramount and Magic Restaurant Staten
Island, Inc., with respect to or evidencing certain indebtedness from Magic
Restaurant Staten Island, Inc., to Paramount, including but not limited to all
promissory notes, security agreements, assignments, license agreements, and any
other agreements entered into or other documents executed in connection
therewith, or as an adjunct or supplement thereto or required thereby.

         106. "Periodic Installments" means, with respect to Tax Claims due the
IRS, quarterly, and with respect to all other Tax Claims, annually.

         107. "Person" means any individual, corporation, general partnership,
limited partnership, association, joint stock company, joint venture, estate,
trust, Governmental Unit, Creditors' Committee, unofficial committee, Creditor,
Equity Holder, Claimant, or other entity.

         108. "Petition Date" means April 6, 1995 with respect to all Debtors
other than Magic Restaurant at Staten Island, Inc., Magic Restaurant at
Elmsford, Inc., and Magic Restaurant of New York Corp., for each of which the
"Petition Date" means June 6, 1995.

         109. "Piedmont" means Piedmont Investment Corporation.

         110. "Piedmont Prepetition Credit Agreements" means those certain
documents and agreements by and between Piedmont and certain Debtor(s), with
respect to or evidencing that certain indebtedness from said Debtor(s) to
Piedmont, including but not limited to all promissory notes, security
agreements, assignments, license agreements, and any other agreements entered
into or other documents executed in connection therewith, or as an adjunct or
supplement thereto or required thereby.

         111. "Plan" means this "Debtors' Second Amended Plan of
Reorganization", as modified from time to time.

         112. "Postpetition Senior Secured Notes" means the Postpetition Series
A Notes and the Postpetition Series B Notes.

         113. "Postpetition Series A Notes" means the obligations of the MRI
Group incurred pursuant to those certain orders of the Bankruptcy Court signed
prior to November 1, 1996 authorizing the MRI Group to incur $2.5 million
(principal) postpetition indebtedness pursuant to Bankruptcy Code Section 364
and all loan agreements, promissory notes, security agreements, mortgages, and
other documents evidencing the same or related thereto or entered into in
connection therewith or as an adjunct or supplement thereto or required thereby.

         114. "Postpetition Series B Notes" means the obligations of the MRI
Group incurred pursuant to those certain orders of the Bankruptcy Court issued
after November 1, 1996 authorizing the MRI Group to incur $3.3 million
(principal) postpetition indebtedness pursuant to Bankruptcy


                                       11
<PAGE>   35
Code Section 364 and all loan agreements, promissory notes, security agreements,
mortgages, and other documents evidencing the same or related thereto or entered
into in connection therewith or as an adjunct or supplement thereto or required
thereby.

         115. "Priority Non-Tax Claim" means a Claim of a kind specified in
Bankruptcy Code Section 507(a)(3), (4), (5), (6), (7) or (9).

         116. "Priority Tax Claim" means a Claim of a Governmental Unit of the
kind specified in Bankruptcy Code Section 507(a)(8).

         117. "Pro Rata", with respect to an allocation among several Persons of
an aggregate number or amount insufficient to satisfy the competing Claims,
demands or desires of all, denotes an allocation to each such Person of a share
of such aggregate number or amount equal to the product of (a) such aggregate
number or amount, multiplied by (b) a fraction of which the numerator is the
number or amount of such Person's respective Claim, desire or demand, and the
denominator is such aggregate number or amount.

         118. "Professional Person" means the following professionals: Andrews &
Kurth, L.L.P., Blank Rome Comisky & McCauley, and Young, Conaway, Stargatt &
Taylor.

         119. "Projections" means the projections of the Reorganized Operating
Debtors' operating profit, free cash flows, and certain other items for the
period through June 30, 1998 attached to the Disclosure Statement ("Financial
Projections for Reorganized Operating Debtors").

         120. "Red Head Confirmation Order" means the order of the New Jersey
Bankruptcy Court confirming the Red Head Plan.

         121. "Red Head Debtors" means, collectively, Red One, Red Three, and
Gallagher, Debtors in Possession in the jointly-administered Red Head
Reorganization Cases.

         122. "Red Head Plan" means the plan of reorganization in the Red Head
Reorganization Cases, in the form attached hereto as Exhibit 1.A--4, or as
subsequently amended or confirmed in the Red Head Reorganization Cases.

         123. "Red Head Reorganization Cases" means any or all of the jointly
administered cases in respect of each of the Red Head Debtors pending in the New
Jersey Bankruptcy Court, as the context may require.

         124. "Red One" means Red One, Inc., a New Jersey corporation.

         125. "Red One Common Stock" means the issued and outstanding common
stock of Red One.


                                       12
<PAGE>   36
         126. "Red Three" means Red Three, Inc., a New Jersey corporation.

         127. "Red Three Common Stock" means the issued and outstanding common
stock of Red Three.

         128. "Red Robin" means Red Robin International, Inc.

         129. "Red Robin Franchise Agreements" means all franchise, lease,
license, management, development, and other agreements of any type, whether or
not executory, between any of the Debtors and Red Robin.

         130. "Red Robin Settlement" means the settlement of the Red Robin
Adversary Proceeding and all other disputes between the Debtor and Red Robin
embodied in the Stipulated Order between the parties approved by the June 27,
1996 Order of the Bankruptcy Court attached to the Disclosure Statement as
Exhibit 8.

         131. "Registration Date" means the date on which any registration
statement filed with the SEC registering the offer and sale of such rights and
shares of New Common Stock under the Plan shall have become effective under the
Securities Act.

         132. "Record Holder" means the holder of an Existing Equity Interest on
the Existing Equity Interest Record Date.

         133. "Reorganization Agreement" means that certain Reorganization
Agreement dated as of May 1, 1996 between MRI and the Ottomanellis.

         134. "Reorganization Cases" means any or all of the jointly
administered cases in respect of each of the above-captioned Debtors pending in
the Bankruptcy Court, as the context may require.

         135. "Reorganized" means, with reference to any Debtor, such Debtor
from and after the Effective Date.

         136. "Reorganized Debtors" means MRI, Magic Restaurant at Secaucus,
Inc.; Magic Restaurant at Yonkers, Corp.; and Magic Restaurants at Kings Plaza,
Inc., from and after the Effective Date.

         137. "Reorganized MRI" means MRI, from and after the Effective Date. It
is anticipated that Reorganized MRI will change its name to Redheads Bistro Bar,
Inc.

         138. "Reorganized MRI Incentive Plan" means the stock incentive plan of
Reorganized MRI, as more fully described in the Disclosure Statement.


                                       13
<PAGE>   37
         139. "Reorganized MRI Restated Certificate of Incorporation" means the
Restated Certificate of Incorporation of Reorganized MRI that will be effective
on the Effective Date under the laws of the State of Delaware, in the form Filed
with the Bankruptcy Court at or before the Confirmation Hearing.

         140. "Reorganized MRI Restated Bylaws" means the Bylaws of Reorganized
MRI that will be effective on the Effective Date, in the form Filed with the
Bankruptcy Court at or before the Confirmation Hearing.

         141. "Reorganized Other Debtor Restated Certificate of Incorporation"
means the Restated Certificate of Incorporation (or similar organic document) of
each of the several Reorganized Debtors, other than MRI, that will be effective
on the Effective Date under the laws of their respective jurisdictions of
organizations.

         142. "Reorganized Other Debtor Restated By-Laws" means the Bylaws of
each of the several Reorganized Debtors, other than MRI, that will be effective
on the Effective Date.

         143. "Saxony" means Saxony Ice Company.

         144. "Saxony Prepetition Credit Agreements" means those certain
documents and agreements by and between Saxony and certain Debtor(s), with
respect to or evidencing certain indebtedness from said Debtor(s) to Saxony,
including but not limited to all promissory notes, security agreements,
assignments, license agreements, and any other agreements entered into or other
documents executed in connection therewith, or as an adjunct or supplement
thereto or required thereby.

         145. "Scheduled" means and refers to information set forth in the
Schedules.

         146. "Schedules" means the schedules Filed by the Debtors pursuant to
Bankruptcy Rule 1007(b), as the same may be amended from time to time prior to
the Effective Date.

         147. "SEC" means the United States Securities and Exchange Commission.

         148. "Series A Preferred Stock" means the Equity Interests in MRI
represented by shares of its outstanding Series A Preferred Stock.

         149. "Section 510(b) Claim" means a Claim of the character described in
Section 510(b) of the Bankruptcy Code.

         150. "Secured Claim" means a Claim, including interest, fees, and
charges as determined pursuant to Bankruptcy Code Section 506(b), that is
secured by a Lien on property in which the Estate has an interest, or that is
subject to setoff under Bankruptcy Code Section 553, to the extent of the value
of the Claimant's interest in the Estate's interest in such property, or to the
extent of the


                                       14
<PAGE>   38
amount subject to setoff, as applicable, as determined pursuant to Bankruptcy
Code Sections 506(a) and, if applicable, 1129(b). Under no event will
post-petition interest on any Secured Claim be Allowed at a rate in excess of
the Maximum Rate.

         151. "Secured Tax Claim" means a Claim of any taxing authority that is
a Secured Claim.

         152. "Securities Act" means the Securities Act of 1933, 15 U.S.C.
Sections 77a, et seq., and the rules and regulations promulgated thereunder.

         153. "SBLI" means State Bank of Long Island.

         154. "SBLI Prepetition Credit Agreements" means those certain documents
and agreements by and between SBLI and certain Debtor(s), relating to or
evidencing certain indebtedness from said Debtor(s) to SBLI, including but not
limited to all promissory notes, security agreements assignments, license
agreements, and any other agreements entered into or other documents executed in
connection therewith, or as an adjunct or supplement thereto or required
thereby.

         155. "Shell Companies" means all of the Debtors other than (1) the
Subsidiaries, (2) MRI, and (3) Magic American Cafe, Inc. and 10 Columbia
Corporate Center, Inc.

         156. "Shell Company Unsecured Creditors" means Creditors holding
Unsecured Claims, classified in Subclass 3C of this Plan, against any of the
Shell Companies.

         157. "Subsidiaries" means Magic Restaurant at Secaucus, Inc., Magic
Restaurants at Kings Plaza, Inc., and Magic Restaurant at Yonkers, Corp.

         158. "10 Columbia Corporate Center, Inc." means 10 Columbia Corporate
Center, Inc., a Maryland corporation, and one of the Debtors.

         159. "Unsecured Claim" means a Claim against any of the Debtors that is
not an Administrative Claim, Priority Non-Tax Claim, Priority Tax Claim, or
Secured Claim.

         160. "USA Signs" means USA Signs of America, Inc.

         161. "USA Signs Prepetition Credit Agreements" means those certain
documents and agreements by and between USA Signs and certain Debtor(s), with
respect to or evidencing certain indebtedness from said Debtor(s) to USA Signs,
including but not limited to all promissory notes, security agreements,
assignments, license agreements, and any other agreements entered into or other
documents executed in connection therewith, or as an adjunct or supplement
thereto or required thereby.


                                       15
<PAGE>   39
         162. "Voting Record Date" means the date and time fixed by the
Bankruptcy Court as the record date for determining which holders of Claims or
Interests in Impaired Classes eligible to vote on this Plan may vote to accept
or reject this Plan. The Voting Record Date is September 3, 1996.

         B. INTERPRETATION, RULES OF CONSTRUCTION, COMPUTATION OF TIME AND
            CHOICE OF LAW

         1. The provisions of this Plan shall control over any descriptions
hereof or inconsistencies contained in the Disclosure Statement. Where this Plan
refers to any contract, instrument, or other agreement or document created in
connection with this Plan, the provisions of such contract, instrument, or other
agreement or document shall control in the case of any inconsistency with the
terms of this Plan, and this Plan shall be interpreted to avoid any
inconsistencies with the provisions of such contract, instrument, or other
agreement or document.

         2. Any term used in this Plan that is not defined in this Plan but that
is used in the Bankruptcy Code or the Bankruptcy Rules has the meaning assigned
to that term (and shall be construed in accordance with the rules of
construction under) the Bankruptcy Code or the Bankruptcy Rules, as the case may
be. Without limiting the foregoing, the rules of construction set forth in
Bankruptcy Code Section 102 shall apply. The definitions and rules of
construction contained herein do not apply to the Disclosure Statement or to any
of the Exhibits to this Plan except to the extent expressly so stated in the
Disclosure Statement or in such Exhibit to this Plan, as the case may be.

         3. The words "herein," "hereof," "hereto," "hereunder" and others of
similar import refer to this Plan as a whole and not to any particular Article,
Section, Subsection, or clause contained in this Plan.

         4. Unless specified otherwise in a particular reference, all references
in this Plan to Articles, Sections and Exhibits are references to Articles,
Sections and Exhibits of or to this Plan.

         5. Any reference in this Plan to an existing document or Exhibit means
such document or Exhibit as it may have been amended, restated, modified, or
supplemented as of the Effective Date.

         6. Captions and headings to Articles and Sections in this Plan are
inserted for convenience of reference only and shall neither constitute a part
of this Plan nor in any way affect the interpretation of any provisions hereof.

         7. Whenever from the context it is appropriate, each term stated in
either the singular or the plural shall include both the singular and the
plural.

         8. In computing any period of time prescribed or allowed by this Plan,
the provisions of Bankruptcy Rule 9006(a) shall apply.


                                       16
<PAGE>   40
         9. All Exhibits to this Plan are incorporated into this Plan, and shall
be deemed to be included in this Plan, regardless of when Filed.

         10. Subject to the provisions of any contract, certificate, bylaw,
instrument, or other agreement or document entered into in connection with this
Plan, or any mandatory provision of law applicable thereto, the rights and
obligations arising under this Plan shall be governed by, and construed and
enforced in accordance with, the federal law of the United States, including the
Bankruptcy Code and Bankruptcy Rules.

                                       II.

              DESIGNATION OF CLASSES OF CLAIMS AND EQUITY INTERESTS

         The following is the designation of the Classes of Claims and Equity
Interests under this Plan. Administrative Claims, Priority Tax Claims and
Secured Tax Claims have not been classified and are excluded from the following
Classes in accordance with Bankruptcy Code Section 1123(a)(1). A Claim or Equity
Interest is classified in a particular Class only to the extent that the Claim
or Equity Interest qualifies within the description of that Class and is
classified in a different Class to the extent any remainder of the Claim or
Equity Interest qualifies within the description of such different Class. A
Claim or Equity Interest is in a particular Class only to the extent that the
Claim or Equity Interest is an Allowed Claim or Allowed Equity Interest in that
Class and has not been paid, released, or otherwise satisfied before the
Effective Date or such other date as determined by the applicable Debtor in its
sole discretion.

         A.       CLASS 1 - SECURED CLAIMS (SUBCLASSES 1A-1K)

         Subclass 1A (Other): Allowed Secured Claims against any of the Debtors,
to the extent that they are not included in any of Subclasses 1B through 1K, but
excluding Secured Tax Claims. Each Allowed Secured Claim in Subclass 1A will be
considered to be in its own separate subclass within Subclass 1A, and each such
subclass shall be deemed to be a separate Class for purposes of this Plan.
Claims in Subclass 1A are Impaired under this Plan.

         Subclass 1B (Big Apple): Allowed Secured Claims of Big Apple under or
evidenced by the Big Apple Prepetition Credit Agreements. Claims in Subclass 1B
are Impaired under this Plan.

         Subclass 1C (Davstar): Allowed Secured Claims of Davstar under or
evidenced by the Davstar Prepetition Credit Agreements. Claims in Subclass 1C
are Impaired under this Plan.

         Subclass 1D (Keybro): Allowed Secured Claims of Keybro under or
evidenced by the Keybro Prepetition Credit Agreements. Claims in Subclass 1D are
Impaired under this Plan.

         Subclass 1E (Merchants): Allowed Secured Claims of Merchants under or
evidenced by the Merchants Prepetition Credit Agreements. Claims in Subclass 1E
are Impaired under this Plan.


                                       17
<PAGE>   41
         Subclass 1F (Extebank): Allowed Secured Claims of Extebank under or
evidenced by the Extebank Prepetition Credit Agreements. Claims in Subclass 1F
are Impaired under this Plan.

         Subclass 1G (Monolith): Allowed Secured Claims of Monolith under or
evidenced by the Monolith Prepetition Credit Agreements. Claims in Subclass 1G
are Impaired under this Plan.

         Subclass 1H (Paramount): Allowed Secured Claims of Paramount under or
evidenced by the Paramount Prepetition Credit Agreements. Claims in Subclass 1H
are Impaired under this Plan.

         Subclass 1I (Piedmont): Allowed Secured Claims of Piedmont under or
evidenced by the Piedmont Prepetition Credit Agreements. Claims in Subclass 1I
are Impaired under this Plan.

         Subclass 1J (SBLI): Allowed Secured Claims of SBLI under or evidenced
by the SBLI Prepetition Credit Agreements. Claims in Subclass 1J are not
Impaired under this Plan.

         Subclass 1K (USA Signs): Allowed Secured Claims of USA Signs under or
evidenced by the USA Signs Prepetition Credit Agreements. Claims in Subclass 1K
are not Impaired under this Plan.

         B.       CERTAIN PRIORITY UNSECURED CLAIMS (CLASS 2)

         Class 2: Allowed Priority Unsecured Claims of employees against any of
the Debtors that are specified as having priority in Bankruptcy Code Section
507(a)(3) or 507(a)(4), not to exceed $4,000 per individual. Such Claims include
certain Claims against any of the by their employees for unpaid prepetition
wages, salaries, or commissions. Claims in Class 2 are not Impaired under this
Plan.

         C.       UNSECURED CLAIMS WITHOUT PRIORITY (SUBCLASSES 3A-3C)

         Class 3 consists of Subclass 3A, Subclass 3AA, Subclass 3B, and
Subclass 3C, each of which is a separate subclass within Class 3, and each of
which is Impaired under this Plan. Each such separate subclass within Class 3
shall be deemed to be a separate Class for purposes of this Plan.

         Subclass 3A: Allowed Unsecured Claims of MRI Unsecured Creditors that
are not cured, paid, released, or waived pursuant to this Plan, assumed by any
of the Reorganized Debtors pursuant to this Plan or agreements incorporated in
this Plan, or classified in any other Class of Claims, including, without
limitation (i) Claims for goods sold and services rendered, (ii) Claims for
monies lent, (iii) Claims based upon guarantees of performance or payment of the
obligations or duties of any Person, (iv) Claims arising under or related to any
Environmental Laws, (v) Claims for contribution, reimbursement or indemnity,
(vi) Claims for fines, penalties, or assessments, (vii) Claims for tort
liability, and (viii) Claims arising from the rejection of executory contracts
and unexpired leases.



                                       18
<PAGE>   42
         Subclass 3AA: Allowed Unsecured Claims of MRI Subsidiary Unsecured
Creditors that are not cured, paid, released, or waived pursuant to this Plan,
assumed by any of the Reorganized Debtors pursuant to this Plan or agreements
incorporated in this Plan, or classified in any other Class of Claims,
including, without limitation (i) Claims for goods sold and services rendered,
(ii) Claims for monies lent, (iii) Claims based upon guarantees of performance
or payment of the obligations or duties of any Person, (iv) Claims arising under
or related to any Environmental Laws, (v) Claims for contribution, reimbursement
or indemnity, (vi) Claims for fines, penalties, or assessments, (vii) Claims for
tort liability, and (viii) Claims arising from the rejection of executory
contracts and unexpired leases.

         Subclass 3B: Allowed Unsecured Claims of Magic American Cafe Unsecured
Creditors that are not cured, paid, released, or waived pursuant to this Plan,
assumed by any of the Reorganized Debtors pursuant to this Plan or agreements
incorporated in this Plan, or classified in any other Class of Claims,
including, without limitation (i) Claims for goods sold and services rendered,
(ii) Claims for monies lent, (iii) Claims based upon guarantees of performance
or payment of the obligations or duties of any Person, (iv) Claims arising under
or related to any Environmental Laws, (v) Claims for contribution, reimbursement
or indemnity, (vi) Claims for fines, penalties, or assessments, (vii) Claims for
tort liability, and (viii) Claims arising from the rejection of executory
contracts and unexpired leases.

         Subclass 3C: Allowed Unsecured Claims of Shell Company Unsecured
Creditors that are not cured, paid, released, or waived pursuant to this Plan,
assumed by any of the Reorganized Debtors pursuant to this Plan or agreements
incorporated in this Plan, or classified in any other Class of Claims,
including, without limitation, (i) claims for goods sold and services rendered,
(ii) Claims for monies lent, (iii) Claims based upon guarantees of performance
or payment of the obligations or duties of any Person, (iv) Claims arising under
or related to any Environmental Laws, (v) Claims for contribution, reimbursement
or indemnity, (vi) Claims for fines, penalties, or assessments, (vii) Claims for
tort liability, and (viii) Claims arising from the rejection of executory
contracts and unexpired leases.

         D.       EQUITY INTERESTS AND CERTAIN CLAIMS RELATING THERETO; 
                  INTERCOMPANY AFFILIATE CLAIMS (CLASSES 4-8)

         Class 4: Equity Interests consisting of the Allowed Series A Preferred
Stock and Allowed Section 510(b) Claims with respect to the Series A Preferred
Stock.

         Class 5: Equity Interests consisting of the Allowed Five Percent
Cumulative Preferred Stock and Allowed Section 510(b) Claims with respect to the
Five Percent Cumulative Preferred Stock.

         Class 6: Equity Interests consisting of the Allowed Existing Common
Stock and Allowed Section 510(b) Claims with respect to the Existing Common
Stock.



                                       19
<PAGE>   43
         Class 7: All other Equity Interests not within Classes 4-6 or 8,
including, without limitation, Allowed Equity Interests consisting of Existing
Stock Options and all Allowed Claims against any of the Debtors arising from any
such Existing Stock Options, including, without limitation, all Section 510(b)
Claims with respect to such Equity Interests, and all Allowed Claims, if any,
arising from the rejection of agreements granting Existing Stock Options, or
rights to acquire any other type of Equity Interest, to the extent, if any, that
they constitute executory contracts.

         Class 8: All Equity Interests of MRI in the Subsidiaries.

                                      III.

                    TREATMENT OF CLAIMS AND EQUITY INTERESTS


         A.       UNCLASSIFIED CLAIMS

         1.       ALLOWED ADMINISTRATIVE CLAIMS

                  a. Professional Persons. All Allowed Administrative Claims of
         Professional Persons against the Debtors that have not been satisfied
         during the Reorganization Cases will receive, on account of and in full
         satisfaction of such Allowed Administrative Claim, Cash equal to the
         Allowed amount of such Claim on the latest of (i) the Effective Date,
         (ii) the date of entry an Order of the Bankruptcy Court Allowing the
         Administrative Claim, or (iii) such other date as may be agreed between
         the Reorganized Debtors and the Holders of such Claims.

                  b.       Other General Administrative Claims.

                           (1)      Generally.

                           Subject to certain provisions contained in this Plan,
                  and unless any holder thereof agrees or has agreed to
                  different or less favorable treatment, each holder of an
                  Allowed Administrative Claim against MRI and the Subsidiaries
                  that has not been satisfied during the Reorganization Cases
                  (other than any such Claims which are restructured as
                  specified elsewhere in this Plan) will receive, on account of
                  and in full satisfaction of such Allowed Administrative Claim,
                  Cash equal to the Allowed amount of such Claim on the latest
                  of (i) the Effective Date, (ii) if disputed, upon entry an
                  Order of the Bankruptcy Court Allowing the Administrative
                  Claim, and (iii) the date on which the distribution to the
                  holder of the Allowed Administrative Claim would have been due
                  and payable in the ordinary course of business or under the
                  terms of any agreement giving rise to the Allowed
                  Administrative Claim.



                                       20
<PAGE>   44
                           (2)      Right to Elect to Receive New Common Stock.




                                       21
<PAGE>   45
                           In lieu of receiving Cash on account of its Allowed
                  Administrative Claim, if agreed to by Reorganized MRI in its
                  sole and absolute discretion, each holder of an Allowed
                  Administrative Claim against MRI or the Subsidiaries may elect
                  in writing on or before the Effective Date (or if disputed or
                  not yet Allowed, within three business days after such
                  Administrative Claim becomes Allowed) to exchange each $1.65
                  of its Allowed Administrative Claim for one share of New
                  Common Stock, subject to the fractional shares provisions of
                  this Plan. The New Common Stock to be issued as a result of
                  such exchange election shall be issued by Reorganized MRI and
                  delivered to the Disbursing Agent for distribution to each
                  such holder of an Allowed Administrative Claim so electing as
                  soon as practicable after the Effective Date.

                           (3)   Shell Company and American Cafe Administrative 
                                 Claims

                           No payments are contemplated to be made under this
                  Plan on account of Administrative Claims against the Shell
                  Companies, Magic American Cafe, Inc. or 10 Columbia Corporate
                  Center, Inc. that have not been paid previously.

                  c. Postpetition Series A Notes. Each Holder of a Postpetition
         Series A Note shall exchange each $0.75 of its Allowed Claim for one
         share of New Common Stock, subject to the fractional shares provisions
         of this Plan. The New Common Stock issued to such Holders will be
         subject to agreements restricting such Holders from selling or
         transferring 50% of such stock during the 12 months following the
         Effective Date. These restrictions on transfer may be waived or
         released by Reorganized MRI at any time, in its sole and absolute
         discretion. The New Common Stock to be issued to such Holders shall be
         issued by Reorganized MRI and delivered to the Disbursing Agent for
         distribution to each such holder as soon as practicable after the
         Effective Date.

                  d. Postpetition Series B Notes. The Holder of the Postpetition
         Series B Notes shall receive one share of New Preferred Stock issued by
         MRI for each $75.00 in Allowed Claim. The New Preferred Stock shall
         have the terms set forth in Exhibit 1.A--3. In addition, the Holder
         shall receive 1.5 million New $2.00 Warrants, and 1.5 million New $5.00
         Warrants.

                  e. Reorganization Bonus Due Rye Management. Any reorganization
         bonus due Rye Management, Inc. ("Rye") under the Consulting Agreement
         between Rye and the Debtors shall be deemed an Administrative Claim and
         shall be satisfied by the issuance to Rye, subject to the fractional
         shares provisions of this Plan, of shares of New Common Stock after the
         Effective Date, based on the sustained trading prices achieved for the
         New Common Stock over the three year period following the Effective
         Date. The reorganization bonus shall be calculated based upon the
         highest average trading price achieved by the New Common Stock over the
         course of ten consecutive trading days during three years following


                                       22
<PAGE>   46
         the Effective Date (with average share volumes traded per day in excess
         of 10,000). Such shares shall be issued to Rye within three business
         days following the end of such period.

                  f. Finder's Fee with Respect to Postpetition Series B Notes.
         The 10% finder's fee payable for the placement of the Postpetition
         Series B Notes shall be satisfied in full by the issuance of New Common
         Stock.


         2.       TAX CLAIMS

         Each holder of an Allowed Priority Tax Claim or Allowed Secured Tax
Claim against MRI or the Subsidiaries (collectively, "Allowed Tax Claims") shall
receive deferred Cash payments in equal Periodic Installments over a period
ending six years after the date of assessment in an aggregate amount equal to
the amount of such Allowed Tax Claim, plus interest from the Effective Date on
the unpaid portion thereof, without penalty of any kind, at the Applicable Tax
Interest Rate. Unless otherwise agreed by the holder of an Allowed Tax Claim,
the first such installment payment on each Allowed Tax Claim shall be made one
year following the later of (i) Effective Date, and (ii) the date the Tax Claim
is Allowed. Each installment shall include simple interest on the unpaid balance
of the Allowed Tax Claim, without penalty of any kind.

         Notwithstanding the foregoing, Reorganized MRI shall have the right to
pay any Allowed Tax Claim, or any remaining unpaid balance of such Claim, in
full, any time on or after the Effective Date, with interest to the date of
payment but without premium or penalty. Further, no holder of an Allowed Tax
Claim will be entitled to any payments on account of any postpetition,
pre-Effective Date interest accrued on an Allowed Tax Claim or on account of any
penalty arising with respect to, or in connection with, an Allowed Tax Claim. In
addition, as of the Effective Date, all Liens securing said Allowed Tax Claims
shall thereupon be released and extinguished and all property of any Reorganized
Debtor that secures the Allowed Tax Claims shall thereupon be free and clear of
any Liens, Claims, and encumbrances of the holder of such Allowed Tax Claims.
Any such Claim or demand for any such accrued interest or penalty, and all Liens
created in respect of such Allowed Tax Claims, shall be discharged by virtue of
Confirmation of this Plan and Bankruptcy Code Section 1141(d)(1), and the holder
of an Allowed Tax Claim shall not assess or attempt to collect such accrued
interest or penalty from any of the Reorganized Debtors (or their properties or
subsidiaries) or assert any Lien rights against any of the Reorganized Debtors
(or their properties or subsidiaries).

         Priority Tax Claims and Secured Tax Claims against Shell Companies and
against Magic American Cafe, Inc. and 10 Columbia Corporate Center, Inc. shall
receive no distribution under this Plan.



                                       23
<PAGE>   47
         B.       TREATMENT OF CLASSIFIED CLAIMS

         The following sets forth the treatment of classified claims under this
Plan:

         1.       UNIMPAIRED CLAIMS

                  a. TREATMENT OF ALLOWED PRIORITY UNSECURED CLAIMS OF EMPLOYEES
                    (CLASS 2).

         Claims in Class 2 are not Impaired under this Plan. Except as may be
otherwise agreed with Reorganized MRI, the holder of an Allowed Class 2 Claim
will be paid in Cash by Reorganized MRI on the later of (i) the Effective Date,
(ii) as soon as practicable after such Claim is Allowed by Final Order, or (iii)
the date on which such Allowed Claim is due and payable in the ordinary course
of business or under the terms of any agreement giving rise to such Allowed
Claim.

         2.       IMPAIRED CLAIMS

         The following claims are Impaired under this Plan:

                  a.       TREATMENT OF ALLOWED SECURED CLAIMS

                           (1)   ALLOWED SECURED CLAIMS IN SUBCLASS 1A

         Claims in Subclass 1A are Impaired under this Plan. Holders of Allowed
Secured Claims in Subclass 1A shall receive no distributions from any of the
Reorganized Debtors or their Affiliates and all such Claims and all related
Liens, mortgages, deeds of trust, encumbrances, charges, and Claims against the
Reorganized Debtors (or their Affiliates) or against any of their properties by
holders of any such Claims shall be fully and completely discharged, released,
and extinguished.

                           (2)  ALLOWED SECURED CLAIMS IN SUBCLASSES 1B, 1C, 
                                AND 1D

         Claims in each of Subclasses 1B, 1C, and 1D are Impaired under this
Plan.

         Subject to the third following paragraph, Allowed Secured Claims in
Subclasses 1B, 1C, and 1D shall receive one share of New Preferred Stock, in the
case of Claims of each such Class issued by the respective Issuing Subsidiary in
respect of the Claims of such Class, for every $75 of Allowed Secured Claim. The
New Preferred Stock to be issued shall be issued by the respective Issuing
Subsidiaries as soon as practicable after the Effective Date.

         In addition, Holders of Allowed Secured Claims treated in Subclasses
1B, 1C, and 1D will be paid, as soon as practicable after the Effective Date,
simple interest accruing on such Claims from the Petition Date to the Effective
Date, at the lesser of (i) the rate of non-default interest payable under the
Prepetition Credit Documents associated with such claims, or (ii) the Maximum


                                       24
<PAGE>   48
Rate, such payment to be effected by issuance of additional shares of New
Preferred Stock at the rate of one share for each $75 of such interest due.

         Upon the Effective Date, except as expressly provided in the following
paragraph, all Liens securing the obligations under the Allowed Secured Claims
in Subclasses 1B, 1C and 1D shall be released and extinguished and all property
of any of the Debtors that secures any such Secured Claim shall thereupon be
free and clear of any Liens, Claims, and encumbrances of the Holder of said
Secured Claims.


                           (3)      ALLOWED SECURED CLAIMS IN SUBCLASS 1G

         Claims in Subclass 1G are Impaired under this Plan.

         Unless otherwise agreed to between Reorganized MRI and the Holder of
the Subclass 1G claim or as otherwise may be provided in the Monolith
Settlement, the Monolith Collateral shall be liquidated and the proceeds, after
payment of the reasonable administrative fees of liquidation, turned over to
Monolith.

                           (4)      ALLOWED SECURED CLAIMS IN SUBCLASSES 1J

         Claims in Subclass 1J are not Impaired under this Plan.

         On the Effective Date, the indebtedness underlying the Secured Claim
treated under this Subclass shall be reinstated on its terms, all arrearages (at
the non-default rate) shall be paid and defaults (other than any default of the
kind specified in Bankruptcy Code Section 365(b)(2)) under the applicable
Prepetition Credit Agreements shall be cured by Reorganized MRI or the
applicable Reorganized Debtor, and the holder of each such Secured Claim shall
retain all legal, equitable, and contractual rights and Liens to which such
claim entitles such Holder.

                           (5)      ALLOWED SECURED CLAIMS IN SUBCLASSES 1E
                                    THROUGH 1I

         Claims in Subclasses 1E through 1I are Impaired under this Plan.

         The Collateral securing each of these Secured Claims shall, at the
election of the Holders of these Claims, (1) be delivered to the Claimants on
the Effective Date, or (2) be liquidated by Reorganized MRI and the proceeds,
after payment of the reasonable administrative fees of liquidation, turned over
to the Claimants.



                                       25
<PAGE>   49
                           (6)      ALLOWED SECURED CLAIM IN SUBCLASSES 1K

         This Secured Claim has been paid in full during the pendency of the
Reorganization Cases. The Holder of this Claim shall receive no distribution
under this Plan, and all property of any of the Debtors that previously secured
this Secured Claim shall vest in the applicable Reorganized Debtors free and
clear of any Liens, Claims, and encumbrances of the Holder of said Secured
Claim.

                  b.       TREATMENT OF ALLOWED UNSECURED CLAIMS (SUBCLASSES 3A
                           THROUGH 3C)

         Class 3 consists of Subclass 3A (Allowed Unsecured Claims of MRI
Unsecured Creditors), Subclass 3AA (Allowed Unsecured Claims of MRI Subsidiary
Unsecured Creditors), Subclass 3B (Allowed Unsecured Claims of Magic American
Cafe Creditors), and Subclass 3C (Allowed Unsecured Claims of Shell Company
Creditors), each of which is a separate subclass within Class 3. Each such
separate subclass within Class 3 shall be deemed to be a separate Class for
purposes of this Plan.

         If the holders of Allowed Claims in Subclass 3A do not accept or are
deemed to have rejected this Plan, then the Debtors shall seek confirmation of
this Plan with regard to Subclass 3A under Bankruptcy Code Section 1129(b).

         If the holders of Allowed Claims in Subclass 3AA do not accept or are
deemed to have rejected this Plan, then the Debtors shall seek confirmation of
this Plan with regard to Subclass 3AA under Bankruptcy Code Section 1129(b).

                           (1)      SUBCLASS 3A (ALLOWED UNSECURED CLAIMS OF
                                    MRI/RED ROBIN UNSECURED CREDITORS)

         Holders of Allowed Claims in Subclass 3A shall receive their Pro Rata
share of the MRI Share Allocation of New Common Stock, subject to the fractional
shares provisions of this Plan. The New Common Stock to be issued to such
Holders shall be issued by Reorganized MRI and delivered to the Disbursing Agent
for distribution to each such holder as soon as practicable after the Effective
Date.

                           (2)      SUBCLASS 3AA (ALLOWED UNSECURED CLAIMS OF
                                    MRI SUBSIDIARY UNSECURED CREDITORS)

         Holders of Allowed Claims in Subclass 3AA shall receive one share of
New Common Stock for each $10.00 in Allowed Unsecured Claims, subject to the
fractional shares provisions of this Plan; provided, however, that no more than
50,000 shares of New Common Stock, in the aggregate, shall be distributed to
such Holders. The New Common Stock to be issued to such Holders shall be issued
by Reorganized MRI and delivered to the Disbursing Agent for distribution to
each such holder as soon as practicable after the Effective Date.



                                       26
<PAGE>   50
                           (3)      SUBCLASS 3B (ALLOWED UNSECURED CLAIMS OF
                                    MAGIC AMERICAN CAFE UNSECURED CREDITORS).

         Holders of Allowed Claims in Subclass 3B shall receive no distribution
under this Plan.

                           (4)      SUBCLASS 3C (ALLOWED UNSECURED CLAIMS OF
                                    SHELL COMPANY CREDITORS)

         Holders of Allowed Claims in Subclass 3C shall receive no distribution
under this Plan.

                  c.       TREATMENT OF EQUITY INTERESTS AND CERTAIN CLAIMS 
                           RELATED THERETO (CLASSES 4-8)

                           (1)      ALLOWED SERIES A PREFERRED STOCK EQUITY
                                    INTERESTS AND CERTAIN CLAIMS RELATED THERETO
                                    (CLASS 4)

         Allowed Equity Interests and Claims in Class 4 are Impaired under this
Plan.

         Holders of Allowed Claims and Equity Interests in Class 4 shall receive
or retain no property or distributions on account of such Allowed Claims or
Allowed Equity Interests. The Debtors are not soliciting the votes of the Class
4 holders and shall seek confirmation of this Plan with respect to Class 4 under
Bankruptcy Code Section 1129(b).

                           (2)      ALLOWED FIVE PERCENT CUMULATIVE PREFERRED
                                    STOCK EQUITY INTERESTS AND CERTAIN CLAIMS
                                    RELATED THERETO (CLASS 5)

         Allowed Equity Interests and Claims in Class 5 are Impaired under this
Plan.

         Holders of Allowed Claims and Equity Interests in Class 5 shall receive
or retain no property or distributions on account of such Allowed Claims or
Allowed Equity Interests. The Debtors are not soliciting the votes of the Class
5 holders and shall seek confirmation of this Plan with respect to Class 5 under
Bankruptcy Code Section 1129(b).


                           (3)      ALLOWED EXISTING COMMON STOCK EQUITY
                                    INTERESTS AND CERTAIN CLAIMS RELATED THERETO
                                    (CLASS 6)

         Allowed Equity Interests and Claims in Class 6 are Impaired under this
Plan.

         Holders of Allowed Claims and Equity Interests in Class 6 shall receive
or retain no property or distributions on account of such Allowed Claims or
Allowed Equity Interests. The Debtors are not soliciting the votes of the Class
6 holders and shall seek confirmation of this Plan with respect to Class 6 under
Bankruptcy Code Section 1129(b).


                                       27
<PAGE>   51
                           (4)      OTHER ALLOWED EQUITY INTERESTS AND CERTAIN
                                    OTHER ALLOWED CLAIMS RELATED THERETO (CLASS
                                    7)

         Allowed Equity Interests and Claims in Class 7 are Impaired under this
Plan.

         Holders of Allowed Claims and Equity Interests in Class 7 shall receive
or retain no property or distributions on account of such Allowed Claims or
Allowed Equity Interests. The Debtors are not soliciting the votes of the Class
7 holders and shall seek confirmation of this Plan with respect to Class 7 under
Bankruptcy Code Section 1129(b).

                           (5)      ALLOWED EQUITY INTERESTS OF MRI IN CERTAIN
                                    OPERATING SUBSIDIARIES (CLASS 8)

         Allowed Equity Interests in Class 8 are not Impaired under this Plan.
Holders of Allowed Equity Interests in Class 8 shall retain all their Equity
Interests the following Reorganized Debtors: Magic Restaurant at Secaucus, Inc.;
Magic Restaurant at Yonkers, Corp.; and Magic Restaurants at Kings Plaza, Inc.


                                       IV.

              TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES

         A.       ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES

         1.       ASSUMPTIONS GENERALLY

         Except as otherwise provided in this Plan, in any Order of the
Bankruptcy Court, or in any contract, instrument, or other agreement or document
incorporated into this Plan or entered into in connection with this Plan or the
Reorganization Cases, pursuant to Bankruptcy Code Section 365, on the Effective
Date each of the executory contracts and unexpired leases listed on the Schedule
of Assumed Contracts attached as Exhibit IV.A hereto and incorporated herein by
this reference shall be assumed and, if applicable, assigned on the terms and
conditions as set forth in said Exhibit IV.A, subject to the same rights as the
Debtors or the Reorganized Debtors held or hold at, on, or after the Petition
Date to modify and/or terminate such agreements under applicable nonbankruptcy
law. Each contract and lease listed on said Exhibit IV.A shall be assumed only
to the extent, if any, that it constitutes an executory contract or unexpired
lease, and the listing of such contract or lease on said Exhibit IV.A shall not
constitute an admission by the Debtors or the Reorganized Debtors that such
contract or lease is an executory contract or unexpired lease or that any of the
Debtors or the Reorganized Debtors has any liability thereunder. Debtors shall
provide notice of any amendment to Exhibit IV.A hereto to the parties to the
executory contracts or unexpired leases affected thereby and to the parties on
the then applicable limited notice service list in the Reorganization Cases.



                                       28
<PAGE>   52
         Each executory contract and unexpired lease assumed pursuant to this
Article IV by any of the Reorganized Debtors shall be fully enforceable by such
Reorganized Debtor in accordance with its terms, except as modified by the
provisions of this Plan, any Order of the Bankruptcy Court authorizing and
providing for its assumption, or applicable federal law.

         2. APPROVAL OF ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES

         Except as otherwise provided in this Plan, the Confirmation Order shall
constitute an order of the Bankruptcy Court, pursuant to Bankruptcy Code Section
365, approving the assumption as of the Effective Date of the executory
contracts and unexpired leases listed on Exhibit IV.A hereto. To the extent that
assumption of an executory contract or unexpired lease on Exhibit IV.A is
conditioned on the modifications specified in said Exhibit IV.A, the
Confirmation Order shall constitute an Order of the Bankruptcy Court pursuant to
Bankruptcy Code Section 365 approving the assumption as of the Effective Date of
said executory contract or unexpired lease as modified pursuant to the terms
specified in said Exhibit IV.A.

         3. OBJECTIONS TO ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES

         TO THE EXTENT ANY PARTY TO AN EXECUTORY CONTRACT OR UNEXPIRED LEASE
IDENTIFIED FOR ASSUMPTION ASSERTS ARREARS OR DAMAGES PURSUANT TO BANKRUPTCY CODE
SECTION 365(b)(1) IN AN AMOUNT DIFFERENT FROM THE AMOUNT SET FORTH ON EXHIBIT
IV.A HERETO, OR HAS ANY OBJECTION TO THE PROPOSED ADEQUATE ASSURANCE OF FUTURE
PERFORMANCE OR THE PROPOSED ASSUMPTION AND CURE REGARDING THE EXECUTORY
CONTRACTS OR UNEXPIRED LEASES ON THE TERMS AND CONDITIONS PROVIDED FOR IN THIS
PLAN, ALL SUCH ASSERTED ARREARS AND ANY OTHER OBJECTIONS SHALL BE FILED AND
SERVED WITHIN THE SAME DEADLINE AND IN THE SAME MANNER ESTABLISHED FOR FILING
OBJECTIONS TO CONFIRMATION.

         Failure to assert any arrearage different in amount from the applicable
amount set forth on Exhibit IV.A hereto, or to File an objection within the time
period set forth above, shall constitute consent to the assumption and cure on
the terms provided for in this Plan and said Exhibit IV.A, including
acknowledgment that (i) the proposed assumption provides adequate assurance of
future performance, (ii) the amount identified for "cure" is the amount
necessary to compensate for any and all outstanding defaults under the
respective executory contract or unexpired lease to be assumed, (iii) no other
defaults exist under such executory contract or unexpired lease, and (iv) to the
extent Exhibit IV.A calls for assumption of an executory contract or unexpired
lease as modified, the party or parties thereto have no objection and
irrevocably consent to the assumption of said executory contract or unexpired
lease as so modified.

         If an objection is Filed to assumption based upon lack of adequate
assurance of future performance or otherwise, and the Bankruptcy Court
determines that the applicable Reorganized


                                       29
<PAGE>   53
Debtors shall not assume the executory contract or unexpired lease, then the
executory contract or unexpired lease in question shall automatically thereupon
be deemed to have been included on Exhibit IV.B hereto and rejected pursuant to
Section IV.B hereof.

         4. PAYMENTS RELATED TO ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED
            LEASES

         Any monetary defaults under each executory contract and unexpired lease
to be assumed under this Plan shall be satisfied, pursuant to Bankruptcy Code
Section 365(b)(1), by payment of the default amount in Cash within 60 days
following the Effective Date, unless otherwise provided on Exhibit IV.A or
otherwise agreed to by the parties to such executory contract or unexpired
lease. In the event of a dispute regarding (i) the amount of any cure payment,
(ii) the ability of the Reorganized Debtors to provide adequate assurance of
future performance under the contract or lease to be assumed, or (iii) any other
matter pertaining to assumption, the cure payments required by Bankruptcy Code
Section 365(b)(1) shall be made following entry of a Final Order of the
Bankruptcy Court resolving the dispute and approving assumption.

         B. EXECUTORY CONTRACTS AND UNEXPIRED LEASES TO BE REJECTED

         1. GENERALLY

         As of the Confirmation Date, each executory contract or unexpired lease
of Debtors that has not been previously assumed pursuant to Order of the
Bankruptcy Court and is not assumed under Section IV.A of this Plan, including,
without limitation, the executory contracts and unexpired leases listed on the
Schedule of Rejected Contracts attached as Exhibit IV.B to this Plan, all
agreements pursuant to which Existing Stock Options were granted, and all
Existing Stock Options, and all Equity Interests or rights to acquire any Equity
Interests, shall be rejected to the extent, if any, that any of the foregoing
constitute executory contracts or unexpired leases, and without conceding that
they constitute executory contracts or unexpired leases or that any of the
Debtors has any liability thereunder.

         The Confirmation Order shall constitute an Order of the Bankruptcy
Court approving such rejections, pursuant to Bankruptcy Code Section 365, deemed
entered as of the Effective Date. Any party to an executory contract or
unexpired lease identified for rejection in this Plan shall, within the same
deadline and in the same manner established for Filing objections to
Confirmation, File any objection to such rejection. Failure to File any such
objection within the time period set forth above shall constitute consent to the
rejection. Debtors shall provide notice of any amendment to Exhibit IV.B hereto
to the parties to the executory contracts or unexpired leases affected thereby
and to the parties on the then-applicable limited notice service list in the
Reorganization Cases.



                                       30
<PAGE>   54
         2.       RED ROBIN

         In accordance with the terms of the Red Robin Settlement, all Red Robin
Franchise Agreements not already heretofore terminated or deemed rejected shall
be deemed rejected, as of the Effective Date. Upon and after the Effective Date
the Red Robin Settlement shall be fully implemented and binding, on its terms,
on the Reorganized Debtors.


         C.       BAR DATE FOR REJECTION DAMAGES

         If the rejection of an executory contract or unexpired lease pursuant
to Section IV.B of this Plan gives rise to a Claim by the other party or parties
to such contract or lease, such Claim, to the extent that it is timely Filed and
is an Allowed Claim, shall be classified in Class 3 as applicable; provided,
however, that the Unsecured Claim arising from the rejection shall be forever
barred and shall not be enforceable against the Debtors, the Reorganized
Debtors, their successors or properties, unless a proof of Claim is Filed and
served on the applicable Reorganized Debtor against whom such Claim is asserted
within thirty (30) days after the date of notice of the entry of an Order of the
Bankruptcy Court rejecting the executory contract or unexpired lease, including,
if applicable, the Confirmation Order.

                                       V.

               MEANS FOR EXECUTION AND IMPLEMENTATION OF THE PLAN

         A.       IMPLEMENTATION OF THE RED HEAD PLAN

         On, prior to, and after the Effective Date, MRI is expressly authorized
to take all actions it deems appropriate to obtain confirmation and
implementation of the Red Head Plan, to acquire the stock or assets of Red One
or Red Three, and/or to succeed to all rights and interests of any of the Red
Head Debtors to the Concept, without further corporate action by any of the
Reorganized Debtors of any type or any further approval of the Bankruptcy Court.
In this regard, MRI is expressly authorized hereunder to, as it deems
appropriate:

         1. Obtain confirmation of the Red Head Plan, and acquire all of the
outstanding Red One Common Stock and Red Three Common Stock pursuant thereto;

         2. Purchase the assets of Red One or Red Three;

         3. Assume and pay or discharge, or cause to be discharged, all
obligations of MRI, Red One, or Red Three under the Red Head Plan; and/or

         4. Purchase or acquire all rights and interests of Gallagher to the
Concept.



                                       31
<PAGE>   55
         B.       CORPORATE ACTION

         1. The entry of the Confirmation Order shall constitute an Order of the
Bankruptcy Court authorizing and approving of the Reorganized Debtors, through
their present Chief Executive Officer (and without the need for any further
action by the Bankruptcy Court or any officers or directors of the Reorganized
Debtors), taking all actions necessary or appropriate to complete, enter into,
implement, and consummate the contracts, instruments, and other agreements or
documents created in connection with this Plan or to be executed and delivered
pursuant to this Plan before, on, or after the Effective Date, including,
without limitation, effecting any change of name of any of the Reorganized
Debtors, adopting the Reorganized MRI Restated Certificate of Incorporation and
the Reorganized MRI Restated Bylaws, or the applicable Reorganized Other Debtor
Restated Certificate of Incorporation and the applicable Reorganized Other
Debtor Bylaws, as the case may be, incorporating and adopting organizational
documents for Finance, adopting the Reorganized MRI Incentive Plan, selecting
the initial directors and officers for the Reorganized Debtors, removing the
existing directors and officers of the Reorganized Debtors, distributing Cash
and issuing and distributing New Common Stock, and implementing such other
matters provided for under or contemplated by this Plan involving the corporate
affairs or structure of the Reorganized Debtors and the corporate action to be
taken by or required by the Reorganized Debtors. Entry of the Confirmation Order
further constitutes an Order of the Bankruptcy Court authorizing and granting
attorney-in-fact powers to the present Chief Executive Officer of the Debtors to
file or cause to be filed such termination statements, releases, or such other
documentation with any applicable public agency deemed necessary in their sole
discretion to effect releases as authorized by this Plan of Liens, mortgages,
claims, and encumbrances against any of the Reorganized Debtors (or their
Affiliates) and their properties.

         2. On the Effective Date, the Reorganized Debtors shall adopt the
Reorganized MRI Restated Certificate of Incorporation, the Reorganized Other
Debtor Certificate of Incorporation, the Reorganized MRI Restated Bylaws and the
Reorganized Other Debtor Restated Bylaws, which shall contain provisions
consistent with Bankruptcy Code provisions prohibiting the issuance of nonvoting
equity securities. Following the Effective Date, each of the Reorganized Debtors
shall retain the right to merge, consolidate, dissolve, or take any other
corporate action in accordance with applicable nonbankruptcy law, including
amending their organic documents pursuant to applicable nonbankruptcy law to
provide for the issuance of nonvoting equity securities.

         3. Each restaurant operation and the associated assets of each of the
Debtors shall be held, on and after the Effective Date, in a subsidiary of
Reorganized MRI formed or continued to hold the assets for that restaurant,
including the Reorganized Subsidiaries. To the extent the Concept or any lease,
furniture, fixtures, equipment, inventory, license (including liquor licenses)
or other assets, tangible or intangible, or rights used in an MRI restaurant are
not presently held in the name of the particular subsidiary, those assets, or
the right to use those assets, will, on the Effective Date, be assigned by MRI
(or the other applicable Debtor entity) into the applicable Reorganized
Subsidiary which will operate that restaurant. All such assignments shall be
made without further action by the officers or board of directors of the
Reorganized Debtors, or further


                                       32
<PAGE>   56
approval of the Bankruptcy Court, and shall be made irrespective of any legal or
contractual restriction on assignment or transfer pertaining to any such assets,
consistent with Section 365(f) of the Bankruptcy Code.

         C.       FUNDING OF THE PLAN

         Cash payments required by this Plan shall be provided from the funds of
the Estate, from funds generated by operation of the Debtors, and the
Reorganized Debtors's business, and from (i) funds borrowed through the issuance
on or prior to the Effective Date of Postpetition Senior Secured Notes, (ii)
funds raised from a private placement of the New Common Stock under this Plan,
or (iii) funds received from the exercise of New Warrants.

         D.       MANAGEMENT OF THE REORGANIZED DEBTORS

         The Disclosure Statement identifies the individuals who are
contemplated to serve initially as the directors and the executive officers of
the Reorganized Debtors commencing on the Effective Date. The listing set forth
in the Disclosure Statement may be modified at or before the Confirmation
Hearing, on such notice to Creditors as the Bankruptcy court may direct. The
directors and officers of the Reorganized Debtors shall be authorized to assume
their offices on or before the Effective Date and shall be authorized to
continue to serve in such capacities thereafter pending further action of the
Board of Directors or stockholders of the Reorganized Debtors in accordance with
applicable state law and the Reorganized Debtors' then-in effect certificates of
incorporation and bylaws.

         E.       EXEMPTION FROM CERTAIN TRANSFER TAXES

         Pursuant to Bankruptcy Code Section 1146(c), the issuance, transfer, or
exchange of New Securities; the creation of any mortgage, deed of trust or other
security interest; and the making or delivery of any deed or other instrument of
transfer under, in furtherance of, or in connection with, this Plan (including
any deeds, bills of sale or assignments executed in connection with this Plan,
agreements entered into in connection therewith, or the Confirmation Order)
shall not be subject to any stamp tax, real estate transfer tax, or similar tax,
and the Confirmation Order shall constitute an Order of the Bankruptcy Court to
that effect.

         F.       CANCELLATION AND SURRENDER OF INSTRUMENTS, SECURITIES, AND
                  OTHER DOCUMENTATION

         On the Effective Date, except as otherwise expressly provided in this
Plan through specific identification and designation, all instruments,
securities, and other documentation or agreements representing or giving rise to
Claims against or Equity Interests in the MRI and the Subsidiaries and any
rights to acquire Equity Interests in MRI and the Subsidiaries shall be deemed
canceled and of no further force or effect, without any further action on the
part of the Bankruptcy Court or any Person. The holders of such canceled
instruments, securities, and other documentation shall have


                                       33
<PAGE>   57
no rights arising from or relating to such instruments, securities, or other
documentation or the cancellation thereof, except the rights expressly provided
pursuant to this Plan through specific identification and designation.

         Except to the extent, if any, otherwise provided in this Plan,
agreements entered into in connection therewith, and the Confirmation Order, as
a condition to participation under this Plan a holder of a note that desires to
receive property to be distributed on account of an Allowed Claim based on such
note shall surrender the note to the Disbursing Agent.

         Entry of the Confirmation Order shall constitute an Order of the
Bankruptcy Court approving the foregoing provisions of this Section F.

         G.       APPLICABILITY OF BANKRUPTCY CODE SECTIONS 1125 AND 1145 TO NEW
                  SECURITIES AND REPLACEMENT NOTES ISSUED UNDER THIS PLAN

         The protection afforded by Bankruptcy Code Section 1125 with regard to
the solicitation of acceptances or rejections of this Plan and with regard to
the offer, issuance, sale, or purchase of the replacement notes, Postpetition
Senior Secured Notes and the New Securities issued and distributed to holders of
Claims and Administrative Claims under or in connection with this Plan and the
Confirmation Order, shall apply to the Debtors and the Reorganized Debtors and
their officers, directors, employees, attorneys and agents. The entry of the
Confirmation Order shall constitute the determination by the Bankruptcy Court
that the Reorganized Debtors, the Debtors, and all of their respective officers,
directors, partners, employees, members, attorneys or agents, and each
Professional Person, attorney, accountant, or other professional employed by any
of them, shall have acted in good faith and in compliance with the applicable
provisions of the Bankruptcy Code pursuant to Section 1125 and the federal
securities laws. In addition, entry of the Confirmation Order shall constitute
an Order of the Bankruptcy Court that the exemption from the requirements of
Section 5 of the Securities Act and any state or local law requiring
registration for the offer or sale of a security provided for in Bankruptcy Code
Section 1145 shall apply to the New Securities (including any New Common Stock
issued as a result of exercise of New Warrants) to be issued under this Plan.

         H.       DISCHARGE AND INJUNCTION

         Entry of the Confirmation Order shall constitute an Order of the
Bankruptcy Court that, except as otherwise provided in this Plan or in
agreements or Orders entered in connection therewith, on and after the Effective
Date,

                  a. the rights afforded in this Plan, and the treatment of all
         Claims and Equity Interests thereunder, (i) shall be in exchange for,
         and in complete satisfaction, discharge, and release of all Claims
         (including without limitation, all Administrative Claims, Secured
         Claims, Priority Tax Claims, other Priority Claims, and Unsecured
         Claims (including any interest accrued on such Claims from and after
         the applicable Petition Date)), against MRI,


                                       34
<PAGE>   58
         the Subsidiaries, and the Reorganized Debtors, or any of their assets
         or properties and any liability thereunder, and (ii) shall terminate
         all Equity Interests in MRI of any nature whatsoever;

                  b. all substantive rights or obligations of MRI under any
         Equity Interests shall be terminated, and MRI and the Subsidiaries
         shall be deemed discharged and released to the fullest extent permitted
         by Bankruptcy Code Section 1141 from all Claims or Equity Interests
         that arose prior to the Effective Date against them, their property or
         assets (including without limitation, all Administrative Claims,
         Intercompany Claims, Secured Claims, Priority Tax Claims, other
         Priority Claims, and Unsecured Claims (including any interest accrued
         on such Claims from and after the applicable Petition Date)), and all
         debts of the kind specified in Bankruptcy Code Sections 502(g), 502(h),
         or 502(i) of the Bankruptcy Code. This discharge and release shall be
         effective in each case whether or not: (i) a proof of Claim or proof of
         interest based on such Claim or Equity Interest is Filed or deemed
         Filed pursuant to Bankruptcy Code Section 501, (ii) a Claim or Equity
         Interest is Allowed pursuant to the Bankruptcy Code, or (iii) the
         holder of a Claim or Equity Interest has accepted this Plan;

                  c. all Persons and Governmental Units shall be permanently
         enjoined by Bankruptcy Code Section 524 from asserting against the
         Reorganized Debtors, their successors, or their assets or properties,
         any other or further Claims or Equity Interests based upon any act or
         omission, transaction, or other activity of any kind or nature that
         occurred prior to the Effective Date. The discharge shall void any
         judgment against any of MRI, the Subsidiaries, or the Reorganized
         Debtors any time obtained to the extent that it relates to a Claim or
         Equity Interest that has been discharged or terminated;

                  d. all Persons and Governmental Units who have held, currently
         hold, or may hold a Claim or Equity Interest against MRI or the
         Subsidiaries, discharged or terminated pursuant to the terms of this
         Plan shall be permanently enjoined by Bankruptcy Code Section 524 from
         taking any of the following actions on account of any such discharged
         Claim or terminated Equity Interest: (i) commencing or continuing in
         any manner any action or other proceeding against any of MRI, the
         Subsidiaries, or the Reorganized Debtors, their successors, assets, or
         properties; (ii) enforcing, attaching, collecting, or recovering in any
         manner any judgment, award, decree, or order against any of MRI, the
         Subsidiaries, or the Reorganized Debtors, their successors, assets, or
         properties; (iii) creating, perfecting, or enforcing any Lien or
         encumbrance against any of MRI, the Subsidiaries, or the Reorganized
         Debtors, their successors, assets, or properties; (iv) asserting any
         setoff, right of subrogation, or recoupment of any kind against any
         obligation due to any of MRI, the Subsidiaries, or the Reorganized
         Debtors, their successors, assets, or properties; and (v) commencing or
         continuing any action, in any manner or place, that does not comply
         with or is inconsistent with the provisions of this Plan or the
         Confirmation Order. Any Person or Governmental Unit violating such
         injunction may be liable for actual damages, including costs and
         attorneys' fees and, in appropriate circumstances, punitive damages;
         and


                                       35
<PAGE>   59
                  e. all Persons and Governmental Units who have held, currently
         hold, or may hold a Claim or Equity Interest discharged or terminated
         pursuant to the terms of this Plan shall be permanently enjoined by
         Bankruptcy Code Section 524 from commencing or continuing in any manner
         any action or other proceeding against any party on account of a Claim
         or cause of action that was property of the Estate, including, without
         limitation, any derivative Claims capable of being brought on behalf of
         any of MRI, the Subsidiaries, or the Reorganized Debtors, and all such
         Claims and causes of action shall remain exclusively vested in the
         Reorganized Debtors to the maximum extent such Claims and causes of
         action were vested in any of MRI or the Subsidiaries. This Plan shall
         be binding upon and govern the acts of all Persons including, without
         limitation, all holders of Claims and Equity Interests, all filing
         agents or officers, title agents or companies, recorders, registrars,
         administrative agencies, Governmental Units and departments, agencies
         or officials thereof, secretaries of state, and all other Persons who
         may be required by law, the duties of their office, or contract to
         accept, file, register, record, or release any documents or
         instruments, or who may be required to report or insure any title or
         state of title in or to any of the assets of any of MRI, the
         Subsidiaries, or the Reorganized Debtors.


         I.       REVESTING OF PROPERTY OF THE ESTATE AND RELEASE OF LIENS

         Except as otherwise provided in this Plan, any contract, instrument, or
other agreement or document created in connection with this Plan, or the
Confirmation Order, on the Effective Date, all property of the Estate of MRI and
the Subsidiaries, including all permits issued by Governmental Units shall
revest in the Reorganized Debtors free and clear of all Claims, mortgages, deeds
of trust, Liens, security, interests, encumbrances, and other interests of any
Person, and the Reorganized Debtors may thereafter operate their businesses and
may use, acquire, and dispose of property and compromise or settle any Claims or
Equity Interests without the supervision or approval of the Bankruptcy Court,
free of any restrictions of the Bankruptcy Code, the Bankruptcy Rules, the Local
Bankruptcy Rules of the United States Bankruptcy Court for the District of
Delaware, and the guidelines and requirements of the Office of the United States
Trustee for the District of Delaware. From and after the Effective Date, the
Reorganized Debtors may use, acquire, and dispose of property without the
supervision or approval of the Bankruptcy Court, free of any restrictions of the
Bankruptcy Code, other than those restrictions expressly imposed by this Plan,
any contract, instrument, or other agreement or document created in connection
with this Plan, or the Confirmation Order. Notwithstanding anything to the
contrary in this Plan, the Confirmation Order shall constitute an Order of the
Bankruptcy Court that the Reorganized Debtors shall not have any liabilities
under or obligations or remediation or other responsibilities in respect of any
property that does not revest in the Reorganized Debtors on the Effective Date.

         Except as otherwise provided in this Plan or in any contract,
instrument or other agreement or document created in connection with this Plan,
on the Effective Date, all mortgages, deeds of trust, Liens, or other security
interests against property of the Estate shall be released, and all right,


                                       36
<PAGE>   60
title, and interest of any holder of such mortgages, deeds of trust, Liens, or
other security interests shall revert to the Reorganized Debtors and their
successors and assigns.

         J.       SETOFFS

         Except as otherwise provided in this Plan, agreements entered into in
connection therewith, the Confirmation Order, or in agreements previously
approved by Final Order of the Bankruptcy Court, the Reorganized Debtors may,
pursuant to Bankruptcy Code Section 553 or applicable nonbankruptcy law, set off
against any Allowed Claim (before any distribution is made on account of such
Claim) any and all of the claims, rights and causes of action of any nature that
any of the Debtors or the Reorganized Debtors may hold against the holder of
such Allowed Claim; provided, however, that neither the failure to effect such a
setoff nor the allowance of any such Claim shall constitute a waiver or release
by any of the Debtors or the Reorganized Debtors of any such claims, rights, and
causes of action that any of the Debtors or the Reorganized Debtors may possess
against such holder. To the extent any of the Reorganized Debtors fails to set
off against a third party and seeks to collect a claim from such third party
after a distribution to such third party pursuant to this Plan on account of its
Allowed Claim, such Reorganized Debtor shall be entitled to full recovery on its
claim against such third party.

         K.       OBJECTIONS TO CLAIMS; ADEQUACY OF NOTICE OF BAR DATE ORDERS
                  AND SCHEDULES OF LIABILITIES

         All objections to Disputed Claims shall be Filed and served on the
holders of such Claims by the later of (i) one year after the Effective Date or
(ii) one year after the particular proof of Claim has been Filed, except as
extended by an agreement between the Claimant and the applicable Reorganized
Debtor or by Order of the Bankruptcy Court upon an application Filed by the
applicable Reorganized Debtor. After the Effective Date, only the Reorganized
Debtors, by and through any of their attorneys (whose representation before the
Bankruptcy Court on behalf of the Debtors or the Reorganized Debtors after the
Effective Date need not be approved in advance by Order) shall have authority to
File objections, or settle, compromise, withdraw, or litigate to judgment
objections to or proceedings to estimate Claims. Notwithstanding any prior Order
of the Bankruptcy Court or the provisions of Bankruptcy Rule 9019, from and
after the Effective Date, the Reorganized Debtors may settle or compromise any
Disputed Claim without the approval of the Bankruptcy Court.

         In order to effectuate and expedite the distributions to be made on or
after the Effective Date, the Reorganized Debtor may seek the entry of one or
more Claims Estimation Orders. Upon the entry of a Claims Estimation Order by
the Bankruptcy Court respecting any Disputed Claim, regardless of whether such
Claims Estimation Order becomes a Final Order, unless a stay of distribution is
obtained, the Disbursing Agent may proceed with distribution based upon the
estimated amount of any such Claim. The initiation of distributions under the
Plan prior to the completion of any appeal of or further proceedings with
respect to any Claim that is the subject of a Claims Estimation Order shall
render any such appeal or further proceeding moot.



                                       37
<PAGE>   61
         If the Bankruptcy Court enters an Order determining or disallowing, in
whole or in part, any Disputed Claim, regardless of whether such Order becomes a
Final Order, unless a stay of distribution is obtained pending appeal, the
Disbursing Agent may proceed with distribution based upon the Bankruptcy Court's
Order determining such Claim. The initiation of distributions under the Plan
prior to the completion of any appeal of or further proceedings with respect to
any Claim that has been determined by Order of the Bankruptcy Court shall render
any such appeal or further proceeding moot.

         The Confirmation Order shall constitute an Order of the Bankruptcy
Court that the notice of the Bar Date Orders was adequate to notify all known
and unknown claimants of the last day to File proofs of Claim with the
Bankruptcy Court or be barred from asserting any Claim (including any
Administrative Claim) against the Debtors, the Reorganized Debtors, and their
respective properties or assets, or from voting on or receiving distributions
under this Plan. In addition, based on the condition of the Debtors' books and
records at the time the Schedules were due to be Filed, the Debtors were unable
to verify the amounts of owing in respect of certain Unsecured and Priority
Claims as of the Petition Date. Accordingly, certain such Claims were scheduled
as Disputed. Entry of the Confirmation Order constitutes an Order of the
Bankruptcy Court approving the adequacy of the Schedules without the need for
amendment.

         L.       PRESERVATION OF RIGHTS OF ACTION

         Except as provided in any other contract, instrument, or other
agreement entered into in connection with this Plan, in accordance with
Bankruptcy Code Section 1123(b), the Reorganized Debtors shall retain and may
enforce any Claims, rights, and causes of action, including rights and causes of
action arising under the Bankruptcy Code which are commenced prior to the
closing of the Reorganization Cases, that any Debtors or its Estate may hold
against any Person. Only the Reorganized Debtors or their respective
successor(s) may pursue such retained Claims, rights or causes of action, as
appropriate, in each case in accordance with the best interests of the
applicable Reorganized Debtor or its successor(s). Entry of the Confirmation
Order shall be deemed to constitute an Order of the Bankruptcy Court that any
Debtor's failure to take any action prior to the Effective Date to enforce any
such Claims, rights, and causes of action did not in any manner whatsoever
constitute a waiver (whether under the doctrine of estoppel, laches, res
judicata or otherwise) of any of such Debtors' or Reorganized Debtors' rights in
respect thereof.

         The Confirmation Order shall be deemed to constitute an Order of the
Bankruptcy Court, as is authorized under Bankruptcy Code Section 502(d),
disallowing in full any Claim of (i) any entity from which property is
recoverable under Bankruptcy Code Sections 542, 543, 550, or 553 or (ii) that is
a transferee of a transfer avoidable under Bankruptcy Code Section 544, 545,
547, 548 or 549, unless such entity or transferee has paid the amount or turned
over any such property for which such entity or transferee is liable under
Bankruptcy Code Sections 542, 543, 550, or 553.



                                       38
<PAGE>   62
         M.       INCLUSION OF NEW EQUITY SECURITIES IN NASDAQ

         The Reorganized Debtors shall use reasonable efforts to cause the New
Common Stock to be included in the National Association of Securities Dealers,
Inc. automated Quotation System.

                                       VI.

                          DISTRIBUTIONS UNDER THE PLAN

         A.       GENERAL MATTERS CONCERNING THE DISTRIBUTION OF CONSIDERATION

         1.       THE DISBURSING AGENT(S)

         The Reorganized Debtors and such other Person(s) as may be approved by
any one of the Reorganized Debtors or the Bankruptcy Court, shall act as
Disbursing Agent(s) under this Plan. Any such Disbursing Agent may, with the
prior approval of the Reorganized Debtors, employ or contract with other Persons
to assist in or to perform the distribution required. Each third party hired as
a Disbursing Agent shall receive from the Reorganized Debtors, and on terms
acceptable to the Reorganized Debtors without the need for further Bankruptcy
Court approval, reasonable compensation for distribution services rendered
pursuant to this Plan and reimbursement of reasonable out-of-pocket expenses
incurred in connection with such services.

         2.       CASH PAYMENTS

         Cash payments made pursuant to this Plan will be in U.S. dollars by
wire transfer from a domestic bank, at the option of the Reorganized Debtors.
However, Cash payments to foreign Claimants may be made, at the option of the
Reorganized Debtors, in such currency and by such means as are necessary or
customary in a particular foreign jurisdiction.

         3.       TRANSMITTAL OF DISTRIBUTIONS

         Notwithstanding anything in this Plan or any agreement, document, or
instrument contemplated under this Plan, all non-Cash distributions shall be
deemed made at the time such distribution is deposited in the United States
mail, postage prepaid. Except as otherwise agreed with the holder of an Allowed
Claim or Allowed Equity Interest, any property to be distributed on account of
an Allowed Claim or Allowed Equity Interest shall be distributed by mail to (i)
the latest mailing address Filed of record for the party entitled thereto or to
a holder of a power of attorney designated by such holder to receive such
distributions or (ii) if no such mailing address has been so Filed, the mailing
address reflected on the Filed Schedules of Assets and Liabilities or in the
Reorganized Debtors' books and records.




                                       39
<PAGE>   63
         4.       UNDELIVERABLE DISTRIBUTIONS

         If any distribution is returned to a Disbursing Agent as undeliverable,
no further distributions shall be made to the holder of the Allowed Claim or
Allowed Equity Interest on which such distribution was made unless and until the
Disbursing Agent or the Reorganized Debtors are notified in writing of such
holder's then-current address. Undeliverable distributions shall remain in the
possession of the Disbursing Agent until such time as a distribution becomes
deliverable or is deemed canceled (as hereinafter provided). Any unclaimed
distribution held by a Disbursing Agent shall be accounted for separately, but
the Disbursing Agent shall be under no duty to invest any such unclaimed
distribution in any manner. Any holder of an Allowed Claim or Allowed Equity
Interest that does not present a claim for an undeliverable distribution within
one year after the date upon which a distribution is first made available to
such holder shall have its right to such distribution discharged and shall be
forever barred from asserting any such Claim or Equity Interest against any of
the Reorganized Debtors or its property or against any other Person, including
the Disbursing Agent(s). All unclaimed or undistributed distributions shall,
pursuant to Bankruptcy Code Section 347(b), be the property of the Reorganized
Debtors and shall be treated and allocated as determined by the Reorganized
Debtors in their sole and absolute discretion.

         B.       FRACTIONAL SHARES

         Notwithstanding any other provision of this Plan, only whole numbers of
shares of New Securities (including shares issued pursuant to any augmentation
provision of this Plan) shall be issued. As a result, if the calculated
distribution on account of Allowed Claims and Allowed Equity Interests based
upon the record holders thereof on the Distribution Record Date, or pursuant to
any augmentation provision of this Plan, would otherwise result in the issuance
to any Person of a number of shares of New Securities that is not a whole
number, then the actual distribution of shares of New Securities to such Person
shall be rounded up (if the fraction equals or exceeds one-half) or down (if the
fraction is less than one-half). No consideration shall be provided in lieu of
fractional shares of New Securities that are rounded down. Any surplus of
fractional shares of New Common Stock existing as a result of the rounding
process shall be retained by Reorganized MRI as treasury stock.

         C.       DISTRIBUTION ON DISPUTED CLAIMS OR DISPUTED EQUITY INTERESTS 
                  THAT BECOME ALLOWED CLAIMS OR ALLOWED EQUITY INTERESTS

         Within thirty (30) days following the allowance by Final Order of all
or a portion of a Disputed Claim or Disputed Equity Interest, the Reorganized
Debtors shall deliver, and the Disbursing Agent shall distribute, in accordance
with the provisions of this Plan regarding the treatment of such Allowed Claim
or Allowed Equity Interest, the consideration to which the holder of such newly
Allowed Claim or Allowed Equity Interest is entitled under the terms of this
Plan, as though such Claim had been Allowed as of the Effective Date.
Concurrently with such distribution, the Reorganized Debtors shall pay (without
interest) or issue to the holder of the newly Allowed Claim or Allowed Equity
Interest an amount, if any, equal to the allocable portion of any


                                       40
<PAGE>   64
consideration distribution on, received for, with respect to, or on account of
previously issued New Common Stock.

         D.       SUBORDINATED CLAIMS


         Any Claim equitably subordinated to the Claims of Class 3A or Class 3AA
Creditors under this Plan by judgment or Order of the Bankruptcy Court (which
judgment or Order need not become a Final Order), shall receive no distribution
under this Plan, provided, however, that in the event the Bankruptcy Court Order
or judgment of subordination specifies an alternative treatment of such Claim
under this Plan, the Claim shall receive the treatment specified by the
Bankruptcy Court Order or judgment. Any Allowed Claim (or portion thereof),
whether secured or unsecured, for any fine, penalty or forfeiture, or for
multiple, exemplary, or punitive damages, to the extent that such fine, penalty,
forfeiture, or damages are not compensation for actual pecuniary loss, and all
Tax Claims for penalties, shall be automatically subordinated to Claims in
Subclasses 3A and 3AA, and shall receive no distribution under this Plan.
                                      VII.

                CONDITIONS PRECEDENT TO EFFECTIVENESS OF THE PLAN

         A.       CONDITIONS PRECEDENT.

         This Plan shall become effective for all purposes on the date (the
"Effective Date") that is the first business day after each of the following
conditions are met:

                  (i) this Plan shall have been confirmed in form and substance
         satisfactory to MRI;

                  (ii) at least $2.5 million, in the aggregate, of financing
         shall have been funded under the Postpetition Series B Notes;

                  (iii) the Red Head Plan shall have been confirmed in form and
         substance satisfactory to MRI, and MRI shall have assumed its
         obligations thereunder;

                  (iv) no stay of the Confirmation Order shall be in effect;

                  (v) no stay of the Red Head Confirmation Order shall be in
         effect;

                  (vi) the closing ("Closing") of the transactions described in
         Section V.A. above shall have occurred;

                  (vii) the fees under 28 U.S.C. Section 1930 of the United
         States Trustee then owing by the Debtors shall have been paid in full;


                                       41
<PAGE>   65
                  (viii) a registration statement, if one shall be required,
         shall have been filed with the SEC registering the New Common Stock
         under the Plan and shall have become effective under the Securities
         Act.

         The Reorganized Debtors retain the right to withdraw or revoke this
Plan, in its entirety or as to any particular Debtor, in their sole discretion
at any time prior to the Confirmation Date. MRI may, in its sole discretion and
without any further notice, waive the conditions set forth in subsections (iii),
(v), and/or (vi) above.

                                      VIII.

                              CONFIRMATION REQUEST

         A.       CONFIRMATION REQUEST

         This Plan incorporates the cramdown provisions of the Bankruptcy Code.
In the event any Impaired Class does not accept this Plan in accordance with the
provisions of Bankruptcy Code Section 1126, the Debtors reserve the right to
request that the Bankruptcy Court confirm this Plan in accordance with
Bankruptcy Code Section 1129(b). In addition, the Debtors request Confirmation
of this Plan under Bankruptcy Code Section 1129(b) with respect to Subclasses
3A, 1F through 1I, and Classes 4,5, 6, and 7.

                                       IX.

                            RETENTION OF JURISDICTION

         A.       RETENTION OF JURISDICTION

         Following Confirmation, the Bankruptcy Court shall retain such
jurisdiction as is legally permissible, including, without limitation, for the
following purposes:

                  (i) to determine the allowability, classification, or priority
         of Claims or Equity Interests;

                  (ii) to construe and to take any action to enforce and execute
         this Plan, the Confirmation Order, or any other Order of the Bankruptcy
         Court;

                  (iii) to issue such Orders as may be necessary for the
         implementation, interpretation, execution, performance, and
         consummation of this Plan;

                  (iv) to protect the property of the Estate revesting in the
         Reorganized Debtors from Claims against, or interference with, such
         property, including actions to quiet or otherwise clear title to such
         property based upon the terms and provisions of this Plan;


                                       42
<PAGE>   66
                  (v) to determine any and all applications for allowance of
         compensation and expense reimbursement of Professional Persons;

                  (vi) to determine any other request for payment of
         Administrative Claims;

                  (vii) to determine all applications, motions, adversary
         proceedings, contested matters, and any other litigated matters
         instituted prior to the closing of the Reorganization Cases (regardless
         of whether initiated prior to or after the Effective Date), including
         litigation commenced to set aside or avoid any transfers pursuant to
         Bankruptcy Code Sections 544, 545, 547, 548, 549, 550, and 553;

                  (viii) to hear and determine all applications for assumption
         or rejection of executory contracts or leases pending as of the
         Effective Date or incorporated in this Plan;

                  (ix) to hear and determine all disputes or controversies
         arising from or under, or relating to, the Reorganization Agreement;

                  (x) to modify this Plan under Bankruptcy Code Section 1127, to
         remedy any defect or omission in this Plan, or to reconcile any
         inconsistency in this Plan so as to carry out its intent and purposes;
         and

                  (xi) to issue injunctions or take such other actions or make
         such other Orders as may be necessary or appropriate to aid the
         consummation of an restrain interference with this Plan.

                                       X.

                            MISCELLANEOUS PROVISIONS

         A.       AMENDMENT AND MODIFICATION OF THIS PLAN

         This Plan may be amended or modified before the Effective Date only by
MRI, or following the Effective Date, only by the Reorganized Debtors, to the
extent provided in Bankruptcy Code Section 1127.

         B.       WITHDRAWAL OR REVOCATION OF THIS PLAN

         The Debtors reserve the right to revoke or withdraw this Plan, in its
entirety or as to any particular Debtor, at any time prior to the Confirmation
Date for any reason whatsoever.




                                       43
<PAGE>   67
         C.       DISMISSAL, LIQUIDATION, OR CONVERSION

         This Plan is confirmed as to MRI and the Subsidiaries, and not as to
the Shell Companies, Magic American Cafe, Inc., or 10 Columbia Corporate Center,
Inc. At or after the Confirmation Hearing the Reorganization Cases involving
those entities may be dismissed or converted to cases under a different Chapter
of the Bankruptcy Code, as MRI may determine or as may otherwise be Ordered by
the Bankruptcy Court. Alternatively, those entities may be dissolved in
accordance with the laws of their respective states of incorporation. Except as
specifically provided in this Plan with respect to claims of Professional
Persons or Holders of Postpetition Senior Secured Notes, Holders of Claims
against and Interests in the Shell Companies, Magic American Cafe, Inc., or 10
Columbia Corporate Center, Inc. shall receive no distributions under this Plan
on account of those Claims or Interests. Furthermore, the classification herein
of certain Claims against those entities (e.g., Subclass 3B Claims) does not
confer a right to payment under this Plan, and does not imply that the entity in
question has been reorganized under this Plan. Rather, such classification is
included in this Plan for clarification purposes, to illustrate the exclusion of
certain Claims from classes that will receive distributions under this Plan.

         D.       SUCCESSORS AND ASSIGNS

         The rights, benefits, and obligations of any Person named or referred
to in this Plan shall be binding on, and shall inure to the benefit of, the
heirs, executors, administrators, successors, or assigns of such Person,
including any successor to or assign of any of the Reorganized Debtors.

         E.       SEVERABILITY OF PROVISIONS OF THIS PLAN

         The provisions of this Plan shall not be severable unless such
severance is agreed to by the Debtors or the Reorganized Debtors, and such
severance would constitute a permissible modification of this Plan pursuant to
Bankruptcy Code Section 1127.

         F.       CREDITORS' COMMITTEE

         Following the Effective Date, the Creditors' Committee shall continue
as a representative body on behalf of Unsecured Creditors to monitor the
Reorganized Debtors' compliance with the terms of this Plan in respect of
Allowed Class 3A and 3AA Claims. The Creditors' Committee shall continue to
retain its counsel, Blank Rome Comisky & McCauley, to assist it in carrying out
these responsibilities. The Reorganized Debtors shall be responsible for payment
of all reasonable and necessary attorneys' fees and expenses incurred by the
Creditors' Committee after the Effective Date. Blank Rome Comisky & McCauley
shall not be required to file any fee applications with the Bankruptcy Court or
obtain an order approving any such post-Effective Date fees and expenses,
provided that any dispute between the Reorganized Debtors and counsel regarding
the reasonableness or necessity of any fees or expenses incurred by counsel for
the Creditors' Committee shall be submitted to the Bankruptcy Court for
determination.



                                       44
<PAGE>   68
         G.       CONTRIBUTION BAR

         The Confirmation Order shall constitute an Order forever barring Claims
for contribution, reimbursement, subrogation or indemnity against MRI or the
Subsidiaries by any holder of a Claim for indemnity, contribution, reimbursement
or subrogation or any Person or entity who was named as a defendant, who could
have been named as a defendant, or who otherwise may claim contribution,
reimbursement, subrogation or indemnity rights in the future against MRI or the
Subsidiaries in connection with the facts and claims asserted, or that could
have been asserted within the scope of res judicata, in any lawsuit that was
pending or could have been pending on the Effective Date. All such Claims shall
be automatically discharged and forever barred upon entry of the Confirmation
Order, without the necessity of the filing or adjudication of any objection to
such Claims.

         H.       EXONERATION AND RELIANCE

         The present and former affiliates, officers, directors, shareholders,
members, representatives, attorneys, accountants, financial advisors, and agents
of the Debtors, the Reorganized Debtors, and the Creditors' Committee shall not
be liable to any holder of a Claim or Equity Interest, or any other party with
respect to any action, forbearance from action, decision, or exercise of
discretion taken at any time through the Effective Date in connection with (a)
the operation of the Debtors or the Reorganized Debtors; (b) the proposal or
implementation of any of the transactions provided for, or contemplated in, this
Plan or the Disclosure Statement; (c) any act taken or omission made in
connection with or related to the Reorganization Cases, or in connection with or
related to formulating, distributing, implementing, confirming, or consummating
this Plan (including soliciting acceptances or rejections thereof), the
Disclosure Statement, or any contract, instrument, or other agreement or
document entered into in connection with this Plan for any act taken or not
taken in connection with or relating to the Reorganization Cases, (d) the
administration of this Plan or the Assets and property to be distributed
pursuant to or as contemplated by this Plan and the Disclosure Statement, other
than for recklessness, willful misconduct or fraud, or (e) any action (breach of
fiduciary duty or otherwise) the same basic facts of which would be relied upon
in any action against any of the Debtors asserting a Claim under Bankruptcy Code
Section 510(b). Furthermore, the foregoing limitation of liability shall be in
addition to the "safe harbor" from liability provided by Section 1125(e) of the
Bankruptcy Code and Section V.F. of this Plan,

         The Debtors, the Reorganized Debtors, the Creditors' Committee, and
their respective affiliates, officers, directors, shareholders, members,
representatives, attorneys, financial advisors, and agents may rely upon the
opinions of counsel, certified public accountants, and other experts or
professionals employed by any of them, and such reliance shall conclusively
establish good faith.




                                       45
<PAGE>   69
                             ANDREWS & KURTH L.L.P.
                             John A. Lee
                             Peter S. Goodman
                             A. Sidney Holderness, Jr.
                             425 Lexington Avenue
                             New York, New York 10017
                             (212) 850-2800

                                   - and -

                             YOUNG, CONAWAY, STARGATT & TAYLOR
                             Laura Davis Jones (No. 2436)
                             Robert S. Brady (No. 2847)
                             Mark I. Duedall (No. 3346)
                             11th Floor, Rodney Square North
                             PO Box 391
                             Wilmington, Delaware 19899-0391
                             (302) 571-6642

                             Co-Counsel to the Debtors and the Debtors in
                             Possession




                             MAGIC RESTAURANTS, INC., for itself and for
                             each of the Debtors


                             ---------------------------------
                             By: Charles Olson, Jr.
                             Its:  Chief Executive Officer



<PAGE>   70
                                 EXHIBIT I.A--1
                       REORGANIZED MAGIC RESTAURANTS, INC.

                           SUBSIDIARY PREFERRED STOCK

                    SUMMARY OF PRINCIPAL TERMS AND CONDITIONS

                  CONCEPT: Certain assets of MRI that currently constitute
collateral security for Secured Claims against MRI will be transferred by
Reorganized MRI to certain of its subsidiaries that are Reorganized Debtors (the
"Issuing Subsidiaries"). Such Secured Claims will be paid in full by issuance,
in each case by the Issuing Subsidiary to which the assets securing a particular
Secured Claim are transferred to the Secured Creditor holding such Secured
Claim, of 8% Cumulative Exchangeable Preferred Stock of such Issuing Subsidiary,
all as more fully described below.

<TABLE>

<S>                                         <C>                                              
ISSUERS:                                    Each Issuing Subsidiary

ISSUES:                                     8% Cumulative Exchangeable Preferred Stock of the
                                            respective Issuing Subsidiaries ("8% Preferred")

ISSUE VALUATION:                            One share of 8% Preferred for each $75 of Allowed Secured
                                            Claim

LIQUIDATION PREFERENCE:                     $75 per share, plus accrued and unpaid dividends, before any
                                            payment made on common stock of the Issuing Subsidiary
                                            (See also "Issuing subsidiary Indebtedness" below)

DIVIDEND RATE:                              8% per annum, payable semi-annually (to the extent of funds
                                            legally available therefor); may at the election of the
                                            respective Issuing Subsidiary (and with the consent of
                                            Reorganized MRI) be paid by issuance to the registered
                                            holders of its 8% Preferred of shares of Common Stock of
                                            Reorganized MRI (valued for this purpose at the closing (bid)
                                            price as of the 10th business day  next preceding declaration
                                            of the dividend)

MANDATORY REPURCHASE:                       To the extent of funds legally available therefor, at end of
                                            each of third, fourth and fifth years following issuance,
                                            Issuing Subsidiary will offer to purchase (at a Cash price in
                                            each case equal to Liquidation Preference plus accrued and
                                            unpaid dividends, one-sixth, one-third, and one-half,
                                            respectively, of the shares of 8% Preferred initially issued by
                                            it (a "Mandatory Repurchase"); provided, however, that if the
                                            closing (bid) price of the Common Stock of Reorganized MRI shall
                                            exceed $10 per share for any period of 40 consecutive 
</TABLE>
<PAGE>   71
<TABLE>
<S>                                         <C>

                                            trading days following issuance, all rights of holders of the 8%
                                            Preferred to any Mandatory Repurchase (past or future) not yet
                                            consummated shall cease (and any director then serving as
                                            provided in "Voting Rights" below by reason of a prior passed
                                            Mandatory Repurchase shall resign)

CALLABILITY:                                Subject to there being funds legally available therefor, Issuing
                                            Subsidiaries may at their option call the 8% Preferred at any
                                            time at a price equal to Liquidation Preference plus accrued
                                            and unpaid dividends

EXCHANGEABILITY:                            At the election of holders of the 8% Preferred, and with the
                                            consent of Reorganized MRI, the shares of 8% Preferred will be
                                            exchangeable for shares of Common Stock of Reorganized MRI as
                                            follows:

                                                -    During first year after issuance: One share of 8%
                                            Preferred = 10 shares of Reorganized MRI Common Stock

                                                -    During second year after issuance: One share of 8%
                                            Preferred = 7.5 shares of Reorganized MRI Common Stock

                                                -    During third year after issuance: One share of 8%
                                            Preferred = 6 shares of Reorganized MRI Common Stock

                                                -    Thereafter, 8% Preferred not exchangeable at holder
                                            option

VOTING RIGHTS:                              None, except that if Issuing Subsidiary passes three
                                            consecutive semiannual dividends or one Mandatory
                                            Repurchase, holders of the 8% Preferred, voting as a single
                                            class, shall be entitled to elect one director to the Board of the
                                            Issuing Subsidiary (who shall, subject to the proviso to
                                            "Mandatory Repurchase" above, continue to serve  until all
                                            accrued dividends and Mandatory Repurchases have been
                                            brought current)

ISSUING SUBSIDIARY
INDEBTEDNESS:                               Issuing Subsidiaries will covenant not to create, incur, assume
                                            or otherwise become or be liable for any indebtedness for
                                            borrowed money or for the deferred purchase price of
                                            property except to Reorganized MRI or another subsidiary of
                                            Reorganized MRI
</TABLE>



                                       2
 
<PAGE>   72
                                      * * *




                                        3
<PAGE>   73
                                 EXHIBIT I.A--2

                       REORGANIZED MAGIC RESTAURANTS, INC.

                     SUBSIDIARY PREFERRED STOCK -- LEVITTOWN

                    SUMMARY OF PRINCIPAL TERMS AND CONDITIONS

                  CONCEPT: Reorganized MRI at Levittown (the "Issuing
Subsidiary") will own the assets at the Levittown Red Head restaurants (the
"Subject Assets"). As provided in the Plan and the Confirmation Order, the
Issuing Subsidiary will issue 8% Cumulative Exchangeable Preferred Stock, as
more fully described below.

<TABLE>
<S>                                         <C>                                                      
ISSUER:                                     The Issuing Subsidiary

ISSUE:                                      8% Cumulative Exchangeable Preferred Stock of the Issuing
                                            Subsidiary ("8% Preferred")

ISSUE VALUATION:                            One share of 8% Preferred for each $75 of Allowed Secured
                                            Claim

LIQUIDATION PREFERENCE:                     $75 per share, plus accrued and unpaid dividends, before any
                                            payment made on common stock of the Issuing Subsidiary
                                            (See also "Issuing Subsidiary Indebtedness" below)

DIVIDEND RATE:                              8% per annum, payable semi-annually in Cash (to the extent
                                            of funds legally available therefor)

MANDATORY REPURCHASE:                       To the extent of funds legally available therefor, beginning on
                                            first anniversary of the Effective Date and monthly thereafter,
                                            Issuing Subsidiary will offer to purchase (at a Cash price in
                                            each case equal to Liquidation Preference plus accrued and
                                            unpaid dividends), one forty-eighth (1/48) of the shares of 8%
                                            Preferred initially issued by it as may be agreed between the
                                            parties (a "Mandatory Repurchase"), so that if all such offers
                                            to purchase are made and accepted the 8% Preferred would be
                                            retired within 5 years.

CALLABILITY:                                Subject to there being funds legally available therefor, Issuing
                                            Subsidiary may at its option call the 8% Preferred at any time
                                            (in whole or in part) at a price equal to Liquidation Preference
                                            plus accrued and unpaid dividends
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                                        4
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<TABLE>
<S>                                         <C>                       
EXCHANGEABILITY:                            At the election of holders of the 8% Preferred, and with the
                                            consent of Reorganized MRI, the shares of 8% Preferred will be
                                            exchangeable for shares of Common Stock of Reorganized MRI as
                                            follows:

                                                -    During first year after issuance: One share of 8%
                                            Preferred = 10 shares of Reorganized MRI Common Stock

                                                -    During second year after issuance: One share of 8%
                                            Preferred = 7.5 shares of Reorganized MRI Common Stock

                                                -    During third year after issuance: One share of 8%
                                            Preferred = 6 shares of Reorganized MRI Common Stock

                                                -    Thereafter, 8% Preferred not exchangeable at holder
                                            option

                                            See also "Conversion Events" below

VOTING RIGHTS:                              None, except that if the Issuing Subsidiary passes three
                                            consecutive semiannual dividends or one Mandatory Repurchase,
                                            holders of the 8% Preferred, voting as a single class and by
                                            majority vote, shall be entitled to elect one director to the
                                            Board of the Issuing Subsidiary (who shall, subject to the
                                            proviso to "Mandatory Repurchase" above, continue to serve until
                                            all accrued dividends and Mandatory Repurchases have been
                                            brought current

ISSUING SUBSIDIARY
INDEBTEDNESS AND
OWNERSHIP OF ASSETS:                        Issuing Subsidiary's charter will block ability to create, incur,
                                            assume or otherwise become or be liable for any indebtedness
                                            for borrowed money or for the deferred purchase price of
                                            property.  Further, the charter(s) will provide that Issuing
                                            Subsidiary will not sell, transfer or dispose of the Subject
                                            Assets except for cash in the ordinary course of business at
                                            then fair market value, or pledge same to secure any
                                            indebtedness for borrowed money or deferred purchase price
                                            of property (which it is not permitted to have in any event).


MERGERS, ETC.                               Issuing Subsidiary's charter provisions will block merger or
                                            consolidation in which it is not the survivor, and certain asset
</TABLE>


                                    5
<PAGE>   75
<TABLE>
<S>                                         <C>  
                                            sales, without consent of holders of a majority of the shares
                                            of the 8% Preferred, voting as a single class

CONVERSION EVENTS:                          Holders of 8% Preferred (acting by majority vote) shall have
                                            the contractual right against Reorganized MRI, if a
                                            Conversion  Event shall occur and have been continuing for
                                            at least 60 days, in respect of the Issuing Subsidiary, to
                                            require Reorganized MRI to deliver to such 8% Preferred
                                            holders, ratably, all outstanding shares of common stock of
                                            the Issuing Subsidiary held by Reorganized MRI (which shall
                                            be all such common stock) in exchange for the 8% Preferred
                                            of such Issuing Subsidiary; in such event such 8% Preferred
                                            shall be delivered to such Issuing Subsidiary and canceled.
                                            "Conversion Events" in respect of the Issuing Subsidiary shall
                                            consist of its (1) failure to timely pay a semi-annual Cash
                                            dividend on its 8% Preferred, or failure to make a required
                                            Mandatory Repurchase (whether or not, in either such case,
                                            there are funds legally available therefor), or (2)  breach of the
                                            covenant on Indebtedness and Ownership of Assets.  The
                                            common stock of each Reorganized Debtor constituting the
                                            Issuing  Subsidiary shall be placed in escrow with an
                                            independent third-party escrow agent for release upon the
                                            earlier of (i) there being no 8% Preferred of such Reorganized
                                            Debtor outstanding and all sums owing in connection
                                            therewith having been paid, or (ii) exercise of the right to
                                            convert such shares of 8% Preferred into the common stock
                                            of such Reorganized Debtor following occurrence of a
                                            Conversion Event as specified above.
</TABLE>



                                     * * *



                                       6
<PAGE>   76
                                 EXHIBIT I.A--3

                       REORGANIZED MAGIC RESTAURANTS, INC.

              PARENT PREFERRED STOCK -- POSTPETITION SERIES B NOTES

                    SUMMARY OF PRINCIPAL TERMS AND CONDITIONS

                  CONCEPT: Reorganized MRI will issue 10% Cumulative
Exchangeable Preferred Stock, as more fully described below.

<TABLE>
<S>                                         <C>   
ISSUER:                                     Reorganized MRI

ISSUE:                                      10% Cumulative Exchangeable Preferred Stock ("10%
                                            Preferred")

ISSUE VALUATION:                            One share of 10% Preferred for each $75 of Allowed Secured
                                            Claim

LIQUIDATION PREFERENCE:                     $75 per share, plus accrued and unpaid dividends, before any
                                            payment made on common stock of the MRI

DIVIDEND RATE:                              10% per annum, payable annually in New Common Stock
                                            issued at a price equal to 80% of the average bid price for the
                                            New Common Stock during the preceding 12 months

REPURCHASE OPTION:                          To the extent of funds legally available therefor, beginning on
                                            third anniversary of the Effective Date and annually
                                            thereafter,  MRI will have the option to purchase (at a Cash
                                            price in each case equal to Liquidation Preference plus
                                            accrued and unpaid dividends), portions of the 10% Preferred
                                            (a "Repurchase Option"), so that if all such offers to purchase
                                            are accepted the 10% Preferred would be retired within 7
                                            years:

                                                -   On the third anniversary: 15.15% of the 10% Preferred

                                                -   On the fourth anniversary: 15.15% of the 10% Preferred

                                                -   On the fifth anniversary 22.73% of the 10% Preferred

                                                -   On the sixth anniversary: 22.73% of the 10% Preferred
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                                    7
<PAGE>   77
<TABLE>
<S>                                         <C>          
                                              -  On the seventh anniversary: 24.24% of the 10% Preferred

CALLABILITY:                                Subject to there being funds legally available therefor, MRI
                                            may at its option call all or any outstanding portion the 10%
                                            Preferred at any time at a price equal to Liquidation
                                            Preference plus accrued and unpaid dividends

EXCHANGEABILITY:                            At the election of the Holder of the 10% Preferred, and with the
                                            consent of Reorganized MRI, the shares of 10% Preferred may be
                                            exchanged for shares of New Common Stock of Reorganized MRI as
                                            follows:

                                                -    During first year after issuance: One share of 10%
                                            Preferred = 10 shares of New Common Stock

                                                -    During second year after issuance: One share of 10%
                                            Preferred = 7.5 shares of New Common Stock

                                                -    During third year after issuance: One share of 10%
                                            Preferred = 6 shares of New Common Stock

                                                -    Thereafter, 10% Preferred not exchangeable at holder
                                            option

VOTING RIGHTS:                              None, except that if the MRI passes any annual dividends,
                                            holders of the 10% Preferred, voting as a single class and by
                                            majority vote, shall be entitled to elect one director to the
                                            Board of MRI, who shall continue to serve until all accrued
                                            dividends have been brought current

MERGERS, ETC.                               MRI's charter provisions will block merger or consolidation
                                            in which it is not the survivor, and certain asset sales, without
                                            consent of holders of a majority of the shares of the 10%
                                            Preferred, voting as a single class

CONVERSION EVENTS:                          MRI, at its sole option, will have the right to convert all or
                                            any portion of the 10% Preferred to a debt instrument, at a
                                            conversion price equal to Liquidation Preference plus accrued
                                            and unpaid dividends, with such debt instrument bearing
                                            interest at a rate of no less than 10% per annum, and having
                                            amortization, collateral, security and payment terms as may
                                            be agreed between MRI and the holder of the 10% Preferred.
</TABLE>



                                     8
<PAGE>   78
                                 EXHIBIT I.A--4

                                  RED HEAD PLAN

          [As attached to Disclosure Statement, or as may be otherwise
                  modified with the consent of Reorganized MRI]