FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period June 30, 1996
ended ---------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------- -------------------
Commission file number 1-12692
-----------------------------------------------
MORTON'S RESTAURANT GROUP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3490149
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. employer
or organization) identification no.)
3333 New Hyde Park Road, Suite 210, New Hyde Park, New York 11042
- --------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
516-627-1515
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
As of August 5, 1996, the registrant had 6,415,523 Shares of its Common Stock,
$.01 par value, issued and outstanding.
(1)
<PAGE>
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
INDEX
Part I - Financial Information Page
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1996
and December 31, 1995 3-4
Consolidated Statements of Income for the three and
six month periods ended June 30, 1996 and July 2, 1995 5
Consolidated Statements of Cash Flows for the six month
periods ended June 30, 1996 and July 2, 1995 6
Notes to Consolidated Financial Statements 7-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-13
Part II - Other Information
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Stockholders 14
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
(2)
<PAGE>
Item 1. Financial Statements
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(amounts in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- -----
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,045 2,351
Accounts receivable 1,296 2,575
Inventories 3,934 3,465
Landlord construction receivables,
prepaid expenses and other current assets 2,505 2,157
Deferred income taxes 1,780 2,280
Assets held for sale 21,602 22,583
------- -------
Total current assets 33,162 35,411
Property and equipment, at cost:
Furniture, fixtures and equipment 11,892 8,304
Leasehold improvements 12,838 7,050
Construction in progress 417 6,618
------- -------
25,147 21,972
Less accumulated depreciation and amortization 3,305 2,593
------- -------
Net property and equipment 21,842 19,379
------- -------
Intangible assets, net of accumulated amortization
of $2,854 at June 30,1996 and $2,654 at
December 31, 1995 13,141 13,341
Other assets and deferred expenses, net of accumulated
amortization of $3,000 at June 30, 1996 and $1,306 at
December 31, 1995 6,128 5,057
------- -------
$74,273 73,188
======= =======
</TABLE>
(Continued)
(3)
<PAGE>
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
(amounts in thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- ----
(unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 4,606 6,904
Accrued expenses 4,888 4,499
Accrued income taxes 577 538
Current portion of note payable to related party -- 483
Liabilities related to assets held for sale 11,276 13,995
------- -------
Total current liabilities 21,347 26,419
Bank debt 25,950 23,650
Other liabilities 5,110 4,079
------- -------
Total liabilities 52,407 54,148
------- -------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value per share.
Authorized 3,000,000 shares, no shares issued
or outstanding - -
Common stock, $.01 par value per share. Authorized
25,000,000 shares, issued and outstanding
6,415,523 shares at June 30, 1996 and
6,367,093 shares at December 31, 1995 64 64
Nonvoting common stock, $.01 par value per share.
Authorized 3,000,000 shares, no shares issued or
outstanding - -
Additional paid-in capital 61,360 61,350
Accumulated deficit (39,558) (42,374)
------ --------
Total stockholders' equity 21,866 19,040
------- -------
$ 74,273 73,188
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
(4)
<PAGE>
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, July 2, June 30, July 2,
1996 1995 1996 1995
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues $ 46,476 41,509 95,345 85,551
Food and beverage costs 15,639 13,823 31,910 28,531
Restaurant operating expenses 22,702 20,722 46,237 42,062
Depreciation, amortization and other
non-cash charges 1,306 1,478 2,900 3,430
General and administrative expenses 3,544 3,227 7,246 6,618
Marketing and promotional expenses 1,014 743 2,152 1,485
Interest expense, net 574 451 1,144 874
------- ------- -------- -------
Income before income taxes 1,697 1,065 3,756 2,551
Income tax expense 425 25 940 125
------- -------- -------- -------
Net income $ 1,272 1,040 2,816 2,426
======= ======== ======== =======
Income per share $ 0.19 0.16 0.42 0.37
======= ======== ======== =======
Weighted average shares outstanding 6,807 6,638 6,773 6,635
======= ======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
(5)
<PAGE>
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(amounts in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30, July 2,
1996 1995
---- ----
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,816 2,426
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation, amortization and other non-cash charges 2,900 3,430
Deferred income taxes 500 -
Change in assets and liabilities:
Accounts receivable 1,708 (633)
Inventories (369) (397)
Prepaid expenses and other assets (303) (300)
Accounts payable, accrued expenses and other (4,095) (5,418)
liabilities
Accrued income taxes (39) (362)
-------- -------
Net cash provided (used) by operating activities 3,118 (1,254)
-------- -------
Cash flows from investing activities:
Purchases of property and equipment, net (2,527) (2,292)
Payments for start-up costs, licenses and other
deferred expenses (2,724) (1,537)
--------- --------
Net cash used by investing activities (5,251) (3,829)
--------- --------
Cash flows from financing activities:
Increase in bank overdraft - 1,544
Principal reduction on bank debt (2,100) (150)
Proceeds from bank debt 4,400 4,025
Payments on note payable to related party (483) (508)
Net proceeds from issuance of stock 10 -
-------- -------
Net cash provided by financing activities 1,827 4,911
-------- -------
Net decrease in cash and cash equivalents (306) (172)
Cash and cash equivalents at beginning of period 2,351 4,031
-------- -------
Cash and cash equivalents at end of period $ 2,045 3,859
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
(6)
<PAGE>
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1996 and July 2, 1995
1) The accompanying unaudited, consolidated financial statements have been
prepared in accordance with instructions to Form 10-Q and, therefore, do not
include all information and footnotes normally included in financial statements
prepared in conformity with generally accepted accounting principles. They
should be read in conjunction with the consolidated financial statements of
Morton's Restaurant Group, Inc., formerly known as Quantum Restaurant Group,
Inc., (the "Company") for the fiscal year ended December 31, 1995, filed by the
Company on Form 10-K with the Securities and Exchange Commission on March 29,
1996.
The accompanying financial statements are unaudited and include all
adjustments (consisting of normal recurring adjustments and accruals) that
management considers necessary for a fair presentation of its financial position
and results of operations for the interim periods presented. The results of
operations for the interim periods are not necessarily indicative of the results
that may be expected for the entire year.
On May 9, 1996, at the Company's Annual Meeting of Stockholders, the
stockholders voted to change the name of the Company from Quantum Restaurant
Group, Inc. to Morton's Restaurant Group, Inc.
The Company uses a fiscal reporting period ending on the closest Sunday to
December 31. The fiscal year consists of 52 weeks and approximately every six or
seven years, a 53rd week will be added.
2) For the purposes of the consolidated statements of cash flows, the Company
considers all highly liquid instruments purchased with a maturity of three
months or less to be cash equivalents. The Company paid cash interest and fees,
net of amounts capitalized, of approximately $1,004,000 and $890,000, and income
taxes of approximately $506,000 and $442,000, for the six months ended June 30,
1996 and July 2, 1995, respectively. During the first six months of 1996, the
Company entered into capital lease arrangements of approximately $1,100,000 for
restaurant equipment.
3) Effective January 2, 1995, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of " ("Statement 121").
During the second quarter of fiscal 1995, the Company approved a plan for
the sale of Peasant Holding Corp. ("Peasant Holding"), the holding company for
Mick's Restaurants, Inc., ("Mick's") and The Peasant Restaurants,
Inc.("Peasant"). Pursuant to Statement 121, the Company discontinued
depreciating fixed assets and amortizing goodwill relating to Mick's and Peasant
in April 1995. The amount of such depreciation and amortization for the
corresponding first three months of fiscal 1995 approximated $364,000.
Coincident with the Company's approval of the plan of sale, the assets held
for sale and related liabilities for Mick's and Peasant have been reclassified
as "Assets held for sale" and "Liabilities related to assets held for sale" when
the Company reports its financial position. The accompanying consolidated
balance sheets include the following components:
(7)
<PAGE>
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- --------
(amounts in thousands, unaudited)
<S> <C> <C>
Current assets $ 2,125 $ 2,686
Net property and equipment 13,206 13,851
Unamortized goodwill 8,077 8,077
Other assets 2,906 4,089
Deferred tax assets 2,180 2,180
Write-down of carrying values (6,892) (8,300)
-------- --------
Assets held for sale 21,602 22,583
-------- --------
Current liabilities 4,089 3,470
Other liabilities 2,855 3,325
Lease exit costs 4,332 7,200
-------- --------
Liabilities related to assets
held for sale 11,276 13,995
-------- --------
Net assets held for sale $ 10,326 $ 8,588
======== ========
</TABLE>
The following represents the combined results of Mick's and Peasant for the
periods ended June 30, 1996 and July 2, 1995. Interest expense was not
allocated.
<TABLE>
<CAPTION>
Six Months Ended
June 30, July 2,
1996 1995
-------- ------
(amounts in thousands,
unaudited)
<S> <C> <C>
Revenues $ 28,451 $ 32,363
Food and beverage costs 8,395 9,466
Restaurant operating expense 17,948 18,938
Depreciation, amortization and other
non-cash charges 103 1,846
General and administrative expenses 2,053 2,257
Marketing and promotional expenses 561 464
-------- --------
Loss before income taxes $ (609) $ (608)
======== ========
</TABLE>
Management had been actively seeking potential buyers for the sale of all
Mick's and Peasant restaurants and in the fourth quarter of fiscal 1995 engaged
an investment banking firm to assist with the sale. Although marketing efforts
concentrated on selling all of the Mick's and Peasant restaurants, sales
materials indicated that a partial sale would be considered. As of July 1996,
interest received for the majority of the restaurants indicates that the related
net assets at June 30, 1996 are recoverable. No meaningful offers were received
for the remaining restaurants (the "Remaining Restaurants"). Cash flow analyses
prepared by management for the Remaining Restaurants indicate that it would be
less costly to close such restaurants in an orderly fashion in the near future,
rather than continue to operate them through the end of their respective lease
terms. Accordingly, assets of $8,300,000 related to the Remaining Restaurants
were written off and expenses of $7,200,000, representing management's estimate
of the expected costs to terminate related leases, were accrued at December 31,
1995. During fiscal 1996,
(8)
<PAGE>
restaurant occupancy expense of approximately $600,000 for the Remaining
Restaurants has been charged against the accrual for lease exit costs. During
the second quarter of fiscal 1996, three Mick's restaurants and one Peasant
restaurant were closed and during July 1996, two more Mick's restaurants were
closed. Net assets held for sale at June 30, 1996 consist of net assets of
$15,600,000 related to the majority of the restaurants and net liabilities of
$5,300,000 related to the Remaining Restaurants.
The write-down and related charges for net assets held for sale reflect
management's best estimate of the costs expected to be incurred in connection
with the disposition of the Remaining Restaurants. As a result of the numerous
uncertainties which may impact the actual costs to be incurred by the Company,
such costs may differ from the current estimates used by management.
4) The Company is involved in various legal actions. See "Part II - Other
Information, Item 1. Legal Proceedings" on page 14 of this Form 10-Q for a
discussion of these legal actions.
(9)
<PAGE>
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Revenues increased $5.0 million, or 12.0%, to $46.5 million for the three
month period ended June 30, 1996, from $41.5 million during the comparable 1995
period. Of the increase, $4.6 million was attributable to incremental restaurant
revenues from eight new restaurants opened after January 1, 1995 and $1.1
million, or 2.8%, was attributable to additional comparable revenues from
restaurants open all of both periods. Offsetting these increases was a reduction
of $0.7 million from Mick's and Peasant restaurants closed during the period.
Average revenues per restaurant open for a full period increased 7.0%.
Revenues increased $9.8 million, or 11.4%, to $95.3 million for the six
month period ended June 30, 1996, from $85.6 million during the comparable 1995
period. Of the increase, $8.8 million was attributable to incremental restaurant
revenues from eight new restaurants opened after January 1, 1995 and $1.7
million, or 2.1%, was attributable to additional comparable revenues from
restaurants open all of both periods. Offsetting these increases was a reduction
of $0.7 million from Mick's and Peasant restaurants closed during the period.
Average revenues per restaurant open for a full period increased 4.8%. In
addition, higher revenues for the first six months of fiscal 1996 reflect the
impact of price increases of approximately 2% in April, 1995 for Mick's and
Peasant Restaurant Groups. The Company operated 71 and 68 restaurants as of June
30, 1996 and July 2, 1995, respectively.
Mick's and Peasant restaurants have generated lower than anticipated
revenues which are adversely impacting average restaurant revenues and earnings
trends. Additionally, as reflected in the table below, the 1996 period was
adversely impacted by declines in the comparable restaurant revenues in the
Mick's and Peasant groups, offset by increases in the Morton's and Bertolini's
groups. The Atlanta market, where 22 of the Company's restaurants are located,
has become increasingly competitive and may continue to adversely impact
comparable restaurant revenues and operating results. As discussed in Note 3 to
the accompanying consolidated financial statements, the Company approved a plan
for the sale of the Mick's and Peasant restaurant groups. Operating results for
Mick's and Peasant during the period they are being held for sale may continue
to be adversely impacted.
Percentage changes in comparable restaurant revenues for the three and six
month periods ended June 30, 1996 versus July 2, 1995 for restaurants open all
of both periods are as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, 1996 Ended June 30, 1996
Percentage Change Percentage Change
----------------- -----------------
<S> <C> <C>
Morton's 10.5% 10.2%
Bertolini's 3.3% 6.1%
Mick's -6.9% -9.9%
Peasant -13.3% -10.7%
Total 2.8% 2.1%
</TABLE>
The Company believes that revenues for the first quarter of 1996 were
adversely affected by severe winter storms in January 1996.
(10)
<PAGE>
Food and beverage costs increased from $13.8 million for the three month
period ended July 2, 1995 to $15.6 million for the three month period ended June
30, 1996 and increased from $28.5 million for the six month period ended July 2,
1995 to $31.9 for the six month period ended June 30, 1996. These costs as a
percentage of revenues increased 0.4% and 0.1% for the respective three and six
month periods.
Restaurant operating expenses which include labor, occupancy and other
operating expenses increased from $20.7 million for the three month period ended
July 2, 1995 to $22.7 million for the three month period ended June 30, 1996, an
increase of $2.0 million. For the six months ended June 30, 1996, these costs
increased from $42.1 million during the 1995 period, to $46.2 million for the
comparable 1996 period. Those costs as a percentage of revenues decreased 1.1%
from 49.9% for the three month period ended July 2, 1995 to 48.8% for the three
month period ended June 30, 1996 and decreased 0.7% from 49.2% for the six month
period ended July 2, 1995, to 48.5% for the comparable 1996 period. During
fiscal 1996, restaurant occupancy expense of approximately $600,000 for the
Remaining Restaurants has been charged against the accrual for lease exit costs.
The 1996 period increase in costs relates to the added costs of operating eight
additional restaurants opened after January 1, 1995.
Depreciation, amortization and other non-cash charges decreased from $1.5
million for the three month period ended July 2, 1995 to $1.3 million for the
three month period ended June 30, 1996, and decreased from 3.6% of revenues to
2.8%, respectively. For the six months ended June 30, 1996, such costs were $2.9
million verses $3.4 million for the comparable 1995 period. The 1996 six month
period decrease is due to the exclusion of 1995 first quarter depreciation and
amortization related to Mick's and Peasant of approximately $0.4 million. Such
depreciation and amortization was discontinued in the second quarter of 1995
pursuant to Statement 121 (see Note 3).
General and administrative expenses for the three month period ended June
30, 1996 were $3.5 million, an increase of $0.3 million as compared with the
three month period ended July 2, 1995. For the six months ended June 30, 1996,
such costs were $7.2 million versus $6.6 million for the comparable 1995 period.
Such costs as a percentage of revenues were 7.6% for the three month period
ended June 30, 1996, a decrease of 0.2% from the three month period ended July
2, 1995 and 7.6% of revenues for the six months ended June 30, 1996, a decrease
of 0.1% from the six months ended July 2, 1995. The increase in such expense is
driven by incremental costs associated with increased restaurant development.
Marketing and promotional expenses were $1.0 million, or 2.2% of revenues,
for the three month period ended June 30, 1996, compared to $0.7 million, or
1.8% of revenues for the three month period ended July 2, 1995. For the six
months ended June 30, 1996, these costs were $2.2 million, or 2.3% of revenues,
as compared to $1.5 million, or 1.7% of revenues, for the comparable 1995
period. The increase is driven by incremental costs associated with increased
restaurant development.
Interest expense, net of interest income, increased to $0.6 million and
$1.1 million, respectively for the three and six month periods ended June 30,
1996 from $0.5 million and $0.9 million, respectively for the three and six
month periods ended July 2, 1995. The increase is a result of higher outstanding
debt balances and higher interest rates.
Income tax expense of $940,000 for the six month period ended June 30, 1996
predominantly represents state income taxes as well as Federal income taxes,
which were partially offset by the utilization of the Company's net operating
loss carryforwards and the establishment of additional deferred tax assets
relating to FICA and other tax credits that were generated during fiscal 1996.
(11)
<PAGE>
Liquidity and Capital Resources
In the past, the Company has had, and may have in the future, negative
working capital balances. The Company does not have significant receivables or
inventories and receives trade credit based upon negotiated terms in purchasing
food and supplies. Funds available from cash sales not needed immediately to pay
for food and supplies or to finance receivables or inventories were used for
noncurrent capital expenditures and or payments of long-term debt balances under
revolving credit agreements.
The Company and The First National Bank of Boston (FNBB) entered into the
Second Amended and Restated Revolving Credit and Term Loan Agreement dated as of
June 19, 1995, as amended in February, March and June 1996 (collectively the
"Credit Agreement"), pursuant to which the Company's then existing credit
facility was restructured and amended to, among other things, increase the
credit facility from $25,000,000 to $30,000,000, consisting of a $15,000,000
term loan (the "Term Loan") and a $15,000,000 revolving credit facility (the
"Revolving Credit Facility") and to extend the final maturity date one year to
December 31, 2001. Loans made pursuant to the Credit Agreement bear interest at
a rate equal to the lender's base rate (plus applicable margin) or, at the
Company's option, the Eurodollar Rate (plus applicable margin). At June 30,
1996, the Company's applicable margin, calculated pursuant to the Credit
Agreement, was 0.25% on base rate loans and 2.25% on Eurodollar Rate loans. The
Company has no outstanding futures contracts or interest rate hedge agreements.
As of June 30, 1996 and December 31, 1995, the Company had outstanding
borrowings of $25,950,000 and $23,650,000, respectively, under the Credit
Agreement. At June 30, 1996, $444,000 was restricted for letters of credit
issued by the lender on behalf of the Company. Unrestricted and undrawn funds
available to the Company under the Credit Agreement were $3,606,000. The
weighted average interest rate on all bank borrowings on June 30, 1996 was 7.8%.
In addition, the Company is obligated to pay fees of 0.25% on unused loan
commitments less than $10,000,000, 0.375% on unused loan commitments greater
than $10,000,000 and a per annum letter of credit fee (based on the face amount
thereof) equal to the applicable margin on the Eurodollar Rate loans.
The availability under the Credit Agreement is scheduled to reduce by
$800,000 on September 30, 1997 and thereafter principal installments on the Term
Loan of $800,000 each will be due at the end of each calendar quarter through
December 31, 2001. The Revolving Credit Facility will be payable in full on
December 31, 2001. Borrowings under the Credit Agreement are secured by all
tangible and intangible assets of the Company. Total amounts of principal
payable by the Company under the Credit Agreement during the five years
subsequent to June 30, 1996 amount to $0 in 1996, $1,600,000 in 1997, $3,200,000
in 1998, $3,200,000 in 1999, $3,200,000 in 2000 and $14,750,000 in 2001. As
stated in Note 3 to the accompanying consolidated financial statements, the
Company approved a plan for the sale of Mick's and Peasant. Under the terms of
the Company's Credit Agreement, net proceeds from such sale will be required to
be used to reduce the Company's outstanding debt.
The Credit Agreement contains certain restrictive covenants with respect to
the Company that, among other things, create limitations (subject to certain
exceptions) on: (i) the incurrence or existence of additional indebtedness or
the granting of liens on assets or contingent obligations; (ii) the making of
investments in any person; (iii) mergers, dispositions of assets or
consolidations; (iv) prepayment of certain other indebtedness; (v) making
capital expenditures above specified amounts; and (vi) the ability to make
certain fundamental changes or to change materially the present method of
conducting the Company's business. The Credit Agreement also requires the
Company to satisfy certain financial ratios and tests. As of June 30, 1996, the
Company believes it was in compliance with such covenants.
(12)
<PAGE>
During the first six months of fiscal 1996, the Company's net investment in
fixed assets, capitalized leases, and related investment costs approximated $6.2
million. The Company estimates that it will expend up to an aggregate of $11.0
million in 1996 to finance pre-opening costs and capital expenditures net of
landlord development and rent allowances and net of equipment lease financing
for new restaurants and ordinary refurbishment of existing restaurants. The
Company has entered into various equipment lease financing agreements with
several financial institutions of which approximately $7.1 million in the
aggregate has been funded through July 1996 and $7.0 million in the aggregate is
available for future fundings. The Company anticipates that funds generated
through operations and funds available through equipment lease commitments as
well as those available under the Credit Agreement will be sufficient to fund
planned expansion and to meet obligations under the Company's notes payable.
Forward-Looking Statements
Except for the historical information contained in this Form 10-Q, certain
statements made herein are forward-looking statements that involve risks and
uncertainties and are subject to important factors that could cause actual
results to differ materially from these forward-looking statements, including
without limitation, the effect of economic and market conditions, the impact of
competitive activities, the Company's expansion plans, restaurant profitability
levels and other risks detailed in the Company's public reports and SEC filings.
(13)
<PAGE>
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
Part II - Other Information
Item 1. Legal Proceedings
The Company is involved in various legal actions incidental to the normal
conduct of its business. Management does not believe that the ultimate
resolution of these actions will have a material adverse affect on the Company's
consolidated financial position, equity, results of operations, liquidity and
capital resources.
Item 4. Submission of Matters to a Vote of Stockholders
The Company's 1996 Annual Meeting of Stockholders was held on May 9, 1996,
for the following purposes: (i) to elect three directors to Class 1 of the Board
of Directors to serve three-year terms and until their successors are duly
elected and qualified, (ii) to consider and act upon a proposal to amend the
Company's Certificate of Incorporation to change the name of the Company from
Quantum Restaurant Group, Inc. to Morton's Restaurant Group, Inc. (iii) to
ratify the re-appointment of KPMG Peat Marwick LLP as the independent auditors
of the Company for the fiscal year ending December 29, 1996. Shares were voted
on each such matter as follows:
Election of Directors
<TABLE>
<CAPTION>
Name Robert Barney
----
<S> <C>
For: 5,987,167
Withheld: 136,500
Name Dianne H. Russell
----
For: 5,987,067
Withheld: 136,600
Name Alan A. Teran
----
For: 5,987,117
Withheld: 136,550
Approval of the Amendment to the Company's Certificate of Incorporation
For: 6,117,682
Against: 4,985
Abstain: 1,000
Ratification and Approval of KPMG Peat Marwick LLP
For: 6,115,567
Against: 5,600
Abstain: 2,500
</TABLE>
In addition, David B. Pittaway, William L. Hyde, Jr., and Dr. John J.
Connolly will continue to serve as Class 2 directors until the election and
qualification of their successors at the 1997 Annual Meeting of Stockholders.
Allen J. Bernstein and John K. Castle will continue to serve as Class 3
directors until the election and qualification of their successors at the 1998
Annual Meeting of Stockholders.
(14)
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
3.01 (d) Second Amendment to the Amended and Restated Certificate of
Incorporation of the Registrant.
4.01 (b) Specimen Certificate representing the Common Stock, par value
$.01 per share including Rights Legend and name change to
Morton's Restaurant Group, Inc.
4.04 (e) Third Amendment to the Second Amended and Restated Revolving
Credit and Term Loan Agreement, dated June 28, 1996 among the
Registrant, The Peasant Restaurants, Inc., Morton's of Chicago,
Inc. and The First National Bank of Boston, individually and as
agent.
27.00 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this report
was filed.
(15)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MORTON'S RESTAURANT GROUP, INC.
----------------------------------------
(Registrant)
Date August 13, 1996
---------------
By: /s/ ALLEN J. BERNSTEIN
----------------------------------------
Allen J. Bernstein
Chairman of the Board and Chief
Executive Officer
Date August 13, 1996 By: /s/ THOMAS J. BALDWIN
---------------- ----------------------------------------
Thomas J. Baldwin
Senior Vice President, Finance and
Chief Financial Officer
(16)
EXHIBIT 3.01.D
State of Delaware
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "QUANTUM RESTAURANT GROUP, INC.", CHANGING ITS NAME FROM "QUANTUM RESTAURANT
GROUP INC.," TO "MORTON'S RESTAURANT GROUP, INC.," FILED IN THIS OFFICE ON THE
NINTH DAY OF MAY, A.D. 1996, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
[SEAL] /s/ Edward J. Freel
-----------------------------------------
Edward J. Freel, Secretary of State
2174262 8100 AUTHENTICATION: 7940060
960134948 DATE: 05-09-96
<PAGE>
SECOND AMENDMENT
TO THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
QUANTUM RESTAURANT GROUP, INC.
Pursuant to the provisions of Section 242 of the General Corporation Law
of the State of Delaware (the "GCL"), Quantum Restaurant Group, Inc. (The
"Corporation") hereby certifies as follows:
FIRST: The Certificate of Incorporation of the Corporation was filed with
the Delaware Secretary of State on October 3, 1988 and an Amended and Restated
Certificate of Incorporation was filed with the Delaware Secretary of State on
June 3, 1992 (the "Amended and Restated Certificate").
SECOND: The First Amendment to the Amended and Restated Certificate was
filed with the Delaware Secretary of State on May 19, 1995.
THIRD: The Amended and Restated Certificate of the Corporation, as amended
heretofore, is hereby further amended as follows:
Article I of the Amended and Restated Certificate of Incorporation
of the Corporation is hereby amended so that it shall henceforth read in
its entirety as follows:
"The Name of the Corporation is Morton's Restaurant Group, Inc. (The
"Corporation")."
FOURTH: The foregoing amendment to the Amended and Restated Certificate was
duly adopted in accordance with the provisions of Section 242 of the GCL, the
board of directors of the Corporation having duly adopted resolutions at a
meeting of the board of directors held on January 30, 1996 setting forth such
amendment, declaring its advisability and directing that it be considered by the
stockholders of the Corporation entitled to vote thereon, such amendment was
duly adopted by a majority of the outstanding shares of Common Stock of the
Corporation at an annual meeting of the Stockholders held on May 9, 1996.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Second Amendment to
the Amended and Restated Certificate of Incorporation as of this 9th day of May,
1996.
By: /s/ Thomas J. Baldwin
-----------------------------------
Name: Thomas J. Baldwin
Title: Senior Vice President
<PAGE>
[SPECIMEN STOCK CERTIFICATE--Front]
COMMON STOCK COMMON STOCK
PAR VALUE $ 0.01 PAR VALUE $ 0.01
C 19237NUMBER [SEAL] THIS CERTIFICATE IS TRANSFERABLE
INCORPORATED UNDER THE IN BOSTON, MASSACHUSETTS
LAWS OF THE STATE OF OR NEW YORK, NEW YORK
DELAWARE
QUANTUM RESTAURANT GROUP, INC.
This Certifies that CUSIP 619429 10 3
See reverse for
certain definitions
[SPECIMEN]
Is the owner of
[corporate seal]
Quantum Restaurant Group, Inc.
Corporate Seal
1988
Delaware
FULLY PAID AMD NONASSESABLE SHARES OF COMMON STOCK OF
Quantum Restaurant Group, Inc., transferable on the books of the Corporation by
the holder hereof in person or by duly authorized attorney upon surrender of
this certificate properly endorsed. The holder hereof accepts said shares of
Common Stock with notice of, and subject to, the provisions of the Corporation's
Certificate of Incorporation and By-Laws and all amendments thereto and
restatements thereof. This certificate is not valid unless countersigned and
registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
NAME CHANGED TO MORTON'S RESTAURANT GROUP, INC.
Dated:
COUNTERSIGNED AND REGISTERED:
THE FIRST NATIONAL BANK OF BOSTON,
TRANSFER AGENT AND REGISTRAR,
/s/ Mary Penezic /s/ Agnes Longarzo /s/ Allen J. Bernstein
- --------------------- ------------------- ----------------------
AUTHORIZED OFFICER SECRETARY PRESIDENT
<PAGE>
[SPECIMEN STOCK CERTIFICATE--Back]
QUANTUM RESTAURANT GROUP, INC.
THE CORPORATION IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF STOCK. THE
CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS, THE
POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE PARTICIPATING, OPTIONAL OR OTHER
SPECIAL RIGHTS OF EACH CLASS OF STOCK THEREOF AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- Custodian
--------------------
(Cust) (Minor)
TEN ENT -- as tenants by the under Uniform Gifts
entireties to Minors
Act
JT TEN -- as joint tenants with right -----------------
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above list.
For value received, __________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please print or typewrite name and address of assignee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
----------------------------------------------
Attorney to transfer the said shares on the books of the within named
Corporation with full power of substitution in the premises.
Dated
-----------------------
-------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE
OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
IMPORTANT: SIGNATURE(S) MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF A
REGISTERED NATIONAL STOCK EXCHANGE OR BY A COMMERCIAL BANK OR TRUST COMPANY.
Signature Guaranteed:
---------------------
This certificate also evidences Rights that entitle the holder hereof to
certain rights as set forth in a Rights Agreement between the Company and The
First National Bank of Boston, as Rights Agent, dated as of December 15, 1994
(the "Rights Agreement"), the terms of which are incorporated herein by
reference and a copy of which is on file at the principal offices of the
Company. Under certain circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will no longer be
evidenced by this certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect on the date of mailing,
without charge promptly after receipt of a written request therefor. Under
certain circumstances set forth in the Rights Agreement, Rights issued to, or
beneficially owned by, any Person who is, was or becomes an Acquiring Person or
any Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement), whether currently held by or on behalf of such Person or by any
subsequent holder, may become null and void.
EXHIBIT 4.04(E)
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This THIRD AMENDMENT (this "Amendment"), dated as of June 28, 1996, by and
among MORTON'S RESTAURANT GROUP, INC., a Delaware corporation (formerly known as
Quantum Restaurant Group, Inc.) having its principal place of business at Suite
210, 3333 New Hyde Park Road, New Hyde Park, New York 11042 (referred to below
and in the Credit Agreement, as defined below, as "Quantum"), THE PEASANT
RESTAURANTS, a Delaware corporation having its principal place of business at
489 Peachtree Street, N. E., Atlanta, Georgia 30308 ("Peasant"), MORTON'S OF
CHICAGO, Inc. an Illinois corporation with its principal place of business at
350 West Hubbard Street, Chicago, Illinois 60610 ("Morton's") (Quantum,
Peasant and Morton's are referred to herein collectively as the "Borrowers",
and each, individually, as a "Borrower"), THE FIRST NATIONAL BANK OF BOSTON, as
Agent (the "Agent") for the lenders (as defined in the Credit Agreement
referred to below), and THE FIRST NATIONAL BANK OF BOSTON ("FNBB") in its
individual capacity as a Lender, amends (a) the Second Amended and Restated
Revolving Credit and Term Loan Agreement dated as of June 19, 1995, as amended
by the First Amendment dated as of February 14, 1996 (the "First Amendment"),
the Second Amendment dated as of March 5, 1996 (the "Second Amendment"), a
letter agreement dated as of May 2, 1996 (the "Supplemental Agreement"), and as
the same may be further amended, modified, or supplemented from time to time
(the "Credit Agreement"), by and among the Borrowers, the Agent, and the
Lenders, and (b) the Supplemental Agreement. Capitalized terms used but not
defined herein shall have the meanings set forth in the Credit Agreement.
WHEREAS, the Borrowers have requested the Lenders agree to extend the
maturity of the credit facilities provided for in the Credit Agreement, and to
amend certain over provisions of the Credit Agreement and the Supplemental
Agreement; and
WHEREAS, the Agent and the Lenders, subject to the terms and provisions
hereof, have agreed to so amend the Credit Agreement and the Supplemental
Agreement;
NOW THEREFORE, the parties hereto hereby agree as follows:
ss.1. Amendments to Credit Agreement and Supplemental Agreement. Subject to
the satisfaction of the conditions precedent set forth in ss. 3 hereof, the
Credit Agreement and the Supplemental Agreement are hereby amended as follows:
ss.1.1. New Definitions. Section 1 of the Credit Agreement is hereby
amended by adding the following new definitions to Section 1 in the appropriate
places in the alphabetical sequence:
"Available Net Cash Proceeds. As to any particular transaction consisting
of a Permitted Disposition, 50% of the Net Cash Proceeds thereof (excluding the
first $1,605,000 of the total Net Cash Proceeds, determined on an aggregate
cumulative basis, received from and after January 1, 1996 with respect to all
such Permitted Dispositions), but, in any event, for purposes hereof, the total
Available Net Cash Proceeds shall not be more than $5,000,000 on an aggregate,
cumulative basis with respect to all such Permitted Dispositions."
<PAGE>
-2-
"CNL. CNL Financial I, Inc., a Florida corporation."
"CNL Collateral. See the definition of CNL Liens in this ss.1.
"CNL Indebtedness. Indebtedness of Morton's and certain of its Subsidiaries
(Morton's of Chicago/Atlanta, Inc. and Morton's of Chicago/Denver, Inc.) to CNL,
not exceeding $2,500,000 in total principal amount, in respect of a term loan
made by CNL to Morton's, maturing ten (1O) years after such loan is made, with
equal monthly amortization of principal and bearing interest at a rate per annum
not exceeding the annual interest rate provided for in the commitment letter
dated June 6, 1996 from CNL to Quantum (a copy of which has been provided to the
Agent by Quantum), and otherwise upon terms and pursuant to documentation in
form and substance satisfactory to the Majority Lenders.
"CNL Liens. Liens and security interests in favor of CNL, with respect only
to the assets of those two certain existing Morton's Restaurants located at 1710
Wynkoop Street, Denver, Colorado and 303 Peachtree Street N.E., Atlanta,
Georgia, respectively (the "CNL Collateral"), securing only the CNL
Indebtedness."
"Net Cash Proceeds. With respect to any sale, lease, transfer or other
disposition of any asset or the sale of any capital stock or any warrants,
rights or options to acquire capital stock, by any Person, the excess of (i) the
gross cash proceeds received by such Person from the sale or disposition of any
such asset (including such capital stock, warrants, rights or options) of such
Person plus, as and when received, all cash payments received subsequent to such
sale or disposition representing (A) any deferred purchase price therefor or (B)
any cash proceeds from the sale or other disposition of any cash equivalents (or
any deferred purchase price obligations) received therefor over (ii) the sum of
(A) a reasonable reserve for any liabilities payable incident to such sale or
disposition, (B) the reasonable direct costs and expenses incurred by such
Person in connection with such sale or disposition (including, without
limitation, reasonable brokerage fees and commissions), (C) all payments
actually made on any Indebtedness (other than the Obligations) or other
obligations which are secured by any assets subject to such sale or disposition
which are required to be repaid out of the proceeds from such transaction and
(D) actual tax payments made or to be made in connection therewith".
"Permitted Disposition(s). Proposed Dispositions which are permitted by ss.
10.12 hereof (or otherwise effected pursuant to transactions expressly approved
in writing by the requisite Lenders hereunder)."
"Proposed Disposition(s). The sale or other disposition of some or all of
the assets or capital stock (except that, in the case of the sale or disposition
of the capital stock of any particular Person, all of the issued and outstanding
capital stock of such Person must be sold or otherwise disposed of pursuant to
such sale or disposition) of Peasant Holdings, Peasant, the Peasant
Subsidiaries, Mick's and/or the Mick's Subsidiaries."
"Revolving Credit Share. At any time of determination, the fraction whose
numerator is the then applicable Revolving Credit Commitment Amount and whose
denominator is the Total Exposure."
<PAGE>
-3-
"Term Loan Share. At any time of determination, the fraction whose
numerator is the then applicable outstanding principal of the Term Loans and
whose denominator is the Total Exposure."
"Total Exposure. At any time of determination, the sum of the then
outstanding principal of the Term Loans plus the then applicable Revolving
Credit Commitment Amount."
ss.1.2. Changes in Certain Definitions.
(a) The definition of Excluded Non-Cash Charges in Section 1 of the Credit
Agreement (as added by the First Amendment to the Credit Agreement) is hereby
amended to read as follows:
"Excluded Non-Cash Charges. For any period, the non-cash expenses and
noncash accounting charges incurred by the Companies in connection with the
Permitted Dispositions, all as determined in accordance with generally accepted
accounting principles."
(b) The definition of Final Maturity Date in Section 1 of the Credit
Agreement is hereby amended to read as follows:
"Final Maturity Date: December 31, 2001."
(c) References to "Quantum" in the Credit Agreement and the other Loan
Documents shall be deemed to be references to Morton's Restaurant Group, Inc., a
Delaware corporation which, prior to May 9, 1996, was formerly known as Quantum
Restaurant Group, Inc.
ss.1.3. Mandatory Reductions. Section 2.1(b) of the Credit Agreement is
hereby amended by adding the following new paragraph (iii):
"(iii) Mandatory Reductions. The Revolving Credit Commitment Amount
shall be automatically and immediately reduced from time to time by the
Revolving Credit Share of the Available Net Cash Proceeds (if any) received
by the Companies in respect of each Permitted Disposition (but only to the
extent that the aggregate, cumulative Available Net Cash Proceeds do not
exceed $5,000,000), in each case allocated pro rata among the Lenders in
accordance with their respective Commitment Percentages (the "Mandatory
Reductions"). No such reduction of the Revolving Credit Commitment Amount
shall be subject to reinstatement."
ss.1.4. Term Loan Principal Payments.
(a) Section 2.6(c) of the Credit Agreement is hereby amended to read
as follows:
"(c) Repayments of Principal of Term Loan.
(i) Scheduled Payments. The Borrowers jointly and severally
promise to pay to the Agent for the ratable accounts of the Lenders
the principal of the Term Loan in quarterly installments of $800,000
per installment, each due and payable on the last day of each calendar
quarter of each calendar year, commencing September 30, 1997, and
<PAGE>
-4-
with a final payment due and payable on the Final Maturity Date in an amount
equal to the then unpaid principal balance of the Term Loan.
(ii) Mandatory prepayments. The Borrowers jointly and severally
shall be obligated to make prepayments in respect of the principal of
the Term Loan immediately at the time of each Permitted Disposition in
an amount equal to the Term Loan Share of the Available Net Cash
Proceeds (if any) received by the Companies in respect of such
Permitted Disposition (but only to the extent that the aggregate,
cumulative Available Net Cash Proceeds do not exceed $5,000,000), in
each case payable to the Agent for application in respect of the Term
Loan to the ratable accounts of the Lenders (the "Mandatory
Prepayments"). Prior to the earlier to occur of (A) the aggregate
cumulative amount of principal repaid or prepaid in respect of the
Term Loan being equal to at least $1,600,000, or (B) December 31,
1997, the Mandatory Prepayments shall be applied against the scheduled
unpaid installments of principal due in respect of the Term Loan in
the direct order of their maturity; otherwise, any and all Mandatory
Prepayments made hereunder shall be applied against the scheduled
unpaid installments of principal due in respect of the Term Loan in
the inverse order of their maturity. No such Mandatory Prepayments
with respect to the Term Loan may be reborrowed."
(b) Section 2.6(d) of the Credit Agreement is hereby amended by deleting
the third and fourth sentence thereof and inserting in their places the
following:
"Prior to the earlier to occur of (A) the aggregate amount of principal
repaid or prepaid in respect of the Term Loan being equal to at least
$1,600,000, or (B) December 31, 1997, prepayments hereunder shall be
applied against the scheduled unpaid installments of principal due in
respect of the Term Loan in the direct order of their maturity; otherwise,
any and all prepayments made hereunder shall be applied against the
scheduled unpaid installments of principal due in respect of the Term Loan
in the inverse order of their maturity. No such amount repaid or prepaid
with respect to the Term Loan may be reborrowed."
ss.1.5. Asset Disposition Reporting Requirements. Section 9.4 of the
Credit Agreement is hereby amended by re-designating paragraph (h) thereof
as paragraph (i) thereof, and inserting the following new paragraph (h)
into ss.9.4 between paragraph (g) and paragraph (i):
"(h) as soon as practicable but, in any event, concurrently with
the consummation of each Permitted Disposition, copies of the material
definitive contracts, agreements and instruments evidencing or
relating to such Permitted Disposition and a computation in reasonable
detail of the Net Cash Proceeds, Available Net Cash Proceeds,
Mandatory Reductions (if any) of the Revolving Credit Commitment
Amount, and Mandatory Prepayment (if any) of the Term Loan arising
from or otherwise relating to such Permitted Disposition."
ss.1.6. Indebtedness. Section 10.1 of the Credit Agreement is hereby
amended by deleting the word "and" from the end of ss.10.1(k), changing the
period at the end of ss.10.1(l) to a semi-colon, inserting the word "and"
immediately after such new semi-colon, and adding the following new ss. 10.1(1):
<PAGE>
-5-
"(m) the CNL Indebtedness."
ss.1.7. Liens. Section iO.4 of the Credit Agreement is hereby amended by
deleting the word "and" from the end of ss.10.4(g), changing the period at the
end of ss.10.4(h) to a semi-colon, inserting the word "and" immediately after
such new semi-colon, and adding the following new ss.10.4(i) immediately after
ss.10.4(h):
"(i) the CNL Liens."
ss.1.8. Asset Dispositions. Section 10.12 of the Credit Agreement is hereby
amended by adding the following at the end of ss. 10.12, immediately before the
period:
"; provided, however, so long as no Default or Event of Default is
continuing, none would result from (or exist after giving effect to) the
applicable Proposed Disposition and in connection therewith the Companies timely
then comply with the applicable provisions of ss.ss.2.1(b), 2.6(c), and 9.4(h)
hereof, the Companies may effect one or more Proposed Dispositions on
arms-length terms for fair market value received in consideration thereof."
ss.1.9. Consents, Etc. Clause (g) of Section 21 of the Credit Agreement is
hereby amended by adding the following at the end of the final parenthetical
expression at the end of clause (g), immediately prior to the end of such final
parenthetical expression and inserted within the parentheses:
"; and except for (i) the release of the CNL Collateral as
provided in ss.24 hereof as in effect immediately after the
effectiveness of the Third Amendment, dated as of June 28, 1996 (the
"Third Amendment") to this Credit Agreement, and (ii) certain (A)
dispositions of Collateral (whether assets or capital stock) and (B)
in the case only of the applicable disposition of all of the capital
stock of any applicable Person, releases of the Obligations only of
such applicable disposed Person and its Subsidiaries, in each case
(whether under clause (A) or clause (B) or both) in transactions that
are permitted by ss.10.12 hereof as in effect immediately after the
effectiveness of the Third Amendment."
ss.1.10. Notices. Section 18(d) of the Credit Agreement is hereby
amended to read as follows:
"(d) if to FNBB, or the Agent, at its Head Office, at 100 Federal
Street, Boston, Massachusetts 02110, Attention: Robert W. MacElhiney,
or such other address for notice as FNBB, or the Agent, as the case
may be, shall last have furnished in writing to the Person giving the
notice;"
ss.1.11. Procedures For Releases of Collateral. Section 24 of the
Credit Agreement is hereby amended by adding the following new
paragraphs at the end of ss.24:
"In the event of the Permitted Disposition of the assets or the
capital stock of applicable Persons pursuant to, and in accordance
with ss.10.12 hereof, the Agent shall (and shall be authorized and
permitted, on behalf of the Lenders, to) release only its
<PAGE>
-6-
security interests and liens on, as the case may be, such disposed assets or
capital stock, and to release the Obligations only as to such applicable
disposed Person and its Subsidiaries (and the security interests and liens on
the assets of such disposed Person and its Subsidiaries securing such
Obligations) in the case of any such Permitted Disposition of all of the capital
stock of such applicable disposed Person, all upon the written request and at
the expense of the Borrowers, in each case without impairing or otherwise
affecting any of Obligations as to any other Person (including the joint and
several liabilities of any and all other Borrowers and any and all other
Guarantors in respect of all of the Obligations, whether initially incurred by
any such released Person or its Subsidiaries or otherwise) or the security
interests and liens of the Agent with respect to the remaining Collateral in any
manner whatsoever. Upon (and as conditions precedent to) each such release,
pursuant to the foregoing provisions, of the applicable Collateral and, as the
case may be, the Obligations as to each such applicable disposed Person and its
Subsidiaries, then each of this Agreement and the other Loan Documents shall be,
effective as of the effective date of such release, amended to delete each
reference to the applicable disposed Collateral and, as the case may be, the
applicable disposed Person and its Subsidiaries, whether as Borrowers or as
Guarantors or otherwise, and to make such other related conforming changes in
connection therewith, all as shall be necessary and appropriate in the good
faith judgment of the Agent to effectuate the intention and purposes of this
Agreement and the other Loan Documents, pursuant to amendment documents in form
and substance mutually satisfactory to the Agent and the Borrowers."
"In the event of (and concurrently with) the incurrence of the CNL
Indebtedness and the related CNL Liens, and provided that at such time no
Default or Event of Default is continuing and none would result from (or
exist after giving effect to) such CNL Indebtedness and such CNL Liens, the
Agent shall (and shall be authorized and permitted, on behalf of the
Lenders, to) release, on a single occasion only, solely its security
interests and liens on such portion of the CNL Collateral as shall then
actually be subject to the CNL Liens, all upon the written request and at
the expense of the Borrowers, in each case without impairing or otherwise
affecting the security interests and liens of the Agent with respect to the
remaining Collateral in any manner whatsoever. In the event any such
released portion of the Collateral is at any time thereafter no longer
subject to such CNL Liens, the Companies shall immediately so notify the
Agent in writing and grant to the Agent (for the benefit of itself and the
Lenders), as collateral security for the Obligations, a first priority
perfected security interest in all such former CNL Collateral pursuant to
the terms of the Security Documents."
ss.1.12. Closing of Certain Restaurants. The Second Amendment to the Credit
Agreement made certain adjustments to the financial covenants contained in the
Credit Agreement, and the related definitions, in order to reflect the closing
of a certain Peasant Restaurant located in Washington, D.C. (as referred to in
the definition of Specified Restaurant Closing Expenses added by the Second
Amendment to Section 1 of the Credit Agreement). The Supplemental Agreement made
certain further adjustments to such financial covenants contained in the Credit
Agreement in connection win the closing of certain other restaurants. In
connection with the planned closing of the Mick's 19th Street Grille restaurant
located in Washington, D.C., the Supplemental Agreement is hereby amended by (a)
increasing the figure set forth in the second paragraph of the Supplemental
Agreement by $300,000 so that such figure
<PAGE>
-7-
(as so amended) shall be "$1,455,000" rather than "$1,155,000" and (b) adding
the following restaurant location to the list attached to the Supplemental
Agreement as Schedule 1 thereto:
"7. The Mick's 19th Street Grille restaurant located at 19th Street in
Washington, D.C."
ss.2. Representations and Warranties. The Borrowers hereby represent and
warrant to the Agent and the Lenders as follows:
(a) Representations and Warranties in Credit Agreement. Except as
specified in writing by the Borrowers to the Agent with respect to the
subject matter of this Amendment prior to the execution and delivery hereof
by the Agent and the Lenders, the representations and warranties of the
Borrowers contained in the Credit Agreement were true and correct in all
material respects when made and continue to be true and correct in all
material respects on the date hereof, except, in each case to the extent of
changes resulting from transactions contemplated or permitted by the Loan
Documents and this Amendment and changes occurring in the ordinary course
of business which singly or in the aggregate are not materially adverse,
and to the extent that such representations and warranties relate expressly
to an earlier date.
(b) Authority, No Conflicts, Enforceability of Obligations, Etc. Each
of the Borrowers hereby confirms that the representations and warranties of
the Borrowers contained in ss.ss.6.1, 6.3 and 6.4 of the Credit Agreement
are true and correct on and as of the date hereof as if made on the date
hereof, treating this Amendment, the Credit Agreement as amended hereby,
and the other Loan Documents as amended hereby, as "Loan Documents" for the
purposes of making said representations and warranties.
ss.3. Conditions to Effectiveness. The effectiveness of this Amendment
shall be subject to the delivery to the Agent and the Lenders by (or on behalf
of) each of the Borrowers or the Guarantors, as the case may be,
contemporaneously with the execution hereof, of each of the following, each in
form and substance satisfactory to the Agent and the Lenders:
(a) this Amendment signed by each of the Borrowers, the Guarantors, the
Agent, and the Lenders;
(b) the Amended and Restated Fee Letter of even date herewith, signed by
each of the Borrowers, the Guarantors, the Agent, and the Lenders;
(c) the amendment fee provided for in such Amended and Restated Fee Letter
as being due and payable in connection herewith;
(d) certificates of an appropriate officer of each of the Borrowers, dated
as of the date hereof, as to (i) the corporate actions taken by each
of the Borrowers authorizing the execution, delivery, and performance
hereof, and (ii) the names, titles, incumbency, and specimen
signatures of the officers of each of the Borrowers authorized to sign
this Amendment on behalf of each of the Borrowers;
<PAGE>
-8-
(e) a favorable written legal opinion addressed to the Agent and the
Lenders, dated as of the date hereof, from Schulte, Roth & Zabel,
special counsel to the Borrowers, with respect to such matters as the
Agent or the Lenders may reasonably request;
(f) such evidence as the Agent may reasonably request such that the Agent
shall be satisfied that the representations and warranties contained
in ss.2 hereof are true and correct on and as of date hereof, and
(g) such other certificates, documents, or instruments with respect to
this Amendment, as the Agent or the Lenders may reasonably request.
ss.4. No Other Amendments or Waivers; Execution in Counterparts. Except as
otherwise expressly provided by this Amendment, all of the terms, conditions and
provisions of the Credit Agreement, the Supplemental Agreement, and the other
Loan Documents shall remain in full force and effect. Each of the Borrowers
confirms and agrees that the Obligations of the Borrowers to the Lenders under
the Loan Documents, as amended and supplemented hereby, are secured by,
guarantied under, and entitled to the benefits, of the Security Documents. The
Borrowers, the Guarantors, the Agent and the Lenders hereby acknowledge and
agree that all references to the Credit Agreement, the Supplemental Agreement,
and the Obligations thereunder contained in any of the Loan Documents shall be
references to the Credit Agreement, the Supplemental Agreement, and the
Obligations, as amended hereby and as the same may be amended, modified,
supplemented, or restated from time to time. The Security Documents and the
perfected first priority security interest of the Lenders thereunder shall
continue in full force and effect, and the collateral security and guaranties
provided for in the Security Documents shall not be impaired by this Amendment.
This Amendment may be executed in any number of counterparts, but all such
counterparts shall together constitute but one instrument. In making proof of
this Amendment it shall not be necessary to produce or account for more than one
counterpart signed by each party hereto by and against which enforcement hereof
is sought.
ss.5. Governing Law. This Amendment shall be construed according to and
governed by the internal laws of the Commonwealth of Massachusetts without
reference to principles of conflicts of law.
[Remainder of Page Intentionally Left Blank]
<PAGE>
-9-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized.
The Borrowers:
MORTON'S RESTAURANT GROUP, INC
THE PEASANT RESTAURANTS, INC.
MORTON'S OF CHICAGO, INC.
By: /s/ Thomas J. Baldwin
----------------------------------
Name: Thomas J. Baldwin
--------------------------------
Title: SVP Finance & CFO
-------------------------------
THE FIRST NATIONAL BANK OF BOSTON,
for itself and as Agent
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Consented and agreed to, by each of
THE GUARANTORS (as defined in the
Credit Agreement)
By: /s/ Thomas J. Baldwin
----------------------------------
Name: Thomas J. Baldwin
--------------------------------
Title: SVP Finance & CFO
-------------------------------
for each of the Guarantors
<PAGE>
-9-
IN WITNESS WHEREOF, the parties thereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized.
The Borrowers:
MORTON'S RESTAURANT GROUP, INC
THE PEASANT RESTAURANTS, INC.
MORTON'S OF CHICAGO, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
THE FIRST NATIONAL BANK OF BOSTON,
for itself and as Agent
By: /s/ Rod Guinn
----------------------------------
Name: Rod Guinn
--------------------------------
Title: Director
-------------------------------
Consented and agreed to, by each of
THE GUARANTORS (as defined in the
Credit Agreement)
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
for each of the Guarantors
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-Q
for the period ended June 30, 1996
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-29-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Jun-30-1996
<CASH> 2,045
<SECURITIES> 0
<RECEIVABLES> 1,296
<ALLOWANCES> 0
<INVENTORY> 3,934
<CURRENT-ASSETS> 33,162<F1>
<PP&E> 25,147
<DEPRECIATION> 3,305
<TOTAL-ASSETS> 74,273
<CURRENT-LIABILITIES> 21,347<F2>
<BONDS> 25,950
0
0
<COMMON> 64
<OTHER-SE> 21,802
<TOTAL-LIABILITY-AND-EQUITY> 74,273
<SALES> 95,345
<TOTAL-REVENUES> 95,345
<CGS> 31,910
<TOTAL-COSTS> 81,047
<OTHER-EXPENSES> 9,398
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,144
<INCOME-PRETAX> 3,756
<INCOME-TAX> 940
<INCOME-CONTINUING> 2,816
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,816
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
<FN>
<F1> Current assets include $21,602 of Assets Held for Sale
<F2> Current liabilities include $11,276 of Liabilities Related to Assets Held
for Sale.
</FN>
</TABLE>
