Exhibit 10.18

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------X
                                        :

                                        :
In re:                                        Chapter 11
                                        :
RANCH *1, INC., ET AL.,                       Case Nos. 01-41853 (AJG)
                                        :           through 01-41881 (AJG)

               Debtors.                 :     (Jointly Administered)

                                        :

                                        :

----------------------------------------X



                 PLAN OF REORGANIZATION JOINTLY PROPOSED BY THE
                  DEBTORS, THE OFFICIAL COMMITTEE OF UNSECURED
                     CREDITORS AND R1 FRANCHISE SYSTEMS, LLC



<TABLE>
<S>                              <C>                           <C>
LOUIS T. DELUCIA (LD-3879)       BENJAMIN MINTZ (BM-6060)      GERARD R. LUCKMAN (GL-8516)
ALAN J. BRODY (AB-4777)          KAYE SCHOLER LLP              SILVERMAN PERLSTEIN
BUCHANAN INGERSOLL, P.C.         425 Park Avenue                 & ACAMPORA
700 Alexander Park               New York, New York  10022     100 Jericho Quadrangle
Suite 300                        (212) 836-8505                Suite 300
Princeton, New Jersey  08540                                   Jericho, New York  11753
(609) 986-6800                   ATTORNEYS FOR R1              (516) 479-6300
-and-                            FRANCHISE SYSTEMS, LLC
140 Broadway                                                   ATTORNEYS FOR THE OFFICIAL
New York, New York 10005                                       COMMITTEE OF UNSECURED CREDITORS
(646) 458-2340

ATTORNEYS FOR THE DEBTORS
AND DEBTORS-IN-POSSESSION
</TABLE>
<PAGE>
                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

ARTICLE I. DEFINITIONS........................................................1
     "Accredited Investor"....................................................1
     "Additional Investor"....................................................1
     "Additional Insider Note"................................................1
     "Administrative Claim"...................................................2
     "Allowed Administrative Claim"...........................................2
     "Allowed Claim"..........................................................2
     "Allowed Insider Unsecured Claim"........................................2
     "Allowed Non-Insider Unsecured Claim"....................................2
     "Allowed Priority Claim".................................................3
     "Allowed Secured Claim"..................................................3
     "Allowed Tax Claim"......................................................3
     "Allowed Unsecured Claim"................................................3
     "Ballot".................................................................3
     "Bankruptcy Code"........................................................3
     "Bankruptcy Court".......................................................3
     "Bankruptcy Rules".......................................................4
     "Business Day"...........................................................4
     "Cash"...................................................................4
     "Chapter 11".............................................................4
     "Chapter 11 Cases" or "Cases"............................................4
     "Claim"..................................................................4
     "Claimant"...............................................................4
     "Class"..................................................................4
     "Class 2 Note"...........................................................4
     "Confirmation"...........................................................5
     "Confirmation Date"......................................................5
     "Confirmation Order".....................................................5
     "Consummation Date"......................................................5
     "Contested"..............................................................5
     "Cram-down"..............................................................5
     "Creditor"...............................................................5
     "Cure Amount Claim"......................................................5
     "Debtors" and "Debtors-In-Possession"....................................6
     "DIP Financing Facility".................................................6
     "Disallowed Claim".......................................................6
     "Disclosure Statement"...................................................6
     "Disputed Claim".........................................................6
     "Distribution Date"......................................................6
     "Effective Date".........................................................6
     "Equity Contribution"....................................................7
     "Equity Security Interests"..............................................7
     "Entity".................................................................7
     "Executory Contract and Unexpired Lease" or "Executory Contract
       or Unexpired Lease"....................................................7
     "Fee Claim"..............................................................7
     "Fee Order"..............................................................7
     "Final Order"............................................................7
     "Insider Claim"..........................................................8
     "Insider Note"...........................................................8
     "IRS"....................................................................8

                                        i
<PAGE>
     "Liquidating Debtors"....................................................8
     "Local Bankruptcy Rules".................................................8
     "Net Equity Contribution"................................................9
     "Ordinary Course Professionals Order"....................................9
     "Permitted Investments"..................................................9
     "Person".................................................................9
     "Petition Date"..........................................................9
     "Plan"...................................................................9
     "Preference Actions".....................................................9
     "Priority Claim".........................................................9
     "Priority Non-tax Claims"................................................9
     "Professional"...........................................................9
     "Professional Reserve"...................................................9
     "Pro-rata"...............................................................10
     "Ranch *1"...............................................................10
     "Record Date"............................................................10
     "Reorganized Ranch *1"...................................................10
     "Reserve"................................................................10
     "R1 Franchise"...........................................................10
     "Secured Creditor".......................................................10
     "Tax Claim"..............................................................10
     "Unsecured Claim"........................................................10
     "Unexpired Leases".......................................................11
     "Voting Class"...........................................................11
     "Other Definitions"......................................................11

ARTICLE II. CLASSIFICATION OF CLAIMS AND INTERESTS............................11

ARTICLE III. SUBSTANTIVE CONSOLIDATION OF DEBTORS AND
  CANCELLATION OF INTERCOMPANY CLAIMS.........................................12
     Substantive Consolidation................................................12
     Intercompany Claims......................................................12

ARTICLE IV. IDENTIFICATION OF CLASSES OF CLAIMANTS IMPAIRED
  OR UNIMPAIRED UNDER THE PLAN................................................12

ARTICLE V. PROVISIONS FOR TREATMENT OF CLAIMS NOT IMPAIRED
  UNDER THE PLAN..............................................................13
     Administrative Claims....................................................13
     Tax Claims...............................................................13
     Priority Claims..........................................................13
     Allowed Secured Claim of  R1 Franchise (Class 1).........................13

ARTICLE VI. PROVISIONS FOR TREATMENTOF CLAIMS IMPAIRED
     UNDER THE PLAN...........................................................14
       Allowed Unsecured Non-Insider Claims (Class 2).........................14
       Allowed Insider Unsecured Claims (Class 3).............................14
       Equity Security Interest Holders (Class 4).............................15

ARTICLE VII. ACCEPTANCE OR REJECTION OF PLAN; EFFECT OF
  REJECTION BY ONE OR MORE CLASSES OF CLAIMS..................................15
     Impaired Classes to Vote.................................................15
     Acceptance by a Class of Creditors.......................................15
     Cram-down................................................................15
     Blank Ballots............................................................15

                                       ii
<PAGE>
ARTICLE VIII. PROVISIONS CONCERNING DISTRIBUTION..............................15
     Time of Distributions Under the Plan.....................................15
     Payment Dates............................................................16
     Manner of Payments Under the Plan........................................16
     Fractional Cents.........................................................16
     Non-Negotiated Checks....................................................16
     Unclaimed Distributions..................................................16
     No Cash Payments of $10.00 or Less on Account of Allowed Claims..........17
     Disputed Payments or Distributions.......................................17

ARTICLE IX. PROVISIONS CONCERNING DISCHARGE AND PROPERTY......................17
       Discharge of All Claims and Equity Interests...........................17
       Vesting of Property in the Debtors.....................................18

ARTICLE X. RELEASES AND TERMINATION...........................................18
     Releases.................................................................18
     Administrative and Priority Claim Bar Dates..............................18
     Certain Terminations.....................................................19
     Rights if Plan not Confirmed.............................................19

ARTICLE XI. REJECTION AND ASSUMPTION OF EXECUTORY CONTRACTS...................20

ARTICLE XII. MEANS FOR EXECUTION OF THE PLAN AND CONDITIONS
  TO CONFIRMATION.............................................................22
     Committee................................................................24

ARTICLE XIII. CONDITIONS TO CONSUMMATION OF THE PLAN..........................26

ARTICLE XIV. PROCEDURES FOR RESOLVING DISPUTED CLAIMS.........................26
     Time Limit for Objections to Claims......................................26
     Resolution of Disputed Claims............................................26
     Payments.................................................................26

ARTICLE XV. RETENTION OF JURISDICTION.........................................27

ARTICLE XVI. EVENT OF DEFAULT.................................................29

ARTICLE XVII. GENERAL PROVISIONS..............................................29
     Modification of the Plan.................................................29
     Ratification of Action Taken During Pendency of the Chapter 11 Cases.....29
     Notices..................................................................29
     Headings.................................................................31
     Governing Law............................................................31
     Successors and Assigns...................................................31
     Reservation of Rights....................................................31
     Disbursing Agent.........................................................32
     Post-Effective Date Fees and Expenses of Debtors' Professionals..........32
     Exculpation..............................................................33
     Discharge Injunction.....................................................33

                                       iii
<PAGE>
          Ranch *1, Inc. ("Ranch *1") and the other above-captioned  Debtors and
Debtors-in-possession   (collectively,   the   "Debtors")(1)  and  the  Official
Committee of Unsecured  Creditors of the Debtors' estates (the  "Committee") and
R1 Franchise  Systems,  LLC, propose the following joint plan of  reorganization
("Plan")  pursuant to Section  1121(a) of Title 11 of the United States Code, as
amended (the "Bankruptcy Code").

                                    ARTICLE I

                                   DEFINITIONS

          Except as otherwise provided in this Plan of Reorganization, all terms
used  herein  shall  have  the  meanings  attributed  to such  terms  under  the
Bankruptcy  Code,  as  amended,  the  applicable  Federal  Rules  of  Bankruptcy
Procedure and the Local Bankruptcy  Rules for the Southern  District of New York
(the "Local Bankruptcy Rules").  The following terms shall have the meanings set
forth below,  and such meanings shall be equally  applicable to the singular and
the plural form of the terms defined, unless the context requires otherwise:

1.01.     "Accredited  Investor" shall have the definition  ascribed  thereto in
          Rule 501(a) promulgated under the Securities Act of 1933, as amended.

1.02.     "Additional  Insider Amount" shall mean an amount equal to the product
          of (x) a fraction,  the  numerator of which is the  aggregate  Allowed
          Class  3  Insider  Unsecured  Claims  held  by  holders  that  are not
          Accredited  Investors,  and the  denominator of which is the aggregate
          Allowed Class 3 Insider Unsecured Claims, and (y) the value, as of the
          Confirmation  Date,  of 143,750  shares of Kahala Stock (as defined in
          section 6.02 hereof).

1.03.     "Additional Insider Note" shall mean a promissory note,  substantially
          in the form annexed to the  Disclosure  Statement as EXHIBIT F, issued
          by  Reorganized  Ranch*1,  in the principal  amount of the  Additional
          Insider Amount, without interest,  with the first payment (of thirteen
          equal  payments)  commencing  twelve (12) months  after the  Effective
          Date.

----------
(1)  The Debtors include:  Ranch *1, Inc.; Ranch *1 Metro,  Inc.; Ranch *1 Metro
     Tech, Inc.; Ranch *1 Pearl,  Inc.; Ranch *1 Group,  Inc.;  Moorgrho,  Inc.;
     Ranch *1 Eighth Avenue, Inc.; Ranch *1 of America,  Inc.; Ranch *1 Fashion,
     Inc.;  Ranch  *1  Number  0117,  Inc.;  Ranch  *1  Palisades,   Inc.;  Dome
     Enterprises,  Inc.;  Ranch *1 Number 0118, Inc.; Ranch *1 Number 202, Inc.;
     Ranch *1 Number 1701, Inc.; Ranch *1 of Broadway;  Ranch *1 on 34th Street,
     Inc.; Ranch *1 Number 0207, Inc.; Ranch *1 0112, Inc.; Ranch *1 52nd, Inc.;
     Ranch *1 Number 0137,  Inc.;  Ranch *1 Number 0113,  Inc.;  Ranch *1 Number
     0135,  Inc.;  Ranch *1 Number 0125,  Inc.; OME, Inc.; Ranch *1 Number 1904,
     Inc.; Ranch *1 Downtown,  Inc.; Ranch *1 Number 0150, Inc.; Ranch *1 Number
     0128, Inc.

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<PAGE>
1.04.     "Administrative  Claim"  shall mean a claim for any cost or expense of
          administration  of the Chapter 11 Case allowed under Section 503(b) of
          the Bankruptcy Code including,  without limitation, (i) any actual and
          necessary  costs and expenses of preserving  the Debtors'  estates and
          operating the Debtors' business,  including,  without limitation,  all
          Cure Amount  Claims  (whether or not payable on the  Effective  Date);
          (ii) all allowances of  compensation  for legal or other  professional
          services or  reimbursement of costs and expenses to the extent allowed
          by the Court under  Sections 330, 331, 503 or 506(c) of the Bankruptcy
          Code or  otherwise  allowed by the Court;  (iii) all  outstanding  and
          unpaid principal,  interest,  costs and other charges due R1 Franchise
          under  the DIP  Financing  Facility;  and (iv)  all  fees and  charges
          assessed against the Debtors' estates under Chapter 123 of Title 28 of
          the United States Code, 28 U.S.C.ss.ss.1911 through 1930.

1.05.     "Allowed  Administrative  Claim" shall mean all or that portion of any
          Administrative Claim which is an Allowed Claim.

1.06.     "Allowed  Claim" shall mean a Claim or portion of a Claim (i) which is
          scheduled by the Debtors  pursuant to Section 521(1) of the Bankruptcy
          Code,  other  than a  Claim  which  is  scheduled  by the  Debtors  as
          disputed,  contingent or unliquidated; or (ii) proof of which has been
          filed pursuant to Section  501(a) of the Bankruptcy  Code on or before
          the date designated by the Court as the last date for filing proofs of
          claim and with respect to which no objection to the allowance  thereof
          has been interposed prior to the final date for filing such objections
          set forth in an order of the Court;  or (iii) which,  after  objection
          thereto,  has been allowed,  in whole or in part, by a Final Order; or
          (iv) a Claim which has been granted pursuant to a Final Order.

1.07.     "Allowed  Insider  Unsecured  Claim"  shall mean an Allowed  Unsecured
          Claim that is an Insider Claim.

1.08.     "Allowed Non-Insider  Unsecured Claim" shall mean an Allowed Unsecured
          Claim, excluding Insider Claims and Disallowed Claims.

                                       2
<PAGE>
1.09.     "Allowed Priority Claim" means all or that portion of an Allowed Claim
          entitled to priority under Section 507(a)(3),  (4), (6), (7) or (8) of
          the Bankruptcy Code.

1.10.     "Allowed  Secured Claim" shall mean all or that portion of any Allowed
          Claim that is secured by a valid  perfected  lien on  property  of the
          Debtors  to the extent of the value of the  interest  of the holder of
          such  Allowed  Secured  Claim or fixed by the  Court by a Final  Order
          pursuant to Section 506(a) of the Bankruptcy Code,  together with such
          interest  accrued  on  or  after  July  3,  2001,   including,   where
          applicable,  fees,  costs  and  charges  as may  be  allowed  by  such
          agreement or by the Court under Section 506(b) of the Bankruptcy Code.
          Allowed  Secured  Claims shall,  INTER ALIA,  include  Claims  granted
          secured status pursuant to a specific order or orders of the Court.

1.11.     "Allowed Tax Claim" shall mean all or that portion of an Allowed Claim
          entitled to priority under Section  507(a)(8) of the Bankruptcy  Code.
          Except as may be ordered  by the Court in the case of an  Allowed  Tax
          Claim,  any interest  accrued on or after July 3, 2001, on Allowed Tax
          Claims shall not be part of any Allowed Tax Claim.

1.12.     "Allowed  Unsecured  Claim" shall mean an Allowed Claim that is not an
          Allowed Administrative Claim, a Cure Amount Claim, an Allowed Priority
          Claim, an Allowed  Secured Claim, or Allowed Tax Claim.  Except as may
          be contemplated by the Class 2 Note, interest accrued on or after July
          3, 2001  through the  Effective  Date shall not be part of any Allowed
          Unsecured Claim

1.13.     "Ballot"   shall  mean  the  form(s)   distributed  to  Creditors  (as
          hereinafter  defined)  holding Claims in an impaired class, or holders
          of interests  in an impaired  class,  on which is to be indicated  the
          acceptance or rejection of the Plan.

1.14.     "Bankruptcy  Code" shall mean Title 11 of the United States Code,  the
          Bankruptcy  Reform Act of 1978 (11 U.S.C.  Sections  101, ET. SEQ.) as
          amended by the Bankruptcy Amendments and Federal Judgeship Act of 1984
          (P.L. No. 98-353), and the Bankruptcy Reform Act of 1994.

1.15.     "Bankruptcy  Court" or "Court" shall mean the United States Bankruptcy
          Court for the  Southern  District  of New York in which  the  Debtors'
          Chapter  11  Cases  are   pending  or  any  court   having   competent
          jurisdiction to enter the Confirmation Order.

                                       3
<PAGE>
1.16.     "Bankruptcy   Rules"  shall  mean  the  Federal  Rules  of  Bankruptcy
          Procedure,  promulgated  under  Section 2075 of Title 28 of the United
          States Code,  together with all  amendments and  modifications,  which
          roles govern  procedure  in cases under Title 11 of the United  States
          Code, as amended.

1.17.     "Business  Day" shall mean any day other  than a  Saturday,  Sunday or
          legal holiday as such term is defined in Bankruptcy Rule 9006.

1.18.     "Cash"  shall  mean  cash  equivalents  in  certified  or  immediately
          available funds, including, but not limited to, bank deposits,  checks
          and similar items.

1.19.     "Chapter 11" shall mean Chapter 11 of the Bankruptcy Code.

1.20.     "Chapter 11 Cases" or "Cases"  shall mean these cases under Chapter 11
          of the  Bankruptcy  Code in which  Ranch  *1,  Inc.,  ET al.,  are the
          Debtors,  which  Chapter 11 Cases are  pending  before the  Bankruptcy
          Court (as defined herein) under  BANKRUPTCY  Case Nos.  01-41853 (AJG)
          through 01-41881 (AJG).

1.21.     "Claim"  shall mean a claim  against the Debtors as defined in Section
          101(5) of the  Bankruptcy  Code;  TO WIT,  the (a)  right to  payment,
          whether  or  not  such  right  is  reduced  to  judgment,  liquidated,
          unliquidated,   fixed,  contingent,   matured,  unmatured,   disputed,
          undisputed, legal, equitable, secured or unsecured; or (b) right to an
          equitable  remedy for breach of  performance if such breach gives rise
          to a right  to  payment,  whether  or not such  right to an  equitable
          remedy is reduced to judgment, fixed, contingent,  matured, unmatured,
          disputed, undisputed, secured or unsecured.

1.22.     "Claimant" shall mean the holder of a Claim.

1.23.     "Class"  shall mean a class of holders of Allowed  Claims or interests
          described in Article II of the Plan.

1.24.     "Class 2 Note" shall mean a promissory note, substantially in the form
          annexed to the Disclosure Statement as Exhibit D issued by Reorganized
          Ranch *1 to the holders of Class 2 Allowed Claims in the principal sum
          of two million two hundred  fifty  thousand  dollars  ($2,250,000.00),
          together with interest at seven percent (7%) per annum, compounded and
          payable  semi-annually with the first payment (of nine equal payments)
          commencing  twelve (12) months after the Effective  Date.  The Class 2

                                       4
<PAGE>
          Note  shall be  secured by a first  priority  lien in the amount  then
          outstanding  under  the  Class 2 Note on all  royalties  to be paid by
          Ranch *1 franchises  existing as of the  Confirmation  Date until such
          time as the Class 2 Note is paid in full.

1.25.     "Confirmation" shall mean entry of an order by the Court approving the
          Plan in accordance with Chapter 11 of the Bankruptcy Code.

1.26.     "Confirmation  Date"  shall mean the date upon which the  Confirmation
          Order is entered by the Bankruptcy Court.

1.27.     "Confirmation  Order"  shall  mean  the  order  entered  by the  Court
          confirming the Plan,  pursuant to Section 1129 of the Bankruptcy Code,
          and approving the transactions contemplated by the Plan.

1.28.     "Consummation  Date"  shall  mean the date  upon  which  all  payments
          required under the Plan have been made to holders of Allowed Claims.

1.29.     "Contested",  when used with  respect  to a Claim,  shall mean a Claim
          against the Debtors,  other than an Allowed  Administrative Claim, (i)
          that is listed in the Debtors'  schedules of  liabilities as disputed,
          contingent, or unliquidated, or (ii) that is the subject of a proof of
          claim to which an objection has been or may be filed.

1.30.     "Cram-down" shall mean Confirmation of the Plan,  notwithstanding  the
          existence of a  non-accepting  Class,  pursuant to the  provisions  of
          Section 1129(b) of the Bankruptcy Code.

1.31.     "Creditor"  shall mean any person that is a Holder of a Claim  against
          the  Debtors  that arose or is deemed to have  arisen on or before the
          Petition Date (as hereinafter defined), including, without limitation,
          Claims of the kind specified in Sections  502(b),  502(h) or 502(1) of
          the Bankruptcy Code.

1.32.     "Cure  Amount  Claim"  shall  mean  a  Claim  based  upon  a  Debtor's
          default(s) pursuant to an Executory Contract or Unexpired Lease at the
          time such  contract or lease is assumed by that Debtor under  Sections
          365 of the Bankruptcy Code and shall be in the amount(s) (a) set forth
          in the schedule annexed to the Disclosure  Statement as EXHIBIT _, (b)

                                       5
<PAGE>
          agreed to between  the  Debtors  and/or  Reorganized  Ranch *1 and the
          holder of the Cure Amount  Claim or (c) fixed  pursuant to an Order of
          the Bankruptcy Court.

1.33.     "Debtors"  and  "Debtors-In-Possession"  shall mean Ranch *1, Inc. and
          the other  above-captioned  Debtors  and  Debtors-in-possession  which
          filed voluntary petitions under Chapter 11 of the Bankruptcy Code.

1.34.     "DIP   Financing   Facility"   shall  mean,   collectively:   (a)  the
          Debtor-in-Possession Loan Agreement,  dated as of July 31, 2001, as it
          may be subsequently  amended and modified,  among the Debtors,  and R1
          Franchise;  (b) all amendments thereto and extensions thereof; and (c)
          all  security  agreements  and  instruments  related to the  documents
          identified in (a) and (b) herein.

1.35.     "Disallowed  Claim"  shall mean any Claim or portion  thereof that has
          been disallowed by the Court by a Final Order.

1.36.     "Disclosure  Statement"  shall mean the document which is filed by the
          Debtors  with the Court in  connection  with this  Plan,  and which is
          approved by a Final Order  pursuant to Section 1125 of the  Bankruptcy
          Code as  containing  adequate  information  to  enable  Claimants  and
          holders of stock interests in the Debtors to make an informed decision
          in voting on the Plan.

1.37.     "Disputed Claim" shall mean (i) any Claim or portion of a Claim (other
          than an Allowed  Claim) which is scheduled by the Debtors as disputed,
          contingent  or  unliquidated;  or (ii) a Claim  which  has been  filed
          pursuant to Section 501(a) of the Bankruptcy  Code as  unliquidated or
          contingent;  or (iii) a Claim which has been filed pursuant to Section
          501(a)  of the  Bankruptcy  Code and as to which an  objection  to the
          allowance thereof has been interposed within the time limitation fixed
          by the  Bankruptcy  Code,  by an order of the Court,  or by this Plan,
          which  objection  has not been  determined,  in whole or in part, by a
          Final Order.

1.38.     "Distribution  Date"  when  used  with  respect  to a Claim or  Equity
          Interest claim (as hereinafter defined) shall mean any date on which a
          distribution on such Claim is to be made pursuant to the Plan.

1.39.     "Effective  Date"  shall mean the first (1st) of the first (1st) month
          after  the  twentieth  (20th)  day  after the date of the entry of the
          Confirmation  Order;  PROVIDED,  HOWEVER,  that the time to appeal the

                                       6
<PAGE>
          Confirmation  Order  has  expired  and  no  appeal  has  been  noticed
          therefrom or that the time to appeal a decision  rendered with respect
          to an  appeal  from  the  Confirmation  Order  has  expired  or that a
          decision  with  respect to an appeal has been  rendered and no further
          appeal is available,  in such event,  the "Effective  Date" shall mean
          the first (1st) of the first  (1st)  month after the tenth  (10th) day
          after the Confirmation Order becomes a Final Order.

1.40.     "Equity  Contribution"  shall mean the sum of $2,750,000.00 paid by R1
          Franchise  to and on behalf of the  Debtors,  pursuant to Section 5.04
          hereof.

1.41.     "Equity  Security  Interests"  shall  have the  meaning  set  forth in
          Section 101(16) of the Bankruptcy Code and "Holders of Equity Security
          Interests" shall have the meaning set forth in  Section101(17)  of the
          Bankruptcy Code.

1.42.     "Entity" shall mean the definition set forth in Section 101(15) of the
          Bankruptcy Code.

1.43.     "Executory  Contract and Unexpired  Lease" or  "Executory  Contract or
          Unexpired  Lease"  shall mean a contract or lease to which one or more
          of the Debtors is a party that is subject to  assumption  or rejection
          under Section 365 of the Bankruptcy Code.

1.44.     "Fee Claim" means a Claim under  Section  330(a),  331, 503 or 1103 of
          the Bankruptcy Code for compensation of a Professional or other entity
          for services rendered or expenses incurred in the Cases.

1.45.     "Fee Order" means the  "Administrative  Order Pursuant to Sections 105
          and 331 of the  Bankruptcy  Code  Establishing  Procedures for Interim
          Compensation and Reimbursement of Expenses of  Professionals"  entered
          by the Bankruptcy Court on or about July 31, 2001.

1.46.     "Final  Order" shall mean an order or judgment of the Court as entered
          on the  docket  that (a) is not  stayed,  (b) has not  been  reversed,
          modified or amended, and (c) as to which the time to appeal,  petition
          for certiorari, or seek reargument, review, reconsideration, rehearing
          or leave to appeal (excluding the time to move for relief from a final
          order or  judgment  under  Rule  60(b) of the  Federal  Rules of Civil
          Procedure  and  the  time  to  request   revocation  of  an  order  of
          confirmation  under Section 1144 of the  Bankruptcy  Code) has expired
          and as to which no appeal, petition for certiorari or other proceeding
          for reargument, review, reconsideration,  rehearing or leave to appeal
          (including  a motion for relief from a final  order or judgment  under

                                       7
<PAGE>
          said  Rule  60(b)  or  a  request  for   revocation  of  an  order  of
          confirmation  under  said  Section  1144) or as to which  any right to
          appeal,   petition  for   certiorari  or  seek   reargument,   review,
          reconsideration,  rehearing  or leave to  appeal  has been  waived  in
          writing in a manner  satisfactory to RI Franchise,  or, if any appeal,
          petition for certiorari,  or other proceeding for reargument,  review,
          reconsideration,  rehearing  or leave to appeal has been  sought,  the
          order or judgment of the Court has been  affirmed by the highest court
          to  which  the  order or  judgment  was  appealed  or from  which  the
          reargument or rehearing was sought, or certiorari has been denied, and
          the time to take any further  appeal,  petition for certiorari or seek
          further  reargument,  review,  reconsideration,  rehearing or leave to
          appeal  (excluding  the time to move for relief  from a final order or
          judgment  under said Rule 60(b) and the time to request  revocation of
          an order of confirmation under said Section 1144) has expired.

1.47.     "Insider  Claim"  shall mean any Claim of an Insider  (as such term is
          defined under Section  101(31) of the  Bankruptcy  Code) and any Claim
          for reimbursement or contribution of a Person (as hereinafter defined)
          that is co-liable  with the Debtors or asserts a right of  subrogation
          pursuant to Section 509 of the Bankruptcy Code.

1.48.     "Insider Note" shall mean a promissory note, substantially in the form
          annexed  to  the   Disclosure   Statement  as  EXHIBIT  E,  issued  by
          Reorganized Ranch *1, in the principal amount of $575,000.00, together
          with  interest at seven percent (7%) per annum,  amortized  over seven
          (7)  years,  compounded  semi-annually,  with the first  payments  (of
          thirteen  equal  payments)  commencing  twelve (12)  months  after the
          Effective Date.

1.49.     "IRS"  shall mean the  Internal  Revenue  Service,  Department  of the
          Treasury of the United States of America.

1.50.     "Liquidating  Debtors"  shall mean those  Debtors  which R1  Franchise
          decides,  in its sole  discretion,  prior to the  Effective  Date,  to
          liquidate and dissolve.

1.51.     "Local Bankruptcy Rules" shall mean the Local Bankruptcy Rules for the
          Southern  District  of New  York,  together  with all  amendments  and
          modifications as applicable to the Chapter 11 Cases.

                                       8
<PAGE>
1.52.     "Net Equity  Contribution" shall mean the Equity Contribution less the
          amount of all  Allowed  Administrative  Claims  less the  Professional
          Reserve.

1.53.     "Ordinary   Course   Professionals   Order"   shall  mean  the  "Order
          Authorizing Debtors and  Debtors-in-Possession  to Retain,  Employ and
          Pay  Professionals  in the Ordinary  Course of the Debtors'  Business"
          entered by the Bankruptcy Court on September 24, 2001.

1.54.     "Permitted  Investments"  shall mean any  investment  as  permitted by
          Section 345 of the Bankruptcy Code.

1.55.     "Person" shall mean the definition set forth in Section 101(41) of the
          Bankruptcy Code.

1.56.     "Petition Date" shall mean July 3, 2001.

1.57.     "Plan" shall mean this Plan of Reorganization,  as modified or amended
          as and to the extent  permitted  herein or by the Bankruptcy Code, and
          any exhibits and schedules annexed herein.

1.58.     "Preference  Actions" means causes of action against Persons  relating
          to any  payment,  conveyance  or other  transfer  of  property  of the
          Debtors to any Person that may be avoidable pursuant to Section 547 of
          the Bankruptcy Code and/or recoverable  pursuant to Section 550 of the
          Bankruptcy Code.

1.59.     "Priority  Claim"  shall mean  "Priority  Tax  Claims"  and  "Priority
          Non-Tax  Claims"  in the  aggregate,  and shall  mean any claim to the
          extent entitled to priority in payment under Section  507(a)(2),  (3),
          (4), (5), (6) or (7) of the Bankruptcy Code.

1.60.     "Priority  Non-tax  Claims" means Priority Claims other than "Priority
          Tax Claims"  which  shall mean  Priority  Claims  entitled to priority
          treatment as a tax under Section 507(a)(7) of the Bankruptcy Code.

1.61.     "Professional" shall mean any professional  employed in the Chapter 11
          Case pursuant to Section 327 or Section 1103 of the  Bankruptcy  Code,
          or  any   professional   or  other  entity  seeking   compensation  or
          reimbursement  of expenses in  connection  with the Cases  pursuant to
          Sections 503(b)(3)(F) and (b)(4) of the Bankruptcy Code.

1.62.     "Professional Reserve" shall mean the anticipated amount to be paid to
          the   Debtors'   and  the   Committee's   Professionals,   except  any
          Professional who may receive compensation or reimbursement of expenses
          pursuant  to the  Ordinary  Course  Professionals  Order,  pursuant to

                                       9
<PAGE>
          paragraph  17.09  herein in the amount of $125,000.  The  Professional
          Reserve shall be held by Reorganized  Ranch *1 in an interest  bearing
          account and may only be used for  post-Effective  Date Payments to the
          Debtors' and the Committee's  Professionals,  except any Professionals
          who may receive  compensation or reimbursement of expenses pursuant to
          the Ordinary Course  Professionals Order, in accordance with paragraph
          17.09 herein.

1.63.     "Pro-rata" shall mean, as to any distribution provided for by the Plan
          in respect of any Class of Claims,  the  allocation  of the  aggregate
          amount  of such  distribution  to any  Class in  accordance  with that
          percentage  of the  total of  Allowed  Claims  in such  Class  that is
          represented by the Allowed Claim receiving the distribution.

1.64.     "Ranch *1" shall mean Ranch *1, Inc. and the  above-captioned  Debtors
          and Debtors-In-Possession.

1.65.     "Record  Date" shall mean the close of  business  on the  Confirmation
          Date.

1.66.     "Reorganized Ranch *1" shall mean the Debtors,  except the Liquidating
          Debtors,  on and after the Effective Date and shall include all of the
          assets of the Debtors.

1.67.     "Reserve"  shall  mean  the  Pro-rata  portion  of any  Cash or  other
          property  retained on account of a Contested Claim,  pending allowance
          of such Claim.

1.68.     "R1 Franchise" shall mean R1 Franchise Systems, LLC.

1.69.     "Secured  Creditor" shall mean the holder of an Allowed Secured Claim,
          including,  without  limitation,  the holder of a lien  securing  real
          estate taxes.

1.70.     "Tax  Claim"  shall  mean a Claim of the  kind  specified  in  Section
          507(a)(7) of the Bankruptcy Code.

1.71.     "Unsecured  Claim"  shall mean any Claim  against  any of the  Debtors
          which arose or which is deemed by the  Bankruptcy  Code to have arisen
          before or on the Petition  Date,  and which is not (a) a Secured Claim
          pursuant to Section  506, as  modified  by Section  1111(b);  or (b) a
          Claim entitled to priority under Sections 503 or 507 of the Bankruptcy
          Code (including but not limited to Tax Claims and/or priority claims);
          or (c) a Claim expressly included in the definition of any other Class
          (including  without limitation each Allowed Claim secured by a lien on
          property  in which the Estate has an  interest to the extent that such
          Claim is determined to be unsecured in accordance with Section 506(a),

                                       10
<PAGE>
          and each claim of the kind  described  in clauses  (3), (4) and (6) of
          Section 507(a) of the  Bankruptcy  Code to the extent that the Allowed
          Amount of such claim may be accorded priority thereunder).

1.72.     "Unexpired  Leases"  shall  mean any lease to which one or more of the
          Debtors are a party and which is in effect  prior to the  Confirmation
          Date.

1.73.     "Voting  Class"  shall mean a Class of Claims  under the Plan which is
          impaired and entitled to vote to accept or reject the Plan.

1.74.     "Other  Definitions"  -  the  words  "herein",   "hereof",   "hereto",
          "hereunder"  and others of similar import refer to the Plan as a whole
          and not to any particular section,  subsection, or clause contained in
          the Plan.  Moreover,  some terms  defined  herein  are  defined in the
          section  in which  they are used and some  terms not  defined  in this
          section are defined elsewhere in the Plan and/or Disclosure Statement.

                                   ARTICLE II

                     CLASSIFICATION OF CLAIMS AND INTERESTS

2.01.     The Plan is proposed in accordance with the provisions of Section 1123
          of the Bankruptcy Code. The Plan itself should be scrutinized in order
          to fully analyze the pertinent provisions of the document. In addition
          to Allowed  Administrative  Claims,  Allowed  Tax  Claims and  Allowed
          Priority  Claims,  the Allowed Claims against the Debtors'  estate are
          divided into the following classes:

2.01.1    CLASS 1 shall consist of:

          The Allowed Secured Claim of R1 Franchise.

2.01.2    CLASS 2 shall consist of:

          All Allowed Non-Insider Unsecured Claims, including all Allowed Claims
          arising  from the  rejection  of  executory  contracts  and  Unexpired
          Leases.

2.01.3    CLASS 3 shall consist of:

          All Allowed Insider Unsecured Claims.

2.01.4    CLASS 4 shall consist of:

          The holders of Equity Security Interests in one or all of the Debtors.

                                       11
<PAGE>
                                   ARTICLE III

                      SUBSTANTIVE CONSOLIDATION OF DEBTORS
                     AND CANCELLATION OF INTERCOMPANY CLAIMS

3.01.     SUBSTANTIVE CONSOLIDATION. On the Effective Date, the Chapter 11 Cases
          and  the  Debtors  and  their  estates  shall  only  be  substantively
          consolidated  for all  purposes of the Plan and shall not be deemed to
          alter, amend or destroy the Debtors as separate entities for any other
          purpose. The assets and liabilities of the Debtors shall be pooled and
          all Claims shall be satisfied from the assets of a single consolidated
          estate.  Any  Claims  against  one or more of the  Debtors  based on a
          guaranty,  indemnity,  co-signature,  surety or  otherwise,  of Claims
          against  another  Debtors'  shall be treated as a single Claim against
          the  consolidated  estate of the  Debtors,  and shall be  entitled  to
          distribution  under the Plan only with  respect to such single  Claim.
          The Court shall  consider the  Debtors'  application  for  substantive
          consolidation  at the  Confirmation  Hearing  and  any  objections  to
          substantive consolidation shall be served and filed as is required for
          objections to the Confirmation of the Plan.

3.02.     INTERCOMPANY  CLAIMS.  On the Effective Date, all Intercompany  Claims
          that  exist  or  may  exist  by  and  amongst  the  Debtors  shall  be
          extinguished.

                                   ARTICLE IV

                     IDENTIFICATION OF CLASSES OF CLAIMANTS
                      IMPAIRED OR UNIMPAIRED UNDER THE PLAN

4.01.     Allowed  Administrative  Claims,  Allowed Tax Claims, Allowed Priority
          Claims and Allowed Secured Claim of Class 1 are not impaired under the
          Plan  except to the extent  the  holder  thereof  has  consented  to a
          different treatment.

4.02.     Allowed  Non-Insider  Unsecured  Claims (Class 2) and Allowed  Insider
          Unsecured  Claims  (Class 3) are impaired by the Plan and are entitled
          to  vote to  accept  or  reject  the  Plan.  Allowed  Equity  Security
          Interests  (Class 4) are receiving no  distribution on account of such
          Equity Security Interests, and are, therefor,  deemed to have rejected
          the Plan.

4.03.     In the event of a  controversy  as to whether any Claimant or Class of
          Claimants are impaired under the Plan,  the Court shall,  after notice
          and a hearing, determine such controversy.

                                       12
<PAGE>
4.04.     The Debtors shall  provide all Claimants  entitled to vote with a form
          of Ballot  approved  by the Court to be used in  casting a vote on the
          Plan.  The  Ballot  shall  designate  the Class in which  the  Debtors
          believe a particular Claim belongs.

                                    ARTICLE V

                           PROVISIONS FOR TREATMENT OF
                       CLAIMS NOT IMPAIRED UNDER THE PLAN

5.01.     ADMINISTRATIVE  CLAIMS.  Except as otherwise provided in Article XI of
          this Plan,  the Debtors  anticipate  that all  Allowed  Administrative
          Claims  will have been paid in full by the  Debtors  on or before  the
          Effective  Date of the Plan in cash or on such  other  terms as may be
          agreed upon by a Claimant of an Allowed  Administrative Claims and the
          Debtors  and/or  Reorganized  Ranch *1. All fees  payable  and reports
          required to be filed  pursuant to 28 U.S.C.  ss.1930  will be paid and
          filed  by  Reorganized  Ranch *1 in  accordance  therewith  until  the
          closing  of the  Debtors'  cases  pursuant  to  Section  350(a) of the
          Bankruptcy Code.

5.02.     TAX CLAIMS.  Allowed Tax Claims will be paid in full, in cash:  (a) in
          the manner and to the extent permitted by Section 1129(a)(9)(c) of the
          Bankruptcy  Code,  which  Allowed  Priority  Tax Claims may be paid by
          Reorganized  Ranch *1 over a period not  exceeding six (6) years after
          the date of  assessment  of such Allowed Tax Claims;  or (b) upon such
          terms and  conditions as may be agreed upon by and between the Debtors
          and/or Reorganized Ranch *1 and any holder of an Allowed Tax Claim.

5.03.     PRIORITY CLAIMS.  Allowed Priority Claims will be paid (a) in full, in
          cash,  upon the Effective  Date; or (b) upon such terms and conditions
          as may be agreed upon by and between  the Debtors  and/or  Reorganized
          Ranch *1 and any holder of an Allowed Priority Claim.

5.04.     ALLOWED  SECURED CLAIM OF R1 FRANCHISE  (CLASS 1). In exchange for the
          financial  accommodations  more  particularly  set  forth  herein,  R1
          Franchise  shall be acquiring and shall be issued one hundred  percent
          (100%) of the stock (equity security  interests) in Reorganized  Ranch
          *1.  Specifically,  in exchange  for making and  funding:  (i) the Net
          Equity Contribution,  and (ii) causing Reorganized Ranch *1 to execute
          and deliver the Class 2 Note,  the Insider  Note,  and the  Additional
          Insider Note, R1 Franchise shall receive one hundred percent (100%) of
          all Equity Security Interests in Reorganized Ranch *1.

                                       13
<PAGE>
                                   ARTICLE VI

                            PROVISIONS FOR TREATMENT
                        OF CLAIMS IMPAIRED UNDER THE PLAN

6.01.     ALLOWED UNSECURED NON-INSIDER CLAIMS (CLASS 2).

          (a)  Within thirty (30) days after the Effective  Date, each holder of
               an Allowed  Non-Insider  Unsecured  Claim (Class 2 Claims)  shall
               receive its PRO RATA distribution of the Net Equity Contribution.

          (b)  Within thirty (30) days after the Effective  Date,  the Committee
               shall receive the Class 2 Note.

          (c)  Any payment to be made pursuant to this section may be prepaid in
               whole  or in part  at any  time by  Reorganized  Ranch  *1 in its
               discretion without penalty.

          (d)  In no  event  shall a  holder  of an  Allowed  Non-Insider  Claim
               receive in excess of one  hundred  percent  (100%) of its Allowed
               Claim plus its pro rata share of interest allowed pursuant to the
               Class 2 Note.

6.02.     ALLOWED  INSIDER  UNSECURED  CLAIMS  (CLASS 3 Within  thirty (30) days
          after the Effective Date (x) each holder of an Allowed Class 3 Insider
          Unsecured  Claim that is an Accredited  Investor shall receive its pro
          rata share (based on the  aggregate  amount of Allowed Class 3 Claims)
          of: (A) 143,750  shares of common  stock of Kahala  Corp.  (KAHA) (the
          "Kahala  Stock");  plus (B) the proceeds of the Insider Note,  and (y)
          each holder of an Allowed Class 3 Insider  Unsecured Claim that is not
          an Accredited  Investor shall receive (A) its pro rata share (based on
          the aggregate amount of Allowed Class 3 Claims) of the proceeds of the
          Insider Note and (B) its pro rata share (based on the aggregate amount
          of  Allowed  Class 3 Claims  held by holders  that are not  Accredited
          Investors) of the proceeds of the Additional Insider Note. The portion
          of  143,750  shares of Kahala  Stock in excess of the amount of shares
          distributed  to holders of Allowed  Class 3 Insider  Unsecured  Claims
          that are Accredited Investors shall not be distributed under the Plan.

                                       14
<PAGE>
6.03.     EQUITY  SECURITY  INTEREST  HOLDERS (CLASS 4). Class 4 consists of all
          holders of pre-petition Equity Security Interest in the Debtors, whose
          present  stock  (equity  security)  interests in the Debtors  shall be
          cancelled  on  the  Effective   Date  and  they  will  not  receive  a
          distribution, and are deemed to have rejected the Plan.

                                   ARTICLE VII

                   ACCEPTANCE OR REJECTION OF PLAN; EFFECT OF
                   REJECTION BY ONE OR MORE CLASSES OF CLAIMS

7.01.     IMPAIRED CLASSES TO VOTE. Each impaired class of Creditors with Claims
          against the  Debtors'  Estate shall be forwarded a ballot and shall be
          entitled to vote separately to accept or reject the Plan.

7.02.     ACCEPTANCE  BY A CLASS OF CREDITORS.  A Class of Creditors  shall have
          accepted the Plan if the Plan is accepted by at least two-thirds (2/3)
          in the aggregate  dollar amount and more than one-half (1/2) in number
          of  Holders  of the  Allowed  Claims of such  class that have voted to
          accept or reject the Plan.

7.03.     CRAM-DOWN.  In the event that any  impaired  Class of  Creditors  with
          Claims  against the  Debtors'  Estate shall fail to accept the Plan in
          accordance  with  Section  1129(a) of the  Bankruptcy  Code,  the Plan
          Proponents  reserve  the right to request  that the  Bankruptcy  Court
          confirm the Plan,  notwithstanding such rejection,  in accordance with
          Section 1129(b)(1) of the Bankruptcy Code.

7.04.     BLANK  BALLOTS.  Any  Ballot  which is  executed  by the  Holder of an
          Allowed Claim or interest but which does not indicate an acceptance or
          rejection of the Plan shall be deemed an acceptance of the Plan.

                                  ARTICLE VIII

                       PROVISIONS CONCERNING DISTRIBUTION

8.01.     TIME OF DISTRIBUTIONS UNDER THE PLAN. Payments and distributions to be
          made by the Debtors on the  Effective  Date pursuant to the Plan shall
          be made on such date, or as soon as  practicable,  except as otherwise
          provided for in the Plan, or as may be ordered by the Court.

                                       15
<PAGE>
8.02.     PAYMENT DATES.  Whenever any payment or  distribution to be made under
          the Plan shall be due on a day other than a Business Day, such payment
          or distribution shall instead be made,  without interest,  on the next
          Business Day.

8.03.     MANNER OF PAYMENTS UNDER THE PLAN.  Cash payments made pursuant to the
          Plan  shall be made in the  currency  of the United  States,  by check
          drawn on a domestic  bank or by wire  transfer  from a domestic  bank.
          Distributions  to all holders of Allowed  Claims  shall be made (a) at
          the  addresses  set forth in the proof of claim filed by such  holders
          (or at last  known  addresses  of such  holders if no proofs of claims
          were filed or the Debtors were  notified of a change of  address);  or
          (b) at the  addresses  set forth in any  written  notices  of  address
          change delivered to the Debtors or the Bankruptcy Court after the date
          the proof of claim was filed; or (c) at the addresses reflected in the
          Debtors'  schedules  if no claim  shall have been filed and no written
          notice of an  address  change has been  received  by the  Debtors.  No
          payments  shall be made to a holder of a Disputed or  Contested  Claim
          unless and until such Claim becomes an Allowed Claim by a Final Order.

8.04.     FRACTIONAL  CENTS.  Any other  provision  of the Plan to the  contrary
          notwithstanding,  no  payments  of  fractions  of cents  will be made.
          Whenever any payment of a fraction of a cent would otherwise be called
          for, the actual  payment  shall reflect a rounding of such fraction to
          the nearest whole cent (rounding down in the case of .5).

8.05.     NON-NEGOTIATED  CHECKS.  Except as otherwise set forth in Section 8.06
          hereof,  if a  Holder  of an  Allowed  Claim,  or and  other  claim or
          interest  fails to  negotiate a check  issued to such Holder under the
          Plan within one  hundred and eighty  (180) days of the date such check
          was issued by  Reorganized  Ranch *1, then the amount of Cash or other
          property  attributable  to such check shall be deemed to be "Unclaimed
          Distributions," and the payee of such check shall be deemed to have no
          further Claim or future Claim against the  Debtors/and/or  Reorganized
          *1 with respect of such check.

8.06.     UNCLAIMED  DISTRIBUTIONS.  In the event any  payment  to a holder of a
          Class 2 Unsecured  Non-Insider  Claim under the Plan remains unclaimed
          for a period of six (6) months after such  distribution  has been made
          (or  after  such  delivery  has  been   attempted),   such   Unclaimed

                                       16
<PAGE>
          Distribution  and all future  distributions to be made to such holders
          shall  be  deemed   forfeited   by  such  holder  and  the   Unclaimed
          Distribution  shall be distributed PRO RATA to the other holders of an
          Allowed Class 2 Unsecured Non-Insider Claims.

8.07.     NO CASH PAYMENTS OF $10.00 OR LESS ON ACCOUNT OF ALLOWED CLAIMS.  If a
          cash  payment  otherwise  provided for by this Plan with respect to an
          Allowed Claim would be less than Ten Dollars ($10.00)  (whether in the
          aggregate   or  on  any   payment   date   provided   in  this  Plan),
          notwithstanding  any contrary  provision of this Plan, no such payment
          will be made and Reorganized  Ranch *1 shall retain such funds for its
          own purposes.

8.08.     DISPUTED  PAYMENTS  OR  DISTRIBUTIONS.  In the  event  of any  dispute
          between  and  among  Claimants   (including  the  Entity  or  Entities
          asserting the right to receive the disputed  payment or  distribution)
          as to the right of any  Entity to  receive  or retain  any  payment or
          distribution  to be made to such  Entity  under the Plan,  Reorganized
          Ranch*1  may, in lieu of making such payment or  distribution  to such
          Entity,  make it instead  into an escrow  account  or to a  disbursing
          agent,  for payment or distribution as ordered by a court of competent
          jurisdiction  or  as  the  interested  parties  to  such  dispute  may
          otherwise agree among themselves.

                                   ARTICLE IX

                  PROVISIONS CONCERNING DISCHARGE AND PROPERTY

9.01.     DISCHARGE  OF ALL  CLAIMS AND EQUITY  INTERESTS.  Except as  otherwise
          provided  in the Plan and the  treatment  of all  claims,  the  rights
          afforded  in the  Plan  shall  be in  exchange  for  and  in  complete
          satisfaction,  discharge and release of all Claims or Interests of any
          nature  whatsoever,  including any interest accrued thereon before, on
          or   after   July   3,   2001,    against    the    Debtors   or   the
          Debtors-In-Possession or any of their assets or properties; and except
          as otherwise provided herein, upon the Effective Date, all such Claims
          against  the  Debtors  or  Debtors-In-Possession  shall be  satisfied,
          discharged and released in full; and all Claimants shall be precluded,
          barred and forever prohibited from asserting against Reorganized Ranch
          *1 or any of their assets, properties, employees, officers, directors,
          representatives  or  professionals,  any other or further  claim based
          upon any act or omission, transaction or other activity of any kind or
          nature that occurred prior to the Effective  Date.  Further,  upon the

                                       17
<PAGE>
          confirmation of the Plan, the taxing  authorities  shall be prohibited
          from pursuing any collection  action against the Debtors' officers and
          shareholders  for  pre-petition  debt as long as the Debtors shall not
          have defaulted in their obligations under the Plan, to the extent such
          parties would be able or permitted to do so under applicable law.

9.02.     VESTING OF PROPERTY IN THE DEBTORS.  Except as  otherwise  provided by
          the Plan, on the Effective Date, title to all assets dealt with by the
          Plan shall pass to  Reorganized  Ranch *1 free and clear of all liens,
          claims and interests in accordance with Section 1141 of the Bankruptcy
          Code, subject only to the liens,  claims and interests provided by the
          Class 2 Note,  the claims and interests  provided by the Insider Note,
          and the claims and interests provided by the Additional Insider Note.

                                    ARTICLE X

                            RELEASES AND TERMINATION

10.01.    RELEASES.  The  Debtors,  the  Committee,   their  respective  agents,
          representatives  and attorneys shall be fully and completely  released
          from any and all claims and/or causes of action and/or  remedies which
          the Debtors,  their  respective  estates and/or their creditors and/or
          equity holders may have against them (known or unknown,  liquidated or
          unliquidated,  fixed or contingent),  existing or hereinafter  arising
          from any past,  present or future actions taken or omitted to be taken
          since the  Petition  Date under or in  connection  with,  related  to,
          effecting, or arising out of the Debtors, the Debtors' operations, the
          Debtors'  bankruptcy cases, the administration of the Debtors' estates
          and/or the consummation of the Plan, which release shall be binding on
          the Debtors, their estates, and all creditors,  immediately upon entry
          of the Confirmation Order,  PROVIDED,  FURTHER,  that said release, as
          defined herein, shall be binding on any subsequently appointed Chapter
          7 trustee, PROVIDED,  FURTHER, that said release shall not release any
          person or entity from any  liability  arising  under (i) the  Internal
          Revenue  Code,  or any state,  city or  municipal  tax code,  (ii) the
          environmental   laws  of  the  United  States,   any  state,  city  or
          municipality,  or (iii) any criminal  laws of the United  States,  any
          state, city or municipality.

                                       18
<PAGE>
10.02.    ADMINISTRATIVE  AND  PRIORITY  CLAIM BAR  DATES.  Except as  otherwise
          provided  in  Article XI of this Plan,  all  Claims  for  Priority  or
          Administrative  Claims  (excluding  Claims by  Professionals)  must be
          filed with the Bankruptcy  Court and served on counsel for the Debtors
          and all interested  parties on or before the  Confirmation  Date or be
          forever barred from asserting  such  Administrative  Claim against the
          Debtors,  Reorganized  Ranch *1 or their respective  property and such
          Administrative  Claims shall be deemed  discharged as of the Effective
          Date,  unless  as  otherwise  provided  herein  or so  ordered  by the
          Bankruptcy  Court;  PROVIDED,  HOWEVER,  that  Professionals  or other
          entities  asserting  a Fee  Claim for  services  rendered  before  the
          Effective  Date must File and serve on  Reorganized  Ranch *1 and such
          other  entities  who  are  designated  by the  Bankruptcy  Rules,  the
          Confirmation  Order,  the Fee Order or other  order of the  Bankruptcy
          Court,  an application for final allowance of such Fee Claim, no later
          than ten (10) days after the Effective Date; PROVIDED,  HOWEVER,  that
          any  professional  who may receive  compensation or  reimbursement  of
          expenses  pursuant  to the  Ordinary  Course  Professionals  Order MAY
          continue to receive such  compensation  and  reimbursement of expenses
          for services  rendered  before the  Effective  Date,  without  further
          Bankruptcy  Court review or approval,  pursuant to the Ordinary Course
          Professional  Order.  Objections  to any Fee  Claim  must be Filed and
          served on Reorganized  Ranch *1 and the requesting party within twenty
          (20) days after the Effective  Date,  with a hearing to be held by the
          Bankruptcy  Court on such Fee Claim within  thirty (30) days after the
          Effective Date, or as now thereafter as the Bankruptcy Court schedules
          such a hearing.  To the extent necessary,  the Confirmation Order will
          amend and supersede  any  previously  entered order of the  Bankruptcy
          Court, including the Fee Order, regarding the payment of Fee Claims.

10.03.    CERTAIN   TERMINATIONS.   On  the  Effective   Date,  all  instruments
          evidencing indebtedness of the Debtors discharged by the Plan shall be
          deemed canceled, unless this Plan provides for the retention of liens.

10.04.    RIGHTS IF PLAN NOT  CONFIRMED.  If  Confirmation  of the Plan does not
          occur as contemplated  herein, the Plan shall be deemed null and void,
          and in such  event,  nothing  contained  herein  shall  be  deemed  to
          constitute a waiver or release of any Claims by or against the Debtors
          or any other  Entity or to  prejudice  in any manner the rights of the
          Debtors  or  any  Entity  in any  further  proceedings  involving  the
          Debtors.

                                       19
<PAGE>
                                   ARTICLE XI

                 REJECTION AND ASSUMPTION OF EXECUTORY CONTRACTS

11.01.    Except  as  otherwise  provided  herein,  any  Executory  Contract  or
          Unexpired Lease of the Debtors not expressly  rejected by the Debtors,
          or which is not the subject of a pending  application to reject on the
          Confirmation  Date,  shall be deemed assumed on the Effective Date. To
          the extent that such Claims  constitute  monetary  defaults,  the Cure
          Amount Claims  associated  with each Executory  Contract and Unexpired
          Lease to be assumed  pursuant to the Plan will be satisfied,  pursuant
          to Section  365(b)(1)  of the  Bankruptcy  Code,  at the option of the
          Debtor assuming such contract or lease or the assignee of such Debtor,
          if any, (1) by payment of the Cure Amount Claim in cash within  ninety
          (90) days after the Effective  Date; (2) after the Effective  Date, as
          soon as practicable  after entry of an applicable  order providing for
          the assumption or assumption and assignment of the Executory  Contract
          or Unexpired Lease; or (3) on such other terms as are agreed to by the
          parties to such Executory  Contract or Unexpired  Lease. If there is a
          dispute  regarding  (1) the amount of any Cure Amount  Claim,  (2) the
          ability of the  applicable  Reorganized  Ranch *1 or any  assignee  to
          provide "adequate assurance of future performance" (within the meaning
          of section 365 of the Bankruptcy  Code) under the contract or lease to
          be  assumed  or (3) any  other  matter  pertaining  to  assumption  or
          assumption  and  assignment of such contract or lease,  the payment of
          any Cure Amount Claim required by Section  365(b)(1) of the Bankruptcy
          Code will be made  following the entry of a Final Order  resolving the
          dispute and approving the assumption.

11.02.    Any Entity whose Claim arises from rejection of an Executory  Contract
          or Unexpired  Lease shall, to the extent such Claim becomes an Allowed
          Claim, have the rights of a Class 2 Claimant with respect thereto.

11.03.    Any  Entity  who has a claim  against  the  Debtors  by  virtue of the
          Debtors'  rejection of its Executory Contract or Unexpired Lease shall
          file a proof of claim  with the Clerk of the Court and serve a copy of

                                       20
<PAGE>
          same upon the Debtors and Debtors'  counsel,  in  accordance  with the
          notice  provisions of Section  17.02  hereof,  within thirty (30) days
          following  service  upon  such  Entity  of  notice  of  entry  of  the
          Confirmation Order or order authorizing such rejection, whichever date
          is earlier.  If such Claim is not filed within the specified  time, it
          shall  be  forever   barred  from   assertion   against  the  Debtors,
          Reorganized Ranch *1 or their assets and property.

11.04.    Any claim filed in  accordance  with the  provisions  of Section 11.03
          hereof  shall be treated as a Disputed  Class 2 Claim until the period
          of time has elapsed  within which the Debtors may file an objection to
          such Claim.

                                       21
<PAGE>
                                   ARTICLE XII

                         MEANS FOR EXECUTION OF THE PLAN
                         AND CONDITIONS TO CONFIRMATION

12.01.    The Plan is to be implemented in a manner consistent with Section 1123
          of the Bankruptcy Code.

12.02.    The  monies  needed to pay the  holders  of  Allowed  Claims  shall be
          generated from the Debtors' operation of their business and the Equity
          Contribution by R1 Franchise.

12.03.    R1 Franchise will be acquiring one hundred percent (100%) of the stock
          in Reorganized  Ranch *1 in exchange for the financial  accommodations
          discussed  herein.  The  terms  of  the  Debtors'  agreement  with  R1
          Franchise are as follows:

          (a)  unless otherwise  terminated pursuant to Section 12.03(c) hereof,
               and  conditioned  upon the  Confirmation  Order  becoming a Final
               Order, on the Effective Date, , R1 Franchise shall make an equity
               contribution  to  Reorganized  Ranch *1 of at least the amount of
               the Equity Contribution,  shall cause R1 Franchise to deliver the
               Kahala Stock  pursuant to Section  6.02  hereof,  and shall cause
               Reorganized Ranch *1 to execute and deliver the Class 2 Note, the
               Insider  Note,  and  the  Additional  Insider  Note  pursuant  to
               Sections 6.01 and 6.02 hereof, respectively;

          (b)  R1 Franchise  shall have received 100% of the direct and indirect
               equity interest of Reorganized Ranch *1;

          (c)  Prior to the Effective Date, R1 Franchise's obligations under the
               Plan shall terminate  (unless R1 Franchise waives in writing such
               termination):

               (i)    automatically  and immediately  upon (1) the conversion of
                      any of the  Chapter 11 Cases to a case under  Chapter 7 of
                      the Bankruptcy  Code; (2) the appointment of a trustee for
                      any of the  Debtors  under  Chapter 7 or Chapter 11 of the
                      Bankruptcy  Code;  or (3)  the  appointment  in any of the
                      Chapter 11 Cases of an  examiner  with  powers  other than
                      those  set  forth  in  Section  1106(a)(3)  and (4) of the
                      Bankruptcy  Code;  (4) entry of an order  authorizing  the

                                       22
<PAGE>
                      sale  of the  Debtors'  assets  under  Section  363 of the
                      Bankruptcy  Code or (5) the  withdrawal of the Plan by the
                      Debtor.

               (ii)   by mutual written consent of R1 Franchise, the Debtors and
                      the Committee;

               (iii)  at the option of R1 Franchise in the event that, due to no
                      fault of R1  Franchise,  (a) the  Plan is not  filed on or
                      before November 19, 2001; (b) the Plan is not confirmed by
                      March 1, 2002; or (c) the Plan is not consummated by April
                      15, 2002;

               (iv)   at the  option of R1  Franchise,  in the event  there is a
                      material adverse change(as  determined in good faith by R1
                      Franchise)   in   the   business,   financial   condition,
                      operations,  or prospects  of the Debtors'  business or in
                      the   Debtors'   relationships   with   its   franchisees,
                      customers, suppliers. employees and others having business
                      relationships with the Debtors;

               (v)    at the option of R1 Franchise and/or the Committee, in the
                      event  the  aggregate  amount  of  Allowed  Administrative
                      Claims shall exceed $2,750,000;

               (vi)   at the option of R1 Franchise,  in the event the aggregate
                      amount of Allowed Priority Claims,  Allowed Tax Claims and
                      Allowed Secured Claims shall exceed $700,000;

               (vii)  at the option of R1 Franchise,  in the event that the Plan
                      is amended or  modified  without  R1  Franchise's  written
                      consent; or

               (viii) at the option of R1  Franchise,  in the event that  either
                      the Debtors or the  Committee  withdraws as a proponent of
                      the Plan,  or either the Debtors or the  Committee  do not
                      actively support confirmation of the Plan.

12.04.    Certain of the Debtors' key  employees as  designated  by R1 Franchise
          and as identified in the Disclosure Statement,  may be responsible for
          day-to-day management of Reorganized Ranch *1.

                                       23
<PAGE>
12.05.    Certain of the Debtors' key  employees as  designated  by R1 Franchise
          and  as  identified  in  the  Disclosure  Statement,  may  enter  into
          employment agreements with Reorganized Ranch *1.

12.06.    COMMITTEE.  From the  Effective  Date to the  Consummation  Date,  the
          members of the Committee  and their duly  appointed  successors  shall
          continue  to serve.  Upon the  disallowance  by Final Order of a claim
          held by a creditor that is a member of the Committee,  such membership
          shall  terminate,  and no  replacement  shall be  appointed.  Upon the
          resignation,  death,  or disability of a member of the Committee,  the
          creditor having  appointed such member of the Committee shall have the
          right to designate a replacement.  In the event such creditor fails to
          designate  a  replacement,  no  replacement  may be  appointed  by the
          Committee.

12.07.    If a Committee member assigns its Claim or releases  Reorganized Ranch
          *1 from the  payment  of the  balance  of its  Claim,  such act  shall
          constitute a resignation  from the Committee.  Likewise if a Committee
          member  acquires the Claim held by merger or  consolidation  with such
          claimant,  such act shall  constitute a resignation from the Committee
          and the Committee shall function in its reduced  number.  In the event
          of the death or resignation of the  chairperson of the Committee,  its
          successor  shall be elected by the remaining  members of the Committee
          from their membership.

12.08.    The  Committee  shall  have the right to:  (i)  extend the time of any
          payment or  distribution to the holders of Class 2 Claims provided for
          the Plan; (ii)  participate in any appeal of the  Confirmation  Order;
          (iii) participate in the claims resolution  process;  and (iv) perform
          such  obligations  conferred on the Committee  under the provisions of
          the Bankruptcy Code.  Notwithstanding  anything to the contrary herein
          contained,  except as otherwise  required by the Bankruptcy  Code, the
          Committee may (i) refuse or abstain from exercising any power or right
          granted it by the  provisions of this Article and defer such powers or
          rights to the holders of outstanding and unpaid Class 2 Claims and act
          in accordance  with the vote of the majority in number of such holders
          and (ii)  negotiate  an  immediate  payout or  discount of the Class 2
          Note.

                                       24
<PAGE>
12.09.    Neither  the  Committee  nor any member  thereof,  nor the  attorneys,
          accountants  or  agents  of the  Committee,  shall  be  liable  to the
          Debtors,  to any  Creditor  or to any  other  person  for an  error of
          judgment or any act or omission other than willful  misconduct,  gross
          negligence  or fraud;  it being  understood  that each member shall be
          liable only for its own misconduct, negligence or fraud. Anything done
          or omitted to be done by the Committee or any agent,  in reliance upon
          the  opinion  of  the   Committee's   counsel,   shall  be  sufficient
          justification for the same.

12.10.    Whenever a written  consent by the  Committee is  required,  a written
          consent  of the  chairperson  of the  Committee  or of  counsel to the
          Committee shall be deemed to constitute such consent.

12.11.    The  individual  members  of the  Committee  shall  continue  to serve
          without compensation after Confirmation of this Plan.

12.12.    Subject to Section 17.09 hereof as to  compensation to the Committee's
          Professionals,  the  Committee  shall have the power and  authority to
          continue  to  retain  counsel  and  accountants  and  to  direct  such
          Professionals to act on behalf of the Committee in any matter on which
          the Committee is authorized to act under this Plan.

12.13.    Any action taken by the Committee in  accordance  with the exercise of
          any rights of the  Committee  under the Plan,  may be taken by mail or
          telephone  so long as all  members of the  Committee  are  notified in
          advance of the  proposed  action and a majority  thereof has  approved
          such action.

12.14.    On the Consummation Date, the Committee shall  automatically  dissolve
          and  the  members  thereof  and  the  Professionals  retained  by  the
          Committee in accordance with Section 1103 of the Bankruptcy Code shall
          be  released   and   discharged   from  their   respective   fiduciary
          obligations.

12.15.    Following the Effective  Date and the  distribution  of the Net Equity
          Contribution,  the Class 2 Notes, the Insider Notes and the Additional
          Insider Notes in  accordance  with the Plan,  Reorganized  Ranch*1 may
          move to close the Chapter 11 Cases in  accordance  with section 350 of
          the Bankruptcy Code  notwithstanding  the fact that the notes have not
          been paid in full.

                                       25
<PAGE>
                                  ARTICLE XIII

                     CONDITIONS TO CONSUMMATION OF THE PLAN

13.01.    The  conditions  to  the   consummation  of  the  Plan  are  that  the
          Confirmation Order is a Final Order unless such condition is waived by
          the  Debtors  with  the  consent  of  R1  Franchise  and  all  of  the
          requirements and conditions to the funding obligations of R1 Franchise
          pursuant  to the Plan  shall  have  been  satisfied  or  waived  by R1
          Franchise, in its sole discretion.

                                   ARTICLE XIV

                    PROCEDURES FOR RESOLVING DISPUTED CLAIMS

14.01.    TIME LIMIT FOR  OBJECTIONS  TO CLAIMS.  Objections  to Claims shall be
          filed by the  Debtors  with the Court and served  upon each  holder of
          each of the Claims to which  objections are made, no later than thirty
          (30) days  subsequent to the Effective  Date or within such other time
          period as may be fixed by the Court. In lieu of making distribution to
          such  holder,   such  Distribution  shall  be  held  in  a  segregated
          non-interest  bearing account by Reorganized Ranch *1. If the Disputed
          or  Contested  Claim of a Holder  of a Class 2  Non-Insider  Unsecured
          Claim  and/or  Class 3 Insider  Unsecured  Claim  becomes a disallowed
          Claim,  the  payments  withheld  pursuant to this  paragraph  shall be
          distributed to Holders of Allowed  Claims in such class  following the
          entry of a Final Order on a Disallowed Claim.

14.02.    RESOLUTION OF DISPUTED CLAIMS.  Unless otherwise ordered by the Court,
          the Debtors  and/or  Reorganized  Ranch *1 shall litigate to judgment,
          settle or  withdraw  objections  to  Disputed  Claims,  in their  sole
          discretion,  without  notice to any party in interest,  other than the
          Committee's counsel.

14.03.    PAYMENTS.  Payments  and  distributions  to each  holder of a Disputed
          Claim  that  ultimately  becomes  an  Allowed  Claim  shall be made in
          accordance  with the  provisions of the Plan with respect to the Class
          of  Creditors  to which  the  respective  holder of an  Allowed  Claim
          belongs  unless  otherwise  ordered by the Court.  Such  payments  and
          distributions shall be made as soon as practicable after the date that
          the Court entered a Final Order allowing such Claim.  Payments made in
          accordance  with this  Article  shall not include the  interest on the
          amount  of such  payment  from  the date on which  the  holder  of the
          Allowed Claim would have been entitled to receive payment if its Claim

                                       26
<PAGE>
          had not been a Disputed  Claim.  Payments  shall be made as and when a
          Disputed Claim has become,  in whole or in part, an Allowed Claim or a
          Disallowed  Claim,  pursuant to a Final Order or agreement between the
          Debtors and such Claimant.  In the event a claim is disputed as of the
          Effective  Date,  the  Debtors  shall  reserve  the full amount of the
          distribution to that Claimant as if the Claim was allowed in full.

                                   ARTICLE XV

                            RETENTION OF JURISDICTION

15.01.    The Bankruptcy  Court shall retain  jurisdiction of these  proceedings
          following the Confirmation Date for the following purposes:

15.01.1   to adjudicate  all  controversies  concerning  the  classification  or
          allowance of any Claims;  to liquidate  any Claims which are disputed,
          contingent or unliquidated; to determine any and all objections to the
          allowance of Claims;

15.01.2   to determine any and all  applications  for allowances of compensation
          and reimbursement of expenses for Professionals and similar fees;

15.01.3   to determine any and all  applications for the rejection or assumption
          of executory  contracts  and/or unexpired leases for the assignment of
          an  assumed  contract  or  unexpired  leases,  as the case may be,  of
          executory  contracts  or  unexpired  leases to which the Debtors are a
          party or with  respect to which  they may be  liable,  and to hear and
          determine,  and if need be, to liquidate,  any and all Claims  arising
          therefrom;

15.01.4   to determine  any and all  applications,  adversary  proceedings,  and
          contested or  litigated  matters  properly  before the Court before or
          after the Confirmation Date;

15.01.5   to modify the Plan pursuant to Section 1127 of the Bankruptcy  Code or
          to remedy any defect or omission or reconcile any inconsistency in the
          Confirmation Order to the extent authorized by the Bankruptcy Code;

15.01.6   to hear and determine all controversies,  suits and disputes,  if any,
          as may arise in connection with the  interpretation  or enforcement or
          implementation of the Plan;

15.01.7   to hear and determine all controversies,  suits and disputes,  if any,
          as may arise  with  regard to orders of this  Court in the  Chapter 11
          Cases entered on or before the Confirmation Date;

                                       27
<PAGE>
15.01.8   to  correct  any  defect,   cure  any   omission  or   reconcile   any
          inconsistency  in the  Plan,  and any  exhibits  to the  Plan  and the
          annexes  thereto,  or the  Confirmation  Order, as may be necessary to
          carry out the purposes and intent of the Plan; to determine such other
          matters as may be  provided  for in the  Confirmation  Order or as may
          from time to time be authorized under the provisions of the Bankruptcy
          Code  or  any  other  applicable  law;  to  consider  and  act  on the
          compromise  and  settlement of any Claim against or cause of action by
          or against the Debtors' Estate;

15.01.9   to  adjudicate  all Claims to a security or ownership  interest in any
          property  of the  Debtors  or in any  proceeds  thereof;  15.01.10  to
          adjudicate all Claims or  controversies  arising out of any purchases,
          sales or  contracts  made or  undertaken  by the  Debtors  during  the
          pendency of the Chapter 11 Cases;

15.01.11  to recover all assets and properties of the Debtors wherever  located,
          including the  prosecution  and  adjudication  of all causes of action
          available to the Debtors as of the Confirmation Date;

15.01.12  to determine  all  questions  and disputes  regarding  recovery of and
          entitlement  to the  Debtors'  assets  and  determine  all  Claims and
          disputes  between  the Debtors  and any other  Entity,  whether or not
          subject to an action pending as of the Confirmation Date;

15.01.13  to enter any order,  including  injunctions,  necessary to enforce the
          title,   rights  and  powers  of  the   Debtors  and  to  impose  such
          limitations,  restrictions, terms and conditions on such title, rights
          and powers as the Court may deem necessary or appropriate;

15.01.14  to enter an order of consummation concluding,  terminating and closing
          the Chapter 11 Cases; and

15.01.15  to make such orders as shall be necessary or  appropriate to carry out
          the  provisions  of the Plan,  including,  but not limited to,  orders
          interpreting, clarifying or enforcing the provisions thereof.

                                       28
<PAGE>
                                   ARTICLE XVI

                                EVENT OF DEFAULT

16.01.    The occurrence of any of the following  shall  constitute a default by
          Reorganized Ranch *1 under the Plan:

16.01.1   the failure of Reorganized Ranch *1 to make any payment when due under
          the Plan, including the failure to make payments due under the Class 2
          Note, which failure shall have been uncured for a period of sixty (60)
          days after  Reorganized  Ranch *1's receipt of written  notice thereof
          unless  such  payment  has  been  extended  in  accordance   with  the
          provisions of the Plan; and

16.01.2   the  failure  of  Reorganized  Ranch  *1 to  comply  with  any  of the
          covenants  contained  in the Plan,  except  for  default in payment as
          provided in paragraph  16.01.1 of this  Article,  which  failure shall
          remain  uncured for a period of sixty (60) days  Reorganized  Ranch *1
          has received written notice of such failure.

                                  ARTICLE XVII

                               GENERAL PROVISIONS

17.01.    MODIFICATION  OF THE PLAN.  The  Debtors  have the sole and  exclusive
          right,  in accordance  with the Bankruptcy  Code, to amend,  modify or
          withdraw the Plan prior to Confirmation with the written consent of R1
          Franchise and the Committee.  After  Confirmation,  the Debtors and/or
          Reorganized  Ranch *1 may, upon Order from the  Bankruptcy  Court,  in
          accordance  with Section  1127(b) of the Bankruptcy  Code,  remedy any
          defect or omission or reconcile any  inconsistency in the Plan in such
          manner as may be necessary to carry out the purpose of the Plan.

17.02.    RATIFICATION  OF ACTION TAKEN DURING PENDENCY OF THE CHAPTER 11 CASES.
          The Confirmation  Order shall ratify all transactions  effected by the
          Debtors  during the period  commencing on the Petition Date and ending
          on the Confirmation Date.

17.03.    NOTICES.  All notices,  requests,  elections or demands to or upon the
          Debtors,  to be  effective,  including  any  change of  address of any
          Claimant for the purposes of receiving distribution under the Plan and
          forfeiting  same pursuant to Section 8.05 hereof,  shall be in writing

                                       29
<PAGE>
          and shall be deemed to have been given or made when actually  received
          or, in the case of notice by  telecopier  transmission,  when received
          and confirmed, and addressed as follows:

                    Ranch *1, Inc.
                    567 7th Avenue
                    Third Floor
                    New York, New York 10018
                    Attn: Raymond DioGuardi, President
                    Tel. No. (212) 354-6666
                    Fax No. (212) 730-4444

               with copy to Debtors' counsel:

                    Buchanan Ingersoll, P.C.
                    700 Alexander Park
                    Suite 300
                    Princeton, New Jersey  08540
                    Attn: Louis T. DeLucia, Esq.
                          Alan J. Brody, Esq.
                    Tel No.: (609) 987-6800
                    Fax No.: (609) 520-0360

               with a copy to Committee's counsel:

                    Silverman Perlstein & Acampora
                    100 Jericho Quadrangle, Suite 300
                    Jericho, New York 11753
                    Attn: Gerard R. Luckman, Esq.
                    Tel No. (516) 479-6300
                    Fax No. (516) 479-6301

               with a copy to R1 Franchise:

                    R1 Franchise Systems, LLC
                    c/o Kahala Corporation
                    7730 East Greenway Road
                    Suite 104
                    Scottsdale, Arizona 85260
                    Attn: Michael J. Reagan, Esq.
                    Tel No. (480) 443-0200
                    Fax No. (480) 443-1972

               with a copy to R1 Franchise's counsel:

                    Kaye Scholer LLP
                    425 Park Avenue
                    New York, New York 10022
                    Attn: Benjamin Mintz, Esq.
                    Tel No. (212) 836-8505
                    Fax No. (212) 836-8689

                                       30
<PAGE>
          All notices and  requests to  Claimants  of any Class shall be sent to
          them at their last known address. The Debtors, and any Claimant of any
          Class, may designate in writing any other address for purposes of this
          Section 17.03, which designation shall be effective upon receipt.

17.04.    HEADINGS.  The headings used in the Plan are inserted for  convenience
          only and  neither  constitute  a portion of the Plan nor in any manner
          affect the provisions of the Plan.

17.05.    GOVERNING  LAW.  Except  to the  extent  that the  Bankruptcy  Code is
          applicable, the rights and obligations arising under the Plan shall be
          governed by, and construed and enforced in accordance  with,  the laws
          of the State of New York.

17.06.    SUCCESSORS AND ASSIGNS. The rights and obligations of any Entity named
          or  referred  to in the Plan shall be binding  upon and shall inure to
          the benefit of, the  predecessors,  successors,  assigns and agents of
          such Entity.

17.07.    RESERVATION  OF RIGHTS.  Nothing  contained  herein shall prohibit the
          Debtors from prosecuting or defending any of their rights as may exist
          on their own behalf.  If Confirmation of the Plan does not occur,  the
          Plan shall be deemed null and void. In such event,  nothing  contained
          in the Plan shall be deemed to  constitute  a waiver or release of any
          Claims by or against the Debtors or their Estates or any other Person,
          or to  prejudice  in  any  manner,  the  rights  and  remedies  of the
          creditors,  the Debtors or their  Estates or any Person in any further
          proceedings  involving the Debtors or their Estates.  Moreover, in the
          event that the Plan and all transactions  contemplated thereby are not
          substantially  consummated  on or before the earlier of (i) sixty (60)
          days  after the  Confirmation  Date or (ii) April 15,  2002,  then the
          Debtors  shall  not  be  obligated  to  consummate  the  Plan,  or the
          transactions  set forth and  contemplated  in this Plan,  and,  at the
          option of the Debtors,  ALL  transactions set forth in the Plan, shall
          be canceled and terminated, and the Debtors shall continue to have, or
          be restored to, all rights and remedies it has, had, or would have had
          as if the Plan and the transactions contemplated herein had never been
          executed, proposed,  negotiated,  discussed, or in any way acted upon,
          and no plan  proponent  or Person  shall have any claims  against  the
          Debtors by virtue of such  termination.  The filing of the Plan and or
          any modifications  hereto,  and the Plan itself shall not constitute a
          waiver by the  Debtors of any and all  rights,  remedies,  objections,

                                       31
<PAGE>
          causes  of  action,  the  Debtors  may have or may wish to raise  with
          respect to anything,  including, without limitation, any other plan or
          plans  filed  or to be  filed in this  bankruptcy  case,  all of which
          rights  and  objections  are  hereby  reserved.  Reorganized  Ranch *1
          reserves the right to modify the  treatment  of any Allowed  Claims at
          any time on and  after the  Effective  Date  upon the  consent  of the
          holder  of such  Allowed  Claim  whose  treatment  is being  modified,
          provided that no such modification which materially  adversely affects
          other Allowed Claims can be made,  unless such  modification  has been
          approved by Final  Order,  upon notice to the  Committee,  or has been
          agreed to by the  Committee  or  accepted  by the  holders  of Allowed
          Claims in the applicable class as determined  pursuant to Section 1126
          of the Bankruptcy Code.

17.08.    DISBURSING  AGENT.  The Debtors are the  disbursing  agents  under the
          Plan.  All  payments to  claimants  in Classes 1, 2, 3, and 4 shall be
          made by the Debtors from a separate disbursement account.

17.09.    POST-EFFECTIVE DATE FEES AND EXPENSES OF DEBTORS'  PROFESSIONALS.  The
          Debtors' Professionals and the Committee's  Professionals shall submit
          their bills for fees and reimbursement of expenses for  post-Effective
          Date  services  directly  to  Reorganized  Ranch *1 and  shall  not be
          required to apply to the Court for approval, which post-Effective Date
          payments to the  Professionals  shall be paid by Reorganized  Ranch *1
          within  fifteen  (15) days of the  submission  of such  bills from the
          Professional  Reserve;  PROVIDED,  HOWEVER, that (1) to the extent the
          Professional  Reserve is insufficient to pay all of the  Professionals
          post-Effective Date payments,  such deficiency shall be the obligation
          of and shall be timely paid by  Reorganized  Ranch *1,  provided  that
          such services  relating to the fees and  reimbursement  of expenses in
          excess of the  Professional  Reserve  were  authorized  in  writing by
          Reorganized  Ranch *1 or were  incurred as a result of a default under
          the  Plan;  (2)  all  fees  and  expenses  incurred  by  the  Debtors'
          Professionals (to the extent  authorized,  in writing,  by Reorganized
          Ranch*1) with respect to  post-Effective  Date  services  performed in
          connection with preference actions,  fraudulent  conveyance actions or
          other  courses of action under  Sections 544, 547, 548, 549 and 550 of
          the  Bankruptcy  Code shall be paid directly by  Reorganized  Ranch *1

                                       32
<PAGE>
          within fifteen (15) days of the submission of bills for such services,
          and not  from  the  Professional  Reserve;  and  (3)  the  Committee's
          Professionals'  fees for  post-Effective  Date  services paid from the
          Professional Reserve shall not exceed the amount of $20,000.

17.10.    EXCULPATION.  Following  the  Effective  Date,  neither  the  Debtors,
          Reorganized Ranch *1, R1 Franchise,  the Creditors' Committee,  any of
          their   respective   shareholders,   officers,   members,   directors,
          employees,  affiliates or agents and their successors and assigns (all
          of the  foregoing  acting  in such  capacity)  nor  any  Professionals
          employed  by any of  them,  shall  have  or  incur  any  liability  or
          obligation  to any Entity for any action  taken or omitted to be taken
          in  connection  with  or  related  to  the  formulation,  preparation,
          solicitation,   dissemination,    implementation,    confirmation   or
          consummation  of the Plan, the  Disclosure  Statement or any contract,
          release or other agreement or document created or entered into, or any
          other action taken or omitted to be taken, in connection with the Plan
          or the Chapter 11 Cases;  provided,  however,  that the  provisions of
          this sentence shall have no effect on the liability of any Entity that
          would  otherwise  result from an action or omission to the extent that
          such  action  or  omission  is  determined  in a Final  Order  to have
          constituted gross negligence or willful misconduct and for obligations
          provided under the Plan.

17.11.    DISCHARGE  INJUNCTION.  The Confirmation  Order shall provide that all
          Entities which have held,  hold or may hold Claims that are discharged
          pursuant to the terms of the Plan shall be thereby permanently stayed,
          restrained  and enjoined on and after the  Effective  Date from taking
          any of the  following  actions on account of such  discharged  Claims,
          other than actions brought to enforce any rights or obligations  under
          the Plan: (i)  commencing,  conducting or continuing in any manner any
          action or proceeding of any kind (including any thereof in a judicial,
          arbitral, administrative or other forum) against Reorganized Ranch *1,
          any of their  property,  or any direct or indirect  transferee  of any
          property  of, or direct or indirect  successor  in interest to, any of
          the  Debtors  or  Reorganized  Ranch *1, or any  property  of any such
          transferee or successor, (ii) enforcing, levying, attaching (including
          pre-judgment  attachment),  collecting or otherwise recovering, by any
          manner or means, any judgment,  award,  decree or order against any of
          Reorganized Ranch *1, any of their property, or any direct or indirect

                                       33
<PAGE>
          transferee  of any  property  of, or direct or indirect  successor  in
          interest  to,  any of the  Debtors  or  Reorganized  Ranch  *1, or any
          property  of  any  such  transferee  or  successor,   (iii)  creating,
          perfecting  or  otherwise   enforcing  in  any  manner,   directly  or
          indirectly, any Lien against any of Reorganized Ranch *1, any of their
          property,  or any direct or indirect transferee of any property of, or
          successor in interest to, any of the Debtors or Reorganized  Ranch *1,
          (iv)  asserting any setoff,  right of subrogation or recoupment of any
          kind, directly or indirectly,  against any of Reorganized Ranch *1, or
          any direct or indirect  transferee of any property of, or successor in
          interest to, any of the Debtors or Reorganized Ranch *1, or (v) acting
          or  proceeding  in any manner  that does not conform to or comply with
          the provisions of the Plan and the Confirmation Order.

17.12.    Should any provision in the Plan be  determined  to be  unenforceable,
          such determination  shall in no way limit or affect the enforceability
          and operative effect of any and all other provisions of the Plan.

17.13.    Except as otherwise provided herein, the classification and the manner
          of satisfying  all Claims under the Plan take into  consideration  the
          existence of guarantees by the Debtors of any  obligation of any other
          Person or Persons, including another Debtors, and that the Debtors may
          be a joint obligor with another  Person or Persons with respect to the
          same  obligation.  All Claims  against the Debtors based upon any such
          guarantees shall be discharged in the manner provided in the Plan, and
          each  creditor  shall be  entitled to only one (1)  distribution  with
          respect  to any  obligation  of the  Debtors.  Any  obligation  of the
          Debtors and all  guarantees  thereof  executed by the Debtors  will be
          deemed to be one obligation  under the Plan entitling that creditor to
          only one distribution.

Dated:     New York, New York
           November 19, 2001

                                        RANCH *1, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT

                                       34
<PAGE>
                                        RANCH *1 METRO, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 METRO TECH, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 PEARL, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 GROUP, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        MOORGRHO, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 EIGHTH AVENUE, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 OF AMERICA, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 FASHION, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT

                                       35
<PAGE>
                                        RANCH *1 NUMBER 0117, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 PALISADES, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        DOME ENTERPRISES, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 NUMBER 0118, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 NUMBER 202, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 NUMBER 1701, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 OF BROADWAY


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 ON 34TH STREET, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT

                                       36
<PAGE>
                                        RANCH *1 NUMBER 0207, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 NUMBER 0112, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 52ND, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 NUMBER 0137, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 NUMBER 0113, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 NUMBER 0135, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 NUMBER 0125, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        OME, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT

                                       37
<PAGE>
                                        RANCH *1 NUMBER 1904, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 DOWNTOWN, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 NUMBER 0150, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        RANCH *1 NUMBER 0128, INC.


                                        By: /s/ Raymond DioGuardi
                                            ------------------------------------
                                            RAYMOND DIOGUARDI, PRESIDENT


                                        OFFICIAL COMMITTEE OF
                                        UNSECURED CREDITORS
                                        OF THE ESTATES
                                        OF RANCH *1, INC., ET ALS.


                                        By: /s/ Joseph Daprile
                                            ------------------------------------
                                            JOSEPH DAPRILE, CHAIRMAN


                                        R1 FRANCHISE SYSTEMS, LLC


                                        By: /s/ David Guarino
                                            ------------------------------------
                                            DAVID GUARINO, VICE PRESIDENT

                                       38