MORTONS RESTAURANT GROUP INC, 10-K, 1997-03-27

MORTONS RESTAURANT GROUP INC
10-K, 1997-03-27
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FORM 10-K

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Fee Required)

For the fiscal year ended December 29, 1996

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required)

For the transition period from ________________ to _____________________________

Commission file number 1-12692

MORTON'S RESTAURANT GROUP, INC.
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(Exact name of registrant as specified in its charter)

Delaware 13-3490149
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(State or other jurisdiction (I.R.S. employer identification no.)
of incorporation or organization)

3333 New Hyde Park Road, New Hyde Park, NY 11042
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(Address of principal executive offices) (zip code)

516-627-1515
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(Registrant's telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class Name of exchange

Common Stock, $.01 par value New York Stock Exchange
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Securities Registered Pursuant to Section 12(g) of the Act:

None
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(Title of Class)

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 |_|

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

As of March 3, 1997, the aggregate market value of voting stock held by
non-affiliates of the registrant was $105,516,051.

As of March 26, 1997, the registrant had 6,458,988 shares of its common stock,
$.01 par value, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

(1) portions of the registrant's annual report to stockholders for the fiscal
year ended December 29, 1996 (the "Annual Report") are incorporated by
reference into Part II hereof; and

(2) portions of the registrant's definitive proxy statement (to be filed
pursuant to Regulation 14A) for the 1997 Annual Meeting of Stockholders
(the "Proxy Statement") are incorporated by reference into Part III hereof.
<PAGE>

Part I

Item 1. Business

General

Morton's Restaurant Group, Inc., formerly known as Quantum Restaurant
Group, Inc., was incorporated as a Delaware corporation on October 3, 1988. As
used in this Report, the terms "MRG" or "Company" refer to Morton's Restaurant
Group, Inc. and its consolidated subsidiaries.

In December 1988, the Company acquired 89% of the outstanding common stock
of a predecessor company of Peasant Holding Corp. ("Peasant Holding"), the
holding company for The Peasant Restaurants, Inc. ("Peasant") and Mick's
Restaurants, Inc. ("Mick's"). On February 6, 1997, the Company completed the
sale of an 80.1% interest in its Atlanta-based Mick's and Peasant restaurants
and is in the process of selling or otherwise disposing of the five remaining
non-Atlanta Mick's restaurants (see Note 3 to the Company's consolidated
financial statements).

At December 29, 1996, the Company owned and operated 67 restaurants
utilizing four distinct restaurant concepts: Morton's, Bertolini's Authentic
Trattorias ("Bertolini's"), Mick's, and Peasant restaurants. These concepts
appeal to a broad spectrum of consumer tastes and target separate price points
and dining experiences. During the first quarter of fiscal 1997, one new
Morton's restaurant was opened, two non-Atlanta Mick's were closed, and the
Company completed the sale of 19 Atlanta-based restaurants decreasing the total
to 47 restaurants (35 Morton's, 7 Bertolini's, and 5 Mick's).

The Company provides strategic support and direction to its subsidiary
companies, and evaluates and analyzes potential locations for new restaurants.
Management consists of Allen J. Bernstein, Chairman of the Board and Chief
Executive Officer, William L. Hyde, Jr., President and Chief Operating Officer,
and vice presidents responsible for site selection and development, finance, and
administration.

The Company plans to expand by adding new Morton's and Bertolini's
restaurants. In addition, the Company has investigated, and may possibly
continue to investigate, the acquisition of other restaurant concepts. The
Company has, and will continue to utilize, stringent criteria to evaluate
acquisition opportunities, which include the following attributes: (i) a proven
record of success and ample opportunities for geographic expansion; (ii)
fundamentally strong operations that could be enhanced by the Company's systems,
cost controls and standards; and (iii) a strong management team committed to
operating as a part of the Company.

The Company has no agreements or letters of intent with respect to any
potential acquisition. The Company does not currently intend to develop a
franchise program for any of its restaurant concepts. There can be no assurance
that the Company's expansion plans will be successfully achieved or that new
restaurants will meet with consumer acceptance or can be operated profitably.

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Sale of Mick's and Peasant Restaurants

On February 6, 1997, the Company completed the sale of its Atlanta-based
Mick's and Peasant restaurants. MRI Acquisition Corporation acquired an 80.1%
interest in Mick's and PRI Acquisition Corporation acquired an 80.1% interest in
Peasant for an aggregate of $6,800,000, consisting of $4,300,000 in cash and
$2,500,000 in the form of two unsecured promissory notes. The Company retained a
19.9% interest in Mick's and Peasant. In connection with the sale, the remaining
non-Atlanta Mick's and Peasant restaurant subsidiaries were transferred to
another subsidiary of the Company. For more information see Note 3 to the
Company's consolidated financial statements.

Morton's of Chicago Steak House Restaurants

At December 29, 1996, Morton's operated 34 premium quality steak houses
located in 32 cities. During the first quarter of 1997, a new Morton's
restaurant was opened in Washington, DC. Morton's offers its clientele a
combination of excellent service and large quantities of the highest quality
menu items. Morton's has received awards in many locations for the quality of
its food and hospitality. Morton's serves only U.S.D.A. prime aged beef,
including a 24 oz. porterhouse, a 20 oz. NY strip sirloin and a 14 oz. filet
mignon. Morton's also offers fresh fish, lobster, veal and chicken. All Morton's
have identical dinner menu items. While the emphasis is on beef, the menu
selection is broad enough to appeal to many taste preferences. The Morton's
dinner menu consists of a table-side presentation by the server of many of the
dinner items, including a 48 oz. porterhouse steak and a live Maine lobster, and
all Morton's restaurants feature an open display kitchen where steaks are
prepared. Each restaurant has a fully stocked bar with a complete list of name
brands and an extensive premium wine list that offers approximately 150
selections.

Morton's caters primarily to high-end, business-oriented clientele. During
the year ended December 29, 1996, the average per-person check, including dinner
and lunch, was approximately $62.25. Management believes that, on a nationwide
basis, a vast majority of Morton's weekday sales and a substantial portion of
its weekend sales are derived from business people using expense accounts. Sales
of alcoholic beverages accounted for approximately 31% of Morton's revenues
during fiscal 1996. In the nine Morton's serving both lunch and dinner during
fiscal 1996, dinner service accounted for approximately 88% of revenues and
lunch service accounted for approximately 12%. All Morton's are open seven days
a week. Those 25 Morton's serving only dinner are open from 5:30 p.m. to 11:30
p.m., while those Morton's serving both lunch and dinner are also open from
11:30 a.m. to 2:30 p.m. for the lunch period.

All Morton's are very similar in terms of style, concept and decor and are
located in retail, commercial and office building complexes in major
metropolitan areas and urban centers. In 1996, 32 Morton's (including all
restaurants opened since the 1989 acquisition) had on-premises private dining
and meeting facilities referred to as "Boardrooms". During fiscal 1996,
Boardroom sales were approximately 16% of sales in those locations offering
Boardrooms. Boardrooms offer a valuable amenity to customers and fully
complement Morton's operations. It is anticipated that all future Morton's will
contain Boardrooms.

Morton's operations and cost systems, developed over 19 years, enable
Morton's to maintain tight controls over operating expenses. The cooking staff
is highly trained and experienced. The uniform staffing patterns throughout
Morton's restaurants enhance operating efficiencies. Morton's management
believes that its centralized sourcing from its primary suppliers of its
U.S.D.A. prime aged beef gives it significant cost and availability advantages
over many independent restaurants. Morton's purchases

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Midwest-bred, grain-fed, U.S.D.A. prime aged beef (approximately the finest two
to three percent of an 1,100 pound steer).

Bertolini's Authentic Trattoria Restaurants

At December 29, 1996, there were seven Bertolini's, located in seven
cities. Bertolini's is a white tablecloth, authentic Italian trattoria, which
provides table service in a casual dining atmosphere. For the year ended
December 29, 1996, Bertolini's average per-person check, including dinner and
lunch, was approximately $18.75. Bertolini's restaurants are open seven days a
week, for lunch and dinner, with typical hours of 11:00 a.m. to 12:00 midnight.
Dinner service accounts for approximately 67% of revenues and lunch service
accounts for approximately 33%. Sales of alcoholic beverages accounted for
approximately 20% of Bertolini's restaurants' revenues during fiscal 1996.

Mick's and Peasant Restaurants

As noted on page 1 and in Note 3 to the Company's consolidated financial
statements, on February 6, 1997, the Company completed the sale of an 80.1%
interest in its Atlanta-based Mick's and Peasant restaurants and is in the
process of selling or otherwise disposing of the five remaining non-Atlanta
Mick's restaurants.

Site Development and Expansion

General. To date, the Company has attempted to maximize its capital resources by
receiving substantial development or rent allowances from its landlords. The
Company's leases typically provide for substantial landlord development or rent
allowances and an annual percentage rent based on gross sales, subject to
market-based minimum annual rents. This leasing strategy enables the Company to
reduce its net investments in newly developed restaurants.

The costs of opening a Morton's or Bertolini's varies by restaurant
depending upon, among other things, the location of the site and the extent of
any renovation required. The Company leases all of its restaurant sites and
operates both free-standing and in-line restaurants. In recent years, the
Company has received substantial landlord development or rent allowances for
leasehold improvements and furniture, fixtures and equipment and, in certain
instances, pre-opening expenses. The Company's average net cash investments for
the six restaurants opened between January 1, 1996 and March 1997, was
approximately $1.3 million, in each case, net of landlord development and or
rent allowances and restaurant equipment lease financings. The Company currently
targets its average net cash investment in new restaurants to be less than $1.5
million per restaurant, although the Company may expend greater amounts for
particular restaurants.

The Company believes that the locations of its restaurants are critical to
its long-term success, and management devotes significant time and resources to
analyzing each prospective site. As it has expanded, the Company has developed
specific criteria by which each prospective site is evaluated. Potential sites
are generally sought in major metropolitan areas. In addition to carefully
analyzing demographic information, such as average household size and income,
for each prospective site, management considers factors such as traffic
patterns, proximity of shopping areas and office buildings, area restaurant
competition, accessibility and visibility. The Company's ability to open new
restaurants depends upon locating satisfactory sites, negotiating favorable
lease terms, securing appropriate government permits and approvals, obtaining
liquor licenses and recruiting and transferring additional qualified management
personnel. For these and other reasons, there can be no assurance that the
Company's expansion plans will

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be successfully achieved or that new restaurants will meet with consumer
acceptance or can be operated profitably.

The standard decor and interior design of each of the Company's restaurant
concepts can be readily adapted to accommodate different types of locations.

Morton's. The first Morton's was opened in 1978 in downtown Chicago, where
Morton's headquarters are still located. From 1978 to 1989, Morton's expanded to
a group of nine restaurants in nine cities. Under the Company, Morton's has
grown from nine to 35 restaurants through March 1997. During 1996, new Morton's
opened in Houston, TX; Phoenix, AZ; Orlando, FL; and a second restaurant in New
York City, NY. During the first quarter of 1997 a new Morton's opened in
Washington, DC.

Morton's are located in retail, commercial and office building complexes in
major metropolitan areas. Management believes that fixed investment/occupancy
costs have been relatively low as appropriate space for new Morton's restaurants
has been readily available. The approximate gross cost to the Company for the
five restaurants opened or relocated between January 1, 1996 and March 1997,
ranged from $2.1 million to $3.8 million, including the costs of leasehold
improvements, capital expenditures for furniture, fixtures and equipment, and
other pre-opening expenses. These aggregate per-restaurant costs were
substantially offset by landlord development and or rent allowances ranging from
$0.8 million to $1.4 million.

The Company plans to continue the development of Morton's and has selected
several possible sites for 1997 openings.

Bertolini's Authentic Trattoria Restaurants. As part of its ongoing restaurant
development program, the Company opened a Bertolini's restaurant in Las Vegas in
May 1992 (located in the Forum Shops Mall, adjacent to Caesar's Palace Casino).
A second Bertolini's was opened in September 1993. During 1995 four Bertolini's
were added and, during 1996, a new Bertolini's was opened in Indianapolis, IN.

The approximate gross cost to the Company for the one restaurant opened
during 1996, was approximately $2.3 million, including the costs of leasehold
improvements, capital expenditures for furniture, fixtures and equipment, and
other pre-opening expenses. These aggregate costs were substantially offset by a
landlord development allowance of $0.8 million.

The Company currently plans to continue the development of Bertolini's and
has selected several possible sites for 1997 openings.

As noted on page 1 and in Note 3 to the Company's consolidated financial
statements, on February 6, 1997, the Company completed the sale of its
Atlanta-based Mick's and Peasant restaurants. Accordingly, no new Mick's or
Peasant restaurants were opened during 1996 and none are planned.

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<PAGE>

Restaurant Locations

The Company operated 47 restaurants as of March 1997. The following table
provides information with respect to those restaurants which are open:

Month and
Year Opened
-----------
Morton's of Chicago Steakhouse Restaurants
Chicago, IL (1) December 1978
Washington (Georgetown), DC November 1982
Philadelphia, PA May 1985
Westchester/Oakbrook, IL June 1986
Dallas, TX May 1987
Boston, MA (1) December 1987
O'Hare/Rosemont, IL June 1989
Cleveland, OH September 1990
Tyson's Corner, VA November 1990
Columbus, OH April 1991
Cincinnati, OH August 1991
San Antonio, TX September 1991
Palm Beach, FL November 1991
Minneapolis, MN December 1991
Nashville, TN September 1992
Beverly Hills, CA (2) October 1992
Detroit/Southfield, MI November 1992
Las Vegas, NV January 1993
Sacramento, CA May 1993
Pittsburgh, PA August 1993
New York (Midtown Manhattan), NY October 1993
St. Louis/Clayton, MO December 1993
Palm Desert, CA January 1994
Atlanta/Buckhead, GA March 1994
Charlotte, NC July 1994
San Francisco, CA November 1994
Dallas/Addison, TX November 1994
Costa Mesa/Orange, CA March 1995
Denver, CO (3) March 1995
Atlanta/Downtown, GA (4) November 1995
Houston, TX January 1996
Phoenix, AZ March 1996
Orlando, FL March 1996
New York (Downtown Manhattan), NY June 1996
Washington (Connecticut Ave.), DC January 1997

Bertolini's Authentic Trattorias
Las Vegas, NV May 1992
Phipp's Plaza, Atlanta, GA September 1993
Pennsylvania Avenue, Washington, DC (5) September 1995
White Flint Mall, Rockville, MD October 1995

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King of Prussia, PA November 1995
Irvine, CA November 1995
Indianapolis, IN October 1996

Mick's Restaurants
PA Ave., Washington, DC February 1993
Annapolis, MD February 1994
Fairfax, VA February 1994
Memphis, TN May 1994
Springfield, VA June 1994

Additional sites are under active review for potential leases representing
new Morton's and Bertolini's units to open. Including the restaurant that opened
during the first quarter of 1997, the Company currently intends to open
approximately six to seven new restaurants during 1997, comprised of both
Morton's and Bertolini's restaurants. There can be no assurance, however, that
the Company's expansion plans will be successfully achieved or that new
restaurants will meet with consumer acceptance or can be operated profitably.

(1) Excludes Morton's Boardroom Banquet facilities.
(2) Operates under the name "Arnie Morton's of Chicago."
(3) The Morton's Denver, CO location relocated in March 1995 to a new site. The
original location had been open since September 1985.
(4) The Morton's Atlanta/Downtown, GA location relocated in November 1995 to a
new site. The original location had been opened since March 1986.
(5) The Bertolini's on Pennsylvania Avenue in Washington, DC opened in
September 1995. It was converted from a Peasant Restaurant (Market Square)
which had been open since September 1990.

Restaurant Operations and Management

Morton's and Bertolini's restaurants have a well developed management
infrastructure and are set up as distinct operating divisions within the
Company. Each division has a senior officer responsible for overall operations.
Operations at the Company's restaurants are supervised by area directors, each
of whom is responsible for the operations of several restaurants and reports to
the appropriate division senior officer. Area directors meet frequently with
senior management to review operations and to resolve any issues. Working in
concert with area directors and restaurant general managers, senior management
defines operations and performance objectives for each restaurant. An incentive
plan has been established in which area directors and certain restaurant
managers participate. Awards under incentive plans are tied to achievement of
specified revenue, profitability and operating targets and related quality
objectives.

The Company strives to maintain quality and consistency in its restaurants
through the careful training and supervision of personnel and the establishment
of standards relating to food and beverage preparation, maintenance of
facilities and conduct of personnel. Restaurant managers, many of whom are drawn
from the Company's restaurant personnel, must complete a training program of at
least twelve weeks during which they are instructed in areas of restaurant
management, including food quality and preparation, customer service, alcoholic
beverage service, liquor liability avoidance and employee relations. Restaurant
managers are also provided with operations manuals relating to food and beverage
preparation and operation of restaurants. These manuals are designed to ensure
uniform operations, consistently high quality products and service and proper
accounting for restaurant operations. The Company holds regular

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meetings of its restaurant general managers to discuss new products, continuing
training and other aspects of business management.

The staff for a typical Morton's consists of one general manager and up to
four assistant managers, and approximately 40 to 60 hourly employees. The staff
for a typical Bertolini's consists of one general manager and up to five other
managers, and approximately 100 hourly employees. Each new restaurant employee
of the Company participates in a training program during which the employee
works under the close supervision of restaurant managers. Management strives to
instill enthusiasm and dedication in its employees. Restaurant management
regularly solicits employee suggestions concerning restaurant operations,
strives to be responsive to the employees' concerns and meets regularly with
employees at each of the restaurants.

The Company devotes considerable attention to controlling food costs. The
Company makes extensive use of computers providing management with pertinent
information on daily sales and inventory requirements, thus minimizing the need
to carry large quantities of food inventory. This cost management system is
complemented by the Company's ability to obtain volume-based discounts. In
addition, each restaurant, within the Company's divisions, has similar menu
items and common operating methods, allowing for more simplified management
operating controls.

The Company maintains financial and accounting controls for each of its
restaurants through the use of centralized accounting and management information
systems and reporting requirements. Revenue, cost and related information is
collected daily from each restaurant. Restaurant managers are provided with
operating statements for their respective locations. Cash and credit card
receipts are controlled through daily deposits in local operating accounts, the
balances of which are wire transferred or deposited to cash concentration
accounts.

Purchasing

The Company's ability to maintain consistent quality throughout its
restaurants depends in part upon the ability to acquire food products and
related items from reliable sources in accordance with Company specifications.
The Company has no long-term contracts for any food items used in its
restaurants. The Company currently does not engage in any futures contracts and
all purchases are made at prevailing market prices. While management believes
adequate alternative sources of supply are readily available, these alternative
sources might not provide as favorable terms to the Company as its current
suppliers when viewed on a long-term basis. All of Morton's U.S.D.A. prime aged
beef is shipped to Morton's restaurants by refrigerated common carrier from its
primary Chicago-based suppliers. All other products used by Morton's are
procured locally based on strict group-wide specifications. Bertolini's
restaurants also adhere to strict product specifications and use both national
and regional suppliers. Food and supplies are shipped directly to the
restaurants and invoices for purchases are sent by vendors to the headquarters
office.

Marketing

Management believes that the Company's commitment to quality food,
hospitality and value/price is the most effective approach to attracting guests.
Accordingly, the Company has historically focused its resources on providing its
customers with superior service and value and has relied primarily on word of
mouth to attract new customers. The Company employs public relations consultants
and limited print, billboard and direct mail advertising, and typically conducts
some local restaurant promotions. The

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Company's expenditure for advertising, marketing and promotional expenses as a
percentage of its revenues was 2.3% during fiscal 1996.

Competition

The restaurant business is highly competitive and fragmented, and the
number, size and strength of competitors varies widely by region. The Company
believes that competition in the markets of each operating division is based on,
among other things, quality of the food products, customer service, reputation,
restaurant location, name recognition and price points. The Company's
restaurants compete with a number of restaurants within their markets, both
locally owned restaurants and other restaurants which are members of regional or
national chains. Some of the Company's competitors are significantly larger and
have greater financial and other resources and greater name recognition than the
Company and its restaurants. Many of such competitors have been in existence
longer than the Company and are better established in areas where the Company's
restaurants are, or are planned to be, located. The restaurant business is often
affected by changes in consumer taste and spending habits, national, regional or
local economic conditions, population and traffic patterns and bad weather. In
addition, factors such as inflation, increased food, labor and benefit costs and
the lack of experienced management and hourly employees may adversely affect the
restaurant industry in general and, particularly, the Company's restaurants.

Service Marks and Trademarks

The Company has registered the names Morton's, Morton's of Chicago,
Bertolini's and certain other names used by its restaurants as trademarks or
service marks with the United States Patent and Trademark Office. The Company is
aware of names similar to that of the Company's restaurants used by third
parties in certain limited geographical areas, although the Company does not
anticipate that such use will prevent the Company from using its marks in such
areas. The Company is not aware of any infringing uses that could materially
affect its business. The Company believes that its trademarks and service marks
are valuable to the operation of its restaurants and are important to its
marketing strategy.

Government Regulation

The Company's business is subject to extensive Federal, state and local
government regulation, including regulations relating to alcoholic beverage
control, public health and safety, zoning and fire codes. The failure to obtain
or retain food, liquor or other licenses would adversely affect the operations
of the Company's restaurants. While the Company has not experienced and does not
anticipate any problems in obtaining required licenses, permits or approvals,
any difficulties, delays or failures in obtaining such licenses, permits or
approvals could delay or prevent the opening of a restaurant in a particular
area. Approximately 31%, 20%, 11% and 22% of the revenues of Morton's,
Bertolini's, Mick's and Peasant Restaurants, respectively, for fiscal 1996 were
attributable to the sale of alcoholic beverages. Each restaurant has appropriate
licenses from regulatory authorities allowing it to sell liquor and or beer and
wine, and each restaurant has food service licenses from local health
authorities. The Company's licenses to sell alcoholic beverages must be renewed
annually and may be suspended or revoked at any time for cause, including
violation by the Company or its employees of any law or regulation pertaining to
alcoholic beverage control, such as those regulating the minimum age of patrons
or employees, advertising, wholesale purchasing, and inventory control, handling
and storage. However, each restaurant is operated in accordance with
standardized procedures designed to assure compliance with all applicable codes
and regulations.

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The Company is subject in certain states to "dram-shop" statutes, which
generally provide a person injured by an intoxicated person the right to recover
damages from an establishment which wrongfully served alcoholic beverages to
such person. While the Company carries liquor liability coverage as part of its
existing comprehensive general liability insurance, a judgment against the
Company under a dram-shop statute in excess of the Company's liability coverage,
or inability to continue to obtain such insurance coverage at reasonable costs,
could have a material adverse effect on the Company.

The development and construction of additional restaurants will be subject
to compliance with applicable zoning, land use and environmental regulations.
Management believes that Federal and state environmental regulations have not
had a material effect on the Company's operations, but more stringent and varied
requirements of local government bodies with respect to zoning, land use and
environmental factors could delay construction of new restaurants and add to
their cost.

The Company is also subject to the Fair Labor Standards Act, the
Immigration Reform and Control Act of 1986 and various state laws governing such
matters as minimum wages, overtime, tip credits and other working conditions. A
significant number of the Company's hourly personnel are paid at rates related
to the Federal minimum wage and, accordingly, increases in the minimum wage or
decreases in the allowable tip credit will increase the Company's labor cost.

Employees

As of December 29, 1996, the Company had approximately 4,057 employees, of
whom 3,605 were hourly restaurant employees, 354 were salaried restaurant
employees engaged in administrative and supervisory capacities and 98 were
corporate and office personnel. Many of the hourly employees are employed on a
part-time basis to provide services necessary during peak periods of restaurant
operations. None of the Company's employees are covered by a collective
bargaining agreement. The Company believes that its relations with its employees
are good.

Forward-Looking Statements

Except for the historical information contained in this document,
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.

Item 2. Properties

All of the Company's restaurants are located in space leased by
subsidiaries of the Company. Restaurant lease expirations, including renewal
options, range from one to twenty-five years. The majority of the Company's
leases provide for an option to renew for terms ranging from five years to ten
years. All of the restaurant leases provide for a specified annual rent, and
most leases call for additional or contingent rent based on sales volumes over
specified levels. Generally, the leases are "net leases" which require the
Company's subsidiary to pay its pro rata share of all taxes, insurance and
maintenance costs. In some cases, the Company or another subsidiary guarantees
the performance of new leases of the tenant subsidiary for a portion of the
lease term, typically not exceeding the first five years.

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During 1996, in conjunction with the sale of an 80.1% interest in its
Atlanta-based Mick's and Peasant restaurants, the Company recorded a $11.5
million pre-tax charge. During 1995 the Company recorded a pre-tax charge of
$15.5 million representing asset write-offs ($8.3 million) and management's
estimate of the expected costs ($7.2 million) to terminate leases related to
certain Mick's and Peasant restaurants located outside of Atlanta. For more
information, see Note 3 to the Company's consolidated financial statements.

The Company maintains its executive offices of approximately 9,800 square
feet in New Hyde Park, New York. The executive offices for Morton's and
Bertolini's consist of approximately 11,300 square feet in Chicago. All such
executive offices are leased.

The Company believes its current office and operating space is suitable and
adequate for intended purposes.

Item 3. 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 effect on the Company's
consolidated financial position, equity, results of operations, liquidity and
capital resources.

Item 4. Submission of Matters to a Vote of Security Holders

None.

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Item 4A. Executive Officers of the Registrant

The following sets forth certain information regarding the Company's executive
officers:

Name Age Position
---- --- --------

Allen J. Bernstein (1) 51 Chairman of the Board and Chief Executive Officer

William L. Hyde, Jr. 49 President, Chief Operating Officer and Director

Thomas J. Baldwin 41 Executive Vice President, Chief Financial
Officer, Assistant Secretary and Treasurer

Agnes Longarzo 58 Vice President-Administration and Secretary

Allan C. Schreiber 56 Vice President-Real Estate

Klaus W. Fritsch 53 Vice Chairman and Co-Founder-Morton's of Chicago

Thomas J. Walters 38 President - Morton's of Chicago

Geoffrey D. Stiles 43 Vice President of Operations-Bertolini's
Restaurants, Inc.

(1) Member of Executive Committee of the Board of Directors.

Allen J. Bernstein has been Chairman of the Board of the Company since
October 1994 and Chief Executive Officer and a Director of the Company since
December 1988. He had been President of the Company from December 1988 through
October 1994. Prior to co-founding the Company, Mr. Bernstein served as a
Chairman and Chief Executive Officer of Le Peep Restaurants, Inc. and its
predecessors from July 1981 to December 1988. From 1975 to 1981, Mr. Bernstein
was President and Chief Operating Officer of Wenco Food Systems, Inc., a New
York City area franchisee for Wendy's Restaurants, Inc. Mr. Bernstein has been a
director of Dave and Busters, Inc. since February 1996.

William L. Hyde, Jr. has been President and a Director of the Company since
October 1994 and Chief Operating Officer since February 1994. He had been
Executive Vice President from February 1994 through October 1994. Mr. Hyde
served as President and Chief Operating Officer of Furr's Bishop's, Inc., a
restaurant company, from August 1992 to January 1994. From March 1992 to August
1992, Mr. Hyde was the Executive Vice President of Operations for Miami Subs
Corporation, a restaurant company. From February 1987 to August 1990, Mr. Hyde
served as President and Chief Executive Officer and from November 1985 to
January 1987 as Senior Vice President for Del Taco Restaurants, Inc. His prior
experience includes serving as President and Chief Executive Officer for Chart
House, Inc., a restaurant company.

Thomas J. Baldwin was elected Executive Vice President in January 1997. He
previously served as Senior Vice President--Finance of the Company since June
1992, and was Vice President--Finance from December 1988 until June 1992. In
addition, Mr. Baldwin has been Chief Financial Officer, Assistant Secretary and
Treasurer of the Company since December 1988. Mr. Baldwin was the Chief
Financial

12
<PAGE>

Officer, Vice President of Finance and Treasurer of Le Peep Restaurants, Inc.
from October 1986 until December 1988. After seven years at Kraft General Foods
Corp., now a subsidiary of Philip Morris Companies Inc., Mr. Baldwin joined
Citicorp in April 1985 and became Vice President responsible for strategic
planning and financial analysis at a major corporate banking division. Mr.
Baldwin has an M.B.A. and is also a licensed certified public accountant in the
State of New York.

Agnes Longarzo has been Vice President of Administration and Secretary of
the Company since December 1988. Ms. Longarzo had been Vice President of
Administration and Corporate Secretary for Le Peep Restaurants, Inc. from March
1983 to December 1988. Prior to joining Le Peep Restaurants, Inc., Ms. Longarzo
served as the Director of Administration of Wenco Food Systems, Inc.

Allan C. Schreiber has been Vice President of Real Estate since January
1996 and prior to that was Director of Real Estate since November 1995. Mr.
Schreiber had been a Senior Managing Director at The Galbreath Company since
1991. Prior to joining Galbreath, he served as an Executive Vice President of
National Westminster Bank USA from 1982 to 1991. Previously, Mr. Schreiber had
been a Vice President and Division Executive of the Chase Manhattan Bank.

Klaus W. Fritsch has been the Vice Chairman of Morton's of Chicago, Inc.
since May 1992. Mr. Fritsch has been with Morton's of Chicago, Inc. since its
inception in 1978, when he co-founded Morton's. After Mr. Arnold Morton ceased
active involvement in 1987, Mr. Fritsch assumed all operating responsibilities
as President in which capacity he served until May 1992.

Thomas J. Walters has been President of Morton's of Chicago, Inc. since
April 1995. He had been Vice President of Operations from March 1994 to April
1995. Previously, Mr. Walters served as Regional Manager since March 1993.
Before joining Morton's, Mr. Walters was Director of Food and Beverage
Operations at the Ritz-Carlton Hotel Group, where he was employed for six years.

Geoffrey D. Stiles has been Vice President of Operations - Bertolini's
Restaurants, Inc. since November, 1996. From 1992 to 1996, Mr. Stiles was with
the Macaroni Grill, a subsidiary of Brinker International, Inc., serving in
various roles including area director, general manager and manager. Mr. Stiles
was an area supervisor for The Olive Garden, a subsidiary of General Mills, Inc.
from 1990 to 1992.

Officers are elected by and serve at the discretion of the Board of
Directors.

13
<PAGE>

Part II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

"Price Range of Common Stock and Related Matters" contained on page 34 of
the Company's Annual Report is hereby incorporated by reference.

Item 6. Selected Consolidated Financial and Operating Data

"Selected Financial Information" contained on page three of the Company's
Annual Report is hereby incorporated by reference.

The graphs labeled "Revenues", "Consolidated Total Assets" and "Number of
Restaurants " on page three of the Company's Annual Report shall not be deemed
incorporated by reference into this Annual Report on Form 10-K.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained on pages 18 to 21 of the Company's Annual Report is hereby
incorporated by reference.

Item 8. Financial Statements and Supplementary Data

The following items are hereby incorporated by reference to the Company's
Annual Report on the pages indicated:

(i) Independent Auditors' Report 21

(ii) Consolidated Balance Sheets as of December 29, 1996 and December 31, 1995 22

(iii) Consolidated Statements of Operations
For the years ended December 29, 1996, December 31, 1995 and January 1, 1995 23

(iv) Consolidated Statements of Stockholders' Equity
For the years ended December 29, 1996, December 31, 1995 and January 1, 1995 24

(v) Consolidated Statements of Cash Flows
For the years ended December 29, 1996, December 31, 1995 and January 1, 1995 25

(vi) Notes to Consolidated Financial Statements 26-34
</TABLE>

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.

14
<PAGE>

Part III

Item 10. Directors and Executive Officers of the Registrant

"Election of Directors" and "Reporting under 16(A) of the Securities
Exchange Act of 1934" contained in the Proxy Statement is hereby incorporated by
reference. See also Item 4A, "Executive Officers of the Registrant" in Part I of
this Annual Report on Form 10-K.

Item 11. Executive Compensation

"Executive Compensation" contained in the Proxy Statement is hereby
incorporated by reference. The matters labeled "Compensation Committee Report"
and "Performance Graph" contained in the Proxy Statement shall not be deemed
incorporated by reference into this Annual Report on Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and Management

"Security Ownership of Certain Beneficial Owners and Management" contained
in the Proxy Statement is hereby incorporated by reference.

Item 13. Certain Relationships and Related Transactions

None.

15
<PAGE>

Part IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) The following documents are filed as part of this Annual Report on Form
10-K:

(1) The response to this portion of Item 14 is set forth in Item 8 of Part
II hereof.

(2) Financial Statement Schedules

Schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have
been omitted.

(3) Exhibits

See accompanying Index to Exhibits. The Company will furnish to any
stockholder, upon written request, any exhibit listed in the
accompanying Index to Exhibits upon payment by such stockholder of the
Company's reasonable expenses in furnishing any such exhibit.

(b) Reports on Form 8-K:

Form 8-K filed on January 6, 1997 regarding the signing of definitive
agreements to sell Mick's Restaurants, Inc. and The Peasant Restaurants,
Inc.

Form 8-K filed on February 7, 1997 regarding the completion of the sale of
Mick's Restaurants, Inc. and The Peasant Restaurants, Inc.

(d) Reference is made to Item 14 (a)(2) above.

16
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 March 26, 1997 By: /s/ ALLEN J. BERNSTEIN
-------------------- ----------------------
Allen J. Bernstein
Chief Executive Officer and Chairman of the
Board of Directors, (Principal Executive
Officer)

Date March 26, 1997 By: /s/ THOMAS J. BALDWIN
-------------------- ---------------------
Thomas J. Baldwin
Executive Vice President, Chief Financial
Officer, Assistant Secretary and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

Date March 26, 1997 By: /s/ WILLIAM L. HYDE, JR.
-------------------- ------------------------
William L. Hyde, Jr.
President, Chief Operating Officer and
Director

Date March 26, 1997 By: /s/ THOMAS J. BALDWIN
-------------------- ---------------------
Thomas J. Baldwin
Executive Vice President, Chief Financial
Officer, Assistant Secretary and Treasurer
(Principal Financial and Accounting Officer)

17
<PAGE>

Date March 26, 1997 By: /s/ ROBERT L. BARNEY
------------------ --------------------
Robert L. Barney
Director

Date March 26, 1997 By: /s/ DIANNE H. RUSSELL
------------------ ---------------------
Dianne H. Russell
Director

Date March 26, 1997 By: /s/ ALAN A. TERAN
------------------ -----------------
Alan A. Teran
Director

18
<PAGE>

Date March 26, 1997 By: /s/ JOHN K. CASTLE
------------------- ------------------
John K. Castle
Director

Date:March 26, 1997 By: /s/ DR. JOHN J. CONNOLLY
------------------- ------------------------
Dr. John J. Connolly
Director

Date March 26, 1997 By: /s/ DAVID B. PITTAWAY
------------------- ---------------------
David B. Pittaway
Director

19
<PAGE>

INDEX TO EXHIBITS

The following is a list of all exhibits filed as part of this report:

Exhibit
Number Page Document
- ------ ---- --------

3.01 (a) ~~~ Amended and Restated Certificate of Incorporation
of the Registrant.

(b) # Certificate of Designation for the Preferred Stock
issuable pursuant to the Rights Plan.

(d) OO Second Amendment to the Amended and Restated
Certificate of Incorporation of the Registrant.

3.02 # Amended and Restated By-Laws of the Registrant,
dated January 17, 1995.

4.01 (a) # Specimen Certificate representing the Common
Stock, par value $.01 per share including Rights
Legend.

(b) OO Specimen Certificate representing the Common
Stock, par value $.01 per share including Rights
Legend and name change to Morton's Restaurant
Group, Inc.

4.02 (a) * Registration Rights Agreement for Common Stock,
dated as of July 27, 1989, among the Registrant,
BancBoston Capital Inc., Legend Capital Group,
L.P., Legend Capital International, Ltd. and Allen
J. Bernstein.

(b) *** Amendment to Registration Rights Agreement for
Common Stock, dated as of April 1, 1992, among the
Registrant, BancBoston Capital Inc., Legend
Capital Group, L.P., Legend Capital International,
Ltd., Allen J. Bernstein, Castle Harlan, Inc. and
certain executive officers of the Registrant.

4.03 (a) *** + Stock Option Agreement, dated as of March 30,
1992, between Thomas J. Baldwin and the
Registrant.

(b) *** + Stock Option Agreement, dated as of March 30,
1992, between Gilbert F. Drake and the Registrant.

(d) * + Stock Option Agreement, dated as of March 30,
1992, between Allen J. Bernstein and the
Registrant.

4.04 (a) ~~~ Second Amended and Restated Revolving Credit and
Term Loan Agreement, dated June 19, 1995 among the
Registrant, The Peasant Restaurants, Inc.,
Morton's of Chicago, Inc. and The First National
Bank of Boston, individually and as agent.

20
<PAGE>

(b) ^ First Amendment to the Second Amended and Restated
Revolving Credit and Term Loan Agreement, dated
February 14, 1996 among the Registrant, The
Peasant Restaurants, Inc., Morton's of Chicago,
Inc. and The First National Bank of Boston,
individually and as agent.

(c) ^ Second Amendment to the Second Amended and
Restated Revolving Credit and Term Loan Agreement,
dated March 5, 1996 among the Registrant, The
Peasant Restaurants, Inc., Morton's of Chicago,
Inc. and The First National Bank of Boston,
individually and as agent.

(d) O Letter Agreement, dated May 2, 1996, among the
Registrant, The Peasant Restaurants, Inc.,
Morton's of Chicago, Inc. and The First National
Bank of Boston, individually and as agent.

(e) OO 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.

(f) Fourth Amendment to the Second Amended and
Restated Revolving Credit and Term Loan Agreement,
dated December 26, 1996 among the Registrant, The
Peasant Restaurants, Inc., Morton's of Chicago,
Inc. and The First National Bank of Boston,
individually and as agent.

(g) Fifth Amendment to the Second Amended and Restated
Revolving Credit and Term Loan Agreement, dated
December 31, 1996 among the Registrant, The
Peasant Restaurants, Inc., Morton's of Chicago,
Inc. and The First National Bank of Boston,
individually and as agent.

(h) Sixth Amendment to the Second Amended and Restated
Revolving Credit and Term Loan Agreement, dated
February 6, 1997 among the Registrant, The Peasant
Restaurants, Inc., Morton's of Chicago, Inc. and
The First National Bank of Boston, individually
and as agent.

4.05 ~ Rights Agreement, dated as of December 15, 1994,
between the Registrant and The First National Bank
of Boston as Rights Agent, which includes as
Exhibit A thereto the form of Certificate of
Designation of Series A Junior Participating
Preferred Stock of the Registrant, as Exhibit B
thereto the form of Rights Certificate and as
Exhibit C thereto the Summary of Rights to
Purchase Preferred Stock.

10.01 # + Morton's of Chicago, Inc. Profit Sharing and Cash
Accumulation Plan as Amended Effective January 1,
1989.

10.02 *** Commercial Lease, between American National
Investor Services, Inc. and Morton's of Chicago,
Inc., dated October 15, 1992, relating to the
executive offices of Morton's located at 350 West
Hubbard Street, Chicago, Illinois.

10.03 * Shareholders Agreement, dated January 1, 1990,
among Stephan D. Nygren, Robert A. Amick, the
Registrant and Peasant Holding Corp.

21
<PAGE>

10.04 **** Commercial Lease, between X-Cell Realty Associates
and the Registrant, dated January 18, 1994
relating to the executive offices of the
Registrant located at 3333 New Hyde Park Road,
Suite 210, New Hyde Park, New York 11042.

10.05 + Amended and Restated Employment Agreement, dated
as of February 1,1997, between the Registrant and
William L. Hyde, Jr.

10.06 (a) **** Commercial Lease Commitment, dated February 7,
1994, between BancBoston Leasing Inc. and the
Registrant relating to restaurant equipment.

(b) # Commercial Lease Commitment, dated August 30,
1994, between General Electric Capital Corporation
and the Registrant relative to restaurant
equipment.

(c) # Commercial Lease Commitment, dated February 14,
1995, between BancBoston Leasing Inc. and the
Registrant relating to restaurant equipment.

(d) ~~~~ Commercial Lease Commitment, dated May 26, 1995,
between ATEL Leasing Corporation and the
Registrant relating to restaurant equipment.

10.07 ~~+ Employment Agreement, dated as of January 31,
1994, between the Registrant and Allen J.
Bernstein.

10.08 ~~ Purchase Agreement, dated July 1, 1994 between the
Registrant and Stephan D. Nygren and related
Promissory Note, dated July 1, 1994, between the
Registrant and Stephan D. Nygren.

10.09 (a) # + Change of Control Agreement, dated December 15,
1994, between the Registrant and Allen J.
Bernstein.

(b) # + Change of Control Agreement, dated December 15,
1994, between the Registrant and William L. Hyde,
Jr.

10.10 # + Second Amended and Restated Employment Agreement,
dated as of February 28, 1995, between the
Registrant and Allen J. Bernstein.

10.11 + Quantum Restaurant Group, Inc. Stock Option Plan.

10.12 OOO Stock Purchase Agreement, dated as of December 31,
1996, by and among Peasant Holding Corp., Morton's
Restaurant Group, Inc., and MRI Acquisition
Corporation.

10.13 OOO Stock Purchase Agreement, dated as of December 31,
1996, by and among Peasant Holding Corp., Morton's
Restaurant Group, Inc., and PRI Acquisition
Corporation.

10.14 Promissory Note, dated March 4, 1997, between CNL
Financial I, Inc., as Lender, and Morton's of
Chicago, Inc.

22
<PAGE>

13.01 Registrant's Annual Report to Stockholders for the
year ended December 29, 1996. Except for the
portions thereof which are expressly incorporated
by reference into this report, such Annual Report
is furnished solely for the information of the
Commission and is not to be deemed "filed" as part
of this report.

22.01 Subsidiaries of the Registrant.

23.01 Independent Auditors' consent to the incorporation
by reference in the Company's Registration
Statement on Form S-8 of the independent auditors'
report included in the Company's Annual Report to
Stockholders.

27.00 Financial Data Schedule

* Included as an exhibit to the Registrant's
Registration Statement on Form S-1 (No. 33-45738)
and incorporated by reference.

*** Included as an exhibit to the Registrant's Annual
Report on Form 10-K for the year ended December
31, 1992 and incorporated by reference.

**** Included as an exhibit to the Registrant's Annual
Report on Form 10-K for the year ended December
31, 1993 and incorporated by reference.

# Included as an exhibit to the Registrant's Annual
Report on Form 10-K for the year ended January 1,
1995 and incorporated by reference.

~ Included as an exhibit to the Registrant's Form
8-K dated on December 15, 1994 and incorporated by
reference.

~~ Included as an exhibit to the Registrant's
Quarterly Report on Form 10-Q, dated October 2,
1994.

~~~ Included as an exhibit to the Registrant's
Quarterly Report on Form 10-Q, dated July 2, 1995.

~~~~ Included as an exhibit to the Registrant's
Quarterly Report on Form 10-Q, dated October 1,
1995.

^ Included as an exhibit to the Registrant's Annual
Report on Form 10-K for the year ended December
31, 1995 and incorporated by reference.

O Included as an exhibit to the Registrant's
Quarterly Report on Form 10-Q, dated March 31,
1996.

OO Included as an exhibit to the Registrant's
Quarterly Report on Form 10-Q, dated June 30,
1996.

OOO Included as an exhibit to the Registrant's Form
8-K, dated January 6, 1996.

+ Management contracts or compensatory plans or
arrangements required to be filed as an exhibit to
the Registrant's Annual Report on Form 10-K
pursuant to Item 14 (a)(3) of this Form 10-K.

FOURTH AMENDMENT TO SECOND AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT

This FOURTH AMENDMENT (this "Amendment"), dated as of December 26, 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, INC., 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), THE FIRST NATIONAL BANK OF BOSTON ("FNBB") in its
individual capacity as a Lender, and IMPERIAL BANK as a Lender, amends 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"), the Third Amendment dated as of June 28, 1996 (the
"Third Amendment"), 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. Capitalized terms used but not defined
herein shall have the meanings set forth in the Credit Agreement.

WHEREAS, pursuant to the Third Amendment the Borrowers may grant 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, securing only the CNL
Indebtedness; and

WHEREAS, the Borrowers have requested the Lenders agree to amend the
definitions of CNL Collateral and CNL Liens in the Credit Agreement to permit
the Borrowers to grant to CNL a security interest in the assets of a certain
existing Morton's Restaurant located at 1030 North State Street, Chicago,
Illinois instead of the certain existing Morton's Restaurant located at 303
Peachtree Street N.E., Atlanta, Georgia; and

WHEREAS, the Agent and the Lenders, subject to the terms and provisions
hereof, have agreed to so amend the Credit Agreement;

NOW THEREFORE, the parties hereto hereby agree as follows:

ss.1. Amendment to Credit Agreement. Subject to the satisfaction of the
conditions precedent set forth in ss.3 hereof, the Credit Agreement is are
hereby amended by amending the definition of CNL Liens to read as follows:

"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
<PAGE>

-2-

1050 North State Street, Chicago, Illinois, respectively (the "CNL Collateral"),
securing only the CNL Indebtedness."

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) such evidence as the Agent may reasonably request such that the
Agent shall be satisfied that each of the Borrowers has taken the
necessary corporate action to authorize the execution, delivery,
and performance hereof;

(c) 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

(d) 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
<PAGE>

-3-

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 interests 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>

-4-

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: Senior Vice President - Finance
and CFO

The Lenders:

THE FIRST NATIONAL BANK OF BOSTON,
for itself and as Agent

By: _____________________________________
Name:____________________________________
Title:___________________________________

IMPERIAL BANK

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: Senior Vice President - Finance and
CFO for each of the Guarantors
<PAGE>

-4-

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: _____________________________________
Name:____________________________________
Title:___________________________________

The Lenders:

THE FIRST NATIONAL BANK OF BOSTON,
for itself and as Agent

By: _____________________________________
Name:____________________________________
Title:___________________________________

IMPERIAL BANK

By: /s/ Diane H. Russell
-------------------------------------
Name: Diane H. Russell
Title: Senior Vice President and Manager

Consented and agreed to, by each of
THE GUARANTORS (as defined in the
Credit Agreement)

By: _____________________________________
Name:____________________________________
Title:___________________________________
<PAGE>

-4-

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: _____________________________________
Name:____________________________________
Title:___________________________________

The Lenders:

THE FIRST NATIONAL BANK OF BOSTON,
for itself and as Agent

By: /s/ Debra Zurka
--------------------------------------
Name: Debra Zurka
Title: Vice President

IMPERIAL BANK

By: _____________________________________
Name:____________________________________
Title:___________________________________

Consented and agreed to, by each of
THE GUARANTORS (as defined in the
Credit Agreement)

By: _____________________________________
Name:____________________________________
Title:___________________________________
for each of the Guarantors

FIFTH AMENDMENT TO SECOND AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT

This FIFTH AMENDMENT (this "Amendment"), dated as of December 31, 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, INC., 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), THE FIRST NATIONAL BANK OF BOSTON ("FNBB") in its
individual capacity as a Lender, and IMPERIAL BANK, 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 Second Amendment dated as of March 5, 1996, a letter agreement dated as of
May 2, 1996, the Third Amendment dated as of June 28, 1996, the Fourth Amendment
dated as of December 26, 1996, 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) each of the Security and Pledge
Agreements (as defined in the Credit Agreement). Capitalized terms used but not
defined herein shall have the meanings set forth in the Credit Agreement.

WHEREAS, the Agent, the Borrowers, and the Lenders, subject to the terms
and provisions hereof, have agreed to so amend the Credit Agreement and the
Security and Pledge Agreements to permit the Lenders to hold differing
percentages of the term loan facility and the revolving credit facility provided
for in the Credit Agreement;

NOW THEREFORE, the parties hereto hereby agree as follows:

ss.1. Amendments to Credit Agreement. Subject to the satisfaction of the
conditions precedent set forth in ss.4 hereof, the Credit Agreement is 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:

"Term Loan Percentage. With respect to each Lender, the percentage set
forth beside its name below (subject to adjustment upon any assignments
permitted by ss.17 hereof):"

"Lender Percentage"
------- -----------

"FNBB 75%"
"Imperial Bank" 25%"
<PAGE>

-2-

"Total Percentage. With respect to each Lender, that portion of the Term
Loan and Revolving Credit Commitment (or, if the Revolving Credit Commitments
are terminated, Revolving Credit Loans, Letter of Credit Participations in
Unpaid Reimbursement Obligations and participating interests in the risk
relating to outstanding Letters of Credit) held by such Lender as a percentage
of the sum of (a) the outstanding principal amount of the Term Loan, plus (b)
the greater of (i) the Revolving Credit Commitment Amount or (ii) the
outstanding principal amount of the Revolving Credit Loans, Unpaid Reimbursement
Obligations and the Maximum Drawing Amount."

ss.1.2. Changes in Certain Definitions. Section 1 of the Credit Agreement
is hereby amended as follows:

(a) by amending the definition of Majority Lenders to read as follows:

"Majority Lenders. As of any date, the Lenders representing at least fifty
percent (50%) of the Lenders on such date (calculated by number of Lenders
without regard to the Loans, Commitment Percentages, or Term Loan Percentages
thereof) and whose aggregate Total Percentages aggregate to at least fifty-one
percent (51%); provided, however, if at any time when there are less than three
(3) Lenders, Majority Lenders shall mean the Lenders whose aggregate Total
Percentages aggregate to at least fifty-one percent (51%)."

(b) by amending the table contained in the definition of Commitment
Percentage to read as follows:

"Lender Percentage"
------- -----------

" FNBB 75%"
"Imperial Bank" 25%"

ss.1.3. Term Loan. Section 2.6 of the Credit Agreement is hereby amended as
follows:

(a) by replacing in every instance the word "Commitment" with the words
"Term Loan"; and

(b) by inserting in ss.2.6(c) after every instance of the phrase "ratable
account of the Lenders" the phrase "in accordance with each Lender's Term Loan
Percentage".

ss.1.4. Payments. Section 4.2 of the Credit Agreement is hereby amended as
follows:

(a) by deleting the word "ratably" from line 11; and

(b) by inserting after the phrase "Commitment Percentage" the phrase "or,
as the case may be, applicable Term Loan Percentage".

ss.1.5. Failure to Make Funds Available. Section 4.10 of the Credit
Agreement is hereby amended as follows:
<PAGE>

-3-

(a) by deleting in ss.4.10(a) the words "of the Loans requested" and
replacing them with the phrase "of the Revolving Credit Loans requested and/or
its Term Loan Percentage of the Term Loan, as applicable";

(b) by deleting in ss.4.10(b) the words "of the Loans" in line 3 and
replacing them with the phrase "of the Revolving Credit Loans and/or the Term
Loan Percentage of the Term Loan, as applicable";

(c) by inserting in clause (ii) of ss.4.10(b) after the word "borrowing"
the phrase "with respect to Revolving Credit Loans and/or Term Loan Percentage
of such borrowing with respect to the Term Loan, as applicable,"; and

(d) by inserting in clause (iii) of ss.4.10(b) after the word "borrowing"
the phrase " with respect to Revolving Credit Loans and/or Term Loan Percentage
of such borrowing with respect to the Term Loan, as applicable,".

ss.1.6. Setoff. Section 12 of the Credit Agreement is hereby amended as
follows:

(a) by inserting in ss.12(b) before the words "Loan", "Loans", and "Notes",
in each instance, the phrase "Revolving Credit";

(b) by inserting inss.12(c) after the word "may" in line 4 the phrase ",but
only with the consent of the Majority Lenders,"; and

(c) by replacing in ss.12(d)(ii) the phrase "pro rata;" with the phrase
"ratably in accordance with the amount of such Obligations of such type as shall
be owing to the respective Lenders;".

ss.1.7. Payments to Agent. Section 13.5.1 of the Credit Agreement is hereby
amended by replacing the phrase "pro rata" with the word "applicable".

ss.1.8. Indemnity. Section 13.7 of the Credit Agreement is hereby amended
by inserting after the words "ratably agree hereby" the phrase ",according to
each Lender's Total Percentage,".

ss.1.9. Agent as Lender. The text of Section 13.8 of the Credit Agreement
is hereby amended to read as follows:

"Agent as Lender. In its individual capacity, FNBB shall have the same
obligations and the same rights, powers, and privileges in respect of its
lending commitments and the Loans made by it, and as the holder of any of the
Notes and as the purchaser of any Letters of Credit Participations, as it would
have if it were not also the Agent."

ss.1.10. Duties in the Case of Enforcement. Section 13.11 of the Credit
Agreement is hereby amended by inserting after the phrase "hereby agreeing
ratably" the phrase ",according to each Lender's Total Percentage,".

ss.1.11. Assignment. Section 17(a) of the Credit Agreement is hereby
amended as follows:

(a) by deleting the words "a portion of its" in the third line thereof and
replacing them with the words "portions of its Term Loan Percentage,";
<PAGE>

-4-

(b) by deleting the words "same portion" and replacing them with the words
"related respective portions";

(c) by replacing the text of clause (i) of such subsection with the text
"each such assignment shall be of a constant, and not a varying, percentage of
all the assignor's rights and obligations in respect of the Revolving Credit
Commitment and the Revolving Credit Loans (and the risk relating to Letters of
Credit), or the Term Loan, as the case may be, under this Agreement;"; and

(d) by replacing the word "and" in clause (ii) of such subsection with the
phrase "and/or (as the case may be)".

ss.1.12. Participations. Section 17(e) of the Credit Agreement is hereby
amended by inserting after the phrase "Revolving Credit Commitment" the phrase "
or Term Loan portion".

ss.1.13. Consents, Amendments, Waivers, Etc.. Section 21 of the Credit
Agreement is hereby amended as follows:

(a) by inserting in clause (d) thereof after the words "Majority Lenders"
the added words " or the definition of Total Percentage hereunder";

(b) by inserting in clause (d) thereof after the words "Commitment
Percentage" the words ", Term Loan Percentage, Total Percentage"; and

(c) by inserting in clause (f) thereof after the words "Commitment
Percentage" the words ", Term Loan Percentage or Total Percentage".

ss.1.14. Exhibit F. Exhibit F of the Credit Agreement is hereby deleted in
its entirety and replaced by the Exhibit F attached hereto.

ss.2. Amendment to Security and Pledge Agreements. Subject to the
satisfaction of the conditions precedent set forth in ss.4 hereof, each of the
Security and Pledge Agreements is hereby amended by inserting in ss.17 of each
such Security and Pledge Agreement after the phrase "its ratable share of such
payments" the phrase "in accordance with Section 12(d) of the Credit Agreement".

ss.3. 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.
<PAGE>

-5-

(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.4. 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) that certain Assignment and Acceptance to be entered into
contemporaneously herewith between FNBB and Heller Financial with
respect to a certain portion of the Term Loan, with the written
consent of the Agent and the Borrowers with respect thereto;

(c) 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

(d) such other certificates, documents, or instruments with respect to
this Amendment, as the Agent or the Lenders may reasonably request.

ss.5. 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 Security and Pledge Agreements, 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 Security
and Pledge Agreements, and the Obligations thereunder contained in any of the
Loan Documents shall be references to the Credit Agreement, the Security and
Pledge Agreements, 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 interests 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.6. 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.
<PAGE>

-6-

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: Senior Vice President - Finance
and CFO

THE FIRST NATIONAL BANK OF BOSTON,
for itself and as Agent

By: _____________________________________
Name:____________________________________
Title:___________________________________

IMPERIAL BANK

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: Senior Vie President - Finance
and CFO for each of the Guarantors
<PAGE>

-6-

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: _____________________________________
Name:____________________________________
Title:___________________________________

THE FIRST NATIONAL BANK OF BOSTON,
for itself and as Agent

By: /s/ DEBRA ZURKA
--------------------------------------
Name: Debra Zurka
Title: Vice President

IMPERIAL BANK

By: _____________________________________
Name:____________________________________
Title:___________________________________

Consented and agreed to, by each of
THE GUARANTORS (as defined in the
Credit Agreement)

By: _____________________________________
Name:____________________________________
Title:___________________________________
<PAGE>

-6-

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: _____________________________________
Name:____________________________________
Title:___________________________________

THE FIRST NATIONAL BANK OF BOSTON,
for itself and as Agent

By: _____________________________________
Name:____________________________________
Title:___________________________________

IMPERIAL BANK

By: /s/ Dianne H. Russell
--------------------------------------
Name: Dianne H. Russell
Title: Senior Vice President and Manager

Consented and agreed to, by each of
THE GUARANTORS (as defined in the
Credit Agreement)

By: _____________________________________
Name:____________________________________
Title:___________________________________

EXHIBIT 4.04(h)

SIXTH AMENDMENT TO SECOND AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT

This SIXTH AMENDMENT (this "Amendment"), dated as of February 6, 1997, 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, INC., 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), THE FIRST NATIONAL BANK OF BOSTON ("FNBB") in its
individual capacity as a Lender, IMPERIAL BANK, as a Lender, and HELLER
FINANCIAL, INC., 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 Second Amendment dated
as of March 5, 1996, a letter agreement dated as of May 2, 1996, the Third
Amendment dated as of June 28, 1996 (the "Third Amendment"), the Fourth
Amendment dated as of December 26, 1996, the Fifth Amendment dated as of
December 31, 1996, 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) each of the Loan Documents (as
defined in the Credit Agreement). Capitalized terms used but not defined herein
shall have the meanings set forth in the Credit Agreement.

WHEREAS, the Companies have requested that certain terms and provisions of
the Credit Agreement and the other Loan Documents be amended in connection with
the pending sale of some or all of the business of the Peasant Restaurants
and/or Mick's Restaurants; and

WHEREAS, the Agent and the Lenders, subject to the terms and provisions
hereof, have agreed to so amend the Credit Agreement and certain of the Loan
Documents;

NOW THEREFORE, the parties hereto hereby agree as follows:

ss.1. Amendments to Credit Agreement. Subject to the satisfaction of the
conditions precedent set forth in ss.7 hereof, the Credit Agreement is 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 ss.1 in the appropriate
places in the alphabetical sequence:

"CSBIC. Creditanstalt Small Business Investment Corporation, a Delaware
corporation."
<PAGE>
-2-

"CSBIC Side Agreement. The Agreement dated as December 31, 1996, among
Peasant Holding, Gregory M. Buckley, CSBIC, and F-Peasant, L.L.C., in the
form thereof delivered by Quantum to the Agent."

"CSBIC Stock Pledges. The non-recourse pledges by Peasant Holding to
CSBIC of certain Retained Equity Interests as referred to in the CSBIC Side
Agreement, to be given pursuant to non-recourse pledge agreements, each in
the form thereof delivered by Quantum to the Agent, as non-recourse
additional collateral to secure the financing to be provided by CSBIC to
the MRI/PRI Buyers in connection with, and upon the closing of, the MRI/PRI
Stock Dispositions."

"Forgiveness of MRI/PRI Intercompany Indebtedness. The forgiveness of
certain intercompany Indebtedness owed by the Persons being disposed of
pursuant to the MRI/PRI Stock Dispositions, to be effected upon the closing
thereof, as referred to in ss.6.16 of each of the MRI/PRI Stock Purchase
Agreements."

"MRI Stock Disposition. The sale by Peasant Holding of 80.1% of the
capital stock of Mick's to MRIAC pursuant to the MRI Stock Purchase
Agreement."

"MRI Stock Purchase Agreement. The Stock Purchase Agreement dated as
of December 31, 1996 by and among Peasant Holding, Quantum and MRIAC, in
the form thereof delivered by Quantum to the Agent."

"MRI Subordinated Note. The Promissory Note dated February 6, 1997 in
the principal amount of $1,500,000 relating to the MRI Stock Purchase
Agreement, payable by MRIAC to Peasant Holding, to be pledged by Peasant
Holding upon the closing under the MRI Stock Purchase Agreement to the
Agent and the Lenders pursuant to the Security Documents to secure the
Obligations."

"MRI/PRI Buyers. PRIAC and MRIAC."

"MRI/PRI Lease Guaranties. The existing guaranties given by the
Companies, as further described (and with respect to maximum amounts of
obligations not exceeding those respective amounts listed) on Schedule 1.2A
attached hereto, with respect to certain real estate leases and/or
equipment leases of the Persons being disposed of pursuant to the MRI/PRI
Stock Dispositions, as referred to in ss.6.22 of the MRI Stock Purchase
Agreement and ss.6.23 of the PRI Stock Purchase Agreement, against which
guaranties the Companies are to be fully indemnified by the MRI/PRI Buyers
pursuant to the MRI/PRI Stock Purchase Agreements."

"MRI/PRI Related Matters. The MRIAC Obligations, the PRIAC
Obligations, the Forgiveness of MRI/PRI Intercompany Indebtedness, the
Indebtedness and Investments constituted by the MRI/PRI Lease Guaranties,
the Investments constituted by the holding of the Retained Equity Interests
and the holding of the MRI/PRI Subordinated Notes, the CSBIC Stock Pledges,
and the transfer restrictions and other encumbrances with respect to
certain Retained Equity Interests provided for in the MRI/PRI Stockholders
Agreement."

"MRI/PRI Stock Dispositions. The MRI Stock Disposition and the PRI
Stock Disposition."
<PAGE>
-3-

"MRI/PRI Stock Purchase Agreements. The MRI Stock Purchase Agreement
and the PRI Stock Purchase Agreement."

"MRI/PRI Stock Purchase Documents. The MRI/PRI Stock Purchase
Agreements, the MRI/PRI Subordinated Notes, the MRI/PRI Stockholders
Agreement, the CSBIC Side Agreement, and the other agreements, instruments,
and documents relating to the MRI/PRI Stock Dispositions, each in the form
thereof delivered to the Agent by Quantum."

"MRI/PRI Stockholders Agreement. The Stockholders Agreement dated as
of February 6, 1997 among Mick's, Peasant, Peasant Holding, Gregory M.
Buckley, CSBIC, and certain other Persons, in the form thereof delivered by
Quantum to the Agent."

"MRI/PRI Subordinated Notes. The MRI Subordinated Note and the PRI
Subordinated Note."

"MRIAC. MRI Acquisition Corporation, a Delaware corporation, to be
merged into Mick's upon the closing under the MRI Stock MRI Stock Purchase
Agreement; and, subsequent to such merger, "MRIAC" shall refer to Mick's."

"MRIAC Obligations. The obligations of Quantum and Peasant Holding to
MRIAC, as further described on Schedule 1.2A attached hereto, in respect of
certain post-closing purchase price adjustment provisions and indemnity
provisions contained in the MRI Stock Purchase Agreement."

"PRI Stock Disposition. The sale by Peasant Holding of 80.1% of the
capital stock of Peasant to PRIAC pursuant to the PRI Stock Purchase
Agreement."

"PRI Stock Purchase Agreement. The Stock Purchase Agreement dated as
of December 31, 1996 by and among Peasant Holding, Quantum and PRIAC, in
the form thereof delivered by Quantum to the Agent."

"PRI Subordinated Note. The Promissory Note dated February 6, 1997 in
the principal amount of $1,000,000 relating to the PRI Stock Purchase
Agreement, payable by PRIAC to Peasant Holding, to be pledged by Peasant
Holding upon the closing under the PRI Stock Purchase Agreement to the
Agent and the Lenders pursuant to the Security Documents to secure the
Obligations."

"PRIAC. PRI Acquisition Corporation, a Delaware corporation, to be
merged into Peasant upon the closing under the PRI Stock Purchase
Agreement; and subsequent to such merger, "PRIAC" shall refer to Peasant."

"PRIAC Obligations. The obligations of Quantum and Peasant Holding to
PRIAC, as further described on Schedule 1.2A attached hereto, in respect of
certain post-closing purchase price adjustment provisions and indemnity
provisions contained in the PRI Stock Purchase Agreement."

"Retained Equity Interests. Any and all direct or indirect equity
interests in Mick's and Peasant to be retained or held by the Companies
subsequent to the closings under the MRI/PRI Stock Purchase Documents, as
such Retained Equity Interests are provided for therein, including,
<PAGE>
-4-

without limitation, (a) the 19.9% equity interest in each of Mick's and
Peasant (on a fully diluted basis), consisting of unsold common stock of
such corporations initially to be held by Peasant Holding, (b) the Holding
Company Securities referred to (and as defined in) the MRI/PRI Stockholders
Agreement which may be issued to Peasant Holding from time to time
thereunder, pursuant to ss.2.7 thereof, and (c) the PHC Warrants and the
PHC Warrant Stock, each as referred to (and as defined) in the MRI/PRI
Stockholder Agreement, which may be issued to Peasant Holding from time to
time thereunder."

ss.1.2. Changes in Certain Definitions. Section 1 of the Credit Agreement
is hereby amended as follows:

(a) by replacing in the text of the definition of Borrowers the word
"Peasant" with the words "Peasant Holding".

(b) by amending the definition of Available Net Cash Proceeds as follows:

(i) by deleting the parenthetical expression in the second, third and
fourth lines thereof.

(ii) by inserting at the end of the definition the new sentence
"Notwithstanding the foregoing, the Net Cash Proceeds of the MRI/PRI Stock
Dispositions shall not constitute Available Net Cash Proceeds."

(i) by replacing the phrase "Peasant Holding and each" with the word
"Each".

(ii) by deleting the phrase "Mick's and each of the Mick's
Subsidiaries,".

(d) by amending the definition of Mick's to read as follows:

"Mick's. Mick's Restaurants, Inc., a Delaware corporation."

(e) by deleting the definition of Mick's Restaurants.

(f) by deleting the definition of Mick's Subsidiaries.

(g) by replacing in the definition of New Concept the phrase "Mick's,
Peasant" with the phrase "Peasant Holding (or its Subsidiaries)".

(h) by deleting from the definition of New Construction the phrase "a
Mick's Restaurant," in each place such phrase occurs.

(i) by amending the definition of Peasant to read as follows:

"Peasant. The Peasant Restaurants, Inc., a Delaware corporation."

(j) by replacing in the text of the definition of Peasant Restaurants the
word "Peasant" with the words "Peasant Holding".
<PAGE>
-5-

(k) by deleting from the definition of Peasant Subsidiaries the phrase "or
a Subsidiary of Peasant".

(l) by amending the definition of Proposed Disposition(s) to read as
follows:

"Proposed Disposition(s). The sale or other disposition of some or all
of the assets of 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
Holding and/or the Peasant Subsidiaries; provided that Proposed
Disposition(s) shall include the MRI/PRI Stock Dispositions."

ss.1.3. Security and Guaranties. Section 3 of the Credit Agreement is
hereby amended as follows:

(a) by deleting from therein the words "Peasant Holding and".

(b) by replacing in such section the words "Obligations of Peasant" with
the words "Obligations of Peasant Holding".

(d) by replacing in such section the phrase " Companies and general
intangibles" with the phrase "Companies, investment property and general
intangibles".

ss.1.4. Subsidiaries. Section 6.2(a) is hereby amended to read as follows:

(a) Quantum has no direct Subsidiaries other than Porterhouse, Peasant
Holding, Italian Holding and QRDC. Quantum owns, of record and
beneficially, 100% of the shares in the capital stock of Porterhouse, 98%
of the shares in the capital stock of Peasant Holding (with the remaining
2% owned of record as of December 31, 1996 by Amick), 100% of the shares in
the capital stock of Italian Holding and 100% of the shares in the capital
stock of QRDC. Peasant Holding has no Subsidiaries other than direct
Peasant Subsidiaries and Peasant Holding owns, of record and beneficially,
all of the shares in the capital stock of each of the Peasant Subsidiaries.
Each of the Peasant Subsidiaries has no Subsidiaries. Porterhouse has no
direct Subsidiaries other than Morton's and owns, of record and
beneficially, all of the shares of capital stock of Morton's (other than
directors' qualifying shares). Morton's has no Subsidiaries other than
direct Morton Subsidiaries and Morton's owns, of record and beneficially,
all of the shares of capital stock of each of the Morton Subsidiaries. Each
of the Morton Subsidiaries has no Subsidiaries. Italian Holding has no
direct Subsidiaries other than Bertolini's and owns, of record and
beneficially, all of the shares of the capital stock of Bertolini's.
Bertolini's has no Subsidiaries other than direct Bertolini's Subsidiaries
and Bertolini's owns, of record and beneficially, all of the shares of
capital stock of each of the Bertolini's Subsidiaries. Each of the
Bertolini's Subsidiaries has no Subsidiaries. QRDC has no Subsidiaries
other than Santa Fe Cantina and owns, of record and beneficially, all of
the shares of capital stock of Santa Fe Cantina. QRDC owns, of record and
beneficially, all of the shares of the preferred stock of Santa Fe USA.
<PAGE>
-6-

ss.1.5. Chief Executive Offices. Section 6.6 of the Credit Agreement is
hereby amended as follows:

(a) by amending clause (b) thereof to read as follows:

"(b) the chief executive offices of Peasant Holding and the Peasant
Subsidiaries and the offices where all of each of their records and books
of account are kept, shall be located at Suite 210, 3333 New Hyde Park
Road, New Hyde Park, New York 11042,"

(b) by deleting clause (d) thereof, by replacing "(e)" with "(d)", and by
replacing "(f)" with "(e)".

ss.1.6. Legal Existence, Etc. Section 9.2 is hereby amended to read as
follows:

"ss.9.2. Legal Existence, Etc. Each of Companies will maintain its
legal existence and good standing under the laws of its jurisdiction of
incorporation, maintain its qualification to do business in each state in
which the failure to do so would have a material adverse effect on the
condition, financial or otherwise, of the Companies, and maintain all of
its rights and franchises reasonably necessary to the conduct of its
business. Quantum shall at all times be the record and beneficial owner of
100% of the outstanding capital stock of each of Porterhouse, Italian
Holding and QRDC on a fully diluted basis and at least 98% of the
outstanding capital stock of Peasant Holding on a fully diluted basis.
Peasant Holding shall at all times be the record and beneficial owner of at
least 19.9% of the outstanding capital stock of each of Peasant and Mick's
(or, if the transaction referred to in ss.2.7 of the MRI/PRI Stockholders
Agreement occurs, 19.9% of the outstanding Holding Company Securities (as
defined in the definition of Retained Equity Interests), rather than
capital stock of Peasant and Mick's) on a fully diluted basis, except for
the effect of dilutive transactions permitted by the MRI/PRI Stock Purchase
Documents. Porterhouse shall at all times be the record and beneficial
owner of 100% of the outstanding capital stock of Morton's on a fully
diluted basis. Except as permitted by ss.10.11(f) or ss.10.11(g) hereof,
Morton's shall at all times be the record and beneficial owner of 100% of
the outstanding capital stock of each of the Morton Subsidiaries on a fully
diluted basis. Italian Holding shall at all times be the record and
beneficial owner of 100% of the outstanding capital stock of Bertolini's on
a fully diluted basis. Except as permitted by ss.10.11(f) or ss.10.11(g)
hereof, Bertolini's shall at all times be the record and beneficial owner
of 100% of the outstanding capital stock of each of the Bertolini's
Subsidiaries on a fully diluted basis."

ss.1.7. Financial Statements. Section 9.4(a) is hereby amended by replacing
in clause (iii) thereof the phrase "Peasant and its Subsidiaries" with the
phrase "Peasant Holding and its Subsidiaries".

ss.1.8. Indebtedness. Section 10.1 of the Credit Agreement is hereby
amended as follows:

(a) by amending subsection (f) as follows:

(i) by replacing the word "Peasant" with the words "Peasant Holding".

(ii) by deleting the phrase "Mick's, the Mick's Subsidiaries,".
<PAGE>
-7-

(b) by deleting the word "and" from the end of ss.10.1(l), replacing the
period at the end of ss.10.1(m) (as added by the Third Amendment) with the
phrase "; and", and adding the following new ss.10.1(n):

"(n) the MRI/PRI Related Matters."

ss.1.9. Capital Expenditures. Section 10.3 of the Credit Agreement is
hereby amended as follows:

(a) by amending subsection (c) to read as follows:

"(c) [Intentionally Omitted]."

(b) by deleting from subsection (d) thereof the phrase "the Mick's
Restaurants,".

ss.1.10. Security Interest and Liens. Section 10.4 of the Credit Agreement
is hereby amended by deleting the word "and" from the end of ss.10.4(h),
replacing the period at the end of ss.10.4(i) (as added by the Third Amendment)
with the phrase "; and", and adding the following new ss.10.4(j):

"(j) the MRI/PRI Related Matters; provided that Peasant Holding shall
pledge all of the Retained Equity Interests held by it from time to time to
the Agent and the Lenders, as Collateral under the Security Documents to
secure the Obligations, as soon as practicable but only to the extent such
pledge is not in violation of the MRI/PRI Stock Purchase Documents."

ss.1.11. Distributions. Section 10.5(a) of the Credit Agreement is hereby
amended by replacing the phrase "ss.4.3" with the phrase "ss.ss. 4.3 and 4.6".

ss.1.12. Conduct of Business. Section 10.9 of the Credit Agreement is
hereby amended as follows:

(a) by replacing in the third sentence thereof the phrase "Morton's,
Peasant" with the phrase "Morton's, the Peasant Subsidiaries,".

(b) by replacing in the final sentence thereof the phrase "(ii) Peasant and
its Subsidiaries, (iii) Mick's and its Subsidiaries and (iv)" with the phrase
"(ii) Peasant Holding and its Subsidiaries, and (iii)".

ss.1.13. Investments.

(a) Section 10.11(f) of the Credit Agreement is hereby amended to read as
follows:

(f) Investments in (i) the Borrowers and wholly owned Subsidiaries of
the Borrowers, (ii) Chicago Steakhouse, so long as Morton's of
Chicago/Dallas, Inc. shall hold at least 49% (by number of votes) of its
outstanding voting stock, (iii) San Antonio Steakhouse so long as Morton's
of Chicago/San Antonio, Inc. shall hold at least 49% (by number of votes)
of its outstanding voting stock, (iv) Bertolini's and the Bertolini's
Subsidiaries so long as Italian Holding and Bertolini's, respectively,
shall hold all of its outstanding capital stock, (v) Houston Steakhouse,
Inc. so long as Morton's of Chicago/Houston, Inc. shall hold at least 49%
(by number of votes) of its outstanding voting stock, and (vi) Addison
Steakhouse, Inc. so long as Morton's of Chicago/Addison, Inc. shall hold at
least 49% (by number of votes) of its
<PAGE>
-8-

outstanding voting stock; provided, however, to the extent state liquor
laws require an individual that is a resident of such state to own a
specified percentage of the shares of the capital stock of any Subsidiary
of the Borrowers or any other entity in which any Borrower (or a Subsidiary
thereof) holds any portion of the outstanding capital stock (such
Subsidiary or other entity being referred to as a "Liquor License Holder"),
such individual stockholder may own no more than such specified percentage
of such capital stock required by such state liquor law, but only if the
following requirements are also satisfied: (v) if and to the extent
permitted by such applicable state liquor law, all such capital stock held
by such individual stockholder shall be properly pledged to the Agent,
pursuant to documentation reasonably satisfactory to the Agent, (w) such
Liquor License Holder shall hold no assets other than the applicable liquor
license for a restaurant operated in such state by any Borrower (or a
Subsidiary thereof), (x) such individual stockholders shall be key
employees, management personnel, officers or authorized agents of the
applicable Borrower (or Subsidiary thereof) operating such restaurant, (y)
if and to the extent permitted by such applicable state liquor laws, the
provisions of ss.10.11(g) otherwise shall have been complied with in
connection with the initial Investment in such Liquor License Holder, and
(z) no Distributions shall be made to such individual stockholders;
provided, further, however, if any of the actions contemplated by either
clause (v) or clause (y) is not permitted by the applicable state liquor
law, all such capital stock owned by such individual stockholders must in
any event be subject to an arrangement, pursuant to documentation
reasonably satisfactory to the Agent, under which the applicable Borrower
(or Subsidiary thereof) has the right to acquire such shares of capital
stock held by such individual stockholders at a nominal price;

(b) Section 10.11(g) of the Credit Agreement is hereby amended by replacing
in the third line thereof the phrase "Peasant, Morton's, Mick's" with the phrase
"Peasant Holding, Morton's".

(c) Section 10.11 of the Credit Agreement is hereby amended by deleting the
word "and" from the end of ss.10.11(i), replacing the period at the end of
ss.10.11(j) with the phrase "; and", and adding the following new ss.10.11(k)
immediately after ss.10.11(j):

"(k) the MRI/PRI Related Matters; provided that no cash Investment
shall be made in respect of any Retained Equity Interests; provided,
further, that Peasant Holding shall pledge all of the Retained Equity
Interests and the MRI/PRI Subordinated Notes held by it from time to time
to the Agent and the Lenders, as Collateral under the Security Documents to
secure the Obligations, as soon as practicable but only to the extent such
pledge is not in violation of the MRI/PRI Stock Purchase Documents."

ss.1.14. Merger, Consolidation, and Disposition of Assets. Section 10.12 of
the Credit Agreement (as amended by the Third Amendment) is hereby amended by
adding the following new sentence at the end thereof:

"Nothing in this ss.10.12 shall prohibit the exchange by Peasant
Holding of certain Retained Equity Interests consisting of capital stock of
Mick's and Peasant for other Retained Equity Interests consisting of
Holding Company Securities (as defined in the definition of Retained Equity
Interests) pursuant to the transactions referred to in ss.2.7 of the
MRI/PRI Stockholders Agreement, provided that such Investment is permitted
by ss.10.11 hereof."
<PAGE>
-9-

ss.1.15. Disposition of Shares and Indebtedness of Subsidiaries. Section
10.13 of the Credit Agreement is hereby amended by adding the following new
paragraph (c) at the end of such section:

"(c) Notwithstanding the foregoing, the MRI/PRI Stock Dispositions and
the MRI/PRI Related Matters shall be permitted under this ss.10.13."

ss.1.16. Change of Location. Section 10.14 of the Credit Agreement is
hereby amended by replacing in clause (a) thereof the phrase "offices, or" with
the phrase "offices from those locations listed in ss.6.6 hereof, or"

ss.1.17. Notices.

(a) Section 18(b) of the Credit Agreement is hereby amended as follows:

(i) by replacing the word "Peasant" with the phrase "Peasant Holding"
in each place such word occurs.

(ii) by replacing the address "489 Peachtree Street, N.E., Atlanta,
Georgia 30308" with the new address "Suite 210, 3333 New Hyde Park Road,
New Hyde Park, New York 11042".

(b) Section 18(d) of the Credit Agreement is hereby amended by replacing
the name "Robert W. MacElhiney" with the name "Christopher M. Holtz".

ss.1.18. Amendments to Existing Security Documents. Section 25 of the
Credit Agreement is hereby amended by replacing in subsection (b) thereof the
phrase "; and" with a period, and by deleting subsection (c) thereof in its
entirety.

ss.1.19. Schedules to the Credit Agreement. Schedule 1.1B to the Credit
Agreement is hereby deleted in its entirety; Schedule 1.1D to the Credit
Agreement is hereby replaced by the new Schedule 1.1D attached hereto; Schedule
1.2A attached hereto is hereby annexed to the Credit Agreement; Schedule 6.3 to
the Credit Agreement is hereby replaced by the new Schedule 6.3 attached hereto;
Schedule 6.10 to the Credit Agreement is hereby replaced by the new Schedule
6.10 attached hereto; Schedule 6.11 to the Credit Agreement is hereby replaced
by the new Schedule 6.11 attached hereto; Schedule 6.21 to the Credit Agreement
is hereby replaced by the new Schedule 6.21 attached hereto; Schedule 6.22 to
the Credit Agreement is hereby replaced by the new Schedule 6.22 attached
hereto; Schedule 6.23 to the Credit Agreement is hereby replaced by the new
Schedule 6.23 attached hereto; Schedule 10.4 to the Credit Agreement is hereby
replaced by the new Schedule 10.4 attached hereto.

ss.2. Amendment to, and Confirmation of, Security and Pledge Agreements.

(a) Amendment to Security and Pledge Agreements. Each of the parties hereto
hereby acknowledges and agrees that the term "Collateral" as defined in each
Security and Pledge Agreement shall include, inter alia, investment property.
Each party hereto who is a "Debtor" under a Security and Pledge Agreement hereby
unconditionally grants to such Secured Party (as defined in such Security and
Pledge Agreement), a continuing security interest in, and lien on, all of such
Debtor's investment property, wherever located, whether now owned or hereafter
acquired or arising, and all proceeds thereof, pursuant to the terms of such
Security and Pledge Agreement to secure the Obligations (as defined therein).
<PAGE>
-10-

(b) Confirmation of the Peasant Holding Security and Pledge Agreement.
Peasant Holding confirms that the capital stock of the Repositioned Subsidiaries
referred to (and as defined) in the MRI/PRI Stock Purchase Agreements previously
pledged to the Agent by Peasant, Mick's or any other Company in connection with
the Credit Agreement constitutes "Stock" pledged under, and for all purposes of,
the Peasant Holding Corp. Security and Pledge Agreement dated as of March 21,
1990, as amended (the "Peasant Holding Security and Pledge Agreement"), between
Peasant Holding and the Agent.

ss.3. Repositioned Subsidiaries. Effective upon the closings under the
MRI/PRI Stock Purchase Agreements, the Repositioned Subsidiaries will become
direct, wholly owned Subsidiaries of Peasant Holding. For the avoidance of
doubt, the parties hereto confirm that such Distribution or other transfer of
all of the capital stock of the Repositioned Subsidiaries to Peasant Holding
shall be permitted under ss.ss. 10.5, 10.11, 10.12, and 10.13 of the Credit
Agreement.

ss.4. Releases of Certain Persons from Credit Agreement and Loan Documents.

(a) As of the effectiveness of this Amendment, Peasant shall be released
from all of its indebtedness and obligations to the Agent and the Lenders and
its joint and several obligations to the remaining Borrowers under or in respect
of the Credit Agreement and the other Loan Documents, all of such indebtedness
and obligations of Peasant being hereby automatically and fully assumed jointly
and severally by each of the remaining Borrowers. Upon the effectiveness hereof,
Peasant shall furthermore no longer be a party to, or a Borrower or a Debtor for
purposes of, the Credit Agreement or any of the Loan Documents, and the Lenders
shall be under no further obligation to make Loans to, to issue, extend, renew,
or amend Letters of Credit for, Peasant.

(b) As of the effectiveness of this Amendment, each of Mick's and those
specific Subsidiaries of Mick's and Subsidiaries of Peasant listed on Exhibit Z
attached hereto (such Subsidiaries of Mick's and such Subsidiaries of Peasant
being collectively referred to as the "Sold Subsidiaries") shall be released
from all of its indebtedness and obligations to the Agent and the Lenders and
its joint and several obligations to the remaining Borrowers and the remaining
Guarantors under or in respect of the Credit Agreement and the other Loan
Documents, all of such indebtedness and obligations Mick's and the Sold
Subsidiaries being hereby automatically and fully assumed jointly and severally
by each of the remaining Guarantors. Upon the effectiveness hereof, each of
Mick's and the Sold Subsidiaries shall furthermore no longer be a party to, or a
Guarantor or a Debtor for purposes of, the Credit Agreement or any of the Loan
Documents.

(c) The Agent and the Lenders acknowledge and agree that as of the
effectiveness of this Amendment, all security interests and liens which Peasant,
Mick's and the Sold Subsidiaries (collectively, the "Sold Entities") granted to
the Agent and the Lenders under or in respect of the Credit Agreement and the
other Loan Documents shall, without further action, be thereupon released,
discharged and terminated and of no further force or effect. The Agent and the
Lenders further acknowledge and agree that as of the effectiveness of this
Amendment, all pledges of the capital stock of only Peasant and Mick's which
Peasant Holding previously granted to the Agent and the Lenders under or in
respect of the Credit Agreement and the other Loan Documents shall, without
further action, be thereupon released, discharged and terminated and of no
further force or effect; however, all other Collateral provided by Peasant
Holding shall remain subject to the Security Documents, and shall not be
impaired hereby. The Agent further agrees to deliver such UCC-3 termination
statements and similar discharge documents, and to take all such similar
actions, as shall be reasonably requested by the Borrowers, at the Borrowers'
sole cost and expense, in connection with such releases, discharges and
<PAGE>
-11-

terminations provided for herein; provided that all of the foregoing shall be on
a basis that is non-recourse to the Agent and the Lenders, and none of the
foregoing shall impair any Collateral not expressly provided to be released
hereunder.

(d) As of the effectiveness of this Amendment, each of the Sold Entities
hereby unconditionally releases, waives, and forever discharges (i) any and all
liabilities, obligations, duties, promises, or indebtedness of any kind of the
other parties to the Credit Agreement and the Loan Documents regarding the
execution, delivery, or performance of the Credit Agreement and the Loan
Documents, and (ii) all claims, offsets, causes of action, suits, or defenses of
any kind whatsoever (if any), whether known or unknown, which such Sold Entity
might otherwise have against the other parties to the Credit Agreement and the
Loan Documents, or any of their directors, officers, employees, or agents, in
either case (i) or (ii), on account of any condition, act, omission, event,
contract, liability, obligation, indebtedness, claim, cause of action, defense,
circumstance, or matter of any kind whatsoever which existed, arose or occurred
at any time prior to the effectiveness hereof regarding the execution, delivery,
or performance of the Credit Agreement and the Loan Documents.

ss.5. Joinder by Peasant Holding. By executing this Amendment, Peasant
Holding hereby becomes a Borrower (instead of a Guarantor) under the Credit
Agreement and the Loan Documents, and shall become and be party thereto for all
purposes thereof as a Borrower instead of a Guarantor. Peasant Holding covenants
and agrees that by its execution hereof it shall perform, be bound by, and shall
comply with, all of the terms and conditions of the Credit Agreement and the
Loan Documents applicable with respect to the Borrowers, including, without
limitation, the absolute and unconditional joint and several liability
provisions of ss.5 of the Credit Agreement under which each Borrower promises on
a joint and several basis to pay and perform all of the Obligations owing from
time to time. Peasant Holding hereby ratifies and confirms in all respects its
obligations under, and the grant of collateral security provided by, the Peasant
Holding Security and Pledge Agreement. Upon the effectiveness of this Amendment,
Peasant Holding shall no longer be a party to, and is hereby released from all
of its indebtedness and obligations to the Lenders as a Guarantor in respect of,
the Guaranty Agreement dated as of March 21, 1990 between Peasant Holding and
the Agent, all such indebtedness and obligations of Peasant Holding being hereby
automatically and fully assumed jointly and severally by each of the remaining
Guarantors. Peasant Holding shall no longer be a Guarantor for purposes of the
Credit Agreement or any of the Loan Documents.

ss.6. 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, after giving
effect to this Amendment, 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
<PAGE>
-12-

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.7. 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) an Allonge to each of the Revolving Credit Notes and an Allonge to
each of the Term Notes, in each case signed by Pleasant Holding,
confirming its joint and several liability as a Borrower thereunder;

(c) such evidence as the Agent may reasonably request such that the Agent
shall be satisfied that the representations and warranties contained
in ss.6 hereof are true and correct on and as of date hereof;

(d) such evidence as the Agent may reasonably request that the MRI/PRI
Stock Dispositions have been consummated concurrently herewith
pursuant to, and in accordance with, the terms of the MRI/PRI Stock
Purchase Agreements, as applicable;

(e) true, accurate, and complete copies of each of the MRI/PRI Stock
Purchase Documents (or arrangements satisfactory to the Agent for the
delivery of the same to the Agent immediately after the effectiveness
hereof);

(f) such evidence as the Agent may reasonably request that the
Repositioned Subsidiaries (as referred to in ss.2(b) of this
Amendment) have concurrently herewith become wholly owned direct
Subsidiaries of Peasant Holding; and the delivery to the Agent in
pledge by Peasant Holding under the Security Documents of all of the
stock certificates evidencing the capital stock of the Repositioned
Subsidiaries, together with undated stock powers with respect thereto
duly executed in blank by Peasant Holding (or arrangements
satisfactory to the Agent for the delivery of the same to the Agent
immediately after the effectiveness hereof);

(g) delivery to the Agent in pledge by Peasant Holding under the Security
Documents of the MRI/PRI Subordinated Notes, together with undated
allonges, endorsements, or other appropriate instruments of assignment
with respect thereto duly executed in blank by Peasant Holding (or
arrangements satisfactory to the Agent for the delivery of the same to
the Agent immediately after the effectiveness hereof);

(h) certificates of an appropriate officer of Peasant Holding, as of the
date hereof, as to (i) the corporate actions taken by it authorizing
the execution, delivery, and performance hereof, and (ii) the names,
titles, incumbency, and specimen signatures of the officers of Peasant
Holding authorized to sign this Amendment and act on behalf of Peasant
Holding as a Borrower under the Credit Agreement;
<PAGE>
-13-

(i) a favorable written legal opinion addressed to the Agent and the
Lenders, as of the date hereof, from Schulte, Roth & Zabel LLP,
special counsel to the Borrowers, with respect to such matters as the
Agent or the Lenders may reasonably request;

(j) such additional UCC-1 financing statements, and such amendments to
existing UCC-1 financing statements, with respect to the Collateral
and the Companies, as the Agent or the Lenders may reasonably require;

(k) an updating Supplemental Trademark Collateral Assignment and Security
Agreement signed by Morton's in favor of the Agent;

(l) a new Trademark Collateral Assignment and Security Agreement signed by
Bertolini's in favor of the Agent; and

(m) such other certificates, documents, or instruments with respect to
this Amendment or the Companies, as the Agent or the Lenders may
reasonably request.

ss.8. 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 Security Documents, 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 hereby ratified and
confirmed, and are and shall be 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 Security Documents, and the Obligations thereunder
contained in any of the Loan Documents shall be references to the Credit
Agreement, the Security Documents, and the Obligations, as amended hereby and as
the same may be amended, modified, supplemented, or restated from time to time.
Except as otherwise expressly provided by this Amendment, the Security
Documents, and the valid, perfected first priority security interests of the
Agent and 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. The release of any applicable Person from any
particular Obligations or the release of any particular Collateral provided for
in this Amendment shall not impair or otherwise affect any of the Obligations as
to any other Person (including, without limitation, 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 any such Obligations are initially
incurred by any such released Person or its Subsidiaries or by any other Person,
and whether arising in respect of Notes, Loans, Letters of Credit, Reimbursement
Obligations, principal, interest, fees, expenses, indemnifications, or
otherwise), or the security interests and liens of the Agent and the Lenders
with respect to the remaining Collateral, in any manner whatsoever. 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.9. 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.
<PAGE>

-14-

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.
MORTON'S OF CHICAGO, INC.
PEASANT HOLDING CORP.

By: /s/ THOMAS J. BALDWIN
-------------------------------------
Name: Thomas J. Baldwin
Title: Executive Vice President - Finance
and CFO

THE FIRST NATIONAL BANK OF BOSTON,
for itself and as Agent

By: _____________________________________
Name:____________________________________
Title:___________________________________

IMPERIAL BANK

By: _____________________________________
Name:____________________________________
Title:___________________________________

HELLER FINANCIAL, INC.

By: _____________________________________
Name:____________________________________
Title:___________________________________

Consented and agreed to, by each of
THE GUARANTORS (as defined in the Credit
Agreement, as amended by this Amendment)

By: /s/ THOMAS J. BALDWIN
-------------------------------------
Name: Thomas J. Baldwin
Title: Executive Vice President - Finance
and CFO
for each of the Guarantors
<PAGE>

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.
MORTON'S OF CHICAGO, INC.
PEASANT HOLDING CORP.

By: _____________________________________
Name:____________________________________
Title:___________________________________

THE FIRST NATIONAL BANK OF BOSTON,
for itself and as Agent

By: /s/ CHRISTOPHER M. HOLTZ
-------------------------------------
Name: Christopher M. Holtz
Title: Vice President

IMPERIAL BANK

By: _____________________________________
Name:____________________________________
Title:___________________________________

HELLER FINANCIAL, INC.

By: _____________________________________
Name:____________________________________
Title:___________________________________

Consented and agreed to, by each of
THE GUARANTORS (as defined in the Credit
Agreement, as amended by this Amendment)

By: _____________________________________
Name:____________________________________
Title:___________________________________
for each of the Guarantors
<PAGE>

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.
MORTON'S OF CHICAGO, INC.
PEASANT HOLDING CORP.

By: _____________________________________
Name:____________________________________
Title:___________________________________

THE FIRST NATIONAL BANK OF BOSTON,
for itself and as Agent

By: _____________________________________
Name:____________________________________
Title:___________________________________

IMPERIAL BANK

By:/s/ DIANNE H. RUSSELL
-------------------------------------
Name: Dianne H. Russell
Title: Senior Vice President and Manager

HELLER FINANCIAL, INC.

By: _____________________________________
Name:____________________________________
Title:___________________________________

Consented and agreed to, by each of
THE GUARANTORS (as defined in the Credit
Agreement, as amended by this Amendment)

By: _____________________________________
Name:____________________________________
Title:___________________________________
for each of the Guarantors
<PAGE>
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.
MORTON'S OF CHICAGO, INC.
PEASANT HOLDING CORP.

By: _____________________________________
Name:____________________________________
Title:___________________________________

THE FIRST NATIONAL BANK OF BOSTON,
for itself and as Agent

By: _____________________________________
Name:____________________________________
Title:___________________________________

IMPERIAL BANK

By: _____________________________________
Name:____________________________________
Title:___________________________________

HELLER FINANCIAL, INC.

By: /s/ DOMINICK J. MASCIANTONIO
-------------------------------------
Name: Dominick J. Masciantonio
Title: Senior Vice President

Consented and agreed to, by each of
THE GUARANTORS (as defined in the Credit
Agreement, as amended by this Amendment)

By: _____________________________________
Name:____________________________________
Title:___________________________________
for each of the Guarantors
<PAGE>

The undersigned hereby join in, and consent and agree to, the terms of this
Amendment. The undersigned also acknowledge that upon the effectiveness of this
Amendment, the undersigned shall no longer be parties to the Credit Agreement
and the Loan Documents, all as provided for in this Amendment.

THE PEASANT RESTAURANTS, INC.

By: /s/ THOMAS J. BALDWIN
-------------------------------------
Name: Thomas J. Baldwin
Title: Senior Vice President - Finance
and CFO

MICK'S RESTAURANTS, INC.

By: /s/ THOMAS J. BALDWIN
-------------------------------------
Name: Thomas J. Baldwin
Title: Senior Vice President - Finance
and CFO

THE SOLD SUBSIDIARIES (as defined in this
Amendment)

By: /s/ THOMAS J. BALDWIN
-------------------------------------
Name: Thomas J. Baldwin
Title: Senior Vice President - Finance
and CFO
for each such Sold Subsidiary
<PAGE>

EXHIBIT Z

Sold Subsidiaries

Mick's at Cumberland Mall, Inc.
Mick's at Northpoint Mall, Inc.
Mick's at Gwinett Place, Inc.
Mick's at Town Center, Inc.
<PAGE>

SCHEDULE 1.1D

1. Peasant at Locust Street, Inc.
2. Mick's at the Forum, Inc.
3. Mick's at Towson Commons, Inc.
4. Mick's at Pennsylvania Ave., Inc.
5. Mick's at 19th Street, Inc.
6. Mick's at the Bellevue, Inc.
7. Mick's at Fair Oaks, Inc.
8. Mick's at Willow Grove, Inc.
9. Mick's at Springfield, Inc.
10. Mick's at Annapolis Mall, Inc.
11. Mick's at Hickory Hollow, Inc.
12. Mick's at Rivergate, Inc.
13. Mick's at Southdale Center, Inc.
14. Mick's at Oak Court, Inc.
15. Mick's at Loehmann's Fashion Island, Inc.
<PAGE>

SCHEDULE l.2A

MRIAC Obligations, PRIAC Obligations, and MRI/PRI Lease Guaranties

Pursuant to Article 3 of the MRI Stock Purchase Agreement and Article 3 and
Section 6.20 of the PRI Stock Purchase Agreement, the purchase price may be
adjusted after the Closing Date.

Pursuant to Section 10.1 of the MRI Stock Purchase Agreement and Section 10.1 of
the PRI Stock Purchase Agreement, indemnification up to a maximum amount of
$6,808,500.

Pursuant to Section 6.21 of the MRI Stock Purchase Agreement and Section 6.22 of
the PRI Stock Purchase Agreement, indemnification for certain third party
claims.

Pursuant to Section 6.8 (c) of the MRI Stock Purchase Agreement and Section 6.8
(c) of the PRI Stock Purchase Agreement, reimbursement for reasonable out of
pocket expenses incurred in providing assistance in connection with defense of
certain claims.

Pursuant to Section 6.20 of the PRI Stock Purchase Agreement, payment in the
event of certain occurrences relating to the Winfield's Transaction.

Pursuant to Section 6.22 of the MRI Stock Purchase Agreement and Section 6.23 of
the PRI Stock Purchase Agreement, indemnification of the guarantor of certain
lease guaranties under certain conditions.
<PAGE>

SCHEDULE l.2A

MRIAC Obligations, PRIAC Obligations, and MRI-PRI Lease Guaranties

MRI/PRI Lease Guaranties

MRG Morton's Restaurant Group
MRI Mick's Restaurants, Inc.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Maximum
Obligation
Guaranteed
Property Landlord Date of Lease Current Guarantor (Approx.)
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
1. Country Place - Trizec Colony Square, 6/7/93 MRG $700,000
Colony Square Inc.

2. Mick's at North North Point Mall, L.P. 6/15/93 MRG $400,000
Point

3. Mick's at Fair Fairfax Associates 7/23/93 MRI & MRG $400,000
Oaks

4. Two Equipment Keycorp Leasing LTD 10/11/94 MRG $16,000 and
Leases $28,000
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

SCHEDULE 6.3

SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT

6.3 (iv) - None
6.3 (vi) - None

The pledge of the Company's stock may be a default under such Company's
lease listed on Schedule 6.10 unless the consent of the lessor under such
lease is obtained as follows:

Morton's of Chicago/ Charlotte, Inc.
Morton's of Chicago/ Cincinnati, Inc.
Morton's of Chicago/ Denver, Inc.
Morton's of Chicago/ Fifth Avenue, Inc.
Morton's of Chicago/ Minneapolis, Inc.
Morton's of Chicago/ Palm Beach, Inc.
Morton's of Chicago/ San Antonio, Inc.
Porterhouse of Los Angeles, Inc.
Morton's of Chicago/ Phoenix, Inc.
Morton's of Chicago/ Baltimore, Inc.
Morton's of Chicago/ San Diego, Inc.
Morton's of Chicago/ Washington Square, Inc.
Bertolini's of Westbury, Inc.
Bertolini's of Circle Centre, Inc.
Bertolini's of Charlotte, Inc.
Bertolini's of Costa Mesa, Inc.
<PAGE>

SCHEDULE 6.10

SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Restaurants Lease Dates Addresses
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Morton's Restaurant Group, Inc. 4/1/94 3333 New Hyde Park Rd., Suite 210, New Hyde Park, NY 11042
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Addison, Inc. 4/19/94 14831 Midway Road, Addison, TX 75244
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Atlanta, Inc. 5/16/95 One Peachtree Center, 303 Peachtree Street, N.E., Atlanta, GA 30303
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Baltimore, Inc.* 7/12/96 Sheraton Inner Harbor Hotel, 300 S. Charles St., Baltimore MD 21201
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Boston, Inc. 8/18/86 One Exeter Plaza, 675-693 Boylston at Exeter, Boston, MA 02116
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Buckhead, Inc. 10/15/93 Peachtree Lenox Building, 3379 Peachtree Road, N.E., Atlanta, GA 30326
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Charlotte, Inc. 11/4/93 227 West Trade Street, Charlotte, NC 28202
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Chicago, Inc. 9/7/78 1050 North State Street, Chicago, IL 60610
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Cincinnati, Inc. 3/28/91 Tower Place at Carew, Suite 105, 28 West 4th Street, Cincinnati, OH 45202
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Clayton, Inc. 7/15/93 7822 Bonhomme Avenue, Clayton, MO 63105
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Cleveland, Inc. 7/26/90 The Avenue at Tower City Center, 1600 West 2nd Street, Cleveland, OH 44113
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Columbus, Inc. 9/25/90 Two Nationwide Plaza, Suite 100, Columbus, OH 43215
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Dallas, Inc. 3/6/86 501 Elm Street, Dallas, TX 75202
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Denver, Inc. 6/3/94 1710 Wynkoop Street, Denver, CO 80202
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Detroit, Inc. 7/3/92 One Towne Square, Southfield, MI 48076
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Fifth Ave.,
Inc. 2/25/93 551 Fifth Avenue, New York, New York 10017
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Houston, Inc. 5/1/95 Centre at Post Oak, 5000 Westheimer, Suite 190, Houston, TX 77056
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Las Vegas, Inc. 9/8/92 Fashion Show Mall, 3200 Las Vegas Blvd. So., Suite 409, Las Vegas, NV 89109
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Minneapolis,
Inc. 8/26/91 555 Nicollet Mall, Minneapolis, MN 55402
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Nashville, Inc. 4/15/92 Church Street Center, 625 Church Street, Nashville, TN 37219
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Orlando, Inc. 6/29/95 Dr. Phillips Market Place, 7600 Dr. Phillips Blvd., Orlando, FL 32819
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Palm Beach, 7/3/91 777 South Flagler Drive, Palm Beach, FL 33401
Inc.
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Palm Desert,
4/20/93 74-880 Country Club Drive, Palm Desert, CA 92660 Inc.
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Philadelphia, Inc.
11/1/84 One Logan Square, 19th & Cherry Street, Philadelphia, PA 19103
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Phoenix, Inc. 8/29/95 Shops at the Esplanade, 2501 E. Camelback Road, Suite 1, Phoenix, AZ 85016
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Pittsburgh, Inc. 4/30/93 625 Liberty Avenue, Suite 180, Pittsburgh, PA 15222
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Rosemont, Inc. 3/23/89 Columbia Centre III, 9525 West Bryn Mawr, Rosemont, IL 60018
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Sacramento,
Inc. 10/13/92 521 L Street, Sacramento, CA 95814
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/San Antonio,
Inc. 1/23/91 849 East Commerce, #283, San Antonio, TX 78205
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/San Diego, Inc.* 5/24/96 285 J. Street, San Diego, CA 92101
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/San Francisco,
Inc. 10/22/93 400 Post Street, 2nd Floor, San Francisco, CA 94102
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Santa Ana, Inc. 5/16/94 1661 West Sunflower Avenue, Suite C-5, Santa Ana, CA 92704
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Virginia, Inc. 3/8/90 8075 Leesburg Pike, Vienna, VA 22182
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Washington, DC,
Inc. 5/12/82 3251 Prospect Street, N.W., Washington, D.C. 20007
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Washington
Square, Inc. 4/4/96 1050 Connecticut Ave.,N.W., Suite 1210, Washington, DC 20036
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/West Street,
Inc. 6/23/95 90 West Street, New York, NY 10006
- ---------------------------------------------------------------------------------------------------------------------------
Morton's of Chicago/Westbrook, Inc. 7/8/85 One Westbrook Corporate Center, 22nd & Wolf Roads, Westchester, IL 60153
- ---------------------------------------------------------------------------------------------------------------------------
Porterhouse of Los Angeles, Inc. 8/30/91 Beverly Hills Nikko, 435 South La Cienega Blvd., Los Angeles, CA 90048
- ---------------------------------------------------------------------------------------------------------------------------
Bertolini's of Charlotte, Inc.* 6/28/96 Phillip's Place, Charlotte, NC 28210
- ---------------------------------------------------------------------------------------------------------------------------
Bertolini's of Circle Centre, Inc. 12/28/95 49 W. Maryland Street, Indianapolis, IN 46225
- ---------------------------------------------------------------------------------------------------------------------------
Bertolini's of Costa Mesa, Inc.* 9/13/96 Metro Pointe Shopping Center,901-A South Coast Dr. Costa Mesa, CA 92626
- ---------------------------------------------------------------------------------------------------------------------------
Bertolini's of Irvine Center, Inc. 11/2/94 45 Fortune Drive, Irvine, CA 92715
- ---------------------------------------------------------------------------------------------------------------------------
Bertolini's of King of Prussia, Inc. 5/95 160 N. Gulph Road, King of Prussia, PA 19406
- ---------------------------------------------------------------------------------------------------------------------------
Bertolini's of Las Vegas,Inc. 1/27/92 Forum Shop at Caesar's, 3500 Las Vegas Blvd., Las Vegas, NV 89103
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

SCHEDULE 6.10

SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bertolini's at Market Square, Inc. 1/19/90 801 Pennsylvania Avenue, Washington, D.C. 20004
- ---------------------------------------------------------------------------------------------------------------------------
Bertolini's of Phipps Plaza, Inc. 4/21/92 Phipps Plaza, 3500 Peachtree Road, Atlanta, GA 30326
- ---------------------------------------------------------------------------------------------------------------------------
Bertolini's of Westbury, Inc. * 1/25/96 The Mall at the Source, Old Country Rd., Westbury, NY 11590
- ---------------------------------------------------------------------------------------------------------------------------
Bertolini's of WhiteFlint Mall, 9/1/94 11301 Rockville Pike, N. Bethesda, MD 20895
Inc.
- ---------------------------------------------------------------------------------------------------------------------------
Mick's At Fair Oaks, Inc. 7/23/93 11750 Fair Oaks Mall, Fairfax, VA 22033
- ---------------------------------------------------------------------------------------------------------------------------
Mick's At Springfield, Inc. 7/28/93 6791-B Springfield Mall, Springfield, VA 22150
- ---------------------------------------------------------------------------------------------------------------------------
Mick's At Annapolis Mall, Inc. 9/14/93 187 Annapolis Mall, Annapolis, MD 21401
- ---------------------------------------------------------------------------------------------------------------------------
Mick's At Oak Court, Inc. 8/30/93 4465 Poplar Avenue, Memphis, TN 38117
- ---------------------------------------------------------------------------------------------------------------------------
Mick's At Pennsylvania Ave, 9/29/92 2401 Pennsylvania Avenue, N.W., Washington, D.C. 20037
Inc.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Restaurant scheduled to open in 1997.

See Schedule 6.3 for defaults.
<PAGE>

SCHEDULE 6.11

SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT

Washington D.C. Dept. of In August, 1994 the District of Columbia
Employment Services' Department of Employment Services ("DES")
Wage and Hour initiated an investigation of Store No. 620's wage
Investigation of Mick's and hour practices. This investigation was
2401 Penn. Ave. initiated in response to a wage complaint filed by
Mr. Jeffrey Gilmore, a former employee.
Apparently, Mr. Gilmore filed the complaint as a
result of payroll deductions in the amount of $115
which were withheld from his final paycheck. Mr.
Gilmore claims that as a result of these payroll
deductions he received less than the minimum wage
of $5.25 per hour required by the District of
Columbia Minimum Wage Act.

On October 4, 1994, the DES issued a
subpoena for Store No. 620's time and payroll
records for the period from January 1, 1994 until
September 30, 1994. The DES has subsequently
agreed to review only a sampling of records from
December 1993 and January, September and October,
1994. These records were provided to the DES on
October 22, 1994.

Upon learning of the wage subpoena and
Mr. Gilmore's allegations, a preliminary
investigation and review of the restaurant's
payroll records was conducted. Based upon this
investigation, the Company concluded that Mr.
Gilmore was inadvertently paid less than the
minimum wage. Mr. Gilmore's complaint has
subsequently been resolved by forwarding a check
in the amount of $115, payable to Mr. Gilmore, to
the DES. The DES has not closed its investigation
of this matter, however, and is presently
reviewing the wage records provided by the
Company.

Based upon our preliminary review of the
payroll records, it appears that the DES could
identify two potential violations of the District
of Columbia wage and hour provisions. The first
potential violation involves uniform deductions.
The District of Columbia Code prohibits employers
from deducting the cost of uniforms and protective
clothing from an employee's earnings. The Company
has indicated that uniform deductions have been
taken in the past. The second potential violation
involves split shift compensation. The District of
Columbia Code requires employers to pay employees
an additional hour of compensation, at the minimum
wage of $5.25 per hour, for each day on which a
split shift is worked. Our preliminary review of
the payroll records indicates that some employees
have not received the split shift compensation
required by the District of Columbia Code.

At this stage, it is difficult to
predict the outcome of the DES investigation since
it is unclear whether the DES will identify these
potential violations. Additionally, due to the
preliminary nature of our investigation, it is
unclear how many employees were subject to uniform
deductions or did not receive the split shift
compensation. Jackson, Lewis, Schnitzler &
Krupman, 261 Madison Avenue, New York, New York,
10016 ("Jackson Lewis") has indicated that it is
unlikely that the liability will exceed $100,000.

Mick's Restaurants, Inc. Mick's Restaurants, Inc. instituted suit
vs. Peachtree Complex, LP against Peachtree Complex, LP in the Superior
Court of Fulton County, Civil Action File No.
E49980. The action arises as a result of a sign on
a competing restaurant having been placed on the
exterior facade of the Mick's Restaurant at
Peachtree Center. Mick's occupies the second and
third floor (from ground level). A space below the
Mick's restaurant is occupied by the "Les Halles"
restaurant. The suit requests declaratory relief,
injunctive relief, specific performance, and seeks
damages for trespass, violation of Georgia's
Deceptive Trade Practices Act and attorney's fees
and litigation expenses. Essentially the issue is
whether the exterior facade of the Building is
part of the Mick's leased premises. No
counterclaim has been asserted against Mick's
Restaurants, Inc. Although nominal and punitive
damages have been requested, the likelihood of a
monetary award is slight, except possibly for fees
and expenses. The goal of the litigation is to
force removal of the offending sign and to stop
the Landlord from allowing similar action in the
future. The law firm of Eillis, Funk, Goldberg,
Labovitz & Dokson, P.C., 3490 Piedmont Road, Suite
400, Atlanta, Georgia 30305, is representing
Mick's Restaurants, Inc. Robert N. Dokson, Esq. is
lead counsel.
<PAGE>

SCHEDULE 6.11

SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT

Italian Restaurants, Inc.

Bertolini's/King In or about early September, 1996, the
of Prussia, Inc. Bureau of Labor Standards ("BLS") of the
(Pennsylvania Commonwealth of Pennsylvania Department of Labor
Bureau of Labor and Industry, conducted an audit of the King of
Standards Prussia restaurant relating to possible child
Investigation) labor law violations. At the conclusion of the
BLS' meeting with representatives of the
restaurant, a BLS investigator informed the
representative that he found 126 violations of
Pennsylvania's Child Labor Law. According to the
investigator, these alleged violations involved
minors working more than the maximum number of
daily and weekly hours permitted under the law,
failing to provide mandated break time to minors
and failing to have on file at the restaurant a
certificate or transferable work permit for each
minor employed at the restaurant. On September 5,
1996, Jackson Lewis contacted the BLS on behalf of
the restaurant and by letter of September 6, 1996,
entered our appearance as counsel of record.
According to the BLS investigator , as of
September 5, 1996, no actual violations or
citations had been issued. At a meeting with the
BLS on January 7, 1997, the BLS indicated that (a)
the Department of Labor is likely to commence an
action to collect fines because of child labor law
violations; (b) if a settlement agreement were
negotiated, a consent decree and fines would be a
part thereof; (c) fines imposed by a court were
likely to be at least $35,000 (unless a lesser
number was negotiated); and, (d) follow-up audits
will be scheduled as part of any negotiated
resolution.

Morton's of Chicago, Inc.

Howard v. Morton's of In this action, Charging Party alleges
Chicago, Inc./Charlotte, that she was discriminated against because of her
Inc. sex when she was sexually harassed by a co-worker.
After learning of the allegations of inappropriate
conduct, the Company conducted an investigation
which culminated in the discharge of the
co-worker. The Company is vigorously defending
against the charge. Further, Charging Party had
signed a Mandatory Arbitration Agreement on her
first day of employment. In responding to the
charge, the Company has asserted that the matter
should be submitted to arbitration. On October 31,
1996, the EEOC issued a Determination finding
reasonable cause to credit Ms. Howard's
allegations.

Adams v. Morton's of Charging Party alleges that she was
Chicago sexually harassed by a co-worker and dismissed
because of her sex and in retaliation for
complaining about acts which she perceived as
being sexual harassment. The Company denies the
material allegations of Ms. Adams' complaint and
is vigorously defending the matter. On April 25,
1995, the Company filed a position statement with
the Equal Employment Opportunity Commission. At
the present stage of the proceedings, it is
difficult to predict the outcome of this matter
with any degree of certainty. If Charging Party
ultimately prevails, she may be entitled to back
pay from the date of her termination on January
12, 1995, i.e., interim earnings, compensatory
damages, punitive damages and attorneys' fees.
<PAGE>

SCHEDULE 6.11

SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT

James Hayden v. Morton's Complainant alleges that he was
of Chicago dismissed because of his race (Black). The Company
denies the material allegations of Mr. Hayden's
complain and contends that Mr. Hayden was
dismissed for engaging in inappropriate conduct.
On March 28, 1995, the Company filed a position
statement with the Pennsylvania Human Relations
Commission denying the material allegations of Mr.
Hayden's complaint and is vigorously defending
this matter. At the present stage of the
proceedings, it is difficult to predict the
outcome of this matter with any degree of
certainty. If the Complainant ultimately prevails,
he may be entitled to back pay from the date of
his termination on August 24, 1994, less interim
earnings.

Robina Kitzler v. In this action, Plaintiff, a former
Morton's of Chicago employee at Morton's in New York, alleges that she
and Luke Owen was struck on the buttocks with a knife by the
restaurant's line cook. In this regard, she has
asserted claims of sexual assault and battery,
negligent retention, sex discrimination in
violation of the New York State and New York City
laws, and intentional infliction of emotional
distress. The Company is vigorously defending this
action and has filed an Answer to the Complaint
denying all allegations of wrongdoing. We deposed
Plaintiff on August 27th and August 28th, 1996 and
Plaintiff has taken several depositions. At the
present state of the proceedings, it is difficult
to predict the outcome of this matter with any
degree of certainty. If Plaintiff ultimately
prevails, she may be entitled to compensatory
damages, punitive damages and attorney's fees.

Wendy Kirkland v. In this matter, the Plaintiff, a former
Morton's of Chicago, et. employee, contends that she was sexually harassed
al., by the general manager of the Company's Palm
Springs restaurant, and then retaliated against in
some as yet unspecified way after she transferred
to the Company's restaurant in San Francisco. The
Company terminated the employment of the Palm
Springs manager after Plaintiff complained about
his conduct, and transferred her to San Francisco
at her request.

Discovery in the case is underway. The
court, which mandates an attempt at some form of
alternative dispute resolution, has directed the
parties to participate in its "Early Neutral
Evaluation" program sometime before the end of
February 1997.

Plaintiff demanded $500,000 to settle
the matter before filing suit. Her complaint seeks
compensatory damages in the form of lost earnings
and emotional distress damages, and punitive
damages. We presently estimate Plaintiff's
economic damages to be nominal because she
obtained other employment after leaving the
Company and has received roughly comparable salary
and benefits. We do not believe that this is a
case with a high risk of punitive damage award.
However, at the present stage of the proceeding,
we cannot estimate its likely outcome or the range
of potential exposure with any degree of
certainty.

Canada v. Morton's of In this matter, Complainant alleges that
Chicago/Cleveland, Inc. the Morton's of Chicago in Cleveland, Ohio refused
to hire her for a job as hostess because of her
race (Black), in violation of Title VII of the
Civil Rights Act of 1964. After the filing of this
charge, a hostess position, which was not
available at the time Complainant initially
applied to Morton's at Cleveland, became
available, and was offered to Complainant.
Complainant rejected the offer. We submitted a
response to the charge on February 1, 1996 denying
the material allegations therein. The investigator
from the Ohio Civil Rights Commission ("OCRC")
assigned to this matter then conducted an
in-person interview with the former Assistant
Manager of the restaurant , and a telephonic
interview with the former night hostess for the
restaurant. On or about July 16, 1996, the
investigator issued a "no probable cause"
determination and dismissed the case. On September
13, 1996 the EEOC issued a determination adopting
the OCRC's finding and notifying Ms. Canada that
she had 90 days to sue from the date she receives
the determination, or until on or about December
15, 1996. To date, Ms. Canada has not filed a
lawsuit.
<PAGE>

SCHEDULE 6.11

SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT

Omar Ferrane v. Morton's Charging Party alleges that he was not
of Chicago hired for a position because of his national
origin (Moroccan). The Company denies the material
allegation of Mr. Ferrane's complaint and contends
openings at the time he applied for the position.
On August 13, 1996, the Company filed a position
statement with the Equal Employment Opportunity
Commission. At the present stage of the
proceedings, it is difficult to predict the
outcome of this matter with any degree of
certainty. If Charging Party ultimately prevails,
he may be entitled to back pay from the date he
was denied employment, February 1996, less interim
earnings, compensatory damages, punitive damages
and attorney's fees.

Fenton Brown v. Morton's In this action, Plaintiff, a former
of Chicago, et. al. server, alleges that he was discriminated against,
in the terms and conditions of his employment
because of his race and age. Plaintiff also claims
that he was sexually harassed and retaliated
against. Plaintiff was terminated pursuant to a
policy which provided for the immediate
termination of any server who accumulated three
errors in ringing and auditing guest checks.
Morton's is vigorously defending this action and
has filed an Answer to the Complaint denying all
of Plaintiff's allegations. Depositions are
currently scheduled for this month. At present, it
is difficult to predict the outcome of this matter
with any degree of certainty. If Plaintiff
ultimately prevails, he may be entitled to
compensatory and punitive damages, back pay from
the date of his termination in June 1995, and
attorney's fees.

Wayne Spain-Bey v. Wayne Spain-Bey is a pantry-line cook in
Morton's of Morton's of Chicago/Philadelphia restaurant. In
Chicago/Philadelphia, February, 1996, Mr. Spain-Bey requested a transfer
Inc. to Morton's Orlando restaurant. After Morton's had
arranged for the transfer, Mr. Spain-Bey decided
to remain in Philadelphia. Since Morton's had
already filled Mr. Spain-Bey's position in the
Philadelphia restaurant, it had no position
available for him, and terminated him on February
26, 1996. Morton's rehired Mr. Spain-Bey when a
position opened in Philadelphia in May 1996.

Mr. Spain-Bey has made a demand for
arbitration, pursuant to Morton's mandatory
arbitration policy, to recover lost wages from
February until May, 1996. Mr. Spain-Bey alleges
causes of action for wrongful termination,
constructive discharge, detrimental reliance and
breach of implied contract. Morton's has answered
the arbitration demand, and the parties are now in
the process of selecting an arbitrator. Mr.
Spain-Bey is seeking $3,300 in lost earnings, as
well as costs and attorney's fees.

Ladsom, Anthony v. The Charging Party is a former employee
Morton's of Chicago of Morton's of Chicago in Atlanta, GA. He filed a
charge of discrimination alleging race
discrimination with regard to promotions and
constructive discharge. The EEOC issued a Notice
of Right to Sue to the Charging Party on April 30,
1996, explaining that he had 90 days in which to
file suit. To our knowledge, the Charging Party
did not file suit within the requisite period of
time.
<PAGE>

SCHEDULE 6.21

SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT

None.
<PAGE>

SCHEDULE 6.22

SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT

None.
<PAGE>

SCHEDULE 6.23

SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT

None.
<PAGE>

SCHEDULE 10.4

SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT

Security interests in ice machines, copy machines, telecommunications equipment
and other similar equipment.

Tax lien resulting from an IRS assessment on The Peasant Restaurants, Inc. and
Mick's Restaurants, Inc. for FICA tax on unreported tips received by employees.
Final payment of this assessment was made in November 1996 and the lien is
expected to be released shortly.

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement"), dated as of the 1st day
of February, 1997, between MORTON'S RESTAURANT GROUP, INC., a Delaware
corporation, with offices at 3333 New Hyde Park Road, Suite 210, New Hyde Park,
New York 11042 ("MRG") and William Hyde ("Hyde"), an individual residing at 5
Great Meadow Road, Laddington, New York 11560.

WHEREAS, Hyde and MRG entered into an employment agreement dated as of the 31st
day of January 1994, and whereas Hyde and MRG desire to amend and restate same.

NOW, THEREFORE, in consideration of the mutual covenants and promises herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows.

1. Employment. MRG employs Hyde and Hyde accepts employment upon the terms
and conditions of this Agreement.

2. Term. The term of this Agreement shall begin on the 1st day of February,
1997 ("Commencement Date"), and shall terminate on the 31st day of January,
2000, said period hereafter referred to as the "Term". Each twelve (12) month
period during the Term, starting with the Commencement Date, is hereafter
referred to as an "Employment Year".

3. Compensation; Benefits; Expenses; and Bonus

A. Base Salary. As compensation for the services to be rendered
hereunder for the entire Term, MRG shall pay to Hyde a base salary (the "Base
Salary") of $275,000. per Employment Year, payable in equal installments at such
times as shall be agreed upon by MRG and Hyde, but no less frequently than
monthly.

B. Participation in Employee Benefits. Hyde shall be eligible to
participate in benefit programs, if any, of MRG which are in effect for its
executive personnel from time to time, including profit sharing, pension,
incentive or other supplemental or special compensation plans or arrangements,
and stock purchase programs, in each case in accordance with the terms of such
program.

C. Travel and Entertainment Costs. MRG recognizes that Hyde, in
rendering the services hereunder, will be required to spend sums of money for
the entertainment of various persons and representatives of companies and
organizations with whom MRG is having, or would like to have business relations.
MRG will advance and/or reimburse reasonable travelling or other out-of-pocket
expenses incurred or to be incurred by Hyde in rendering the

1
<PAGE>

services hereunder in behalf of MRG, and MRG will advance such funds to Hyde, or
reimburse Hyde upon presentation of vouchers or other documents reasonably
necessary to verify the expenditures and sufficient in form and substance to
satisfy Internal Revenue Service ("IRS") requirements for any travelling or
other expenses.

D. Auto Expense. MRG recognizes Hyde's need for an automobile for
business purposes. It, therefore, shall provide Hyde with an automobile
allowance of $750.00 per month for the purpose of either purchasing or leasing a
motor vehicle. Hyde shall be responsible for all other costs associated with any
motor vehicle including, but not limited to, repairs, insurance, gasoline, etc.,
unless such costs are incurred in connection with extraordinary company business
and otherwise meet the requirements of subparagraph 2 C. above.

E. Bonus Incentive. In addition to the Base Salary, Hyde shall be
eligible to receive an annualized bonus incentive payment ("Bonus"). The amount
of the Bonus shall be in the sole and complete discretion of the Board of
Directors ("Board") of MRG, except in no event shall the amount of the Bonus for
any full Employment Year be less than the sum of $125,000. ("Minimum Bonus").
The Bonus shall be payable to Hyde within thirty (30) days of receipt by MRG of
the statement of profits and losses for MRG's fiscal year most closely
corresponding to each Employment Year, on a fully consolidated basis, from its
independent certified public accountant then regularly auditing the books and
records of MRG.

F. Medical Insurance. MRG shall, for so long as Hyde is employed by
it, pay for the benefit of Hyde the premium on the medical policies presently
being provided to executive employees of MRG, or policies substantially similar
to same.

G. Disability Insurance. Throughout the Term, MRG shall provide
disability coverage for Hyde in such amounts to effectively cover no less than
sixty-five (65%) percent of Hyde's Base Salary plus Minimum Bonus, with
insurance policies the same as or substantially equivalent to those in force for
senior executives of MRG.

H. Life Insurance. (a) MRG presently pay for and maintains a policy of
insurance on the life of Hyde, payable to his designated beneficiaries in the
face amount of $1,000,000.00 and shall continue to do so throughout the Term. In
addition if obtainable at standard rates, MRG shall pay for and maintain an
additional policy or policies of insurance on the life of Hyde, payable to his
estate or his designated beneficiaries in a face amount or amounts which
aggregate an additional $1,000,000. at all times during the Term (either term or
whole life insurance at the sole discretion of MRG). Upon the termination of
Hyde's employment, Hyde shall have the option, within thirty (30) days

2
<PAGE>

thereafter, to acquire MRG's interest in the policy or policies that may be
procured by MRG pursuant hereto, upon payment to MRG of such policy's or
policies then cash surrender value, if any. If Hyde exercises such option, MRG
will take whatever steps are necessary to assign all the rights in the entire
policy or policies to Hyde and to deliver physical possession of the policy or
policies to Hyde. If Hyde shall fail to exercise such option, MRG may cancel the
policy or polices and recover their cash surrender value, if any and neither
Hyde nor any person claiming through Hyde shall have any rights whatsoever in
any part of the policy or policies or their values.

(b) MRG in its discretion, any time after the execution of this
Agreement, may apply for and procure as owner and for its own benefit, insurance
on the life of Hyde, in such amounts and in such form or forms as MRG may
choose. Hyde shall have no interest whatsoever in such policy or policies, but
he shall, at the request of MRG, submit to such medical examination, supply such
information, and execute such documents as may be required by the insurance
company or companies to whom MRG has applied for such insurance.

I. Physical Exam. During each Employment Year, MRG shall pay the
reasonable costs of a physical examination of Hyde by a physician of his choice,
in excess of the amount therefor reimbursed to, or paid on behalf of, Hyde
pursuant to the medical insurance referred to in Paragraph 3.F above.

4. Employment and Duties.

A. MRG hereby employs Hyde as the Chief Operating Officer and
President of MRG.

B. Hyde shall devote his full time and attention to MRG's business and
have authority and be responsible for the general administration of the business
and affairs of MRG and shall enforce the policies of the Board. Hyde shall have
such powers and duties as may be from time to time prescribed by the Board,
provided that the nature of Hyde's powers and duties so prescribed shall not be
inconsistent with Hyde's position hereunder. Hyde, if elected, shall serve as a
member of the Board, without additional compensation, provided that MRG
maintains adequate Directors and Officers insurance. Nothing contained in this
Agreement shall be construed to require MRG to cause Hyde's appointment or
election to the Board.

C. Hyde may serve on the boards of directors of other publicly held
companies provided such service (a) does not interfere with his duties
hereunder, and (b) is approved by the Board and CEO.

3
<PAGE>

D. In the discharge of his duties, Hyde shall report directly to and
be subject to the supervision of the Chief Executive Officer of MRG (the "CEO").

5. Other Businesses; Vacations.

A. Hyde shall be entitled to hold equity interests in other businesses
provided that (a) such holdings do not require performance of any services, and
(b) such other businesses are not competitive with the business conducted by MRG
or any subsidiary or affiliate; provided, however, that this shall not apply to
stockholdings in publicly traded corporations which do not exceed five (5%)
percent of the outstanding capital stock thereof.

B. Hyde shall be entitled to take periodic vacations consistent with
industry practices and with his duties hereunder.

6. Death or Disability.

A. Death. In the event of Hyde's death, his Base Salary for the month
in which his death occurs plus an equitable pro ration of the Minimum Bonus for
the Employment Year in which his death occurs, shall be paid to his estate and
the obligations of MRG under this Agreement shall terminate with such payment.

B. Temporary Disability. In the event that Hyde shall be temporarily
disabled, MRG shall continue to pay his full Base Salary (less any sums received
under any MRG paid disability insurance contracts) for the period of temporary
disability. Notwithstanding the foregoing:

(a) MRG's obligations to make Base Salary payments shall not
exceed six (6) consecutive months;

(b) If the disability has a duration exceeding six (6)
consecutive months, or if Hyde experiences aggregate periods of temporary
disability during any eighteen (18) month period exceeding nine (9) months, MRG
shall either, (i) continue such Base Salary payments for such additional period
of such disability as MRG shall determine until Hyde shall resume the
performance of his duties; or (ii) upon twenty (20) days written notice to Hyde,
terminate such Base Salary payments at any time and terminate Hyde's employment,
in which event MRG shall pay to Hyde an equitable pro rata portion of the
Minimum Bonus for the Employment Year in which such termination occurs and the
obligations of MRG shall terminate with such payment.

C. Permanent Disability.

If Hyde suffers a permanent disability, either MRG or Hyde (or
his personal representative) may upon ten (10) days written notice to the other,
terminate this Agreement, whereupon

4
<PAGE>

MRG shall pay to Hyde his Base Salary for the month in which such termination
occurs, plus pay to Hyde an equitable pro rata portion of the Minimum Bonus for
the Employment Year in which such termination occurs and the obligations of MRG
shall terminate with such payment.

D. Definitions. For purposes hereof:

(a) "Temporary Disability" shall mean the inability of Hyde, for
medical reasons certified by a Qualified Physician, to perform his usual and
customary duties under this Agreement, under circumstances indicating, in the
opinion of such physician, that the disability is not permanent.

(b) "Permanent Disability" means the inability of Hyde, for
medical reasons certified by a Qualified Physician, to substantially perform his
usual and customary duties under this Agreement under medical circumstances
which in the opinion of such physician render such disability permanent.

(c) A "Qualified Physician" is one selected by Hyde and
reasonably satisfactory to MRG. If the parties are unable to agree, a Qualified
Physician shall be one mutually selected by two physicians, one of whom shall
have been designated by each party.

7. Early Termination.

A. Hyde's employment under this Agreement and Hyde's right to further
payments of compensation of any nature or continued benefit hereunder may be
terminated in advance of the expiration of the Term, at the option of MRG, upon
thirty (30) days' written notice to Hyde for Cause. "Cause" means: (i)
conviction of Hyde in a court of law of theft, embezzlement, fraud or any other
felony which involves dishonesty or moral turpitude; (ii) failure by Hyde to
perform or observe in any material respect any of his obligations under the
Agreement, other than by reason of a Temporary Disability or Permanent
Disability, which failure continues for thirty days after the Board has given
written notice thereof to Hyde; or (iii) Hyde's habitual neglect of Hyde's
duties (other than on account of Hyde's disability).

B. In the event MRG terminates this Agreement other than pursuant to
subparagraphs 6.B, 6.C, or 7.A above, MRG shall remain liable to Hyde only for
the full amount of the aggregate future payments which otherwise would have been
paid to Hyde hereunder for the balance of the Term from and after the date of
such termination. Nothing herein shall be construed to require MRG to accelerate
any payment that may be due Hyde.

C. Any payments due Hyde pursuant to subparagraph 7.B above shall be
reduced by any unemployment benefits, and all compensation Hyde may earn in
other employment to a maximum of

5
<PAGE>

seventy-five percent (75%) of Hyde's Base Salary and Bonus provided, however,
that Hyde shall not be required to accept other employment except that of
similar kind and nature to the employment hereunder.

8. Competition; Non-Disclosure.

A. During the Term, except as permitted in Subparagraphs 4.C and 5.A
above, Hyde shall not, without the prior written consent of MRG, directly or
indirectly have any interest in, as owner, sole proprietor, stockholder,
partner, director, officer, employee, consultant, broker or otherwise (each, an
"Affiliation"), or perform any services for any business which brokers, finds,
owns and/or operates, or seeks to broker, find, own and/or operate restaurant
businesses.

B. Upon the termination of the Term or at such other time as MRG may
request, Hyde agrees to return to MRG all originals and copies, whether
generated by Hyde or anyone else, of all documents, files, lists, forms,
contracts, notebooks, rolodexes, keys, credit cards, and any other material
which, during the Term, came into Hyde's possession and relate to MRG, or any of
its subsidiaries or affiliates, their respective businesses or their potential
acquisitions and investments.

C. The parties hereto intend to and hereby confer jurisdiction to
enforce the covenants contained in this Paragraph 8 upon the courts of any state
within the geographic scope of such covenants. In the event that the courts of
any one or more of such states shall hold such covenants wholly unenforceable by
reason of the breadth of such scope or otherwise, it is the intention of the
parties hereto that such determination not bar or in any way affect MRG's right
to the relief provided in this Agreement in the courts of any other state within
the geographic scope of such covenants, as to breaches of such covenants in such
other respective jurisdictions, the above covenants as they relate to each state
being, for this purpose, severable into diverse and independent covenants.

9. Remedies. Legal Fees and Right of Offset.

A. The parties recognize that irreparable damage will result in the
event that the provisions of Paragraph 8 hereof shall not be specifically
enforced. If any dispute arises concerning action in violation of any such
provision, the parties hereto agree that an injunction be issued restraining
such action pending determination of such controversy and that no bond or other
security shall be required in connection therewith. If any dispute arises
concerning the right or obligation of any party hereto, such right or obligation
shall be enforceable by a decree of specific performance. Such remedies shall,
however, not be exclusive of and

6
<PAGE>

shall be in addition to any other remedies which the parties may have, including
injunctive relief and actions for damages.

B. In the event that any action, suit or other proceeding in law or in
equity is brought to enforce the covenants contained in Paragraph 8 hereof, or
to obtain money damages for the breach thereof, and such action results in the
award of a judgment for money damages or in the granting of any injunction or
restraining order in favor of MRG, all expenses (including reasonable attorneys,
fees) of MRG in such action, suit or other proceeding shall be paid promptly by
Hyde.

C. MRG shall have the right to set off and apply against any amount
due and payable to Hyde hereunder any other amount then due and owing by Hyde to
MRG or any of its subsidiaries or affiliates, whether arising under this
Agreement or otherwise.

10. Survival Of Obligations. Notwithstanding the expiration of the term of
this Agreement or any termination of this Agreement, any duty or obligation
which has been incurred and which has not been fully observed, performed and/or
discharged, and any right, unconditional or conditional, which has been created
and has not been fully enjoyed, enforced, and/or satisfied, shall survive such
expiration or termination until such duty or obligation has been fully observed,
performed and/or discharged and such right has been enforced, enjoyed and/or
satisfied.

11. Notices. All notices hereunder shall be in writing and shall be mailed,
delivered by hand or telecopied. All such notices shall be deemed to have been
given or delivered five (5) days after the date mailed in any general or branch
United States Post Office enclosed in a registered postpaid envelope addressed
to the address of the respective parties stated below, on the date of the by
hand delivery if delivered, or on the date of receipt, if telecopied. The
notices shall be addressed as follows:

If to Hyde:

William Hyde
5 Great Meadow Road
Laddington, New York 11560

with a copy to:

Crawford & Lewis
450 Laurel, Suite 1600
Baton Rouge, LA 70801

and

7
<PAGE>

P. O. Box 3656
Baton Rouge, Louisiana 70821-3656
Attention: James R. Lewis, Esq.

If to MRG:

MORTON'S RESTAURANT GROUP, INC.
3333 New Hyde Park Road, Suite 210
New Hyde Park, New York 11042
Attention: Allen J. Bernstein

with a copy to:

Salamon, Gruber, Newman & Blaymore P.C.
97 Powerhouse Road
Roslyn Heights, New York 11577
Attention: David Gruber, Esq.

or to such other address as a party hereto may notify the other pursuant to this
Section 11.

12. Waiver. Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant or condition, nor shall any waiver or relinquishment of any right or
power hereunder at any one time or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.

13. Severability. The invalidity or unenforceability of any provisions
hereof shall in no way affect the validity or enforceability of any other
provision.

14. Modification. This Agreement cannot be changed, modified or discharged
orally, but only if consented to in writing by both parties.

15. Assignment. This Agreement is a personal contract and, except as
specifically set forth herein, the rights and interests of Hyde herein may not
be sold, transferred, assigned, pledged or hypothecated. In the event of any
attempted assignment or transfer of rights hereunder contrary to the provisions
hereof, MRG shall have no further liability for payments hereunder.

16. Benefit. Except as otherwise herein expressly provided, this Agreement
shall inure to the benefit of and be binding upon MRG, its successors and
assigns, including but not limited to any corporation which may acquire all or
substantially all of MRG's assets and business or with or into which MRG may be
consolidated or merged, and Hyde, his heirs, executors, administrators and legal
representatives, provided that the obligations of Hyde hereunder may not be
delegated.

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<PAGE>

17. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within such State.

18. Indemnity. MRG shall indemnify Hyde and hold him harmless for any
acts or decisions made by him in good faith while performing services for MRG as
an officer of MRG and shall include him under any insurance policy now in force
or hereinafter obtained during the term of this Agreement, covering the other
officers and directors of MRG against lawsuits; provided, however, MRG shall be
under no obligation to obtain any such coverage. To the extent permitted under
the Delaware General Corporation Law, MRG will pay reasonable all expenses,
including attorneys, fee, actually and necessarily incurred by Hyde in
connection with the defense of such act, suit or proceeding and in connection
with any appeal thereon including the cost of court settlements.

19. Withholding of Taxes. MRG may withhold from any amounts or benefits
payable under this Agreement all federal, state, city and other taxes as shall
be required pursuant to any law or governmental regulation or ruling.

20. Contract Headings. All headings of the Paragraphs of this Agreement
have been inserted for convenience of reference only, are not to be considered a
part of this Agreement, and shall in no way affect the interpretation of any of
the provisions of this Agreement.

21. Severability. If any provision of this Agreement, or the application
thereof to any person or circumstances, shall, for any reason and to any extent,
be invalid or unenforceable, the remainder of this Agreement and the application
of such provision to other persons or circumstances shall not be affected
thereby, but rather shall be enforced to the greatest extent permitted by law.

22. Entire Agreement. This Agreement contains the sole and entire agreement
and understanding of the parties and supersedes any and all prior agreements,
discussions, negotiations, commitments and understandings among the parties
hereto with respect to the subject matter hereof. There are no representations,
agreements, arrangements or understandings, oral or written, between or among
the parties concerning the subject matter hereto which are not fully expressed
herein or in any supplemental written agreements of even or subsequent date
hereof.

23. Counterparts. This Agreement and any amendments hereto may be executed
in two (2) or more counterparts, each of which shall be deemed an original and
all of which shall constitute one and the same instrument, binding on the
parties and the signature

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<PAGE>

of any party to any counterpart shall be deemed a signature to, and may be
appended to, any other counterpart.

24. Additional Documents. Each of the parties hereto agrees to execute and
deliver, without cost or expense to any other party, any and all such further
instruments or documents and to take any and all such further action reasonably
requested by such other of the parties hereto as may be necessary or convenient
in order to effectuate this Agreement and the intents and purposes thereof.

25. Authorization. MRG is authorized to enter into this Agreement by virtue
of a resolution adopted at a special meeting of Directors held on
____________________.

26. Attorney's Fees and Expenses. In the event that any action, suit or
other proceeding in law or in equity is brought to enforce the covenants
contained herein the prevailing party shall be entitled to recover its
reasonable attorneys, fees from the non-prevailing party.

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

/s/ William Hyde
-------------------------------
William Hyde

Attest: MORTON'S RESTAURANT GROUP, INC.

/s/ Agnes Longarzo By: /s/ Allen J. Bernstein
- ------------------------- ----------------------------
Agnes Longarzo, Secretary Allen J. Bernstein
President

PROMISSORY NOTE

US $2,500,000.00 Nassau County, New York

FOR VALUE RECEIVED, the undersigned, jointly and severally if more than
one, promises to pay CNL FINANCIAL I, INC., a Florida corporation, or order, the
principal sum of TWO MILLION FIVE HUNDRED THOUSAND AND NO/1OO DOLLARS
(US$2,500,000.00) with interest on the unpaid principal balance from the date of
this Note, until paid, at the rate of 10.002 percent per annum. The principal
and interest shall be payable at 400 East South Street, Suite 500, Orlando,
Florida 32801, or such other place as the holder hereof may designate in
writing, in consecutive monthly installments of Thirty-Three Thousand Forty and
45/100 Dollars ($33,040.45) on the first (1st) day of each month beginning May
1, 1997, until the entire indebtedness evidenced hereby is fully paid, except
that any remaining indebtedness, if not sooner paid, shall be due and payable on
April 1, 2007 (the "Maturity Date"). All computation of interest shall be made
by the holder on the basis of a year of 360 days and shall be allocated in
twelve (12) equal monthly installments.

If any installment under this Note is not received by the holder hereof
within ten (10) calendar days after Lender's written demand for such amount, the
entire principal amount outstanding hereunder and accrued interest thereon shall
at once become due and payable, at the option of the holder hereof. The holder
hereof may exercise this option to accelerate during any Default (as hereinafter
defined) by the undersigned regardless of any prior forbearance. In the event of
any Default under this Note or any Instrument or any other Loan Document (as
such terms are hereinafter defined), and if the same is referred to an attorney
at law for collection or any action at law or in equity is brought with respect
hereto, the undersigned shall pay the holder hereof all reasonable expenses and
costs, including, but not limited to, reasonable attorneys' fees and expenses,
including reasonable attorneys' fees and expenses on any appeal. Any forbearance
by the holder in exercising any right or remedy under this Note or any
Instrument or any other Loan Document, or otherwise afforded by applicable law,
shall not be a waiver of or preclude the exercise of any right or remedy. The
acceptance by the holder of payment of any sum due hereunder after the due date
of such payment or after holder has declared an event of Default shall not be a
waiver of holder's right to either require prompt payment when due of all other
sums so secured or to declare a default for failure to make prompt payment.

If any installment under this Note is not received by the holder hereof
within ten (10) calendar days after the installment is due, the undersigned
shall pay to the holder hereof a late charge of five percent (5%) of such
installment, such late charge to be immediately due and payable without demand
by the holder hereof. If any installment under this Note or any other monetary
payment due under this Note, any Instrument or any other Loan Document remains
past due for ten (10) calendar days or more after Lender's written demand for
such amount, or if there
<PAGE>

shall exist any other Default under this Note, any Instrument or any other Loan
Document (after any applicable notice or cure period provided therein or
herein), the outstanding balance of this Note shall bear interest during the
period in which the undersigned is in Default at the lesser of four percent
(4%) over the Note rate or the highest rate allowed by applicable law.

From time to time, without affecting the obligation of the undersigned or
the successors or assigns of the undersigned to pay the outstanding principal
balance of this Note and observe the covenants of the undersigned contained
herein (after any applicable notice or cure period provided therein or herein)
and without affecting the guaranty of any person, corporation, partnership or
other entity for payment of the outstanding principal balance of this Note,
without giving notice to or obtaining the consent of the undersigned, the
successors or assigns of the undersigned or guarantors, and without liability on
the part of the holder hereof, the holder hereof may, at the option of the
holder hereof, release anyone liable on any of said outstanding principal
balance, accept a renewal of this Note, join in any extension or subordination
agreement, release any security given herefor, take or release other or
additional security, waive any term or provision of this Note, any Instrument or
any other Loan Document, and agree in writing with the undersigned (at the
undersigned's sole and absolute discretion) to extend the time for payment of
said outstanding principal balance or any part thereof, reduce the payments
thereon, modify the terms and time of payment of said outstanding principal
balance, modify the rate of interest or period of amortization of this Note,
change the amount of the monthly installments payable hereunder or otherwise
modify or amend any term or provision of this Note, any Instrument or any other
Loan Document.

Presentment, notice of dishonor, right to setoff and counterclaim, and
protest are hereby waived by all makers, sureties, guarantors and endorsers
hereof. This Note shall be the joint and several obligation of all makers,
sureties, guarantors and endorsers, and shall be binding upon them and their
successors and assigns.

The indebtedness evidenced by this Note is secured by that certain
Mortgage, Assignment of Rents and Security Agreement (herein referred to as the
"Instrument"), executed by the undersigned or its affiliates, and encumbering
certain real property more particularly described therein (herein referred to as
the "Property"), and reference is made thereto for rights as to acceleration of
the indebtedness evidenced by this Note. This Note shall be governed by the law
of the State of Illinois, except for enforcement rights as to any such Property
which must be governed by the law of any other jurisdiction in which any such
Property may be located.

A Default [as defined in any Instrument or any and all other notes,
instruments, documents and agreements evidencing or securing or relating to the
same or the indebtedness represented or secured thereby (herein a "Loan
Document")] under any Instrument or any Loan Document shall constitute a Default
under this Note.

Borrower's Initials: TJB
Borrower's Initials: TJB
Borrower's Initials: TJB

2
<PAGE>

Unless funds are advanced hereunder on the first day of the month, the
undersigned shall pay the holder hereof interest only, in advance, on the
outstanding principal balance of this Note at the rate set forth above from the
date that funds are advanced to and including the last day of the month on which
funds are so advanced.

Unless applicable law provides otherwise, so long as the undersigned is
not in Default hereunder, all payments received by the holder under this Note or
any Instrument shall be applied by holder in the following order of priority:
(i) amounts due and payable to holder by the undersigned for any advances made
by the holder under the Instrument or under any of the other Instruments or Loan
Documents for the purposes of paying taxes, insurance and other charges incurred
with respect to the Property; (ii) interest due and payable on the Note; (iii)
principal of the Note; (iv) interest due and payable on advances made by the
holder under the Instrument or under any of the other Instruments or Loan
Documents in order to protect the holder's security interest in any of the
collateral securing the Note; (v) principal of advances made by the holder under
the Instrument or under any of the other Instruments or Loan Documents in order
to protect the holder's security interest in any of the collateral securing the
Note; (vi) interest due and payable on any Future Advance (as such term is
defined in the Instrument), provided that if more than one Future Advance is
outstanding, the holder may apply payments received among the amounts of
interest payable on the Future Advances in such order as the holder, in the
holder's sole discretion, may determine; (vii) principal of any Future Advance,
provided that if more than one Future Advance is outstanding, the holder may
apply payments received among the principal balances of the Future Advances in
such order as the holder, in the holder's sole discretion, may determine; and
(viii) any other sums due and payable secured by this Instrument or under any of
the other Instruments in such order as the holder, at the holder's option, may
determine; provided, however, that the holder may, at the holder's option, apply
any sums payable on advances made by the holder under the Instrument or under
any of the other Instruments or Loan Documents in order to protect the holder's
security interest in any of the collateral securing the Note prior to interest
on and principal of the Note, but such application shall not otherwise affect
the order of priority of application herein. Upon the undersigned's Default
under this Note, the Instrument, any of the other Instruments or in any of the
other Loan Documents, the holder may apply any payments received by the holder
in any amount and in any order as the holder shall determine in the holder's
sole discretion.

ADDITIONAL COVENANTS. In addition to the covenants and agreements made in
this Note, the undersigned further covenants and agrees with and in favor of
holder as follows:

A. Prepayment Premium

1. Prepayment in Full

Borrower's Initials: TJB
Borrower's Initials: TJB
Borrower's Initials: TJB

3
<PAGE>

At any time after the first one (1) year of the Note term and upon giving
holder sixty (60) days prior written notice, the undersigned may prepay the
entire unpaid principal balance of the Note on the last Business Day before a
scheduled monthly payment date by paying, in addition to the entire unpaid
principal balance, accrued interest, and any other sums due holder at the time
of prepayment, a Prepayment Premium equal to the greater of:

(a) 1% of the entire unpaid principal balance of the Note, or

(b) The present value of all remaining payments of principal and
interest discounted at an annual discount rate equal to the
"Termination Swap Rate" as defined below, less the present value of
all remaining payments of principal and interest discounted at the
CNL Swap Rate. For purposes of the foregoing, the "CNL Swap Rate"
shall be the rate, as fixed and determined by Lender in its
reasonable discretion on the date hereof, which is paid by Lender to
its (or which otherwise would be required to be received by an
experienced and qualified) interest rate swap counterparty for a
fixed rate loan swap in the notional amount and with the term of the
Loan, in order for each counterparty to pay on behalf of Lender a
floating rate equal to the 30-day LIBOR (London Inter-Bank Offering
Rate); and the "Termination Swap Rate" shall be the rate, as
determined by holder in its reasonable discretion as of the date and
time of any prepayment hereunder, which the holder can contract to
receive from its (or which otherwise would be paid by an experienced
and qualified) interest rate swap counterparty for a fixed rate loan
swap in the notional amount of and with the remaining amortization
terms of the amount being prepaid, in order for such counterparty to
accept a floating rate equal to the 30-day LIBOR (London Inter-Bank
Offering Rate), minus one-quarter of one percent (25 Basis Points).

No Prepayment Premium shall be due for any full prepayment made by the
undersigned, upon not less than thirty (30) days prior written notice to holder,
within ninety (90) days of the maturity date of the Note. By way of illustration
only, attached hereto as Exhibit "A" is a hypothetical calculation of the
Prepayment Premium.

Except as provided below, no partial prepayments are permitted.

2. Partial Prepayments

The undersigned shall have no right to make a partial prepayment of the
outstanding indebtedness during the Note term except as set forth below. In the
event that the holder shall require a partial prepayment of the outstanding
indebtedness after a Default under the Note, the Instrument or any of the other
Loan Documents, against the indebtedness secured by the Instrument, or, if the
holder shall for any other reason accept a partial prepayment by the

Borrower's Initials: TJB
Borrower's Initials: TJB
Borrower's Initials: TJB

4
<PAGE>

undersigned of the outstanding indebtedness, in addition to the principal amount
being prepaid, accrued interest thereon and any other sums due holder at the
time of prepayment with respect thereto, a Prepayment Premium shall be due and
payable to the holder equal to the greater of:

(i) 1% of the amount of principal being prepaid, or

(ii) the "Swap Termination Costs," as defined below, plus one hundredth
of one percent (1 Basis Point) of the amount of principal being
prepaid for each month remaining in the Term of this Note as of the
date of any such prepayment. For purposes of the foregoing, the
"Swap Termination Costs" shall be defined as the costs actually
incurred by the holder as a result of and in connection with the
partial termination of any interest hedging or swap agreement
obtained for the Loan evidenced hereby to the extent of the notional
amount equal to the amount being prepaid or, at holder's election,
to obtain a new interest rate swap in such amount at the Loan Swap
Rate (as defined above) from an experienced and qualified interest
rate swap counterparty selected by holder for a fixed rate loan swap
in the notional amount of and with the remaining amortization terms
of the amount being prepaid, in order for such counterparty to
accept a floating rate equal to the 30-day LIBOR (London Inter-Bank
Offering Rate).

Except as provided in the next sentence, any partial prepayment of the
outstanding indebtedness shall not extend the due date of any subsequent monthly
installments or change the amount of such installments, unless the holder shall
otherwise agree in writing. Upon any partial prepayment, the holder shall have
the option, in its sole and absolute discretion, to recast the monthly
installments due under the Note so that the maturity date of the Note shall
remain the same.

3. Prepayment Premium Due Whether Voluntary or Involuntary Prepayment;
Insurance and Condemnation Proceeds

The undersigned shall pay the Prepayment Premium due under this Note
whether the prepayment is voluntary or involuntary (in connection with the
holder's acceleration of the unpaid principal balance of the Note) or the
Instrument is satisfied or released by foreclosure (whether by power of sale or
judicial proceeding), deed in lieu of foreclosure or by any other means.
Notwithstanding any other provision herein to the contrary, the undersigned
shall not be required to pay any Prepayment Premium in connection with any
prepayment occurring as a result of the application of insurance proceeds or
condemnation awards under the Instrument. For a prepayment occurring prior to
the time that a voluntary prepayment is permitted hereunder whether as a result
of acceleration of this Note or otherwise, then a Prepayment Premium shall

Borrower's Initials: TJB
Borrower's Initials: TJB
Borrower's Initials: TJB

5
<PAGE>

be due and payable in the amount set forth above plus an additional five percent
(5%) of the principal amount prepaid.

If the undersigned shall give notice of a prepayment but shall fail, for
any reason, to make such prepayment, the undersigned shall immediately pay the
holder hereof any and all reasonable costs, fees and expenses (including
reasonable in house and outside attorneys' fees and expenses) associated with
the holder hereof's administrative preparation for such prepayment.

The Prepayment Premium is the negotiated charge between the undersigned
and the holder hereof for the privilege of the undersigned to prepay this Note
at the times provided above. The undersigned hereby covenants and agrees to
indemnify the holder hereof and hold it harmless from any reasonable costs,
fees, expenses (including attorneys' fees and expenses) resulting from any
action, litigation or judicial decision alleging, claiming or holding that the
Prepayment Premium is a penalty, and from any damages (whether compensatory or
punitive) ordered by a court, judge or administrative law judge which may
determine that the Prepayment Premium is a penalty.

4. Notice; Business Day

Any notice to the holder provided for in this Note shall be given in the
manner provided in the Instrument. The term "Business Day" means any day other
than a Saturday, a Sunday, or any other day on which the holder is not open for
business. Notices to the holder shall be by certified mail, return receipt
requested, or by national receipted overnight delivery service, to the address
of the holder as set forth above or as otherwise specified in writing by the
holder, and shall be effective only upon delivery or attempted delivery.

B. Assignment

This Note is freely assignable in whole or in part, from time to time, by
the holder and the holder may grant participation interest(s) herein. Without
limiting the foregoing, the undersigned understands and agrees that the holder
intends to and may sell, pledge, grant a security interest in, collaterally
assign, transfer, deliver or otherwise dispose of this Note and the
undersigned's other Loan Documents (or any interest therein, or its rights and
powers thereunder), from time to time, in connection with the Securitization (as
defined in the Instrument). This Note shall be binding upon the undersigned, its
heirs, devises, administrators, executives, personal representatives,
successors, receivers, trustees, permitted assignees, including all successors
in interest of the undersigned, and shall inure to the benefit of the holder
hereof, and the successors and assignees of the holder hereof.

C. Governing Law; Miscellaneous

Borrower's Initials: TJB
Borrower's Initials: TJB
Borrower's Initials: TJB

6
<PAGE>

This Note shall be governed by and construed in accordance with the laws
of the State of Illinois and applicable federal law, except for enforcement
rights as to any such Property which must be governed by the law of any other
jurisdiction in which any such Property may be located. The parties hereto
intend to conform strictly to the applicable usury laws. In no event, whether by
reason of demand for payment, prepayment, acceleration of the maturity hereof or
otherwise, shall the interest contracted for, charged or received by the holder
hereof hereunder or otherwise exceed the maximum amount permissible under
applicable law. If from any circumstance whatsoever interest would otherwise by
payable to the holder in excess of the maximum lawful amount permitted by
applicable law. If the holder hereof shall ever receive anything of value deemed
interest under applicable law which would apart from this provision be in excess
of the maximum lawful amount, an amount equal to any amount which would have
been excessive interest shall be applied to the reduction of the principal
amount owing hereunder in the inverse order of its maturity and not to the
payment of interest, or if such amount which would have been excessive interest
exceeds the unpaid balance of principal hereof, such excess shall be refunded to
the undersigned. All interest paid or agreed to be paid to the holder hereof
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full stated term (including any renewal or
extension) of such indebtedness so that the amount of interest on account of
such indebtedness does not exceed the maximum permitted by applicable law. The
provisions of the paragraph shall control all existing and future agreements
between the undersigned and the holder hereof.

Whenever possible this Note and each provision hereof shall be interpreted
in such manner as to be effective, valid and enforceable under applicable law.
Any provisions of this Note which are prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidation the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. In addition, any determination that the application of any
provision hereof to the person or under any circumstance is illegal and
unenforceable shall not affect the legality, validity and enforceability of such
provision as it may be applied to any other person or in any other circumstance.

WAIVER OF JURY TRIAL. THE BORROWER AND LENDER BY ITS ACCEPTANCE HEREOF,
FOR ITSELF AND FOR EACH HOLDER HEREOF, HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY AGREE, THAT:

(A) NEITHER THE BORROWER NOR LENDER, NOR ANY ASSIGNEE, SUCCESSOR, HEIR OR
LEGAL REPRESENTATIVE OF ANY OF THE SAME SHALL SEEK A JURY TRIAL IN ANY LAWSUIT,
PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE ARISING FROM OR
BASED UPON THIS NOTE.

Borrower's Initials: TJB
Borrower's Initials: TJB
Borrower's Initials: TJB

7
<PAGE>

ANY INSTRUMENT OR ANY LOAN DOCUMENT EVIDENCING, SECURING OR RELATING TO THE
OBLIGATIONS OR TO THE DEALINGS OR RELATIONSHIP BETWEEN OR AMONG THE PARTIES
THERETO;

(B) NEITHER THE BORROWER NOR LENDER SHALL SEEK TO CONSOLIDATE ANY SUCH
ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL HAS NOT BEEN OR CANNOT BE WAIVED;

(C) THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY NEGOTIATED BY THE
BORROWER AND LENDER, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS;

(D) NEITHER THE BORROWER NOR LENDER HAS IN ANY WAY AGREED WITH OR
REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE
FULLY ENFORCED IN ALL INSTANCES;

(E) IN NO EVENT SHALL LENDER BE RESPONSIBLE OR LIABLE FOR CONSEQUENTIAL OR
PUNITIVE DAMAGES; AND

(F) THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER TO ENTER INTO THIS
TRANSACTION AND IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT
OF COMPETENT LEGAL COUNSEL.

[Signatures on next page]

Borrower's Initials: TJB
Borrower's Initials: TJB
Borrower's Initials: TJB

8
<PAGE>

NOTICE TO THE BORROWER

Do not sign this loan agreement before you read it. This loan agreement
provides for the payment of a penalty if you wish to repay the loan prior to
the date provided for repayment in the loan agreement. In addition, this loan
agreement authorizes the lender to refuse to accept repayment of the loan prior
to the date provided for repayment in the loan agreement unless certain
conditions stated in the loan agreement are met.

MORTON'S OF CHICAGO, INC., an
Illinois corporation

/s/ Phyllis Zucaro By: /s/ Thomas J. Baldwin
- -------------------------------- ----------------------------
Name: Phyllis Zucaro Name: Thomas J. Baldwin
Its: SVP Finance & CFO
/s/ Michael D. Blaymore
- --------------------------------
Name: Michael D. Blaymore

(CORPORATE SEAL)

MORTON'S OF CHICAGO/DENVER,
INC., an Illinois corporation

(CORPORATE SEAL)

MORTON'S OF CHICAGO/CHICAGO,
INC., an Illinois corporation

(CORPORATE SEAL)

9
<PAGE>

STATE OF New York
COUNTY OF Nassau

BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared Thomas J. Baldwin, as Senior Vice
President of MORTON'S OF CHICAGO, INC., an Illinois corporation, the corporation
that executed the foregoing instrument, known to me to be the person and officer
whose name is subscribed to the foregoing instrument, and acknowledged to me
that the same was the act of the said corporation, and that he executed the same
as the act of such corporation for the purposes and consideration therein
expressed and in the capacity therein stated.

GIVEN UNDER MY HAND AND SEAL this 3rd day of March, 1997.

/s/ David Gruber
-----------------------------------------
Notary Public - State of New York
[STAMP]
Print Name: David Gruber
Commission Number:_______________________
Commission Expires: March 30,1999

STATE OF New York
COUNTY OF Nassau

BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared Thomas J. Baldwin, as Senior Vice
President of MORTON'S OF CHICAGO/DENVER, INC., an Illinois corporation, the
corporation that executed the foregoing instrument, known to me to be the person
and officer whose name is subscribed to the foregoing instrument, and
acknowledged to me that the same was the act of the said corporation, and that
he executed the same as the act of such corporation for the purposes and
consideration therein expressed and in the capacity therein stated.

GIVEN UNDER MY HAND AND SEAL this 3rd day of March, 1997.

10
<PAGE>

STATE OF New York
COUNTY OF Nassau

BEFORE ME, the undersigned, a Notary Public in and for said County and
State, on this day personally appeared Thomas J. Baldwin, as Senior Vice
President of MORTON'S OF CHICAGO/CHICAGO, INC., an Illinois corporation, the
corporation that executed the foregoing instrument, known to me to be the person
and officer whose name is subscribed to the foregoing instrument, and
acknowledged to me that the same was the act of the said corporation, and that
he executed the same as the act of such corporation for the purposes and
consideration therein expressed and in the capacity therein stated.

GIVEN UNDER MY HAND AND SEAL this 3rd day of March, 1997.

This instrument was prepared by: Daniel F. McIntosh, Esquire
Lowndes, Drosdick, Doster, Kantor & Reed, P.A.
215 North Eola Drive
Orlando, Florida 32801

Morton's Restaurant Group, Inc.
1996 Annual Report

"ABOUT OUR COMPANY"

"A great steak exists. It's a matter of breeding, then proper aging. You verify
these truths at Morton's."

The quote is from the 1997 Washington Post Dining Guide, but it could have been
said by any of our Morton's of Chicago guests who have enjoyed our elegant and
memorable dining experience.

A dining experience in a fun, colorful and festive setting is the order of the
day at Bertolini's Authentic Trattoria. Our trattorias feature genuine Italian
ingredients imported and prepared daily in our kitchens.

Morton's Restaurant Group maintains locations from coast to coast, principally
in major metropolitan areas such as Beverly Hills, Chicago, Washington D.C. and
New York. The growth of our flagship Morton's of Chicago steakhouses reflects
one of the American restaurant industry's great success stories. Beginning in
1978 on State Street in the heart of Chicago, Morton's grew to nine restaurants
in its first decade. In its second decade, Morton's Restaurant Group has grown
the concept to 35 Morton's of Chicago steakhouses. Bertolini's has also rapidly
grown -- from our one Las Vegas restaurant that opened four years ago to the
seven we have today.

Great food, a fabulous atmosphere and warm and friendly hospitality -- it's the
trademark of Morton's Restaurant Group. As we continue to follow our plans for
expansion domestically and internationally, we will always remember that what
brought us this far has been the outstanding
<PAGE>

response from our guests, who frequent our restaurants. This wonderful
word-of-mouth, of course, reflects on our people---the finest in the industry.

As we approach the 21st Century, we look forward to maximizing the opportunities
to increase our brand identity and name recognition for Morton's of Chicago and
Bertolini's Authentic Trattoria, and enhancing our reputation as the premier
fine-dining restaurant company.
<PAGE>

SELECTED FINANCIAL INFORMATION
(dollars in millions, except per share data)
================================================================================

<TABLE>
<CAPTION>
Statement of Operations Information Fiscal Years
----------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Restaurant Revenues (All) $ 193.4 $ 173.4 $ 156.3 $ 119.4 $ 93.1

Restaurant Revenues (Combined Morton's
of Chicago and Bertolini's) 139.0 109.0 90.8 64.2 47.5

EBITDA (1) 17.5 11.2 12.7 11.0 9.2

Income Before Income Taxes and
Nonrecurring Charges 8.8 3.1 3.1 5.3 4.4
Income (Loss) Before Income Taxes (2.7)(2) (14.7)(3) (3.0)(4) 5.3 4.4

Income (Loss) Before Extraordinary Item 1.8(2) (13.9)(3) (0.3)(4) 4.9 2.8
Net Income (Loss) 1.8(2) (13.9)(3) (0.3)(4) 4.9 (1.0)(5)
Income (Loss) Per Share:
Before Extraordinary Item 0.26(2) (2.18)(3) (0.05)(4) 0.74 0.58
Net Income (Loss) $ 0.26(2) $ (2.18)(3) $ (0.05)(4) $ 0.74 $ (0.20)(5)
</TABLE>

- --------------------------------------------------------------------------------

Balance Sheet Information
Fiscal Years
----------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----

Current Assets $27.3(6) $35.4(6) $15.4 $13.0 $ 6.7
Net Property and Equipment 24.7 19.4 25.3 19.8 10.8
Total Assets 77.0 73.2 73.5 65.3 41.4
Current Liabilities 25.3(7) 26.4(7) 15.4 16.1 9.8
Long-Term Debt 24.9 23.7 20.0 12.7 1.5
Stockholders' Equity $21.1 $19.0 $32.9 $33.3 $28.4

================================================================================

(1) Represents earnings before interest, taxes, depreciation and amortization,
and nonrecurring charges.
(2) Includes a nonrecurring charge of $11.5 million to write-down the
Atlanta-based Mick's and Peasant restaurants recorded in conjunction with
the sale of such restaurants .
(3) Includes nonrecurring charges of $15.5 million representing a write-down
and related charges for net assets held for sale and $2.2 million related
to the settlement of a lawsuit.
(4) Includes one-time charges aggregating $6.1 million, of which $5.5 million
relates to the write-off of a preferred stock minority investment in an
affiliate.
(5) Includes an extraordinary charge, net of income taxes, of $3.8 million
relating to the early extinguishment of debt.
(6) Includes assets held for sale of $12.5 million and $22.6 million for fiscal
1996 and 1995, respectively.
(7) Includes liabilities related to assets held for sale of $12.1 million and
$14.0 million for fiscal 1996 and 1995, respectively.
<PAGE>

CHAIRMAN AND PRESIDENT'S LETTER
TO OUR STOCKHOLDERS

For Morton's Restaurant Group, 1996 marked a year of progress, key decisions and
strategic growth.

This is our first report to you as Morton's Restaurant Group (NYSE:MRG). Our
name now clearly recognizes the fine-dining leadership position, extraordinary
brand identity and enviable reputation for excellence that Morton's of Chicago
steakhouses have earned over the past eighteen years. Additionally, it
underscores our commitment to increasing stockholder value by focusing our
efforts on Morton's and Bertolini's.

In February, we announced the completion of the sale of our Atlanta-based Mick's
and Peasant restaurants. It was a major step forward for us as we continue to
grow our company on the solid foundation of our two core fine-dining concepts,
Morton's and Bertolini's. A subsidiary of Morton's Restaurant Group has retained
a minority interest in Mick's and Peasant.

Of all our accomplishments throughout the year, we are most proud of the
progress we've made in continuing to develop our people, both at Morton's and
Bertolini's. Morton's of Chicago has established standards for excellence and
consistency that enable us to recruit and hire the highest quality professionals
in every city and in every restaurant we open.

What has also helped us become a niche leader in our industry is the emphasis we
place on our sophisticated staff and management training programs, in addition
to a premier employee compensation and benefits package. Even more important is
the "culture" that exists at Morton's of Chicago. This results in our people
maintaining a loyalty to us, often choosing a career path with Morton's. Taken a
step further, this translates to a guest loyalty which is truly remarkable. In a
time when the public has so many choices regarding dining possibilities, the
fact that our guests return to Morton's regularly is a tribute not only to our
excellent cuisine and ambiance, but also to our superb service and outstanding
people who provide our guests with the ultimate in hospitality.

The fact that Morton's of Chicago has been so successful is due in large measure
to those who have been with us for ten, fifteen, and soon, twenty years.
Programs such as our Employee Stock Purchase Plan, our Profit Sharing Plan and
the Service Recognition Programs allow us to reward, in a tangible way, our most
valuable asset, our people.

Morton's of Chicago has been able to achieve its nationwide growth and success
by maintaining the highest quality and consistency and by refusing to compromise
our standards. The conventional wisdom had been that Morton's could not be fully
replicated in so many locations without some compromises.
We have defied conventional wisdom.
<PAGE>

For the year ended December 29, 1996, Morton's Restaurant Group, Inc. reported
revenues of $193,378,000, up 11.5% over revenues of $173,373,000 reported for
the year ended December 31, 1995. Combined 1996 Morton's of Chicago steakhouses
and Bertolini's Authentic Trattoria revenues of $138,968,000 were up 27.5% over
their combined 1995 revenues of $108,986,000. 1996 earnings before income taxes
and nonrecurring charges were $8,758,000. Including a nonrecurring charge
related to the sale of Mick's and Peasant restaurants of $11,500,000 and income
tax benefits, net income of $1,765,000, or $.26 per share, was reported for the
year ended December 29, 1996. This compares to a net loss of $13,908,000, or
$2.18 per share, reported for the year ended December 31, 1995. Included in the
year ended December 31, 1995 results is a pre-tax charge of $2,240,000, which
related to the settlement of a lawsuit, and a pre-tax charge of $15,500,000,
which related to a reduction of asset-carrying values and lease exit costs
associated with certain Mick's and Peasant restaurants.

As Morton's of Chicago continues to focus on its outstanding growth
opportunities, Bertolini's has begun to show its strong potential. While
Bertolini's is an authentic trattoria featuring the finest in Northern Italian
cuisine, its emphasis, in a sense, is similar to that of Morton's of Chicago.
Only fresh, high-quality ingredients are used at Bertolini's, either imported
from Italy or made "in-house" in our "made from scratch" kitchens. Like Morton's
of Chicago, Bertolini's prides itself on its niche position as an adult-oriented
restaurant, yet it is still appealing to families and children.

The Bertolini's menu is one of simplicity, with an atmosphere that is clearly
unique: colorful, fun and festive, a place where you experience casual fine
dining. The simplicity of the Bertolini's concept enhances its potential for
adaptability to a wide variety of diverse geographical areas. Currently,
Bertolini's Authentic Trattorias are achieving success in areas such as Irvine,
CA, Indianapolis, IN and King of Prussia, PA. Like Morton's of Chicago, we
believe Bertolini's has significant long-range potential for growth and
expansion throughout America.

Along with plans to expand Bertolini's potentially throughout the country, we
continue to add to the appeal of our current restaurants by expanding
"internally." A major renovation was recently completed at our Las Vegas
restaurant, which increased our patio seating capacity; our Pennsylvania
Avenue/Market Square restaurant in Washington D.C. has been updated with new
stone columns and colorful murals to provide more of our Bertolini's signature
look; and the patio at our White Flint/North Bethesda, MD restaurant has been
enclosed to increase restaurant seating.

To assist us in reaching our goals, we named Geoffrey Stiles vice president of
operations for Bertolini's in November of 1996. Geoff has an impressive
background in the Italian food segment, and we believe that his experience and
team-building skills will have a significant impact on our continuing growth and
success. We strongly believe that not only is Bertolini's a viable growth
vehicle, but it is now positioned to meet the needs for future expansion.

For the year ahead, we believe the growth of Morton's of Chicago and Bertolini's
Authentic Trattoria will continue as we focus on enhancing our training
programs, further sharpening our strong marketing and hospitality programs, and,
for Morton's of Chicago, increasing opportunities to showcase our boardroom
business. Because of the strength of our commitment, we believe we will be able
to develop Bertolini's into a niche-leading upscale Italian restaurant -- just
as Morton's of Chicago has become America's premier fine dining steakhouse.
Additionally, we are
<PAGE>

now looking at some very exciting possibilities regarding future international
development for Morton's of Chicago steakhouses.

But our ultimate commitment is to you, the stockholders. You will be pleased to
know that Morton's Restaurant Group, today, is stronger than ever, and poised to
meet the challenges of the future.

We take great pleasure in exceeding the expectations of our guests. We wish to
assure you that our mission and philosophy is the same regarding our
stockholders' expectations.

Allen J. Bernstein
Chairman of the Board and Chief Executive Officer

William L. Hyde, Jr.
President and Chief Operating Officer
<PAGE>

MORTON'S OF CHICAGO AND BERTOLINI'S AUTHENTIC TRATTORIA

Maybe it happened to you at the Morton's in downtown Chicago -- or was it the
one in the Wall Street district? It could be that you were in Beverly Hills,
barely a porterhouse and cabernet away from one of many international
celebrities. Princess Caroline of Monaco, baseball's Ken Griffey, Jr., President
George Bush, Mel Gibson and Lyle Lovett have all recently graced our
restaurants. Or perhaps you were in Phoenix, or Boston, Minneapolis or Orlando,
or any of our 35 prime locations. But wherever it was, the experience was
remarkably consistent. You don't merely enter into a Morton's -- instead, you're
transported, quickly surrounded and ultimately seduced by mahogany and brass, by
soft lighting and warm hospitality, by the vague sense that you've slipped into
another time, another era.

"GUESTS APPRECIATE OUR COMMITMENT TO EXCELLENCE. THEY DEMAND, AND DESERVE THE
VERY BEST, AND THAT IS EXACTLY WHAT THEY GET, CONSISTENTLY AT MORTON'S."
Thomas J. Walters, President
Morton's of Chicago

The deep aroma of prime aged beef edges against dark mahogany paneled walls that
hold the dynamic work of LeRoy Neiman. You pass by patrons enjoying the finest
of premium wines, while waiters glide through the room clutching the most
delicious of desserts. It is clubby, but not clique-ish; impeccably appointed,
but not stuffy. Your waiter, utterly professional, knows how to tread the fine
line -- knowledgeable but not overbearing, classy but not overly formal,
attentive but not hovering.

If you order a steak -- indeed, most of Morton's clientele order a beef entree
- -- you might try the three-pound double porterhouse. New York magazine says ours
"is the champ, singing with flavor and rare as can be." Meantime, the Los
Angeles Times has claimed the other coast for us: "There's not a better steak in
Southern California." And the Orlando Sentinel adds: "If you're a connoisseur of
top-of-the-line steaks, you probably know Morton's of Chicago -- the uptown,
Midwestern-based restaurant where steak is serious business."

It's fair to say there are those who feel that going to Morton's and not
ordering a steak is like facing East during a picturesque sunset -- you're
missing the point. Then again, it wasn't long ago when members of the St. Louis
Rams' offensive line visited the St. Louis (Clayton) restaurant -- and before it
was all over, consumed, not steak, but 40 pounds of lobster, an equal amount of
lamb chops, 30 orders of scallops, 30 orders of crabmeat cocktail along with 10
dozen jumbo shrimp -- all topped off with 15 classic cigars. The fact is, thanks
to the supreme quality of all the items on the Morton's menu, our guests choose
to sample almost everything. After all, we've seen them come back -- again and
again.

Why so many happy returns? At Morton's, we do stake our reputation on our
steaks. "They're the best steaks money can buy, period," says Mike Donlon, a
Morton's regional general manager. All of our beef is shipped fresh from our
long-time Chicago suppliers. Last year, we served more than one-and-one-half
million pounds of USDA prime aged beef -- certified as the absolute highest
grade of beef and properly aged to make it tender and full of flavor.
<PAGE>

The standards for our seafood are as precise as those for our beef. The New York
Law Journal says "I wish everyone else in town had such superb seafood." Our
Atlantic salmon is farm raised, our scallops originate seventy miles east of
Cape Cod and our swordfish steak comes to us from the coast of Rhode Island. The
whole, baked Maine Lobsters are flown in fresh daily and, on average, weigh
three pounds or more. Crain's New York Business calls them "awesome."

All Morton's potatoes must meet strict specifications: they must weigh between
18 and 22 ounces, Idaho-grown, free of blemishes, with specific water and sugar
content levels -- and the two million plus we serve each year are hand-selected.
In terms of supply, if the Columbus restaurant runs out, the Morton's in
Cleveland will arrange for a rush shipment from door to door. Every product gets
the same serious attention. When the Detroit (Southfield) restaurant ran out of
an ingredient for its salad dressing, a Morton's employee in Chicago picked up a
supply and sent it out overnight express. "We will never compromise our
product," says Elaine Fosse, a regional general manager.

Morton's jumbo asparagus is purchased from below the equator during winter
months and purchased from above the equator the rest of the year. The products
are constantly monitored -- especially during the critical season changes. "If
the asparagus that we serve in the Palm Desert restaurant meets our high
standards, we've been known to contact that grower, and if necessary, transport
it to an East Coast Morton's," says Peggy DeNapoli, manager of restaurant
services. "This level of commitment makes us unique." The premium wine list at
Morton's has received praise from, most recently, Wine Spectator, who rated us
number one among national steakhouse companies in 1996. There is a core list of
at least 150 wines at most Morton's, and in wine centers such as New York and
San Francisco, the restaurants carry nearly 500 selections.

Consistency is everything: a New York strip sirloin, whether you're dining in
Dallas or Denver or Detroit, should be, and is, the same (and so tender that, as
Gourmet magazine says, "it barely needs a knife.") Mike Donlon says it's why
people keep coming back. "No matter what city you're in, you know you're going
to have a consistently positive experience," he says. "And when you're
entertaining your boss, your friends and family or your client, you want to make
sure everything's just right." Since Morton's first opened in 1978, the menu has
been continually developed and maintained by Klaus W. Fritsch, Morton's of
Chicago vice chairman and co-founder. All Morton's items must pass Fritsch's
approval before becoming part of the menu. He most recently unveiled an expanded
lunch menu at our newest Morton's in downtown Washington D.C.

"ONE OF OUR CORE VALUES IS TO EXCEED GUESTS' EXPECTATIONS. IT STARTS WITH
PURCHASING THE FINEST PRODUCTS AVAILABLE."
Peggy DeNapoli, Manager of Restaurant Services
Morton's of Chicago

But there's something else at work -- hospitality. "Our prime beef is certainly
outstanding," says Tom Walters, Morton's of Chicago president. "But serving our
guests is the real differentiating point." Morton's adopts an approach that
ensures lots of people at your table, and lots of hospitality, but not so much
that you feel smothered. "It's a key part of our success," says Elaine Fosse.
"We encourage our employees to acknowledge guests by name and to get to know
their
<PAGE>

dining preferences, so we can fully accomodate them each time they come in. The
guests respond wonderfully."

Stories abound about the company's obsession with guest hospitality. A few days
before Christmas, a major investment bank executive walked into the Morton's at
90 West Street and told general manager Pat Felitti that his company wanted to
purchase 175 sets of our signature steak knives as holiday gifts. He needed them
in two days. Pat scrambled like mad, but he came through. 130 of the sets were
sent overseas.

There's more. A guest spills a beverage, and a Morton's general manager takes
the soiled jacket out and has it cleaned before dessert is over. Two guests have
a critical choice to make: eat a leisurely dinner at Morton's or rush out the
door to grab theater tickets for an evening show. A Morton's server voluntarily
runs out, stands in line, and promptly brings back the tickets during the
guest's main course.

General managers have been known to visit guests in the hospital and bring them
dinner. Recently, a manager gave a couple an anniversary celebration they'll
never forget. He brought a prime rib dinner to their home -- set up a
tablecloth, poured the wine, the works. Food and beverage manager Charlie
Johnson recalls one regular who wanted his own personalized steak. "It was in
Westchester. He wanted whole peppercorn smashed into a New York strip steak,
wrapped in plastic to age it and put in the cooler, with his name on it. When he
came in on a Saturday night, his steak was ready for him."

Speaking of anniversaries, some of these same employees will celebrate
double-digit ones with Morton's sometime this year. Astonishing, considering the
fact that Morton's has been around only since 1978; more astonishing,
considering the high turnover rate in the restaurant business, 95% for staff
employees, according to the National Restaurant Association, compared to
Morton's of Chicago's turnover rate, which is approximately 40% lower. The
difference -- employee recognition programs, continual rigorous training coupled
with genuine advancement opportunities, profit sharing, health benefits and
flexible work schedules. "We have a premier compensation package," says Tom
Walters. It pays off for the company: employees who stay develop relationships
with guests, who cherish the personal contact and become regulars.

"GARLIC IS THE CORNERSTONE OF ITALIAN CUISINE. IT IS SAID TO BE THE KETCHUP
OF INTELLECTUALS."
Bryan Dillon, Corporate Executive Chef
Bertolini's Authentic Trattoria

It also allows Morton's the opportunity to become an integral part of the
community. Morton's employees work with dozens of charitable groups, including
the American Cancer Society, "Big Brothers" and more. Most restaurants will
close once or twice a year to host a charity event, whether it benefits a local
zoo or a children's organization. "Kim Owens, our catering manager in Charlotte
(now at Morton's in Atlanta) did an enormous amount of work with the Leukemia
Foundation," says Deborah Hinson, Morton's national catering and sales director.
"It was hundreds of hours of dedicated work, and Kim was named Charlotte's Woman
of the Year. It's a testimony to the caliber of people that are with this
company."
<PAGE>

Other special events are simply fun, and profitable. Three thousand people who
attended the 1997 Grammy Awards in New York partied afterwards with delectables
from Morton's. We were chosen for the festivities because Grammy representatives
said Morton's has "some of the best cuisine in the world." Our groundbreaking,
first-ever Women's Cigar Dinner received tremendous media coverage last year and
was such an overwhelming success that Morton's hosted it again this year. A
portion of the proceeds went to the National Coalition Against Domestic
Violence. "It was an excellent networking opportunity for professional women to
get together," says Hinson. "It was just wild. They let their hair down and had
a wonderful evening. Many of them have become regular guests."

The winemaker dinners, cigar smokes and single malt scotch tastings are all huge
draws for Morton's; in most cases, our restaurants sell out. The private
Boardrooms, used for business meetings, conventions and social celebrations
(including corporate events, wedding receptions, rehearsal dinners and
birthdays), introduce thousands of brand-new guests every year, all exposed to
Morton's for the first time.

To give the Chicago Tribune the last word: "Morton's is the Rolls Royce of
steak houses."

If Morton's is the Rolls Royce of steak houses, Bertolini's might be considered
the Corvette of Italian restaurants. Fun and festive with a colorful finish,
it's an authentic trattoria with a zesty Northern Italian street festival
atmosphere.

It's definitely different from Morton's, but its favorable reviews are similar.
The readers of the Las Vegas Review-Journal say it's "the best Italian
restaurant in town." Peachtree magazine in Atlanta claims the decor is "as much
a feast for the eye as the food is for the palate." And as for the Los Angeles
Times, well, "you're bound to be impressed."

The philosophy is also the same as Morton's. "The guest always comes first,"
says John Maloney, a Bertolini's area director. "We started in Las Vegas, and
from the beginning we've had a great guest response. But what tore up the town
was the service and the great food. That's what stole Vegas' heart." On an
average day, the Las Vegas restaurant serves 1,500 meals; the extra virgin olive
oil is imported from Italy, the pizzas are pulled from wood-burning ovens, the
gelato is made in house and the espressos and cappuccinos are brewed fresh. But
the key element is the training. Servers are literally a walking encyclopedia
replete with detailed information about our Italian food and wines. Not only do
they know what Fazzoletto con Funghi is -- a handkerchief sheet of fresh pasta
inundated with spinach, ricotta cheese and a wild mushroom sauce -- they can
even offer details about the dish. Ditto for the Tagliolini al Frutti di Mare --
that's tagliolini and lobster, shrimp and scallops with tomatoes, parmesan and a
cream sauce. "When our servers get out on the floor, they absolutely must know
the entire menu," says Maloney. "We want them to be able to answer any questions
from our guests."

The above-and-beyond approach truly applies to the menu and to our hospitality.
"We tell our people to do whatever is necessary to satisfy the dining
preferences of our guests," says Bryan Dillon, Bertolini's corporate executive
chef. "If there's something that's not on the menu, and if the guest wants it,
and if it's humanly possible to do it, we'll do it." Every ingredient used in
the Bertolini's menu is made from scratch right at the restaurant: the sauces,
pastas, pizzas, and gelato. "We have a system where everything is made fresh,"
says Dillon. Bertolini's is very "old
<PAGE>

world," more rustic, and with large portions, a key element of all Morton's
Restaurant Group restaurants. "That's what makes it personal," says Dillon. "And
the guest immediately knows it." Adding to the authenticity is the Bertolini's
philosophy of importing its ingredients directly from Italy. "The recipe for our
pomodoro sauce is from Italy," says Geoffrey Stiles, Bertolini's vice president
of operations. "So is the olive oil and the ingredients for the mascarpone
cheese. We have to do it to achieve the authenticity we're looking for. The
flavor profile is different from its American counterpart."

"OUR CALAMARI IS SERVED WITH A TOMATO CAPER SAUCE, AND EVERYBODY TRIES TO
DUPLICATE IT. BUT NO ONE HAS."
John Maloney, Area Director
Bertolini's Authentic Trattoria

Then there's the very special "look and feel" of Bertolini's. Whether in Irvine
or Indianapolis, it's informal; the restaurants are awash in bright vests,
richly-colored murals, and festive Italian music. The food is prepared
exhibition-style, and served on bright white tablecloths covered in butcher
paper and crayons on the side -- something for the servers to scribble their
names on. "There aren't many Italian restaurants that fit the niche that
Bertolini's fills," says Geoffrey Stiles. "We don't try to be `sophisticated'.
But we are high-energy and exciting. It's a place where I'd feel comfortable
taking my wife out for a nice dinner. It's an adult-oriented restaurant that
also appeals to families."

Dessert is another focal point in the traditional authentic Italian meal. The
same holds true at Bertolini's, where we showcase our gelato, featuring multiple
flavors made in house daily. Forty percent of our guests order dessert, with the
favorites being gelato and our tiramisu, a mousse made with a mascarpone cream
cheese and drenched in espresso and marsala. Guests love the gelato dessert
display; it's another visually appealing component of the Bertolini's
experience.

When it comes to our people, Bertolini's adopts the Morton's strategy. The
interview and orientation process is lengthy, not perfunctory. "We're very
particular about who we bring on board," says John Maloney. "We attract a unique
individual, someone who truly believes in what we're doing, both with food and
guest hospitality." Bertolini's has a strong "promote from within" policy. Every
quarter, top employees undergo extensive training in every conceivable area,
from dining room work to dishwashing. Managers take all sorts of
self-improvement seminars, including time management, employee relations, and
stress management. There's also a major emphasis on community service. "We're
involved with many local organizations, including the Valley Forge Youth Academy
and Swarthmore College," says Bruce Myers, general manager of Bertolini's at
King of Prussia. "Make-a-Wish Foundation used the proceeds from our opening
charity event to set up a shopping spree at the mall for some terminally ill
children. Seeing the children benefit from this event made it all worthwhile."

Great food, superb service, a devotion to the highest quality ingredients, a
commitment to our people and a generous corporate spirit constantly giving back
to the community: these are just a few of the reasons why Morton's Restaurant
Group continues its strong and steady growth. We are a company that has
consistently kept its commitment to providing guests with an exceptional
experience -- and clearly one that is equally committed to carefully growing its
business.
<PAGE>

SIDEBAR FEATURES

Boardroom Benefits
The Morton's of Chicago private Boardrooms -- used for business meetings,
corporate dinners and social celebrations, such as anniversaries, birthday
parties, graduations and rehearsal dinners -- are now taking the next step. Like
the new downtown Washington D.C. Morton's, which may be the Boardroom "Capitol"
of the country. It opened earlier this year with five Boardrooms, the most of
any Morton's restaurant. Almost any kind of celebration or dinner can be held
there; the Boardrooms work for groups ranging from six to 160. They're fully
equipped with state-of-the-art audio-visual equipment, should you need to make a
presentation before, during or after dinner. (All A-V equipment is bipartisan
and works equally well for Democrats, Republicans or Independents.) Whatever
your party, our Boardrooms are the perfect place to have a party, whether it be
a business luncheon or a dynamic dinner event.

- --------------------------------------------------------------------------------

Destination Bertolini's
True, Bertolini's is changing the concept of dining at the nation's top retail
centers. At the moment, most Bertolini's are located inside upscale malls and
entertainment centers, whether it's The Forum Shops at Caesars Palace, The
Spectrum in Irvine, California, The Mall at King of Prussia, or Circle Centre in
Indianapolis. While Bertolini's is the place to be even if you don't have any
shopping to do, the plan is to eventually take its initial design and adapt it
to other types of locations - to make it a destination in itself. We believe
that the Bertolini's concept is so flexible it can work in practically any major
metropolitan area in the United States, including high-traffic downtown centers,
business areas and free-standing sites. Stay tuned.

- --------------------------------------------------------------------------------

www.mortons.com
So your eyes are feasting on the Morton's double porterhouse? Or is it a
mouthwatering plate of Bertolini's Tagliolini al Frutti di Mare? Or are you just
taking a long look at our fabulous menu? Whatever, all that doesn't necessarily
mean you're actually at a Morton's of Chicago or Bertolini's Authentic
Trattoria. Now you can check us out on-line. Welcome to Morton's Restaurant
Group on the world wide web, the most desired dining destination on the
Internet. Between actual visits to Morton's and Bertolini's, feel free to look
at the latest on our menus, visit our nationwide locations and catch up on our
latest company news, restaurant reviews, financial information, company history
and upcoming special events and restaurant openings. The Morton's Restaurant
Group web site..... it's the next best thing to being there. Please E-Mail us at
[email protected]

- --------------------------------------------------------------------------------

The Bull...
The Bear...
The Beef.

MRG Specialists at NYSE. What's it like on the trading floor of the New York
Stock Exchange? Well, grab a minute (if you can) with Jimmy Enrich, a Specialist
with Equitrade. He'll tell you that working the trading floor is like performing
on Broadway -- a constant adrenaline buzz, but in this case, there's no script
and the cast of characters changes every day. His partner, Joe McCarthy, has
been a top NYSE floor specialist for 15 years. He is responsible for trading
<PAGE>

Morton's Restaurant Group common stock (NYSE: MRG). The added bonus of working
on Wall Street... the fact that our Morton's of Chicago steakhouse is nearby at
90 West Street... steps away from the hectic pace of the trading floor.

Equitrade is one of three dozen specialist firms on the NYSE. It specializes in
over 100 issues.

- --------------------------------------------------------------------------------

Prime Aged Beef in its Prime
Tender and flavorful USDA prime aged beef -- it's what our guests crave.
Proof positive is Morton's of Chicago's growth; in the last eight years, we've
grown from nine restaurants to thirty-five restaurants, and our sales are five
times what they were in 1988. True, we believe much of that's due to our
great food and hospitality. But there's another reason why a fine dining
steakhouse like Morton's is becoming an American icon -- because it's such a
treat. "Steak takes center stage when people eat out," says Tom Walters,
president of Morton's of Chicago. "It's the nation's top pick." Trends
clearly show that diners want red meat when they're having a "meal
celebration" -- whether it's business related or a social celebration. What's
more, beef consumption is on a two-year rise after more than a decade of
decline. And many industry experts say Morton's is one of the best-positioned
companies to benefit from this new demand.

- --------------------------------------------------------------------------------

The Real Deal
At Bertolini's, when we say our trattorias provide authentic Italian cuisine, we
mean it. Here's a sampling of some of the ingredients we import directly from
Italy: the ingredients for the pomodoro and cream sauces, the gelato ingredients
we use to prepare all of our 130 flavors, the mascarpone and mozzarella cheese
ingredients, and the extra virgin olive oil that's served at the table so guests
can enjoy it with the Pizzetta Bertolini. True, there's an easier way to do it:
we could simply buy cheaper ingredients. But if we did that, we would lose the
authenticity of our true Italian dishes. By importing directly from Italy, you
can be assured that Bertolini's goes not only the extra mile -- but thousands of
miles to bring its guests the very best.
<PAGE>

MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of
Operations

Results of Operations

1996 Compared to 1995

Revenues increased $20.0 million, or 11.5%, to $193.4 million for fiscal
1996 from $173.4 million during fiscal 1995. Of the increase, $21.4 million was
attributable to incremental revenues from nine new restaurants opened after
January 1, 1995 and $4.1 million, or 2.6%, of additional comparable revenues
from restaurants open all of both periods. Offsetting these increases was a
reduction of $5.5 million from Mick's and Peasant restaurants closed during
fiscal 1996. Average sales per restaurant open for the full year increased
11.3%. In addition, higher revenues for fiscal 1996 reflect the impact of price
increases of approximately 1% in November 1996 for Morton's of Chicago and
approximately 2% in April 1995 for Mick's and Peasant. The Company operated 67
restaurants as of December 29, 1996 (including 34 Morton's of Chicago
steakhouses, 7 Bertolini's, 18 Mick's, and 8 Peasants) and 71 restaurants as of
December 31, 1995 (including 30 Morton's of Chicago steakhouses, 6 Bertolini's,
25 Mick's, and 10 Peasants).

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 fiscal 1996 period
was adversely impacted by declines in the comparable restaurant revenues in the
Mick's and Peasant restaurant groups, offset by increases in the Morton's and
Bertolini's restaurant groups. The Atlanta market, where 22 of the Company's
restaurants are located, has become increasingly competitive. As discussed in
Note 3 to the Company's consolidated financial statements, the Company completed
the sale of an 80.1% interest in its Atlanta-based Mick's and Peasant restaurant
groups.

Percentage changes in comparable revenues for fiscal 1996 versus fiscal
1995 for restaurants open all of both years are as follows:
<PAGE>

Percentage Change
-----------------

Morton's 9.2%
Bertolini's 3.7%
Mick's (7.8)%
Peasant (8.3)%
Total 2.6%

The Company believes that revenues for the first quarter of fiscal 1996
were adversely affected by severe winter storms in January 1996. The Company
believes that the Olympic Games which were held in Atlanta in July 1996 had a
favorable impact on Atlanta-based restaurant revenues for that period.

Food and beverage costs increased from $57.7 million for fiscal 1995, to
$64.7 million for fiscal 1996. Offsetting these increases was a reduction of
approximately $1.8 million due to the Mick's and Peasant restaurants closed
during fiscal 1996. These costs as a percentage of revenues increased 0.2% for
the period.

Restaurant operating expenses, which include labor, occupancy and other
operating expenses, increased from $85.9 million for fiscal 1995 to $92.4
million for fiscal 1996, an increase of $6.5 million. Those costs as a
percentage of revenues decreased 1.7% from 49.5% for fiscal 1995 to 47.8% for
fiscal 1996. Offsetting these increases was a reduction of approximately $4.8
million for fiscal 1996 due to the nine Mick's and Peasant restaurants closed
during the period. In addition, restaurant occupancy expense does not include
approximately $1.5 million for the Remaining Restaurants (see Note 3 to the
Company's consolidated financial statements) which has been charged against the
accrual for lease exit costs. The 1996 period increase in costs related to the
added costs of operating nine additional restaurants opened after January 1,
1995.

Depreciation, amortization and other non-cash charges were $6.5 million
for fiscal 1996 versus $6.3 million in fiscal 1995. The fiscal 1996 period
increase is due to increased start-up cost amortization resulting from increased
development in fiscal 1996 from fiscal 1995, offset by the exclusion of
depreciation and amortization related to Mick's and Peasant of approximately
$0.4 million recorded in the first quarter of fiscal 1995. Such depreciation and
amortization was discontinued in the second quarter of 1995 pursuant to
Statement 121 (see Note 3 to the Company's consolidated financial statements).
<PAGE>

General and administrative expenses for fiscal 1996 were $14.3 million
versus $14.1 million for fiscal 1995. Such costs as a percentage of revenues
were 7.4% for fiscal 1996 as compared to 8.1% in fiscal 1995, representing a
decrease of 0.7%.

Marketing and promotional expenses were $4.4 million, or 2.3% of revenues,
for fiscal 1996 compared to $4.4 million, or 2.5% of revenues, for fiscal 1995.
These expenses reflect an increase driven by incremental costs associated with
restaurant development offset by a reduction of approximately $0.2 million due
to the closure of certain Mick's and Peasant restaurants during the period.

Interest expense, net of interest income, increased to $2.3 million for
fiscal 1996 from $1.8 million for fiscal 1995. This increase is a result of
higher outstanding debt balances.

During fiscal 1995, the Company recorded a charge of approximately $2.2
million related to the settlement of a lawsuit, and associated legal and related
costs, which had been pending in the United States District Court for the
District of Nevada (see Note 15 to the Company's consolidated financial
statements).

In connection with the Company's plan to sell or otherwise dispose of the
Mick's and Peasant restaurant groups, the Company recorded a charge of $15.5
million in fiscal 1995 to write-down certain assets held for sale and to accrue
related lease exit costs. During fiscal 1996, the Company recorded an additional
charge of $11.5 million in connection with the sale of an 80.1% interest in its
Atlanta-based Mick's and Peasant restaurants (see Note 3 to the Company's
consolidated financial statements).

An income tax benefit of $4.5 million and $0.8 million for fiscal 1996 and
fiscal 1995, respectively, is the result of utilization of the Company's net
operating loss carryforwards, additional deferred tax assets relating to FICA
and other tax credits generated during fiscal 1996, and a reassessment of the
valuation allowance against deferred tax assets (see Note 8 to the Company's
consolidated financial statements).

1995 Compared to 1994

Revenues increased $17.1 million, or 10.9%, to $173.4 million for fiscal
1995 from $156.3 million during fiscal 1994. Of the increase, $12.9 million was
attributable to incremental revenues from seventeen new restaurants opened after
January 1, 1994 and $4.5 million, or 3.2%, of additional comparable revenues
from restaurants open all of both periods. Average sales per restaurant open for
the full year decreased 3.1%. Included in fiscal 1994 was consulting fee income
of $0.25 million. In addition, higher revenues for fiscal 1995 reflect the
impact of price increases of approximately 2% in November 1994 for Morton's of
<PAGE>

Chicago and approximately 2% in April 1995 for Mick's and Peasant. The Company
operated 71 and 67 restaurants as of December 31, 1995 and January 1, 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 fiscal 1995 period
was adversely impacted by declines in the comparable restaurant revenues in the
Mick's and Peasant restaurant groups, offset by increases in the Morton's and
Bertolini's restaurant 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 Company's 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 restaurant groups during the
period they are being held for sale may continue to be adversely impacted.

Percentage changes in comparable revenues for fiscal 1995 versus fiscal
1994 for restaurants open all of both years are as follows:

Percentage Change
-----------------

Morton's 9.6%
Bertolini's 9.1%
Mick's (8.2)%
Peasant (1.3)%
Total 3.2%

Food and beverage costs increased from $52.3 million for fiscal 1994, to
$57.7 million for fiscal 1995. These costs as a percentage of revenues decreased
0.2% for the period.

Restaurant operating expenses which include labor, occupancy and other
operating expenses, increased from $76.5 million for fiscal 1994 to $85.9
million for fiscal 1995, an increase of $9.4 million. Those costs as a
percentage of revenues increased 0.6% from 48.9% for fiscal 1994 to 49.5% for
fiscal 1995. The increase in costs relates to the added costs of operating
seventeen additional restaurants opened after
<PAGE>

January 1, 1994. Contributing to the increase of 0.6% as a percentage of
revenues are restaurant operating expenses for several Mick's restaurants which
opened in new markets during fiscal 1994 and generated lower than anticipated
revenues and are adversely impacting earnings trends.

Depreciation, amortization and other non-cash charges were $6.3 million
for fiscal 1995 versus $8.9 million in fiscal 1994. The fiscal 1995 period
decrease is due to decreased start-up cost amortization resulting from reduced
development in the latter part of fiscal 1994 and during fiscal 1995, as well as
the exclusion of 1995 second, third and fourth quarter depreciation and
amortization related to Mick's and Peasant restaurant groups. The amount of such
depreciation and amortization was approximately $1.2 million in fiscal 1994 (see
Note 3 to the Company's consolidated financial statements).

General and administrative expenses for fiscal 1995 were $14.1 million
versus $12.3 million for fiscal 1994. Such costs as a percentage of revenues
were 8.1% for fiscal 1995 as compared to 7.8% in fiscal 1994, representing an
increase of 0.3%. The increase in such expense is driven by incremental costs
associated with operating seventeen additional restaurants since January 1,
1994.

Marketing and promotional expenses were $4.4 million, or 2.5% of revenues,
for fiscal 1995 compared to $2.6 million, or 1.6% of revenues, for fiscal 1994.
The increase is driven by incremental costs associated with restaurant
development and increased advertising expenditures in the Atlanta region for
Mick's restaurants.

Interest expense, net of interest income, increased to $1.8 million for
fiscal 1995 from $0.7 million for fiscal 1994. This increase is a result of
higher outstanding debt balances and higher interest rates.

During the fourth quarter of fiscal 1994, the Company decided to suspend
development of future Mick's and Peasant restaurants and wrote off approximately
$0.6 million of related development costs incurred through the architectural and
pre-construction stages for locations which the Company decided not to further
pursue. No such charges were recorded during fiscal 1995.

Included in fiscal 1994 is a charge of $5.5 million related to the
write-off of the Company's preferred stock minority investment in Santa Fe USA,
Inc. ("Santa Fe") (See Note 4 to the Company's consolidated financial
statements).

An income tax benefit of $0.8 million and $2.7 million for fiscal 1995 and
fiscal 1994, respectively, is the result of utilization of the Company's net
operating loss carryforwards, additional deferred tax assets
<PAGE>

relating to FICA and other tax credits generated during fiscal 1995, and a
reassessment of the valuation allowance against deferred tax assets (see Note 8
to the Company's consolidated financial statements).

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
June 19, 1995 as amended from time to time (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 December 29, 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.

During fiscal 1996, FNBB syndicated portions of the Term Loan and the
Revolving Credit Facility of the Credit Agreement to two additional lenders,
Imperial Bank and Heller Financial. FNBB, as agent for the Lenders, receives an
annual fee of $10,000 paid by the Company.

As of the end of fiscal 1996 and fiscal 1995, the Company had outstanding
borrowings of $24,900,000 and $23,650,000, respectively, under the Credit
Agreement. At December 29, 1996, $399,000 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 $4,701,000 as of
December 29, 1996. The weighted average interest rate on all bank borrowings on
December 29, 1996 was 7.77%. In addition, the Company is obligated to pay fees
of 0.25% on unused loan commitments less than $10,000,000, 0.375%
<PAGE>

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 be reduced 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 December 29, 1996 amount to $1,600,000 in 1997, $3,200,000 in
1998, $3,200,000 in 1999, $3,200,000 in 2000, and $13,700,000 in 2001. As
discussed in Note 3 to the Company's consolidated financial statements, the
Company has completed the sale of an 80.1% interest in its Mick's and Peasant
Atlanta-based restaurants. Net cash proceeds from the sale were used to reduce
the Company's Revolving Credit Facility.

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 December 29, 1996,
the Company believes it was in compliance with such covenants.

In March 1997, a subsidiary of the Company and CNL Financial I, Inc.
("CNL") entered into a $2,500,000 loan agreement (the "CNL Loan"). Monthly
principal and interest payments will be made over the ten-year term of the loan.
Proceeds from the CNL Loan were used to reduce the Company's Revolving Credit
Facility.

In July 1994, the Company entered into an agreement to purchase 9% of the
outstanding 11% of common stock of Peasant Holding Corp. ("Peasant Holding")
from one of the two remaining minority holders of Peasant Holding common stock.
The purchase price of the shares was approximately $1,985,000 plus interest
calculated at 5%, which was paid in installments through March 1996.
<PAGE>

During fiscal 1996, the Company's net investment in fixed assets and
related investment costs, net of capitalized leases, approximated $9.8 million.
The Company estimates that it will expend up to an aggregate of $12.0 million in
1997 to finance ordinary refurbishment of existing restaurants and preopening
costs and capital expenditures, net of landlord development and rent allowances
and net of equipment lease financing, for new restaurants. The Company has
entered into various equipment lease financing agreements with several financial
institutions of which approximately $8.4 million in the aggregate has been
funded from February 1994 through March 1997 and $5.7 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.

At December 29, 1996, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $4.7 million expiring by 2007 and
various state income tax net operating loss carryforwards. Approximately $1.4
million of the Company's deferred tax asset related to the write-off of Santa Fe
represents a capital loss. Additionally, as of December 29, 1996, the Company
had approximately $2.6 million in FICA and other tax credits available to reduce
income taxes payable in future years expiring by 2011. As a result of the
Company's equity offerings in 1992, certain limitations apply on the maximum
annual amount of the net operating loss carryforward and credit carryforwards
which may be utilized by the Company to offset taxable income in future periods.

In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which temporary differences become deductible and net operating
losses can be carried forward. Management considers projected future taxable
income and tax planning strategies in making this assessment. Based upon the
level of historical income of the Morton's of Chicago and Bertolini's
restaurants and projections of future taxable income over the next two to three
years, management believes it is more likely than not that the Company will
realize its net deferred tax asset. Deferred tax assets arising from capital
losses have been fully reserved for since the Company has no capital gains to
offset such losses.
<PAGE>

Inflation

The impact of inflation on labor, food and occupancy costs can
significantly affect the Company's operations. Many of the Company's employees
are paid hourly rates related to the Federal minimum wage. Food costs as a
percentage of net sales have been somewhat stable due to procurement
efficiencies and menu price adjustments. The Company currently does not engage
in any futures contracts and all purchases are made at prevailing market prices.
Building costs, taxes, maintenance and insurance costs all have an impact on the
Company's occupancy costs, which continued to increase during the period.
Management believes the current practice of maintaining operating margins
through a combination of menu price increases and cost controls, careful
evaluation of property and equipment needs, and efficient purchasing practices
is its most effective tool for coping with inflation.

Seasonality

The Company's business is somewhat seasonal in nature, with revenues being
less in the third quarter than in other quarters primarily due to Morton's
reduced summer volume. It is possible, given the sale of Mick's and Peasant, as
discussed in Note 3 to the Company's consolidated financial statements, that the
Company's revenues will become more seasonal in nature. The following table sets
forth historical unaudited quarterly revenues for the Company's restaurants
which were open for the entire period from January 1, 1994 to December 31, 1995
(52 restaurants), and for the entire period from January 1, 1995 to December 29,
1996 (57 restaurants):

Comparable Restaurant Revenues
(in thousands)

<TABLE>
<CAPTION>
1994 1995 1995 1996
---- ---- ---- ----
52 restaurants 57 restaurants
-------------- --------------
$ % $ % $ % $ %
- - - - - - - -
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Quarter 35,123 25.6 36,873 26.0 42,879 26.9 43,526 26.6
Second Quarter 33,008 24.0 33,952 23.9 38,300 24.1 39,388 24.1
Third Quarter 31,732 23.1 32,190 22.7 35,498 22.3 37,508 23.0
Fourth Quarter 37,552 27.3 38,851 27.4 42,562 26.7 42,912 26.3
------- ----- ------- ----- ------- ----- ------- -----
137,415 100.0 141,866 100.0 159,239 100.0 163,334 100.0
======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
<PAGE>

The Company believes that revenues for the first quarter of fiscal 1994
were adversely affected by numerous and exceptionally severe winter storms,
particularly in Mick's and Peasant restaurant groups and that the severe winter
storms in January 1996 also impacted fiscal 1996 first quarter revenues. The
Company believes that the Olympic Games which were held in Atlanta in July 1996
had a favorable impact on Atlanta-based restaurant revenues for that period.

Forward-Looking Statements

Except for the historical information contained in this annual report,
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.
<PAGE>

Independent Auditors' Report

The Board of Directors and Stockholders
Morton's Restaurant Group, Inc.:

We have audited the accompanying consolidated balance sheets of Morton's
Restaurant Group, Inc. and subsidiaries as of December 29, 1996 and December 31,
1995 and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the years in the three-year period ended December 29,
1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Morton's Restaurant
Group, Inc. and subsidiaries as of December 29, 1996 and December 31, 1995 and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 29, 1996, in conformity with generally
accepted accounting principles.

As discussed in Notes 2(k) and 3 of the notes to consolidated financial
statements, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," in 1995.

KPMG PEAT MARWICK LLP

Jericho, New York
February 7, 1997
<PAGE>

MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

December 29, 1996 and December 31, 1995

(amounts in thousands, except share data)

<TABLE>
<CAPTION>
December 29, December 31,
Assets 1996 1995
- ------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,276 $ 2,351
Accounts receivable 2,116 2,575
Inventories 4,254 3,465
Landlord construction receivables,
prepaid expenses and other current assets 2,408 2,157
Deferred income taxes 3,808 2,280
Assets held for sale 12,474 22,583
------- -------
Total current assets 27,336 35,411
------- -------

Property and equipment, at cost:
Furniture, fixtures and equipment 13,552 8,304
Leasehold improvements 14,188 7,050
Construction in progress 1,284 6,618
------- -------
29,024 21,972
Less accumulated depreciation and amortization 4,353 2,593
------- -------
Net property and equipment 24,671 19,379
------- -------
Intangible assets, net of accumulated amortization of $3,054 at
December 29, 1996 and $2,654 at December 31, 1995 12,941 13,341
Other assets and deferred expenses, net of accumulated amortization of
$3,963 at December 29, 1996 and $1,306 at December 31, 1995 5,909 5,057
Deferred income taxes 6,129 --
------- -------

$76,986 $73,188
======= =======
</TABLE>

(Continued)
<PAGE>

MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets, Continued

December 29, 1996 and December 31, 1995

(amounts in thousands, except share data)

<TABLE>
<CAPTION>
December 29, December 31,
Liabilities and Stockholders' Equity 1996 1995
- ------------------------------------ ---- ----
<S> <C> <C>
Current liabilities:
Accounts payable $ 4,694 $ 6,904
Accrued expenses 7,795 4,499
Accrued income taxes 700 538
Current portion of note payable to related party -- 483
Liabilities related to assets held for sale 12,134 13,995
-------- --------
Total current liabilities 25,323 26,419
-------- --------

Bank debt 24,900 23,650
Other liabilities 5,676 4,079
-------- --------
Total liabilities 55,899 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 6,443,673 at December 29, 1996
and 6,367,093 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 61,632 61,350
Accumulated deficit (40,609) (42,374)
-------- --------

Total stockholders' equity 21,087 19,040
-------- --------

$ 76,986 $ 73,188
======== ========
</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>

MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

Years ended December 29, 1996, December 31, 1995, and January 1, 1995

(amounts in thousands, except per share data)

<TABLE>
<CAPTION>
December 29, December 31, January 1,
1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
Revenues $ 193,378 $ 173,373 $ 156,319

Food and beverage costs 64,723 57,734 52,338
Restaurant operating expenses 92,382 85,891 76,494
Depreciation, amortization and other non-cash charges 6,454 6,321 8,907
General and administrative expenses 14,333 14,115 12,264
Marketing and promotional expenses 4,431 4,407 2,557
Interest expense, net 2,297 1,829 696
Litigation settlement and related expenses -- 2,240 --
Write-down and related charges for net assets held
for sale 11,500 15,500 --
Write-off of restaurant development costs -- -- 597
Write-off of preferred stock investment in affiliate -- -- 5,506
--------- --------- ---------

Loss before income taxes (2,742) (14,664) (3,040)

Income tax benefit (4,507) (756) (2,704)
--------- --------- ---------

Net income (loss) $ 1,765 $ (13,908) $ (336)
========= ========= =========

Net income (loss) per share $ 0.26 $ (2.18) $ (0.05)
========= ========= =========

Weighted average shares and equivalents outstanding 6,792 6,367 6,367
========= ========= =========
</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>

MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity

Years ended December 29, 1996, December 31, 1995 and January 1, 1995

(amounts in thousands)

<TABLE>
<CAPTION>
Additional Total
Common Paid-In Accumulated Stockholders'
Stock Capital Deficit Equity
----- ------- ------- ------

<S> <C> <C> <C> <C>
Balance at December 31, 1993 $ 64 $ 61,330 $(28,130) $ 33,264
Issuance of restricted stock -- 20 -- 20
Net loss -- -- (336) (336)
------- -------- -------- --------

Balance at January 1, 1995 64 61,350 (28,466) 32,948
Net loss -- -- (13,908) (13,908)
------- -------- -------- --------

Balance at December 31, 1995 64 61,350 (42,374) 19,040
Exercise of stock options -- 282 -- 282
Net income -- -- 1,765 1,765
------- -------- -------- --------

Balance at December 29, 1996 $ 64 $ 61,632 $(40,609) $ 21,087
======= ======== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>

MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 29, 1996, December 31, 1995, and January 1, 1995

(amounts in thousands)

<TABLE>
<CAPTION>
December 29, December 31, January 1,
1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,765 $(13,908) $ (336)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation of property and equipment 1,534 1,112 1,678
Amortization of intangible assets 400 461 636
Amortization of other deferred expenses 3,722 3,337 5,346
Deferred occupancy costs 798 1,411 1,269
Deferred income taxes (5,477) (1,006) (2,837)
Write-down and related charges for net assets held for sale 11,500 15,500 --

Write-off of preferred stock investment in
affiliate -- -- 5,506
Write-off of restaurant development costs -- -- 597
Change in assets and liabilities:
Accounts receivable 351 (899) (546)
Inventories (456) (398) (1,261)
Prepaid expenses and other assets 122 212 (1,489)
Accounts payable, accrued expenses and other liabilities (6,050) 751 (251)
Accrued income taxes 450 (605) (13)
-------- -------- --------

Net cash provided by operating activities 8,659 5,968 8,299
-------- -------- --------

Cash flows from investing activities:
Purchases of property and equipment (5,297) (6,628) (6,783)
Payments for start-up costs, licenses and other deferred expenses (4,486) (3,236) (4,164)

Payments for investment in preferred stock of and loans to
affiliate -- -- (2,465)
Cash paid to minority holder for common stock of subsidiary (483) (535) (967)
-------- -------- --------

Net cash used by investing activities (10,266) (10,399) (14,379)
-------- -------- --------
</TABLE>

(Continued)
<PAGE>

MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued

(amounts in thousands)

<TABLE>
<CAPTION>
December 29, December 31, January 1,
1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from financing activities:
Decrease in bank overdraft $ -- $ (574) $ (461)
Principal reduction on bank debt (4,750) (4,150) (2,650)
Proceeds from bank debt 6,000 7,475 10,275
Net proceeds from issuance of stock 282 -- 20
------- ------- --------

Net cash provided by financing activities 1,532 2,751 7,184
------- ------- --------

Net increase (decrease) in cash and cash equivalents (75) (1,680) 1,104

Cash and cash equivalents at beginning of year 2,351 4,031 2,927
------- ------- --------

Cash and cash equivalents at end of year $ 2,276 $ 2,351 $ 4,031
======= ======= ========
</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>

MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 29, 1996, December 31, 1995 and January 1, 1995

(1) Organization and Other Matters

Morton's Restaurant Group, Inc., formerly known as Quantum Restaurant
Group, Inc., ("Company"), was incorporated in the State of Delaware in October
1988 and is engaged in the business of owning and operating restaurants.

In 1988, the Company acquired 89% of the outstanding common stock of a
predecessor company of Peasant Holding Corp. ("Peasant Holding"), the holding
company for The Peasant Restaurants, Inc. ("Peasant") and Mick's Restaurants,
Inc. ("Mick's"). The acquisition was accounted for using the purchase method of
accounting. During 1994, the Company purchased 9% of the outstanding 11% of
common stock of Peasant Holding from one of the two remaining minority holders
for approximately $1,985,000 (see Note 12). During 1995, the Company approved a
plan to sell its Mick's and Peasant Restaurants, and on February 6, 1997, the
Company completed the sale of its Atlanta-based Mick's and Peasant restaurants
(see Note 3).

In 1989, the Company acquired 100% of the outstanding common stock,
preferred stock, stock options and common stock warrants of Porterhouse, Inc.
and subsidiaries, which do business as Morton's of Chicago ("Morton's"), a
national restaurant group. The acquisition was accounted for using the purchase
method of accounting.

During fiscal 1994, the Company changed its fiscal reporting period from a
calendar basis, with a December 31 year end, to a fiscal year basis 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. The Company
believes the effect of the change was not material to the Company's financial
statements.

(2) Summary of Significant Accounting Policies

(a) Principles of Consolidation

The consolidated financial statements include the accounts and results of
operations of the Company and its subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation. The minority
interest in Peasant Holding's losses were allocated to the minority interest in
the equity capital of Peasant Holding. To the extent such losses exceed the
minority interest in the equity capital of Peasant Holding, they have been
charged to the Company.

(b) Inventories

Inventories consist of food, beverages, and supplies and are recorded at
the lower of cost or market. Cost is determined using the first-in, first-out
(FIFO) method.
<PAGE>

Property and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of the related assets.
Improvements to leased premises and property under capital leases are amortized
on the straight-line method over the shorter of the lease term, including
planned extensions, or estimated useful lives of the improvements. In fiscal
1996, 1995, and 1994, interest costs during the construction period for
leasehold improvements of $202,500, $235,000, and $496,400, respectively, were
capitalized.

(d) Other Assets and Deferred Expenses

The Company defers certain organizational and start-up costs associated
with the opening of each new restaurant. Such costs are amortized over the 12
months following the restaurant's opening. Unamortized start-up costs of
$3,472,000 and $2,849,000 at the end of fiscal 1996 and 1995, respectively, are
included in "Other assets and deferred expenses" in the accompanying
consolidated balance sheets. Also included in "Other assets and deferred
expenses" are smallwares of $1,775,000 at the end of fiscal 1996 and $1,515,000
at the end of fiscal 1995. In addition, included in "Assets held for sale" are
$760,000 and $1,400,000 of smallwares at the end of fiscal 1996 and 1995,
respectively.

(e) Income Taxes

The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("Statement 109"). Statement 109 requires a change
from the deferred method of accounting for income taxes of APB Opinion 11 to the
asset and liability method of accounting for income taxes. Under the asset and
liability method of Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date.

(f) Intangible Assets

Intangible assets arose from the acquisitions of Peasant Holding and
Morton's (see Note 1). Amortization is being recognized on a straight-line basis
over forty years for goodwill. During fiscal 1994, additional goodwill of
approximately $1,985,000 was recorded in connection with the purchase of Peasant
Holding common stock from a minority holder (see Note 12). Coincident with the
adoption of Statement 121 (see Note 3), Mick's and Peasant unamortized goodwill
of $8,077,000 was reclassified to "Assets held for sale".

(g) Marketing and Promotional Expenses

Marketing and promotional expenses in the accompanying consolidated
statements of operations include advertising expenses of $2,875,000, $3,026,000,
and $920,000 for fiscal 1996, 1995 and 1994, respectively.
<PAGE>

(h) Statements of Cash Flows

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 $2,141,000, $1,798,000, and
$720,000 and income taxes of approximately $977,000, $894,000 and $360,000, for
fiscal 1996, 1995 and 1994, respectively. During fiscal 1996, 1995 and 1994, the
Company entered into capital lease finance agreements of approximately
$2,346,000, $2,069,000 and $522,000, respectively, for restaurant equipment. In
1994, the Company purchased a minority interest from a Peasant Holding
stockholder for cash and a note payable (see Note 12).

(i) Earnings Per Share

For fiscal 1996, 1995 and 1994, weighted average common shares and
equivalents outstanding were 6,792,169, 6,367,093 and 6,366,509, respectively.
Fiscal 1996 includes incremental shares relating to common stock equivalents
(stock options) which are dilutive.

(j) Use of Estimates

Management of the Company has made certain estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.

(k) Long-Lived Assets

The Company's accounting policies relating to the recording of long-lived
assets including property and equipment and intangibles are discussed above. As
discussed in Note 3, the Company adopted the provisions of Statement 121
effective January 2, 1995. Statement 121 requires, among other things, that
long-lived assets held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the fair values of the assets. Assets to be
disposed of or sold are reported at the lower of the carrying amount or fair
value less costs to sell. Statement 121 did not have an impact on the Company at
adoption.

(l) Stock-Based Compensation

The Company records compensation expense for stock options only if the
current market price of the underlying stock exceeds the exercise price on the
date the options are granted. On January 1, 1996, the Company adopted Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("Statement 123"). The Company has elected not to implement the
fair value based accounting method for stock options, but has elected to
disclose the proforma net earnings and proforma earnings per share for stock
option grants made beginning in fiscal 1995 as if such method had been used to
account for stock-based compensation costs as described in Statement 123.
<PAGE>

(3) Assets Held For Sale and Related Liabilities

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 Mick's and Peasant. Pursuant to Statement 121, the Company
discontinued depreciating fixed assets and amortizing goodwill relating to
Mick's and Peasant for the second, third, and fourth quarters of fiscal 1995 and
all of fiscal 1996. The amount of such depreciation and amortization for the
corresponding fiscal 1994 period approximated $1,232,000.

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
December 29, 1996 and December 31, 1995 consolidated balance sheets include the
following components:

December 29, December 31,
1996 1995
---- ----
(amounts in thousands)

Current assets $ 2,166 $ 2,686
Net property and equipment 10,704 13,851
Unamortized goodwill 8,077 8,077
Other assets 2,143 4,089
Deferred tax assets -- 2,180
Write-down of carrying values (10,616) (8,300)
-------- --------
Assets held for sale 12,474 22,583

Current liabilities 3,495 3,470
Other liabilities 1,612 3,325
Lease exit and other transaction costs 7,027 7,200
-------- --------

Liabilities related to assets held for sale 12,134 13,995
-------- --------
Net assets held for sale $ 340 $ 8,588
======== ========

The following represents the combined results, before nonrecurring
charges, of Mick's and Peasant for the years ended December 29, 1996, December
31, 1995 and January 1, 1995. Interest expense was not allocated.

1996 1995 1994
---- ---- ----
(amounts in thousands)

Revenues $54,410 $ 64,387 $ 65,550

Food and beverage costs 15,956 18,839 19,321
Restaurant operating expenses 33,042 38,776 36,821
Depreciation, amortization and other
non-cash charges 172 2,679 5,859
General and administrative expenses 3,741 4,190 3,998
Marketing and promotional expenses 975 1,643 1,001
------- -------- --------

Income (loss) before income taxes $ 524 $ (1,740) $ (1,450)
======= ======== ========
<PAGE>

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. Most of the
interest received related to the majority of the restaurants located mainly in
the Atlanta area. No meaningful offers were received for the remaining
restaurants (the "Remaining Restaurants"). Cash flow analyses prepared by
management for the Remaining Restaurants indicated that it would be less costly
to close such restaurants in an orderly fashion in the near term, 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, had been accrued at December 31,
1995. During fiscal 1996, restaurant occupancy expenses of approximately
$1,498,000 for the Remaining Restaurants were charged against the accrual for
lease exit costs. During fiscal 1996, seven Mick's restaurants and two Peasant
restaurants were closed. During January 1997, two more Mick's restaurants were
closed.

On February 6, 1997, the Company completed the sale of its Atlanta-based
Mick's and Peasant restaurants. In connection with the sale, the Remaining
Restaurants were transferred to another subsidiary of the Company. Pursuant to
these agreements, MRI Acquisition Corporation acquired an 80.1% interest in
Mick's and PRI Acquisition Corporation acquired an 80.1% interest in Peasant for
an aggregate of $6,800,000, consisting of $4,300,000 in cash and $2,500,000 in
the form of two unsecured promissory notes. The Company retained a 19.9%
interest in Mick's and Peasant. In conjunction with the sale, the Company has
recorded a fiscal 1996 fourth quarter charge of $11,500,000 to write-down the
Atlanta-based restaurants to their net realizable values based on the fair value
of the consideration received, accrue for the various expenses related to the
closing of such sale and to write-off two restaurants which are not part of the
sale, one of which was closed in January 1997. Net assets held for sale at
December 29, 1996 consisted of net assets of $3,700,000 related to the
Atlanta-based restaurants and net liabilities of $3,400,000 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 Mick's and Peasant. 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) Investments

On August 13, 1993, a subsidiary of the Company purchased 30,000 shares of
Series A Cumulative Convertible Preferred Stock of Santa Fe ("Santa Fe Preferred
Stock") for a purchase price of $4,000,000. Santa Fe was a moderately-priced
full service steakhouse group based in Columbus, Ohio.

Dividends on the Santa Fe Preferred Stock accrued at an annual rate of 6.5%
through August 1994 and at 8% thereafter. The Company recorded this investment
under the cost method of accounting for long term investments. In connection
with the purchase of Santa Fe Preferred Stock, the Company paid $1,000,000 in
cash at closing and entered into three $1,000,000 notes payable to Santa Fe. The
Company paid one of the notes in November 1993 and the remaining notes during
fiscal 1994. In addition, a subsidiary of the Company loaned additional amounts
totaling $465,000 during fiscal 1994 and the Company entered into a guaranty of
up to $200,000 for Santa Fe lease obligations. During the second quarter of
fiscal 1994, the Company entered into a management agreement with Santa Fe.
Pursuant to the management agreement, the Company was entitled to receive an
annual management fee of 3% of the gross revenues of Santa Fe.
<PAGE>

As a result of Santa Fe's continuing operating losses and failure to meet
its development objectives, the Company recorded a nonrecurring charge of
$5,506,000 related to the write-off of the Company's loans and preferred stock
investment in Santa Fe during fiscal 1994. As of December 31, 1995, the Company
had utilized the entire amount accrued during fiscal 1994 and there have been no
further cash outlays.

(5) Development Costs

During the fourth quarter of fiscal 1994, the Company decided to suspend
development of future Mick's and Peasant restaurants and wrote off approximately
$597,000 of related development costs incurred through the architectural and
pre-construction stages for locations which the Company decided not to further
pursue.

(6) Accrued Expenses

Accrued expenses consist of the following:
December 29, December 31,
1996 1995
---- ----
(amounts in thousands)

Restaurant operating expenses $ 1,509 $ 592
Payroll and related taxes 1,004 775
Accrued construction costs 929 22
Current portion of capital lease
liabilities 913 534
Sales and use tax 882 787
Rent and property taxes 797 653
Accrued gift certificates 695 635
Other 1,066 501
------- -------

Total accrued expenses $ 7,795 $ 4,499
======= =======

(7) Bank Debt

The Company and The First National Bank of Boston ("FNBB") entered into the
Second Amended and Restated Revolving Credit and Term Loan Agreement, dated June
19, 1995 as amended from time to time (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 December 29, 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.

During fiscal 1996, FNBB syndicated portions of the Term Loan and Revolving
Credit Facility of the Credit Agreement to two additional lenders, Imperial Bank
and Heller Financial. FNBB, as agent for the Lenders, receives an annual fee of
$10,000 paid by the Company.
<PAGE>

Management believes that the carrying amount of long-term debt
approximates fair value since the interest rate is variable and the margins are
consistent with those available to the Company under similar terms.

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 December 29, 1996 amount to $1,600,000 in 1997, $3,200,000 in
1998, $3,200,000 in 1999, $3,200,000 in 2000 and $13,700,000 in 2001. As
discussed in Note 3, the Company has completed the sale of its Atlanta-based
Mick's and Peasant restaurants. Net cash proceeds from the sale were used to
reduce the Company's Revolving Credit Facility.

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 December 29, 1996,
the Company believes it was in compliance with such covenants.

The Credit Agreement permits the Company to pay dividends or repurchase
stock in an amount not to exceed 5% of consolidated net income calculated for
the fiscal year immediately preceding the fiscal years in which any such
dividends or repurchases take place, provided that no event of default is then
existing or would result from such payment. In addition, the Company is
permitted to pay dividends and repurchase stock in an additional amount not to
exceed 25% of net proceeds from equity offerings, including the Company's 1992
equity offering.

(8) Income Taxes

Income tax expense (benefit) for fiscal 1996, 1995 and 1994 includes state
and local current taxes in the amounts of $970,000, $250,000 and $580,000,
respectively. Included in income tax benefit for fiscal 1996, 1995 and 1994 are
approximately $5,477,000, $1,006,000 and $3,284,000, respectively, of benefits
relating to the utilization of the Company's net operating loss carryforward and
a reassessment of the valuation allowance against deferred tax assets.
<PAGE>

Income tax benefit for fiscal 1996, 1995 and 1994 differed from the amounts
computed by applying the U.S. Federal income tax rate of 34% to loss before
income taxes as a result of the following:

<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(amounts in thousands)
<S> <C> <C> <C>
Computed "expected" tax benefit $ (932) $(4,986) $(1,034)
Increase (reduction) in income taxes resulting from:
State and local income taxes, net of federal income tax
benefit 644 165 383
Amortization of intangible assets 139 159 209
Change in valuation allowance and increase in
deferred tax assets (4,523) 3,880 (2,044)
Other, net 165 26 (218)
------- ------- -------
$(4,507) $ (756) $(2,704)
======= ======= =======
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at the end of fiscal 1996
and 1995 are presented below:

<TABLE>
<CAPTION>
December 29, December 31,
1996 1995
---- ----
(amounts in thousands)
<S> <C> <C>
Deferred tax assets:
Federal and state net operating loss carryforwards $ 4,181 $ 2,158

Write-off of preferred stock investment 1,400 1,400
Write-down and related charges for
assets held for sale 6,109 5,270
Compensatory stock options 1,124 983
Deferred rent and start-up amortization 2,793 4,376
FICA and other tax credits 2,645 2,188
-------- --------
Total gross deferred tax assets 18,252 16,375
Less valuation allowance (7,114) (9,400)
-------- --------
Net deferred tax assets 11,138 6,975
Deferred tax liabilities:
Property and equipment depreciation 1,201 2,515
-------- --------
Net deferred tax assets and liabilities $ 9,937 $ 4,460
======== ========
</TABLE>

At December 29, 1996, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $4,747,000 expiring by 2007 and
various state income tax net operating loss carryforwards. Approximately
$1,400,000 of the Company's deferred tax asset related to the write-off of Santa
Fe represents a capital loss. Additionally, as of December 29, 1996, the Company
had approximately $2,645,000 in FICA and other tax credits available to reduce
income taxes payable in future years expiring by 2011. As a result of the
Company's equity offerings in 1992, certain limitations apply on the maximum
annual amount of the net operating loss carryforward and credit carryforwards
which may be utilized by the Company to offset taxable income in future periods.

temporary differences become deductible and net operating losses can be carried
forward. Management considers projected future taxable income and tax planning
strategies in making this assessment. Based upon the level of historical income
of the Morton's of Chicago and Bertolini's restaurants and projections of future
taxable income over the next two to three years, management believes it is more
likely than not that the Company will realize its net deferred tax asset.
Deferred tax assets arising from capital losses have been fully reserved for
since the Company has no capital gains to offset such losses.

(9) Capital Stock

(a) On December 15, 1994, the Company adopted a Stockholder Protection
Rights Plan ("Rights Plan"). Pursuant to the Rights Plan, a dividend of one
Right for each outstanding share of the Company's Common Stock was issued to
shareholders of record on January 3, 1995. Under certain conditions, each Right
may be exercised to purchase 1/100 of a share of Series A Junior Participating
Preferred Stock (the "Preferred Stock") of the Company at a price of $42. The
Rights will become exercisable following the tenth day after a person or group
acquires 15% or more of the Company's Common Stock or announces a tender or
exchange offer, the consummation of which would result in ownership by such
person or group of 15% or more of the Company's Common Stock. If a person or
group acquires 15% or more of the Company's outstanding Common Stock, each Right
will entitle its holder (other than such person or members of such group) to
purchase, at the Right's then-current purchase price, in lieu of 1/100 of a
share of Preferred Stock, a number of shares of the Company's Common Stock
having a market value of twice the Right's purchase price. In addition, if the
Company is acquired in a merger or other business combination, 50% or more of
its assets or earning power is sold or transferred, or a reclassification or
recapitalization of the Company occurs that has the effect of increasing by more
than 1% the proportionate ownership of the Company's Common Stock by the
acquiring person, then, each Right will entitle its holder to purchase, at the
Right's then-current purchase price, a number of the acquiring company's shares
of common stock having a market value at that time of twice the Right's purchase
price.

The Rights may be redeemed prior to becoming exercisable by the Company,
subject to approval of the Board of Directors for $.01 per Right, in accordance
with the provision of the Rights Plan. The Rights expire on January 3, 2005. The
Company has reserved 200,000 shares of Preferred Stock for issuance upon
exercise of the Rights.

(b) In May 1995, the Company amended its 1991 Stock Option Plan (the
"Stock Option Plan") which provides for the issuance of incentive stock options
("ISO's") and non-qualified stock options ("NQSO's") to employees. The Stock
Option Plan, as amended, provides that options, having a maximum term of ten
years, may be granted to purchase up to 900,000 shares of Common Stock.

The exercise price of ISO's will be equal to the fair market value of the
shares subject to option on the date of grant, while the exercise price of
NQSO's will be determined by a committee of the Board of Directors. Options vest
and become exercisable commencing at the second anniversary date of the grant at
the rate of 25% per year.
<PAGE>

Activity in stock options is summarized as follows:

<TABLE>
<CAPTION>
1996 1995 1994
-------------------- -------------------- --------------------
Weighted Shares Weighted Shares Weighted Shares
Average Subject Average Subject Average Subject
Exercise to Exercise to Exercise to
Price Option Price Option Price Option
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year $ 6.63 693,295 $ 6.27 648,745 $ 4.97 465,245
Options granted 12.97 233,650 10.88 97,000 9.94 233,600
Options exercised 3.67 76,580 -- -- 0.07 5,000
Options canceled 10.72 59,600 10.08 52,450 12.59 45,100
------ ------- ------ ------- ------ -------

End of year $ 8.48 790,765 $ 6.63 693,295 $ 6.27 648,745
------ ------- ------ ------- ------ -------
</TABLE>

As of December 29, 1996, there were 326,040 options exercisable with a weighted
average exercise price of $4.01.

(c) In October of 1995, the Financial Accounting Standards Board issued
Statement No. 123, "Accounting for Stock-Based Compensation" ("Statement 123"),
which was adopted by the Company in 1996. The Company has elected to disclose
the pro forma net income and earnings per share as if such method had been used
to account for stock-based compensation cost as described in Statement 123.

The per share weighted average fair value of stock options granted during
1996 and 1995 was $7.01 and $5.35 on the date of grant using the Black Scholes
option-pricing model with the following weighted average assumptions: 1996 -
expected dividend yield 0.0%, risk-free interest rate of 6.0%, and an expected
life of 7 years; 1995 - expected dividend yield 0.0%, risk-free interest rate of
6.0%, and an expected life of 6.8 years.

The Company applies APB Opinion No. 25 in accounting for its Stock Option
Plan and, accordingly, no compensation cost has been recognized for its stock
options in the financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for its stock options under
Statement 123, the Company's net income (loss) and net income (loss) per share
would have been reduced to the pro forma amounts indicated below:

1996 1995
---- ----
(amounts in thousands,
except per share data)

Net income (loss) as reported $1,765 $(13,908)
Pro forma $1,516 $(13,955)

Net income (loss) per share as reported $ 0.26 $ (2.18)
Pro forma $ 0.22 $ (2.19)

Pro forma net income (loss) reflects only options granted in 1996 and 1995.
Therefore, the full impact of calculating compensation cost for stock options
under Statement 123 is not reflected in the pro forma net income amounts
presented above because compensation cost is reflected over the options' vesting
period of five years and compensation cost for options granted prior to January
1, 1995 is not considered.
<PAGE>

(10) Operating Leases

All of the Company's operations are conducted in leased premises. Including
renewal options, remaining lease terms range from one to 25 years.

In connection with entering into leases, the Company is frequently provided
with development allowances from the lessors. These allowances for leasehold
improvements, furniture, fixtures and equipment are offset against the related
fixed asset accounts and the net amount is amortized on a straight-line basis
over the shorter of the lease term, including planned extensions, or estimated
useful lives of the assets. At the end of fiscal 1996 and fiscal 1995, $578,000
and $679,000, respectively, of development allowances were due from lessors and
are included in "Landlord construction receivables, prepaid expenses and other
current assets" in the accompanying consolidated balance sheets.

The Company leases certain office and restaurant facilities and related
equipment under noncancelable operating lease agreements with an affiliate and
third parties. Certain leases contain contingent rental provisions based upon a
percent of gross sales and or provide for rent deferral during the initial term
of such leases. Included in "Other liabilities" in the accompanying consolidated
balance sheets at the end of fiscal 1996 and fiscal 1995 are accruals related to
such rent deferrals of approximately $2,656,000 and $2,273,000, respectively. In
addition, included in "Liabilities related to assets held for sale" are
approximately $1,592,000 and $3,281,000, respectively, of such accruals at the
end of fiscal 1996 and 1995. For financial reporting purposes, such leases are
accounted for on a straight-line rental basis. Future minimum annual rental
commitments under these leases are approximately as follows:

Affiliate Third Party
--------- -----------
(amounts in thousands)

Fiscal 1997 $ 414 $ 12,533
Fiscal 1998 409 12,727
Fiscal 1999 397 12,050
Fiscal 2000 408 11,896
Fiscal 2001 418 11,472
Fiscal 2002 and thereafter 2,111 81,097
------ --------
Total minimum lease payments $4,157 $141,775
====== ========

Contingent rental payments on building leases are typically made based upon
the percentage of gross sales on the individual restaurants that exceed
predetermined levels. The percentage of gross sales to be paid and related gross
sales level vary by unit. Contingent rental expense was approximately
$2,391,000, $1,904,000 and $1,809,000, for fiscal 1996, 1995 and 1994,
respectively.

Rental expense for all leases was approximately $14,175,000, $13,375,000
and $11,378,000, for fiscal 1996, 1995 and 1994, respectively, of which
approximately, $564,000, $553,000 and $552,000, respectively, was paid to the
affiliate.

(11) Capital Leases

The Company finances the purchase of certain restaurant equipment through
capital leases. At December 29, 1996 and December 31, 1995, furniture, fixtures
and equipment include approximately
<PAGE>

$4,628,000 and $2,655,000 of net assets recorded under capital leases. These
assets are amortized over the life of the respective leases. At December 29,
1996 and December 31, 1995, capitalized lease obligations of approximately
$3,020,000 and $1,846,000 are included in "Other liabilities" in the
accompanying consolidated balance sheets. In addition, included in "Liabilities
related to assets held for sale" are approximately $17,000 and $43,000,
respectively, of such capital lease obligations at the end of fiscal 1996 and
1995.

The Company's minimum future obligations under capital leases as of
December 29, 1996 are as follows:

(amounts in thousands)
Fiscal 1997 $1,329
Fiscal 1998 1,267
Fiscal 1999 1,044
Fiscal 2000 713
Fiscal 2001 241
Fiscal 2002 and thereafter 5
------
Total minimum lease payments 4,599
Less amount representing interest 649
------
Present value of net minimum lease
payments
(including current portion of $913) $3,950
======

(12) Acquisition Related Agreements

In connection with the Peasant Holding acquisition (see Note 1), two of the
selling shareholders, who retained a minority interest in Peasant Holding,
signed employment agreements with Peasant Holding. One of these agreements was
for a period of five years and terminated in December 1993. The other had been
amended and restated effective December 1, 1992, and further amended and
supplemented September 13, 1995, and terminated on December 31, 1996.

In July 1994, the Company entered into an agreement to purchase 9% of the
outstanding 11% of common stock of Peasant Holding from one of the two minority
holders of Peasant Holding common stock. The purchase price of the shares was
approximately $1,985,000 plus interest calculated at 5%, which was paid in
installments through March 1996.

The Company has a right of first refusal should the remaining minority
shareholder desire to sell his Peasant Holding shares at any time after December
1996, and can require the shareholder to sell such shares to the Company or
Peasant Holding should the shareholder leave the employ of Peasant Holding.
Additionally, the shareholder has the right to require the Company or Peasant
Holding to purchase such shares during a three-year period which commenced in
December 1993. The price of the shares under all the aforementioned agreements
is based upon an agreed to formula of seven times earnings before interest and
taxes on a per share basis, adjusted for amortization of intangible assets
resulting from the acquisition of Peasant Holding and certain other effects of
the acquisition, as defined.

(13) Employment Agreements

The Company and its Chief Executive Officer entered into an employment
agreement on January 1, 1992. The agreement, as amended, is terminable by the
Company upon 60 months prior notice. On
<PAGE>

January 31, 1994, the Company entered into an employment agreement with its
President. The agreement, as amended, expires on January 31, 2000.

During fiscal 1994, the Company entered into change of control agreements
with the two officers noted above and another officer which grant these
employees the right to receive up to approximately three times their base
compensation (as computed under the Internal Revenue Code) if there is a change
in control of the Company and termination of their employment during a specified
period by the Company without cause or by such officer with good reason.

(14) Employee Benefit Plans

Employees of Morton's Restaurant Group, Morton's of Chicago, and
Bertolini's who are over the age of 21 and who have completed a year of service
are eligible for voluntary participation in a profit sharing plan. Employer
contributions to the plan are made at the discretion of the Board of Directors.
Employer contributions for fiscal 1996, 1995 and 1994 were $364,612, $145,203
and $128,758, respectively.

Effective January 1, 1991, Peasant Holding adopted a 401(K) Plan benefiting
certain employees. No employer contributions have been made.

(15) Legal Matters and Contingencies

In October 1995, the Company announced that the lawsuit among the Company, a
subsidiary of the Company and Mr. Alberto Lombardi and a company controlled by
Mr. Lombardi had been settled on mutually satisfactory terms and agreed to the
dismissal of all claims pending against each other. In connection with the
settlement, the Company recorded a pre-tax charge of approximately $2,240,000 in
1995, which amount includes legal and related costs associated with the lawsuit.
The settlement provides that it is not to be construed or considered to be an
admission of guilt or noncompliance with any federal, state or local statute,
public policy, tort law, common law or of any other wrongdoing whatsoever.

Price Range of Common Stock and Related Matters

================================================================================

The Company's Common Stock is traded on the New York Stock Exchange ("NYSE")
under the symbol "MRG". From January 21, 1994 until May 9, 1996, it was traded
under the symbol "KRG."

The following table sets forth, for the periods indicated, the highest and
lowest sale prices for the Common Stock, as reported by NYSE.

Fiscal Year Ended December 29, 1996 High Low
================================================================================

First Quarter........................................... $17 1/4 $10 7/8
Second Quarter.......................................... 19 13 5/8
Third Quarter........................................... 18 1/2 15 1/8
Fourth Quarter.......................................... 17 5/8 14

Fiscal Year Ended December 31, 1995 High Low
================================================================================

First Quarter........................................... $11 5/8 $ 9 5/8
Second Quarter.......................................... 11 5/8 9 7/8
Third Quarter........................................... 14 7/8 9 7/8
Fourth Quarter.......................................... 13 7/8 10 1/8

On December 29, 1996, the last reported sale price of the Common Stock on the
NYSE was $16.00.

As of March 3, 1997, there were approximately 58 holders of record of the
Company's Common Stock. The Company believes that as of such date there were
approximately 1,300 beneficial owners of its Common Stock.

The Company has not paid any dividends on its common stock since its inception.
The Company currently intends to retain all of its earnings to support the
continued development of its business and has no present intention of paying any
dividends on its Common Stock. Any future determination as to the payment of
dividends will be at the discretion of the Board of Directors and will depend on
the Company's financial condition, results of operations, capital requirements,
compliance with charter and contractual restrictions and such other factors as
the Board of Directors deems relevant. In addition, the Company's Credit
Agreement restricts the payment of dividends. See Note 7 of Notes to
Consolidated Financial Statements.
<PAGE>
Corporate Information
Morton's Restaurant Group, Inc. and Subsidiaries

The Board of Directors

Allen J. Bernstein (1)
Chairman of the Board
and Chief Executive Officer,
Morton's Restaurant Group, Inc.

Robert L. Barney (3)
Retired Chairman,
Wendy's International, Inc.

John K. Castle (1,3)
Chairman and Chief Executive Officer,
Castle Harlan, Inc.,
a private merchant bank.

Dr. John J. Connolly (3)
President and Chief Executive Officer,
Castle Connolly Medical Ltd.

William L. Hyde, Jr.
President, Chief Operating Officer
and Director,
Morton's Restaurant Group, Inc.

David B. Pittaway (1,2)
Managing Director,
Castle Harlan, Inc.

Dianne H. Russell (2)
Senior Vice President, Manager
Imperial Bank

Alan A. Teran (2)
Private Investor

Committees of the Board

1. Executive 2. Audit 3. Compensation and Stock Option

Senior Corporate Officers

Allen J. Bernstein
Chairman of the Board
and Chief Executive Officer

William L. Hyde, Jr.
President, Chief Operating Officer
and Director

Thomas J. Baldwin
Executive Vice President,
Chief Financial Officer,
Assistant Secretary and Treasurer

Agnes Longarzo
Vice President -
Administration and Secretary

Allan C. Schreiber
Vice President - Real Estate

Klaus W. Fritsch
Vice Chairman and Co-Founder
Morton's of Chicago

Thomas J. Walters
President
Morton's of Chicago

Geoffrey D. Stiles
Vice President - Operations
Bertolini's Restaurants

Investor Data

Common Stock
The common stock of Morton's
Restaurant Group, Inc. is traded on
the New York Stock Exchange under
the symbol "MRG" (NYSE:MRG).

Stock Transfer Agent and
Registrar of Stock
The First National Bank of Boston
c/o Boston Equiserve, L.P.
P.0. Box 644
Boston, Massachusetts 02102

Counsel
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022

Independent Auditors
KPMG Peat Marwick LLP
One Jericho Plaza
Jericho, New York 11753

Executive Offices
3333 New Hyde Park Road
New Hyde Park, New York 11042

Form 10-K Information
A copy of the Company's annual
report on Form 10-K, together with
financial statements and schedules,
as filed with the Securities and
Exchange Commission, will be fur-
nished to any stockholder without
charge upon written request to the
Company.

Investor Relations
Thomas J. Baldwin
Executive Vice President,
Chief Financial Officer
Morton's Restaurant Group, Inc.
3333 New Hyde Park Road
New Hyde Park, New York 11042

Annual Meeting
The annual meeting of stockholders
will be held at 9:00 A.M. on
Thursday May 1,1997 at
The Garden City Hotel,
45 seventh Street, Garden City,
New York 11530.

SUBSIDIARIES OF THE REGISTRANT

NAME STATE OF INCORPORATION
---- ----------------------

1. Porterhouse, Inc. Delaware
2. Morton's of Chicago, Inc. Illinois
3. Morton's of Chicago/Addison, Inc. Delaware
4. Morton's of Chicago/Atlanta, Inc. Illinois
5. Morton's of Chicago/Baltimore, Inc. Delaware
6. Morton's of Chicago/Boston, Inc. Illinois
7. Morton's of Chicago/Buckhead, Inc. Delaware
8. Morton's of Chicago/Charlotte, Inc. Delaware
9. Morton's of Chicago/Chicago, Inc. Delaware
10. Morton's of Chicago/Cincinnati, Inc. Delaware
11. Morton's of Chicago/Clayton, Inc. Delaware
12. Morton's of Chicago/Cleveland, Inc. Illinois
13. Morton's of Chicago/Columbus, Inc. Delaware
14. Morton's of Chicago/Dallas, Inc. Illinois
15. Morton's of Chicago/Denver, Inc. Illinois
16. Morton's of Chicago/Detroit, Inc. Delaware
17. Morton's of Chicago/Fifth Avenue, Inc. Delaware
18. Morton's of Chicago/Houston, Inc. Delaware
19. Morton's of Chicago/Las Vegas, Inc. Delaware
20. Morton's of Chicago/Minneapolis, Inc. Delaware
21. Morton's of Chicago/Nashville, Inc. Delaware
22. Morton's of Chicago/New Orleans, Inc. Illinois
23. Morton's of Chicago/Orlando, Inc. Delaware
24. Morton's of Chicago/Palm Beach, Inc. Delaware
25. Morton's of Chicago/Palm Desert, Inc. Delaware
26. Morton's of Chicago/Philadelphia, Inc. Illinois
27. Morton's of Chicago/Phoenix, Inc. Delaware
28. Morton's of Chicago/Pittsburgh, Inc. Delaware
<PAGE>

29. Morton's of Chicago/Rosemont, Inc. Illinois
30. Morton's of Chicago/Sacramento, Inc. Delaware
31. Morton's of Chicago/San Antonio, Inc. Delaware
32. Morton's of Chicago/San Diego, Inc. Delaware
33. Morton's of Chicago/San Francisco, Inc. Delaware
34. Morton's of Chicago/Santa Ana, Inc. Delaware
35. Morton's of Chicago/Virginia, Inc. Illinois
36. Morton's of Chicago/Washington, DC, Inc. Delaware
37. Morton's of Chicago/Washington Square, Inc. Delaware
38. Morton's of Chicago/West Street, Inc. Delaware
39. Morton's of Chicago/Westbrook, Inc. Illinois
40. Morton's, Inc. Illinois
41. Porterhouse of Los Angeles, Inc. Delaware
42. Addison Steakhouse, Inc. Texas
43. Chicago Steakhouse, Inc. Texas
44. Houston Steakhouse, Inc. Texas
45. San Antonio Steakhouse, Inc. Texas
46. Peasant Holding Corp. Delaware
47. The Peasant Restaurants, Inc. Delaware
48. Mick's Restaurants, Inc. Delaware
49. Peasant at Locust Street, Inc. Delaware
50. Mick's at Gwinnett Place, Inc. Delaware
51. Mick's at Town Center, Inc. Delaware
52. Mick's at the Forum/Minneapolis, Inc. Delaware
53. Mick's at Towson Commons, Inc. Delaware
54. Mick's at Cumberland Mall, Inc. Delaware
55. Mick's at Pennyslyvania Ave., Inc. Delaware
56. Mick's at Southdale Center, Inc. Delaware
57. Mick's at 19th Street, Inc. Delaware
58. Mick's at the Bellevue, Inc. Delaware
59. Mick's at Fair Oaks, Inc. Delaware
<PAGE>

60. Mick's at Willow Grove, Inc. Delaware
61. Mick's at Northpoint Mall, Inc. Delaware
62. Mick's at Springfield, Inc. Delaware
63. Mick's at Annapolis Mall, Inc. Delaware
64. Mick's at Loehmann's Fashion Island, Inc. Delaware
65. Mick's at Hickory Hollow, Inc. Delaware
66. Mick's at Oak Court, Inc. Delaware
67. Mick's at Rivergate, Inc. Delaware
68. Italian Restaurants Holding Corp. Delaware
69. Bertolini's Restaurants, Inc. Delaware
70. Bertolini's of Circle Centre, Inc. Delaware
71. Bertolini's of Irvine Center, Inc. Delaware
72. Bertolini's of King of Prussia, Inc. Delaware
73. Bertolini's of Las Vegas, Inc. Delaware
74. Bertolini's at Market Square, Inc. Delaware
75. Bertolini's of Phipps Plaza, Inc. Delaware
76. Bertolini's of Phillips Place, Inc. Delaware
77. Bertolini's of Westbury, Inc. Delaware
78. Bertolini's of WhiteFlint Mall, Inc. Delaware
79. Bertolini's of Costa Mesa, Inc. Delaware
80. Quantum Restaurant Development Corporation Georgia
81. Santa Fe Steakhouse & Cantina Corp. Delaware

Consent of Independent Auditors

The Board of Directors
Morton's Restaurant Group, Inc.:

We consent to the incorporation by reference in the registration statement on
Form S-8 of Morton's Restaurant Group, Inc. of our report dated February 7,
1997, relating to the consolidated balance sheets of Morton's Restaurant Group,
Inc. and subsidiaries as of December 29, 1996 and December 31, 1995 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 29, 1996,
which report is incorporated by reference in the December 29, 1996 annual report
on Form 10-K of Morton's Restaurant Group, Inc.

KPMG PEAT MARWICK LIP

Jericho, New York
March 24, 1997

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from December 29,
1996 Form 10K
</LEGEND>
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-29-1996
<CASH> 2,276
<SECURITIES> 0
<RECEIVABLES> 2,116
<ALLOWANCES> 0
<INVENTORY> 4,254
<CURRENT-ASSETS> 27,336 <F1>
<PP&E> 29,024
<DEPRECIATION> 4,353
<TOTAL-ASSETS> 76,986
<CURRENT-LIABILITIES> 25,323 <F2>
<BONDS> 24,900
0
0
<COMMON> 64
<OTHER-SE> 21,023
<TOTAL-LIABILITY-AND-EQUITY> 76,986
<SALES> 193,378
<TOTAL-REVENUES> 193,378
<CGS> 64,723
<TOTAL-COSTS> 163,559
<OTHER-EXPENSES> 30,264 <F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,297
<INCOME-PRETAX> (2,742)
<INCOME-TAX> (4,507)
<INCOME-CONTINUING> 1,765
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,765
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
<FN>
<F1> Current assets include $12,474 of Assets Held for Sale.
<F2> Current liabilities include $12,134 of Liabilities Related to Assets Held
for Sale.
<F3> Includes write down and related charges for net assets held for sale of
$11,500.
</FN>

</TABLE>