<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-12692
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MORTON'S RESTAURANT GROUP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3490149
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(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
3333 New Hyde Park Road, Suite 210, New Hyde Park, New York 11042
- --------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
516-627-1515
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
As of November 3, 1998, the registrant had 6,547,720 shares of its Common Stock,
$.01 par value, issued and outstanding.
1
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MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Part I - Financial Information Page
------------------------------ ----
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of September 27, 1998 and December 28, 1997 ..................... 3-4
Consolidated Statements of Income for the three and nine month periods ended
September 27, 1998 and September 28, 1997 .................................................... 5
Consolidated Statements of Cash Flows for the nine month periods ended September 27, 1998
and September 28, 1997 ....................................................................... 6
Notes to Consolidated Financial Statements ..................................................... 7-9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ........................................................................ 10-15
Part II - Other Information
Item 1. Legal Proceedings ....................................................................... 16
Item 4. Submission of Matters to a Vote of Stockholders ......................................... 16
Item 6. Exhibits and Reports on Form 8-K ........................................................ 16
Signatures ....................................................................................... 17
</TABLE>
2
<PAGE>
Item 1. Financial Statements
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(amounts in thousands)
<TABLE>
<CAPTION>
September 27, December 28,
1998 1997
------- -------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ................................... $ 2,015 $ 3,437
Accounts receivable ......................................... 2,153 1,669
Inventories ................................................. 5,479 5,420
Landlord construction receivables, prepaid expenses and other
current assets ............................................ 2,701 3,226
Deferred income taxes ....................................... 5,420 4,890
------- -------
Total current assets .................................. 17,768 18,642
Property and equipment, at cost:
Furniture, fixtures and equipment ........................... 21,929 19,169
Leasehold improvements ...................................... 26,782 21,876
Land ........................................................ 3,869 --
Construction in progress .................................... 1,499 46
------- -------
54,079 41,091
Less accumulated depreciation and amortization .............. 8,815 6,449
------- -------
Net property and equipment ............................ 45,264 34,642
------- -------
Intangible assets, net of accumulated amortization of $3,760 at
September 27, 1998 and $3,458 at December 28, 1997 .......... 12,235 12,537
Other assets and deferred expenses, net of accumulated
amortization of $2,933 at September 27, 1998 and $3,901 at
December 28, 1997 ........................................... 10,859 11,902
Deferred income taxes ............................................ 2,040 4,220
------- -------
$88,166 $81,943
------- -------
------- -------
</TABLE>
(Continued)
3
<PAGE>
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
(amounts in thousands, except share data)
<TABLE>
<CAPTION>
September 27, December 28,
1998 1997
------- -------
(unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ............................................ $ 6,916 $ 6,159
Accrued expenses ............................................ 7,820 13,210
Current portion of bank debt and capital lease obligations .. 1,704 1,419
Accrued income taxes ........................................ 387 656
------- -------
Total current liabilities ........................... 16,827 21,444
Bank debt ........................................................ 30,022 24,931
Capital lease obligations ........................................ 3,073 3,739
Other liabilities ................................................ 3,417 3,274
------- -------
Total liabilities ................................... 53,339 53,388
------- -------
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 6,652,915
shares at September 27, 1998 and 6,604,565 shares at
December 28, 1997 ......................................... 67 66
Nonvoting common stock, $.01 par value per share ............
Authorized 3,000,000 shares, no shares issued or
outstanding ............................................... -- --
Additional paid-in capital .................................. 62,708 62,214
Cumulative foreign currency translation adjustment .......... (72) --
Accumulated deficit ......................................... (27,876) (33,725)
------- -------
Total stockholders' equity ............................ 34,827 28,555
------- -------
$88,166 $81,943
------- -------
------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
1998 1997 1998 1997
-------- -------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues ............................................ $ 40,886 $ 37,461 $134,201 $125,056
Food and beverage costs ............................. 14,005 12,787 45,932 42,958
Restaurant operating expenses ....................... 19,021 17,680 58,904 55,860
Depreciation, amortization and other non-cash charges 1,801 1,410 6,415 5,324
General and administrative expenses ................. 3,105 2,993 9,921 9,885
Marketing and promotional expenses .................. 1,063 846 3,516 2,928
Interest expense, net ............................... 532 564 1,714 1,772
-------- -------- -------- --------
Income before income taxes ................ 1,359 1,181 7,799 6,329
Income tax expense .................................. 340 295 1,950 1,582
-------- -------- -------- --------
Net income ................................. $ 1,019 $ 886 $ 5,849 $ 4,747
-------- -------- -------- --------
-------- -------- -------- --------
Net income per share:
Basic ...................................... $ 0.15 $ 0.14 $ 0.88 $ 0.73
-------- -------- -------- --------
-------- -------- -------- --------
Diluted .................................... $ 0.15 $ 0.13 $ 0.84 $ 0.69
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average shares outstanding:
Basic ...................................... 6,652 6,515 6,634 6,481
-------- -------- -------- --------
-------- -------- -------- --------
Diluted .................................... 6,930 6,949 6,927 6,873
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(amounts in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
Sept. 27, Sept. 28,
1998 1997
-------- --------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income ...................................................... $ 5,849 $ 4,747
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation, amortization and other non-cash charges ........... 6,415 5,324
Deferred income taxes ........................................... 1,650 1,283
Change in assets and liabilities:
Accounts receivable ......................................... (483) (650)
Inventories ................................................. (58) (370)
Prepaid expenses and other assets ........................... 113 (3,090)
Accounts payable, accrued expenses and other liabilities .... (6,188) (3,157)
Accrued income taxes ........................................ (269) (385)
-------- --------
Net cash provided by operating activities .............. 7,029 3,702
-------- --------
Cash flows from investing activities:
Purchases of property and equipment, net ........................ (8,923) (6,144)
Payments for start-up costs, licenses and other deferred expenses (2,072) (4,896)
Proceeds from sale of Mick's and Peasant restaurants ............ -- 4,308
-------- --------
Net cash used by investing activities .................. (10,995) (6,732)
-------- --------
Cash flows from financing activities:
Principal reduction on bank debt ................................ (4,296) (7,665)
Proceeds from bank debt ......................................... 6,400 10,200
Net proceeds from issuance of stock ............................. 495 471
-------- --------
Net cash provided by financing activities .............. 2,599 3,006
-------- --------
Effect of exchange rate changes on cash .............................. (55) --
-------- --------
Net decrease in cash and cash equivalents ............................ (1,422) (24)
Cash and cash equivalents at beginning of period ..................... 3,437 2,276
-------- --------
Cash and cash equivalents at end of period ........................... $ 2,015 $ 2,252
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 27, 1998 and September 28, 1997
1) The accompanying unaudited, consolidated financial statements have
been prepared in accordance with instructions to Form 10-Q and, therefore, do
not include all information and footnotes normally included in financial
statements prepared in conformity with generally accepted accounting principles.
They should be read in conjunction with the consolidated financial statements of
Morton's Restaurant Group, Inc., (the "Company") for the fiscal year ended
December 28, 1997, filed by the Company on Form 10-K with the Securities and
Exchange Commission on March 26, 1998.
The accompanying financial statements are unaudited and include all
adjustments (consisting of normal recurring adjustments and accruals) that
management considers necessary for a fair presentation of its financial position
and results of operations for the interim periods presented. The results of
operations for the interim periods are not necessarily indicative of the results
that may be expected for the entire year.
The Company uses a fiscal year which consists of 52 weeks.
Approximately every six or seven years, a 53rd week will be added.
2) For the purposes of the consolidated statements of cash flows, the
Company considers all highly liquid instruments purchased with a maturity of
three months or less to be cash equivalents. The Company paid cash interest and
fees, net of amounts capitalized, of approximately $1,616,000 and $1,398,000 and
income taxes of approximately $797,000 and $954,000, for the nine months ended
September 27, 1998 and September 28, 1997, respectively. During the first nine
months of fiscal 1998 and 1997, the Company entered into capital lease
arrangements of approximately $953,000 and $1,569,000, respectively, for
restaurant equipment. Also during the first nine months of fiscal 1998, the
Company entered into mortgage financing of $3,000,000 for the purchase of land
and construction of a restaurant.
3) As described below, on February 6, 1997, the Company completed the
sale of its Atlanta-based Mick's Restaurants, Inc. ("Mick's") and The Peasant
Restaurants, Inc. ("Peasant"). 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 had
approved a plan for the sale of Mick's and Peasant.
7
<PAGE>
The following represents the combined results of operations for Mick's
and Peasant for the periods ended September 27, 1998 and September 28, 1997.
Interest expense was not allocated.
<TABLE>
<CAPTION>
Nine Months Ended
Sept. 27, 1998 Sept. 28, 1997*
-------------- --------------
(amounts in thousands, unaudited)
<S> <C> <C>
Revenues ............................................ $ -- $7,981
Food and beverage costs ............................. -- 2,407
Restaurant operating expense ........................ -- 4,841
Depreciation, amortization and other non-cash charges -- 6
General and administrative expenses ................. -- 529
Marketing and promotional expenses .................. -- 138
------ ------
Income before income taxes ................. $ -- $ 60
------ ------
------ ------
</TABLE>
- --------------
*Includes the Atlanta-based Mick's and Peasant restaurants through
February 6, 1997, the date of sale, as discussed below, and the five remaining
non-Atlanta Mick's restaurants which the Company sold, closed or otherwise
disposed of during fiscal 1997.
Management had been actively seeking potential buyers for the sale of
all Mick's and Peasant restaurants, however, 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, rather than continue to operate them through the end of
their respective lease terms. Accordingly, assets of $8,300,000 related to the
Remaining Restaurants were written off and expenses of $7,200,000, representing
management's estimate of the expected costs to terminate related leases, were
accrued at December 31, 1995. During the first nine months of fiscal 1998 and
1997, restaurant occupancy expense of approximately $546,000 and $1,201,000 for
the Remaining Restaurants has been charged against the accrual for lease exit
costs, respectively. During fiscal 1997, the remaining seven Mick's restaurants
were sold, closed or otherwise disposed of. At September 27, 1998 and December
28, 1997, included in "Accrued expenses" in the accompanying consolidated
balance sheet is approximately $231,000 and $788,000 representing the remaining
lease disposition liabilities related to the closing of these restaurants.
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 which, on April 6, 1998 was exchanged for a
19.9% interest in Atlanta Dining Group, Inc., parent of Mick's and Peasant. The
unsecured promissory notes and the 19.9% interest in Mick's and Peasant were
recorded at their estimated fair values on the date of the sale of approximately
$2,200,000 and are included in "Other assets and deferred expenses" in the
accompanying consolidated balance sheets at September 27, 1998 and December 28,
1997. In conjunction with the sale, the Company had 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
8
<PAGE>
received, to 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, both of which
were disposed of in fiscal 1997.
4) During 1998, the Company opened two international locations, one in
Singapore (May 1998) and one in Toronto (September 1998). Foreign revenues and
expenses are translated at average exchange rates and foreign assets and
liabilities are translated at period-end exchange rates. Net foreign exchange
gains and losses on translation are reported in stockholders' equity.
5) During fiscal 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income". For the nine
months ended September 27, 1998, the change in the cumulative foreign currency
translation adjustment was $72,000, which is a component of comprehensive
income.
6) In October 1998, the Company announced that its board of directors
has authorized a repurchase of up to 20%, or approximately 1.3 million shares,
of the Company's outstanding common stock. The timing and amount of the
purchases will be at the full discretion of the Company's senior management and
subject to market conditions and applicable securities and tax regulations. The
repurchase will be accomplished through periodic purchases at prevailing prices
on the open market, by block purchases or in privately negotiated transactions.
The repurchased shares will be retained as treasury stock for use for corporate
purposes. The Company expects to finance the purchases from existing cash flow,
through its current credit facility, from additional borrowings, or a
combination thereof.
7) The Company is involved in various legal actions. See "Part II -
Other Information, Item 1. Legal Proceedings" on page 16 of this Form 10-Q for a
discussion of these legal actions.
9
<PAGE>
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The following table represents the unaudited combined results of
operations for Morton's Restaurant Group, Morton's of Chicago Steakhouses
(Morton's) and Bertolini's Authentic Trattorias (Bertolini's), excluding Mick's
Restaurants, Inc. (Mick's) and The Peasant Restaurants, Inc. (Peasant). As
discussed in Note 3 to the accompanying consolidated financial statements, the
Company completed the sale of its Atlanta-based Mick's and Peasant restaurants
on February 6, 1997 and closed, sold, or otherwise disposed of all other
remaining Mick's and Peasant restaurants during fiscal 1997.
Morton's Restaurant Group, Inc., Morton's and Bertolini's (excluding Mick's
and Peasant):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 27, 1998 Sept. 28, 1997 Sept. 27, 1998 Sept. 28, 1997
-------------- -------------- -------------- --------------
(amounts in thousands)
<S> <C> <C> <C> <C>
Revenues ........................... $ 40,886 $ 36,661 $134,201 $117,075
Food and beverage costs ............ 14,005 12,531 45,932 40,551
Restaurant operating expenses ...... 19,021 17,160 58,904 51,019
Depreciation, amortization and other
non-cash charges ............... 1,801 1,410 6,415 5,317
General and administrative expenses 3,105 2,941 9,921 9,357
Marketing and promotional expenses . 1,063 831 3,516 2,790
Interest expense, net .............. 532 564 1,714 1,772
-------- -------- -------- --------
Income before income taxes $ 1,359 $ 1,224 $ 7,799 $ 6,269
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
The following represents the unaudited combined results of operations for
Mick's and Peasant. Interest expense was not allocated to Mick's and Peasant.
Mick's and Peasant Restaurants:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 27, 1998 Sept. 28, 1997 Sept. 27, 1998 Sept. 28, 1997
-------------- -------------- -------------- --------------
(amounts in thousands)
<S> <C> <C> <C> <C>
Revenues ........................... $ -- $ 800 $ -- $ 7,981
Food and beverage costs ............ -- 255 -- 2,407
Restaurant operating expenses ...... -- 521 -- 4,841
Depreciation, amortization and other
non-cash charges .............. -- -- -- 6
General and administrative expenses -- 52 -- 529
Marketing and promotional expenses . -- 15 -- 138
-------- -------- -------- --------
Income (loss) before
income taxes ............ $ -- $ (43) $ -- $ 60
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
10
<PAGE>
Revenues increased $3.4 million, or 9.1%, to $40.9 million for the
three month period ended September 27, 1998, from $37.5 million for the
comparable 1997 period. Revenues from Morton's and Bertolini's increased $4.2
million, or 11.5%, to $40.9 million for the three month period ended September
27, 1998, from $36.7 million during the comparable 1997 period. Of the increase
in Morton's and Bertolini's revenues, $3.6 million was attributable to
incremental restaurant revenues from ten new restaurants opened after December
30, 1996 and $0.8 million, or 2.3%, was attributable to additional comparable
revenues from restaurants open all of both periods. Average Morton's and
Bertolini's revenues per restaurant open for a full period decreased 0.5%.
Included in 1997 three-month revenues is approximately $0.2 million of
consulting fee income. Revenues for the Mick's and Peasant restaurants were
approximately $0.8 million in the third quarter of fiscal 1997.
Revenues increased $9.1 million, or 7.3%, to $134.2 million for the
nine month period ended September 27, 1998, from $125.1 million for the
comparable 1997 period. Revenues from Morton's and Bertolini's increased $17.1
million, or 14.6%, to $134.2 million for the nine month period ended September
27, 1998, from $117.1 million for the comparable 1997 period. Of the increase in
Morton's and Bertolini's revenues, $14.0 million was attributable to incremental
restaurant revenues from ten new restaurants opened after December 30, 1996 and
$3.8 million, or 3.4%, was attributable to additional comparable revenues from
restaurants open all of both periods. Average Morton's and Bertolini's revenues
per restaurant open for a full period increased 0.9%. Included in 1997
nine-month revenues is approximately $0.5 million of investment income and $0.2
million of consulting fee income. As stated in Note 3, the Company completed the
sale of its Atlanta-based Mick's and Peasant restaurants on February 6, 1997 and
all remaining Mick's and Peasants were disposed of during fiscal 1996 and 1997.
Revenues for the Mick's and Peasant restaurants were approximately $8.0 million
for the nine-month period ended September 28, 1997. Certain Bertolini's
restaurants have generated lower than anticipated revenues which have adversely
impacted average restaurant revenues, earnings and earnings trends.
Additionally, as reflected in the table below, 1998 was impacted by declines in
Bertolini's comparable restaurant revenues offset by increases in Morton's.
Percentage changes in comparable restaurant revenues for the three and
nine-month periods ended September 27, 1998 versus September 28, 1997 for
restaurants open all of both periods are as follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Sept. 27, 1998 Ended Sept. 27, 1998
Percentage Change Percentage Change
----------------- -----------------
<S> <C> <C>
Morton's .. 4.2% 4.3%
Bertolini's -5.9% -0.9%
Total ..... 2.3% 3.4%
</TABLE>
Food and beverage costs increased from $12.8 million for the three month
period ended September 28, 1997 to $14.0 million for the three month period
ended September 27, 1998 and increased from $43.0 million for the nine month
period ended September 28, 1997 to $45.9 million for the nine month period ended
September 27, 1998. Food and beverage costs, excluding all Mick's and Peasant
restaurants, increased by $1.5 million to $14.0 million for the three month
period ended September 27, 1998 from $12.5 million recorded for the three month
period ended September 28, 1997 and increased by $5.3 million to $45.9 million
for the nine month period ended September 27, 1998, from $40.6 million for the
comparable 1997 period. These costs as a percentage of related revenues
increased 0.1% and decreased 0.4% for the three and nine month periods,
respectively. As a result of the disposition of Mick's and Peasant as discussed
in Note 3, there was a reduction in food and beverage costs of approximately
$0.3 million and $2.4 million in the three and nine month periods ended
September 27, 1998 from the corresponding 1997 periods, respectively.
11
<PAGE>
Restaurant operating expenses which include labor, occupancy and other
operating expenses increased from $17.7 million for the three month period ended
September 28, 1997 to $19.0 million for the three month period ended September
27, 1998, an increase of $1.3 million. For the nine months ended September 27,
1998, these costs increased from $55.9 million during the 1997 period, to $58.9
million for the comparable 1998 period. Restaurant operating expenses, excluding
all Mick's and Peasant restaurants, increased from $17.2 million for the three
month period ended September 28, 1997 to $19.0 million for the comparable 1998
period and increased from $51.0 million for the nine month period ended
September 28, 1997 to $58.9 million for the comparable 1998 period. Those costs,
excluding Mick's and Peasant, as a percentage of revenues decreased 0.3% from
46.8% for the three month period ended September 28, 1997 to 46.5% for the three
month period ended September 27, 1998 and increased 0.3% from 43.6% for the nine
month period ended September 28, 1997 to 43.9% for the comparable 1998 period.
Offsetting the increase in total restaurant operating expenses was a reduction
of approximately $0.5 million and $4.8 million during the three and nine month
periods ended September 27, 1998 versus the comparable 1997 periods,
respectively, due to the disposition of Mick's and Peasant restaurants as
discussed in Note 3.
Depreciation, amortization and other non-cash charges increased from
$1.4 million for the three month period ended September 28, 1997 to $1.8 million
for the three month period ended September 27, 1998 and increased from 3.8% of
revenues to 4.4%, respectively. For the nine months ended September 27, 1998,
such costs were $6.4 million versus $5.3 million for the comparable 1997 period.
Pre-opening costs associated with the opening of new restaurants are amortized
over the 12 months following opening. Timing of restaurant openings affects the
amount of amortization of such costs.
General and administrative expenses for the three month period ended
September 27, 1998 were $3.1 million, an increase of $0.1 million, from $3.0
million for the three month period ended September 28, 1997. For the nine months
ended September 27, 1998, such costs were $9.9 million versus $9.9 million for
the comparable 1997 period. General and administrative expenses, excluding all
Mick's and Peasant restaurants, increased $0.2 million from $2.9 million for the
three month period ended September 28, 1997 to $3.1 million for the comparable
1998 period and increased $0.5 million from $9.4 million for the nine month
period ended September 28, 1997, to $9.9 million for the comparable 1998 period.
Such costs, excluding Mick's and Peasant, as a percentage of revenues were 7.6%
for the three month period ended September 27, 1998, a decrease of 0.4% from the
three month period ended September 28, 1997 and 7.4% for the nine months ended
September 27, 1998, a decrease of 0.6% from the nine months ended September 28,
1997. The increase in such expense is driven by incremental costs associated
with restaurant development. General and administrative expenses relating to
Mick's and Peasant restaurants decreased $0.1 million and $0.5 million during
the three and nine month periods ended September 27, 1998, respectively, versus
the comparable 1997 period as a result of the disposition of Mick's and Peasant
restaurants discussed in Note 3.
Marketing and promotional expenses were $1.1 million, an increase of
$0.3 million, and $3.5 million, an increase of $0.6 million, for the three and
nine month periods ended September 27, 1998, respectively. Marketing and
promotional expenses, excluding Mick's and Peasant restaurants, were $1.0
million, or 2.6% of revenues for the three months ended September 27, 1998, as
compared to $0.8 million, or 2.3% of revenues, for the comparable 1997 period
and were $3.5 million, or 2.6% of revenues for the nine months ended September
27, 1998, as compared to $2.8 million, or 2.4% of revenues, for the comparable
1997 period. The increase is driven by incremental costs associated with
increased restaurant development. Mick's and Peasant marketing and promotional
expenses were $0.01 million and $0.1 million during the three and nine-month
periods ended September 28, 1997.
Interest expense, net of interest income, decreased $0.1 million to $0.5
million for the three month period ended September 27, 1998. For the nine month
period ended September 27, 1998, interest expense decreased $0.1 million to $1.7
million.
12
<PAGE>
Income tax expense of $2.0 million for the nine month period ended
September 27, 1998 represents Federal income taxes, which were partially offset
by the establishment of additional deferred tax assets relating to FICA and
other tax credits that were generated during fiscal 1998, as well as state
income taxes.
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 are used for
noncurrent capital expenditures and/or payments of long-term debt balances under
revolving credit agreements.
The Company and BankBoston, N.A. (formerly The First National Bank of
Boston) ("BBNA") entered into the Second Amended and Restated Revolving Credit
and Term Loan Agreement dated as of June 19, 1995, as amended from time to time
(collectively, the "Credit Agreement"), pursuant to which the Company's credit
facility is $32,500,000, consisting of a $32,500,000 revolving credit facility
(the "Revolving Credit"). The Revolving Credit will be payable in full on the
final maturity date of December 31, 2004. 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 September 27, 1998, the Company's applicable margin,
calculated pursuant to the Credit Agreement, was 0.00% on base rate loans and
1.75% on Eurodollar Rate loans. BBNA has syndicated portions of the Revolving
Credit.
As of September 27, 1998 and December 28, 1997, the Company had
outstanding borrowings of $25,000,000 and $22,700,000, respectively, under the
Credit Agreement. At September 27, 1998, $230,000 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 $7,270,000. The
weighted average interest rate on all bank borrowings on September 27, 1998 was
7.5%. In addition, the Company is obligated to pay fees of 0.25% on unused loan
commitments less than $10,000,000, 0.375% on unused loan commitments greater
than $10,000,000 and a per annum letter of credit fee (based on the face amount
thereof) equal to the applicable margin on the Eurodollar Rate loans.
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 September
27, 1998 amount to $0 for each of 1998 through 2003 and $32,500,000 in 2004. The
borrowings under the Company's Credit Agreement have been classified as
long-term bank debt on the Company's consolidated balance sheet. As stated in
Note 3 to the accompanying consolidated financial statements, the Company
completed the sale of its Atlanta-based Mick's and Peasant restaurants in fiscal
1997. Net cash proceeds from the sale were used to reduce the Company's
Revolving Credit.
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 September 27, 1998,
the Company believes it was in compliance with such covenants.
13
<PAGE>
On April 7, 1998 and May 29, 1998, the Company entered into interest
rate swap agreements with BBNA on notional amounts of $10,000,000 each. The term
of the agreements are for three years and may be extended for an additional two
years at the option of BBNA.
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") which matures
on April 1, 2007 and has a 10.02% per annum interest rate. Principal and
interest payments will be made over the term of the loan. Proceeds from the CNL
loan were used to reduce the Company's Revolving Credit. At September 27, 1998
the outstanding principal balance of the CNL Loan was approximately $2,271,000
of which approximately $177,000 is payable within the next fiscal year and
therefore has been included in "Current portion of bank debt and capital lease
obligations" in the accompanying consolidated balance sheet for the period ended
September 27, 1998.
In May 1998, a subsidiary of the Company and FFCA Acquisition
Corporation ("FFCA") entered into a loan agreement to fund the purchase of land
and the construction of a Morton's of Chicago restaurant for an amount not
exceeding $3,000,000. In May 1998, $1,500,000 was funded for the land purchase
and in September 1998, an additional $1,500,000 was funded upon completion of
construction. Upon the final disbursement, the interest rate was fixed at a per
annum interest rate of 7.68%. Principal and interest payments on the loan, which
matures on October 1, 2018, are made on a monthly basis. At September 27, 1998
the outstanding principal balance was approximately $2,994,000 of which
approximately $66,000 is payable within the next fiscal year and therefore has
been included in "Current portion of bank debt and capital lease obligations" in
the accompanying consolidated balance sheet for the period ended September 27,
1998.
During the first nine months of fiscal 1998, the Company's net
investment in fixed assets and related investment costs, net of capitalized
leases approximated $11.0 million. The Company estimates that it will expend up
to an aggregate of $15.0 million in 1998 to finance ordinary refurbishment of
existing restaurants and pre-opening costs and capital expenditures, net of
landlord development and rent allowances and net of equipment lease and mortgage
financing, for new restaurants. The Company has entered into various equipment
lease and mortgage financing agreements with several financial institutions of
which approximately $16.7 million in the aggregate is available for future
fundings. The Company anticipates that funds generated through operations and
funds available through equipment lease and mortgage financing commitments as
well as those available under the Credit Agreement will be sufficient to fund
planned expansion.
The Company has entered international markets with the openings of
Morton's of Chicago restaurants in Singapore in May 1998 and in Toronto in
September 1998. Other international opportunities are being investigated.
New Accounting Pronouncements
In April 1998, Statement of Position (SOP) 98-5, "Reporting on the Costs
of Start-up Activities", was issued. The SOP requires that costs incurred during
start-up activities (including pre-opening costs) be expensed as incurred. The
Company will adopt the SOP in the first quarter of 1999. Since the Company
currently amortizes pre-opening costs over the twelve months following the
underlying restaurant's opening, the impact of adopting this pronouncement will
be dependent upon the amount of unamortized start-up costs at the date of
adoption.
In June 1998, Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("Statement
133"), was issued. Statement 133 standardizes the accounting for derivative
instruments and requires that all derivative instruments be carried at fair
value in the statement of financial position. The Company has not determined the
impact that Statement 133 will
14
<PAGE>
have on its financial statements and believes that such determination will not
be meaningful until closer to the date of initial adoption in January 2000.
Year 2000
The Company has instituted a company wide initiative to examine the
implications of the Year 2000 on the Company's computer systems and
applications to ensure that the Company's computer systems will function
properly in the Year 2000 and thereafter. The Company anticipates completing
its Year 2000 project in early calendar 1999 and belives that the Year 2000
issue will not pose significant operational problems for its computer
systems. The Company has also initiated procedures to communicate with
suppliers regarding compliance with Year 2000 requirements. The Corporation
has not determined the impact, if any, on its operations if outside third
parties with which it has a business relationship fail to comply with Year
2000 requirements. Management currently believes that the costs related to
the Company's compliance with the Year 2000 issue should not have a material
adverse effect on its consolidated financial position, results of operations
or cash flows. While the Company has developed plans to test its business
critical computer systems prior to the Year 2000, there can be no assurance
that the systems of other parties upon which the Company's business also
relies will be Year 2000 compliant on a timely basis.
Forward-Looking Statements
This quarterly report on Form 10Q contains various "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1993, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements, written, oral or otherwise made, represent the
Company's expectation or belief concerning future events. Without limiting the
foregoing, the words "believes," "anticipates," "plans," expects," and similar
expressions are intended to identify forward-looking statements. The Company
cautions that these statements are further qualified by important economic and
competitive factors that could cause actual results to differ materially, or
otherwise, from those in the forward-looking statements, including, without
limitation, risks of the restaurant industry, the competitive environment,
including a highly competitive industry with many well-established competitors
with greater financial and other resources than the Company, and the impact of
changes in consumer tastes, local, regional and national economic and market
conditions, restaurant profitability levels, expansion plans, demographic
trends, traffic patterns, employee availability and benefits and cost increases,
and other risks detailed from time to time in the Company's periodic earnings
releases and reports filed with the Securities and Exchange Commission. In
addition, the Company's ability to expand is dependent upon various factors,
such as the availability of attractive sites for new restaurants, the ability to
negotiate suitable lease terms, the ability to generate or borrow funds to
develop new restaurants and obtain various government permits and licenses and
the recruitment and training of skilled management and restaurant employees.
Accordingly, such forward-looking statements do not purport to be predictions of
future events or circumstances and therefore there can be no assurance that any
forward-looking statement contained herein will prove to be accurate.
15
<PAGE>
MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
Part II - Other Information
Item 1. Legal Proceedings
An employee (Plaintiff) of a subsidiary of the Company, initiated legal
action against Morton's of Chicago, Quantum Corporation and unnamed "Doe"
defendants on February 8, 1996 in California Superior Court in San Francisco.
Plaintiff's, Ms. Wendy Kirkland, complaint alleged under California law, among
other things, wrongful constructive termination, sex discrimination and sexual
harassment. Plaintiff sought general, special, and punitive damages in
unspecified amounts, as well as attorney's fees and costs. The case was
subsequently removed to the US District Court for the Northern District of
California. By order dated October 14, 1997, the Court granted Plaintiff's
motion for partial summary judgment, finding that an employer is strictly liable
under California law for the sexually harassing conduct of the employer's
supervisory employees. On November 25, 1997, a jury in the US District Court for
the Northern District of California awarded a judgment to the Plaintiff. In
conjunction with the judgment, the Company recorded a 1997 fourth quarter
nonrecurring, pre-tax charge of $2,300,000, representing compensatory damages of
$250,000, punitive damages of $850,000, and an estimate of the Plaintiff's and
the Company's legal fees and expenses. On July 29, 1998, the Court entered
judgment in accordance with the jury's verdict.
The Company intends to vigorously contest and appeal the judgment.
The Company is also involved in other 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 Stockholders
No matters were submitted to a vote of stockholders during the quarter
for which this report was filed.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
4.04 (n) Amended and Restated Promissory Note, dated September
18, 1998, among FFCA Acquisition Corporation and Morton's of Chicago, a
subsidiary of the Registrant.
4.04 (o) Ninth Amendment to the Second Amended and Restated
Revolving Credit and Term Loan Agreement, dated September 25, 1998,
between BankBoston, N.A., individually and as agent, and the
Registrant.
10.16 First Amendment to the Second Amended and Restated
Employment Agreement, dated October 1, 1998, between Registrant and
Allen J. Bernstein.
27.00 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this
report was filed.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MORTON'S RESTAURANT GROUP, INC.
-------------------------------------
(Registrant)
Date November 10, 1998 By: /s/ ALLEN J. BERNSTEIN
------------------------- -----------------------------
Allen J. Bernstein
Chairman of the Board, President
and Chief Executive Officer
Date November 10, 1998 By: /s/ THOMAS J. BALDWIN
------------------------- ----------------------------
Thomas J. Baldwin
Executive Vice President
and Chief Financial Officer
17
<PAGE>
INDEX TO EXHIBITS
The following is a list of all exhibits filed as part of this report.
<TABLE>
<CAPTION>
Exhibit
Number Page Document
------- ---- --------
<S> <C> <C>
4.04 (n) Amended and Restated Promissory Note, dated
September 18, 1998, among FFCA Acquisition
Corporation and Morton's of Chicago, a
subsidiary of the Registrant.
4.04 (o) Ninth Amendment to the Second Amended and
Restated Revolving Credit and Term Loan
Agreement, dated September 25, 1998, between
BankBoston, N.A., individually and as agent,
and the Registrant.
10.16 First Amendment to the Second Amended and
Restated Employment Agreement, dated October 1,
1998, between Registrant and Allen J. Bernstein.
27.00 Financial Data Schedule
</TABLE>
<PAGE>
Exhibit 4.04(n)
AMENDED AND RESTATED PROMISSORY NOTE
Dated as of September 18, 1998
$3,000,000.00 Scottsdale, Arizona
THIS AMENDED AND RESTATED PROMISSORY NOTE (this "Note") executed by
MORTON'S OF CHICAGO-NORTH MIAMI BEACH, INC., a Delaware corporation
("Debtor"), amends and restates that certain Promissory Note dated as of May
14, 1998 in the principal amount of $3,000,000.00, payable to FFCA
ACQUISITION CORPORATION, a Delaware corporation ("FFCA").
Debtor, for value received, hereby promises to pay to FFCA, whose
address is 17207 North Perimeter Drive, Scottsdale, Arizona 85255, or order,
on or October 1, 2018 (the "Maturity Date"), as herein provided, the
principal sum of THREE MILLION AND 00/100 DOLLARS ($3,000,000.00), and to pay
interest on the unpaid principal amount of this Note from the date hereof to
the Maturity Date at the rate of 7.677% per annum on the basis of a 360-day
year of twelve 30-day months, such principal and interest to be paid
in immediately available funds and in lawful money of the United States.
Initially capitalized terms which are not otherwise defined in this
Note shall have the meanings set forth in that certain Loan Agreement dated as
of May 14, 1998 between Debtor and FFCA, as such agreement may be amended
from time to time (the "Loan Agreement").
Interest on the principal amount of this Note for the period
commencing with the date set forth above through the last day in the month in
which this note is dated shall be due and payable upon delivery of this Note.
Thereafter, principal and interest shall be payable in consecutive monthly
installments of TWENTY-FOUR THOUSAND FOUR HUNDRED NINETY-THREE AND 52/100
DOLLARS ($24,493.52) commencing on November 1, 1998, and continuing on the
first day of each month thereafter until the Maturity Date, at which time,
the outstanding principal and unpaid accrued interest shall be due and
payable.
Prior to the fifth anniversary of this Note, Debtor may not prepay
this Note. From and after the fifth anniversary of this Note, Debtor may
prepay this Note in full, but not in part, including all accrued but unpaid
interest hereunder and all sums advanced by FFCA pursuant to the Loan
Documents which secure this Note, provided that (i) an Event of Default shall
not have occurred under this Note, (ii) any such prepayment shall only be
made on a regularly scheduled payment date upon not less than 30 days prior
written notice from Debtor to FFCA, and (iii) any such prepayment shall be
made together with payment of a prepayment premium equal to:
(a) 5% of the amount prepaid if the prepayment is made on or
following the fifth anniversary of this Note but prior to the sixth
anniversary of this Note;
(b) 4% of the amount prepaid if the prepayment is made on or
following the sixth anniversary of this Note but prior to the seventh
anniversary of this Note;
<PAGE>
(c) 3% of the amount prepaid if the prepayment is made on or
following the seventh anniversary of this Note but prior to the eighth
anniversary of this Note;
(d) 2% of the amount prepaid if the prepayment is made on or
following the eighth anniversary of this Note but prior to the ninth
anniversary of this Note; and
(e) 1% of the amount prepaid if the prepayment is made on or
following the ninth anniversary of this Note but prior to the tenth
anniversary of this Note.
If this Note is prepaid on or following the tenth anniversary of this Note
there shall be no prepayment premium.
The foregoing prepayment premium shall be due and payable if this
Note is prepaid prior to the tenth anniversary of this Note regardless of
whether such prepayment is the result of a voluntary prepayment by Debtor or
as a result of FFCA declaring the unpaid principal balance of this Note,
accrued interest and all other sums due under this Note and any Loan
Documents which secure this Note, due and payable in accordance with the
provisions of this Note (the "Acceleration"); provided, however, the
prohibition on prepayment and such prepayment premium shall not be applicable
with respect to a prepayment of this Note as a result of the application of
casualty or condemnation proceeds as contemplated by the Mortgage. If this
Note is prepaid as a result of an Acceleration prior to the fifth anniversary
of this Note, a prepayment premium of 5% of the principal amount prepaid
shall be due and payable to FFCA by Debtor at the time of such prepayment.
Upon execution of this Note, Debtor shall establish arrangements
whereby all payments of principal and interest hereunder are transferred by
wire or other means directly from Debtor's bank account to such account as
FFCA may designate or as FFCA may otherwise designate. Each payment of
principal and interest hereunder shall be applied first toward any past due
payments under this Note (including payment of all Costs (as herein
defined)), then to accrued interest, and the balance, after the payment of
such accrued interest, if any, shall be applied to the unpaid principal
balance of this Note; provided, however, each payment hereunder after an
Event of Default has occurred under this Note shall be applied as FFCA in its
sol discretion may determine.
This Note is secured by the Mortgage and guaranteed by the Guarantor
pursuant to the Guaranty. An "Event of Default" shall be deemed to have
occurred under this Note if (a) any principal, interest or other monetary sum
certain due under this Note is not paid within five days after the date when
due and FFCA shall have given Debtor notice thereof and a period of seven
days from the delivery of such notice shall have elapsed without such
past-due sum being paid, or (b) an Event of Default (as defined under any of
the Loan Documents).
During the continuation of an Event of Default under this Note, then,
time being of the essence hereof, FFCA may declare the entire unpaid
principal balance of this Note, accrued interest, if any, and all other sums
due under this Note and any Loan Documents which secure this Note, due and
payable at once without notice to Debtor.
2
<PAGE>
All past-due principal and/or interest shall bear interest from the
due date to the date of actual payment at the lesser of the highest rate for
which the undersigned may legally contract, or the rate of 13% per annum (the
"Default Rate"), and such Default Rate shall continue to apply following a
judgment in favor of FFCA under this Note; provided, however, the Default
Rate shall not be applicable if all past due principal and/or interest is
paid in full within the notice and cure periods provided for in the Loan
Agreement.
All payments of principal and interest due hereunder shall be made
(i) without deduction of any present and future taxes, levies, imposts,
deductions, charges or withholdings, which amounts shall be paid by Debtor,
and (ii) without any other right of abatement, reduction, setoff, defense,
counterclaim, interruption, deferment or recoupment for any reason
whatsoever. Debtor will pay the amounts necessary (such amounts are hereby
deemed not to include income taxes, gross receipts taxes, transfer taxes and
corporate taxes) such that the gross amount of the principal and interest
received by FFCA is not less than that required by this Note.
No delay or omission on the part of FFCA in exercising any remedy,
right or option under this Note shall operate as a waiver of such remedy,
right or option. In any event, a waiver on any one occasion shall not be
construed as a waiver or bar to any such remedy, right or option on a future
occasion.
Debtor hereby waives presentment, demand for payment, notice of
dishonor, notice of protest, and protest, notice of intent to accelerate,
notice of acceleration and all other notices or demands in connection with
delivery, acceptance, performance, default or endorsement of this Note.
All notices, consents, approvals or other instruments required or
permitted to be given by either party pursuant to this Note shall be in
writing and given by (i) hand delivery, (ii) facsimile, (iii) express
overnight delivery service or (iv) certified or registered mail, return
receipt requested, and shall be deemed to have been delivered upon (a)
receipt, if hand delivered, (b) transmission, if delivered by facsimile, (c)
the next business day, if delivered by express overnight delivery service, or
(d) the third business day following the day of deposit of such notice with
the United States Postal Service, if sent by certified or registered mail,
return receipt requested. Notices shall be provided to the parties and
addresses (or facsimile numbers, as applicable) specified below:
If to Debtor: Mr. Thomas Baldwin
Chief Financial Officer
Morton's of Chicago--North Miami Beach, Inc.
3333 New Hyde Park Road
New Hyde Park, New York 11042
Telephone: (516)627-1515
Telecopy: (516)627-2050
3
<PAGE>
with a copy to: Mr. Thomas Baldwin
Chief Financial Officer
Morton's Restaurant Group, Inc.
3333 New Hyde Park Road
New Hyde Park, New York 11042
Telephone: (516) 627-1515
Telecopy: (516) 627-2050
with a copy to: David Gruber, Esq.
Salamon, Gruber, Newman and Blaymore
Suite 102
97 Powerhouse Road
Roslyn Heights, NY 11577
Telephone: (516) 625-1700
Telecopy: (516) 625-1795
If to FFCA: Dennis L. Ruben, Esq.
Executive Vice President and General Counsel
FFCA Acquisition Corporation
17207 North Perimeter Drive
Scottsdale, AZ 85255
Telephone: (602) 585-4500
Telecopy: (602) 585-2226
or to such other address or such other person as either party may from time to
time hereafter specify to the other party in a notice delivered in the manner
provided above.
Should any indebtedness represented by this Note be collected at law
or in equity, or in bankruptcy or other proceedings, or should this Note be
placed in the hands of attorneys for collection after fault, Debtor shall
pay, in addition to the principal and interest due and payable hereon, all
costs of collecting or attempting to collect this Note (the "Costs"),
including reasonable attorney's fees and expenses of FFCA (including those
fees and expenses incurred in connection with any appeal and those of FFCA's
in-house counsel) whether or not a judicial action is commenced by FFCA.
This Note may not be amended or modified except by a written
agreement duly executed by Debtor and FFCA. In case any one or more of the
provisions contained in this Note shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Note, and this Note shall be
construed as if such provision had never been contained herein or therein.
Notwithstanding anything to the contrary contained in any of the Loan
Documents, the obligations of Debtor to FFCA under this Note and any other
Loan Documents are subject to the limitation that payments of interest and
late charges to FFCA shall not be required to the extent that receipt of any
such payment by FFCA would be contrary to provisions of applicable law
limiting the maximum rate of interest that may be charged or collected by
FFCA. The portion of any such payment received by FFCA that is in excess of
the maximum interest permitted by such
4
<PAGE>
provisions of law shall be credited to the principal balance of this Note or
if such excess portion exceeds the outstanding principal balance of this
Note, then such, excess portion shall be refunded to Debtor. All interest
paid or agreed to be paid to FFCA shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and/or spread throughout
the full term of this Note (including, without limitation, the period of any
renewal or extension thereof) so that interest for such full term shall not
exceed the maximum amount permitted by applicable law.
It is the intent of the parties hereto that the business relationship
created by this Note and the other Loan Documents is solely that of creditor
and debtor and has been entered into by both parties in reliance upon the
economic and legal bargains contained in the Loan Documents. None of the
agreements contained in the Loan Documents is intended, nor shall the same be
deemed or construed, to create a partnership between FFCA and Debtor, to make
them joint venturers, to make Debtor an agent, legal representative, partner,
subsidiary or employee of FFCA, nor to make FFCA in any way responsible for
the debts, obligations or losses of Debtor. Debtor acknowledges that FFCA (or
any Affiliate of FFCA) and Franchisor are not affiliates, agents, partners,
or joint venturers, nor do they have any other legal, representative or
fiduciary relationship other than debtor/creditor and/or landlord/tenant
relationship unrelated to the transactions contemplated by the Loan Documents.
FFCA, by accepting this Note, and Debtor acknowledge and warrant to
each other that each has been represented by independent counsel and Debtor
has executed this Note after being fully advised by said counsel as to its
effect and significance. This Note shall be interpreted and construed in a
fair and impartial manner without regard to such factors as the party which
prepared the instrument, the relative bargaining powers of the parties or the
domicile of any party.
Time is of the essence in the performance of each and every
obligation under this Note.
Debtor acknowledges that this Note was substantially negotiated in
the State of Arizona, the executed Note was delivered in the State of
Arizona, all payments under this Note will be delivered in the State of
Arizona and there are substantial contacts between the parties and the
transactions contemplated herein and the State of Arizona. For purposes of
any action or proceeding arising out of this Note, the parties hereto
expressly submit to the jurisdiction of all federal and state courts located
in the State of Arizona. Debtor consents that it may be served with any
process or paper by registered mail or by personal service within or without
the State of Arizona in accordance with applicable law. Furthermore, Debtor
waives and agrees not to assert in any such action, suit or proceeding that
it is not personally subject to the jurisdiction of such courts, that the
action, suit or proceeding is brought in an inconvenient forum or that venue
of the action, suit or proceeding is improper. It is the intent of Debtor and
FFCA that all provisions of this Note shall be governed by and construed
under the laws of the State of Arizona. Nothing contained in this paragraph
shall limit or restrict the right of FFCA to commence any proceeding in the
federal or state courts located in the state in which the Premises is located
to the extent FFCA deems such proceeding necessary or advisable to exercise
remedies available under the Loan Documents.
FFCA, BY ACCEPTING THIS NOTE, AND DEBTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A
5
<PAGE>
TRIAL BY JURY WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION,
PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO
AGAINST THE OTHER OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF
OR IN CONNECTION WITH THIS NOTE, THE RELATIONSHIP OF FFCA AND DEBTOR,
DEBTOR'S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM FOR INJURY OR
DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY. THIS WAIVER BY THE PARTIES
HERETO OF ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY HAS BEEN NEGOTIATED
AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. FURTHERMORE, DEBTOR AND FFCA
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT THEY MAY HAVE
TO SEEK PUNITIVE, CONSEQUENTIAL AND INDIRECT DAMAGES FROM THE OTHER PARTY
WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM
OR COUNTERCLAIM BROUGHT BY THEM AGAINST THE OTHER PARTY HERETO OR ITS
SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH
THIS NOTE OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER
BY DEBTOR AND FFCA OF ANY RIGHT THEY MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL
AND INDIRECT DAMAGES HAS BEEN NEGOTIATED BY THE PARTIES HERETO AND IS AN
ESSENTIAL ASPECT OF THEIR BARGAIN.
This obligation shall bind Debtor and its successors and assigns, and
the benefits hereof shall inure to FFCA and its successor and assigns. FFCA
may assign its rights under this Note as set forth in the Loan Agreement.
6
<PAGE>
IN WITNESS WHEREOF, Debtor has executed and delivered this Note
effective as of the date first set forth above.
DEBTOR:
MORTON'S OF CHICAGO-NORTH MIAMI
BEACH, INC., a Delaware corporation
By /s/ Thomas J. Baldwin
---------------------------------
Its EVP & CFO
---------------------------------
Printed Name Thomas J. Baldwin
----------------------
<PAGE>
Exhibit 4.04(o)
NINTH AMENDMENT TO SECOND AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This NINTH AMENDMENT (this "Amendment"), executed, delivered, and dated
as of September 25, 1998 (but effective as of the specified Effective Date
referred to below), 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"), PEASANT HOLDING CORP., a Delaware corporation
having its principal place of business at Suite 210, 3333 New Hyde Park Road,
New Hyde Park, New York 11042 ("Peasant Holding"), 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
Holding and Morton's are referred to herein collectively as the "Borrowers",
and each, individually, as a "Borrower"), BANKBOSTON, N.A. (formerly known as
The First National Bank of Boston), as Agent (the "Agent") for the Lenders
(as defined in the Credit Agreement referred to below), BANKBOSTON, N.A.
(formerly known as The First National Bank of Boston and referred to below
and in the Credit Agreement, as defined below, as "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 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, a
letter agreement dated as of November 7, 1996, the Fourth Amendment dated as
of December 26, 1996, the Fifth Amendment dated as of December 31, 1996, the
Sixth Amendment dated as of February 6, 1997, the Seventh Amendment dated as
of June 27, 1997, the Eighth Amendment dated as of February 12, 1998, 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, the Borrowers have requested the Lenders agree to amend certain
provisions of the Credit Agreement; 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:
<PAGE>
Section 1. Amendments to the Credit Agreement.
Section 1.1. Changes in Certain Provisions.
(a) The table contained in the definition of Commitment Percentages
is hereby amended to read as follows:
<TABLE>
<CAPTION>
Lender Percentage
------ ----------
<S> <C>
FNBB 69.2307692%
Imperial Bank 30.7692308%
</TABLE>
(b) The definition of Final Maturity Date is hereby amended to read
as follows:
"Final Maturity Date. December 31, 2004."
(c) The second sentence of the definition of Revolving Credit
Commitment is hereby amended to read as follows:
"The initial aggregate Revolving Credit Commitment is Thirty
Two Million Five Hundred Thousand Dollars ($32,500,000)."
(d) The definition of Revolving Credit Commitment Amount is hereby
amended to read as follows:
"Thirty Two Million Five Hundred Thousand Dollars
($32,500,000), minus the amount of any reductions effected pursuant to
the terms of this Agreement."
(e) Section 4.5 of the Credit Agreement is hereby amended by
replacing the figure "$7,500,000" with the figure "$22,500,000."
Section 1.2. Year 2000 Provision. Section 6 of the Credit Agreement is
hereby amended by inserting the following new subsection Section 6.25 at the
end of Section 6 thereof:
"Section 6.25. Year 2000 Provision. The Borrowers and their
Subsidiaries have reviewed the areas within their businesses and
operations which could be adversely affected by, and have developed
or are developing a program to address on a timely basis, the "Year
2000 Problem" (i.e. the risk that computer applications used by the
Borrowers or any their Subsidiaries may be unable to recognize and
perform properly date sensitive functions involving certain dates
prior to and any date after December 31, 1999). Based upon such
review, the Borrowers reasonably believe that the "Year 2000 Problem"
will not have any materially adverse effect on the business or
financial condition of the Borrowers or any of their Subsidiaries."
Section 1.3. Covenants. Section 10 of the Credit Agreement is hereby
amended as follows:
2
<PAGE>
(a) by amending subsection 10.1(f) by replacing the figure
"$19,000,000" with the figure "$40,000,000".
(b) by amending the text of subsection 10.3(a) to read as follows:
"The Companies may not make or enter into, incur, or assume any binding
commitment to make capital expenditures or binding lease commitments related
to New Construction with respect to the Peasant Restaurants, the Morton's
Restaurants and the Bertolini's Restaurants unless, as of the date of
determination, no more than twenty-five percent (25%) of the Peasant
Restaurants, the Morton's Restaurants and the Bertolini's Restaurants have
demonstrated a negative Net Restaurant Operating Profit for the twelve month
period ending on the date which is the end of the month or quarter for which
the Agent has received the most recent financial information pursuant to
Section 9.4 hereof, with such determination to be made without regard to the
first three (3) months for which each restaurant was open for business."
(c) by amending the text of subsection 10.3(b) to read as follows
(subsection 10.3(c) having previously been deleted by the Sixth Amendment to
the Credit Agreement):
"[Intentionally Omitted.]"
Section 2. Transitional Arrangements; Allocations. Effective as of the
date hereof, each Lender shall make such dispositions and arrangements with
each other Lender with respect to the then outstanding Revolving Credit Loans
(the "Adjustment") as shall result in the amount of Revolving Credit Loans
owed to each Lender being equal to the product of such Lender's Commitment
Percentage multiplied by the aggregate Revolving Credit Loans outstanding on
the date hereof (the "Adjusted Amount"). Each of the Borrowers and the
Guarantors hereby agrees that each Lender's Adjusted Amount shall be
Revolving Credit Loans owed by the Borrowers jointly and severally to such
Lender as if such Lender had initially made Revolving Credit Loans to the
Borrowers in the amount of the Adjusted Amount. The Borrowers also hereby
jointly and severally agree to pay all amounts referred to in Section 4.12 of
the Credit Agreement arising in connection with the Adjustment (as if the
Adjustment resulted in prepayments of the Revolving Credit Loans reallocated
pursuant to the Adjustment) and in connection with the repayment of the Term
Loan as contemplated hereby below. Upon the occurrence of the Adjustment, (a)
the Agent shall appropriately adjust its records to reflect each Lender's
Adjusted Amount and (b) each Lender previously party to the Credit Agreement
shall promptly thereafter return to the Agent its existing Revolving Credit
Note as replaced by an Amended and Restated Revolving Credit Note in
connection with this Amendment and the contemplated increase and reallocation
of the Revolving Credit Commitment Amount.
Section 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 and as of the date hereof, and as of the Effective Date,
except, in each case to the extent of changes resulting from
transactions contemplated or permitted by
3
<PAGE>
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 Sections 6.1, 6.3 and 6.4
of the Credit Agreement are true and correct on and as of the date
hereof, and as of the Effective Date, as if made on each such date,
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.
Section 4. Conditions to Effectiveness. This Amendment shall be deemed
to be effective as of September 25, 1998 (the "Effective Date"), subject to:
(a) 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 the following documents, each in form and
substance satisfactory to the Agent and the Lenders:
(i) this Amendment signed by each of the Borrowers, each of the
Guarantors, the Agent, and each of the Lenders;
(ii) an Amended and Restated Revolving Credit Note executed and
delivered by the Borrowers in favor of BankBoston, N.A. and an
Amended and Restated Revolving Credit Note executed and delivered
by the Borrowers in favor of Imperial Bank, in the amounts of their
respective Commitment Percentages of the aggregate Revolving Credit
Commitment Amount, which shall (from and after the Effective Date)
be deemed to constitute the Revolving Credit Notes referred to in
the Credit Agreement;
(iii) certificates of an appropriate officer of each of the Borrowers,
dated as of the date hereof, as to (i) corporate actions taken by
each of the Borrowers authorizing the execution, delivery, and
performance hereof, and (ii) the names, titles, incumbency, and
specimen signatures of the officers of each of the Borrowers
authorized to sign this Amendment on behalf of each of the
Borrowers;
(iv) a favorable written legal opinion addressed to the Agent and
Lenders, dated as of the date hereof, from outside counsel to the
Borrowers, with respect to such matters as the Agent and the Lenders
may reasonably request;
(v) such evidence as the Agent may reasonably request such that the
Agent shall be satisfied that the representations and warranties
contained in Section 3 hereof are true and correct on and as of date
hereof and as of the Effective Date.
(vi) such other certificates, documents, or instruments with respect
to this Amendment, the Borrowers and the Guarantors as the Agent or
the Lenders may reasonably request; and
4
<PAGE>
(vii) an updating amendment to the Fee Letter previously in effect,
reflecting the extension of the Final Maturity Date.
(b) the completion of the following acts:
(i) the Borrowers shall have repaid the Term Loan in full prior
to or on the Effective Date, so as to reduce permanently the
Term Loan principal amount outstanding to $0 as of the Effective
Date;
(ii) the payment of such extension and amendment fees by the
Borrowers, relating hereto, as shall have been previously,
separately agreed by the parties, to be paid to the Agent for
allocation among the Lenders in such respective amounts as so
agreed with each such Lender.
Section 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 and the other Loan
Documents shall remain in full force and effect. Each of the Borrowers and
the Guarantors 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 and the
Obligations thereunder contained in any of the Loan Documents shall be
references to the Credit 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 as collateral security for the
Obligations 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.
Section 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.
5
<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.
PEASANT HOLDING CORP.
MORTON'S OF CHICAGO, INC.
By /s/ Thomas J. Baldwin
--------------------------------
Name: Thomas J. Baldwin
Title: Executive Vice President and
Chief Financial Officer
BANKBOSTON, N.A. (formerly known as
The First National Bank of Boston),
for itself and as Agent
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
IMPERIAL BANK
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
FLEET NATIONAL 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: Executive Vice President and
Chief Financial Officer for
each of the Guarantors
6
<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.
PEASANT HOLDING CORP.
MORTON'S OF CHICAGO, INC.
By
--------------------------------
Name: Thomas J. Baldwin
Title: Executive Vice President and
Chief Financial Officer
BANKBOSTON, N.A. (formerly known as
The First National Bank of Boston),
for itself and as Agent
By: /s/ Christopher Holtz
---------------------------------
Name: Christopher Holtz
-------------------------------
Title: Vice President
------------------------------
IMPERIAL BANK
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
FLEET NATIONAL BANK
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Consented and agreed to, by each of
THE GUARANTORS (as defined in the Credit
Agreement)
By:
---------------------------------
Name: Thomas J. Baldwin
Title: Executive Vice President and
Chief Financial Officers for
each of the Guarantors
6
<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.
PEASANT HOLDING CORP.
MORTON'S OF CHICAGO, INC.
By:
--------------------------------
Name: Thomas J. Baldwin
Title: Executive Vice President and Chief
Financial Officer
BANKBOSTON, N.A. (formerly known as The
First National Bank of Boston), for itself
and as Agent
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
IMPERIAL BANK
By: /s/ James B. Higgens Jr.
--------------------------------
Name: James B. Higgens Jr.
------------------------------
Title: First Vice President
------------------------------
FLEET BANK, N.A.
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
Consented and agreed to, by each of
THE GUARANTORS (as defined in the Credit
Agreement)
By:
--------------------------------
Name: Thomas J. Baldwin
Title: Executive Vice President and Chief
Financial Officer for each of the
Guarantors
7
<PAGE>
EXHIBIT 10.16
FIRST AMENDMENT TO SECOND AMENDED
AND RESTATED EMPLOYMENT AGREEMENT
---------------------------------
This amendment dated as of October 1, 1998 ("First Amendment") is to the
AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement") dated as of February
28, 1995 between Quantum Restaurant Group, Inc., now known as Morton's
Restaurant Group, Inc. ("MRG") and Allen J. Bernstein ("Bernstein").
The parties, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, agree as follows:
1. Paragraph 2(a) of the Agreement is hereby deleted and in its place
and stead there is inserted the following:
"(a) As compensation for the services to be rendered hereunder,
until December 31, 1999, MRG shall pay to Bernstein a base salary
(as adjusted hereafter pursuant to the next sentence hereof, the
"Base Salary") at the rate of $625,000. per annum, payable in equal
installments at such times as shall be agreed upon by MRG and
Bernstein, but no less frequently than monthly. The annual Base
Salary for the Employment Year commencing January 1, 2000, shall
increase at the rate of increase in the Consumer Price Index for
Urban Wage Earners and Clerical Workers, as compiled by the U.S.
Bureau of Labor Statistics for the preceding year (the "CPI"). The
Base Salary may be increased at a faster rate than that of the CPI,
at the discretion of the board of Directors, and depending upon the
profitability and growth of MRG."
2. Paragraph 7(a) of the Agreement is hereby deleted and in its place
and stead there is inserted the following:
"(a) If Bernstein is unable to perform his duties by reason of
illness or incapacity (a "Disability") for a continuous period of
more than six (6) months, the compensation otherwise payable to him
during the continued period of such illness or incapacity after
such six (6) month period shall be at the annual rate of
$226,500.00. Bernstein's full compensation shall be reinstated upon
his return to employment and the discharge of his full duties
hereunder. Notwithstanding anything herein to the contrary, if
Bernstein shall be absent from his employment by reason of illness
or incapacity for a continuous period of more than eighteen (18)
months, this Agreement shall terminate, except Bernstein's legal
representatives shall be entitled to receive the compensation
herein provided to the last day of the eighteenth month of such
continuous period."
<PAGE>
3. Paragraph 7(f) of the Agreement is hereby deleted and in its place
and stead there is inserted the following:
"(f) In the event (i) this Agreement terminates pursuant to Section
7(e) or (ii) Quantum has delivered Quantum Notice's (the date of
such termination or delivery being the "Measuring Date"), MRG
covenants and agrees to pay and be liable for, on the days
originally fixed herein for the payments thereof, and for a period
of sixty (60) months following the Measuring Date, Bernstein's
compensation (except Bonus shall be due only for the calendar year
during which the Measuring Date occurs, and pro rated, on an
annualized basis, for that year), reimbursement to Bernstein of the
costs and expenses for the automobile and chauffeur as set forth in
Section 5 at the cost thereof as of the Measuring Date, membership
dues and other reasonable expenses for Bernstein to attend meetings
and conferences of the Young President's Organization and other
expenses under the terms of this Agreement as they become due,
together with all reasonable expenses which Bernstein may then or
thereafter incur for legal expenses and all other reasonable costs
paid or incurred by Bernstein for enforcing the payment of such
amounts. As an alternative, at the election of Bernstein made within
thirty days of the Measuring Date, MRG shall pay to him as damages
such a sum as at the time of such termination represents sixty (60)
multiplied by $67,800., together with all reasonable expenses which
Bernstein may then or thereafter incur for legal expenses and all
other reasonable costs paid or incurred by Bernstein for enforcing
payment of such amounts. Bernstein agrees to use his best efforts
to seek alternative employment as an executive earning a salary
reasonably comparable with that being paid to Bernstein by MRG,
upon any such termination. Upon and after Bernstein's acquisition
of such alternative employment, (i) MRG's only obligation hereunder
shall be the payment to Bernstein of $50,600. per month, or part
thereof, until the 60th month following the Measuring Date, if
Bernstein has not made the election referred to in the second
preceding sentence, or (ii) if Bernstein has made such election, he
shall repay to MRG an amount equal to the product of [$17,366.]
multiplied by "X", where X equals the difference between 60 and the
number of months between the Measuring Date and the date Bernstein
commences such new employment."
4. Paragraph 8(e) of the Agreement is hereby deleted and in its place
and stead there is inserted the following:
"(e) MRG shall, for so long as Bernstein is employed by it, procure
and maintain a disability insurance policy (the "Disability
Policy"). The Disability Policy will provide that during the period
commencing after the sixth
-2-
<PAGE>
month of a Disability of Bernstein and terminating when Bernstein
reaches the age of 65, Bernstein shall be provided with benefits
equal to approximately $325,000. per annum. Any benefits received
by Bernstein pursuant to this Section 8(e) shall be in addition to,
and not exclusive of, any compensation to be paid to Bernstein
pursuant to Section 7(a) hereof."
5. In all other respects, the Agreement shall remain in full force and
effect and the parties hereby reconfirm and ratify same.
/s/ ALLEN J. BERNSTEIN
-----------------------------------
Allen J. Bernstein
MORTON'S RESTAURANT GROUP, INC.
By: /s/ THOMAS J. BALDWIN
-------------------------------
Thomas J. Baldwin - Exec. V.P.
Attest:
/s/ Agnes Longarzo
- -----------------------------------
Secretary
-3-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 27, 1998 FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-START> DEC-29-1997
<PERIOD-END> SEP-27-1998
<CASH> 2,015
<SECURITIES> 0
<RECEIVABLES> 2,153
<ALLOWANCES> 0
<INVENTORY> 5,479
<CURRENT-ASSETS> 17,768
<PP&E> 54,079
<DEPRECIATION> 8,815
<TOTAL-ASSETS> 88,166
<CURRENT-LIABILITIES> 16,827
<BONDS> 30,022
0
0
<COMMON> 67
<OTHER-SE> 34,760
<TOTAL-LIABILITY-AND-EQUITY> 88,166
<SALES> 134,201
<TOTAL-REVENUES> 134,201
<CGS> 45,932
<TOTAL-COSTS> 91,251
<OTHER-EXPENSES> 13,437
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,714
<INCOME-PRETAX> 7,799
<INCOME-TAX> 1,950
<INCOME-CONTINUING> 5,849
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,849
<EPS-PRIMARY> $0.88
<EPS-DILUTED> $0.84
</TABLE>
