-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MautJYBRAPfqQkQa6Xg8PWKkSvYHbP5f7pcFbmQDaJXJx5t2h/Tsm+h20y3OCXfS umRcT5Pl2VyfexXIllKchQ== /in/edgar/work/0000912057-00-049903/0000912057-00-049903.txt : 20001115 0000912057-00-049903.hdr.sgml : 20001115 ACCESSION NUMBER: 0000912057-00-049903 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20001001 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORTONS RESTAURANT GROUP INC CENTRAL INDEX KEY: 0000883981 STANDARD INDUSTRIAL CLASSIFICATION: [5812 ] IRS NUMBER: 133490149 STATE OF INCORPORATION: DE FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12692 FILM NUMBER: 766495 BUSINESS ADDRESS: STREET 1: 3333 NEW HYDE PK RD STE 210 CITY: NEW HYDE PARK STATE: NY ZIP: 11042 BUSINESS PHONE: 5166271515 MAIL ADDRESS: STREET 1: 3333 NEW HYDE PARK ROAD STREET 2: SUITE 210 CITY: NEW HYDE PARK STATE: NY ZIP: 11042 FORMER COMPANY: FORMER CONFORMED NAME: QUANTUM RESTAURANTS GROUP INC DATE OF NAME CHANGE: 19950315 10-Q 1 a2029918z10-q.txt 10-Q 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 October 1, 2000 ------------------------------------------------- OR [] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------------- ----------------------- Commission file number 1-12692 -------------------------------------------------- MORTON'S RESTAURANT GROUP, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-3490149 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 3333 New Hyde Park Road, Suite 210, New Hyde Park, New York 11042 - -------------------------------------------------------------------------------- (Address of principal executive offices) (zip code) 516-627-1515 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of November 8, 2000, the registrant had 4,136,752 Shares of its Common Stock, $.01 par value, outstanding. MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES INDEX
PART I - FINANCIAL INFORMATION PAGE Item 1. Financial Statements Consolidated Balance Sheets as of October 1, 2000 and January 2, 2000 3-4 Consolidated Statements of Income for the three and nine month periods ended October 1, 2000 and October 3, 1999 5 Consolidated Statements of Cash Flows for the nine month periods ended October 1, 2000 and October 3, 1999 6 Notes to Consolidated Financial Statements 7-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-13 Item 3. Quantitative and Qualitative Disclosure about Market Risk 13 PART II - OTHER INFORMATION Item 1. Legal Proceedings 14 Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15
2 Item 1. Financial Statements MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES Consolidated Balance Sheets (amounts in thousands)
October 1, January 2, 2000 2000 ---- ---- (unaudited) ASSETS Current assets: Cash and cash equivalents $ 2,002 $ 5,806 Accounts receivable 905 1,093 Inventories 6,553 7,134 Landlord construction receivables, prepaid expenses and other current assets 2,920 2,724 Deferred income taxes 6,297 5,699 -------- -------- Total current assets 18,677 22,456 -------- -------- Property and equipment, at cost: Furniture, fixtures and equipment 33,232 30,696 Leasehold improvements 46,091 38,002 Land 6,236 6,236 Construction in progress 3,925 2,281 -------- -------- 89,484 77,215 Less accumulated depreciation and amortization 15,600 10,500 -------- -------- Net property and equipment 73,884 66,715 -------- -------- Intangible assets, net of accumulated amortization of $4,604 at October 1, 2000 and $4,286 at January 2, 2000 11,391 11,709 Other assets and deferred expenses, net of accumulated amortization of $689 at October 1, 2000 and $698 at January 2, 2000 6,016 5,970 Deferred income taxes 5,138 7,511 -------- -------- $115,106 $114,361 ======== ========
(Continued) 3 MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES Consolidated Balance Sheets, Continued (amounts in thousands, except share data)
October 1, January 2, 2000 2000 ---- ---- (unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 6,884 $ 7,870 Accrued expenses 17,627 22,036 Current portion of obligations to financial institutions and capital leases 4,615 4,422 Accrued income taxes 275 140 --------- --------- Total current liabilities 29,401 34,468 Obligations to financial institutions and capital leases, less current maturities 85,626 60,970 Other liabilities 5,072 6,855 --------- --------- Total liabilities 120,099 102,293 --------- --------- Commitments and contingencies Stockholders' equity (deficit): 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 6,766,650 shares at October 1, 2000 and 6,758,200 shares at January 2, 2000 68 68 Nonvoting common stock, $.01 par value per share. Authorized 3,000,000 shares, no shares issued or outstanding -- -- Additional paid-in capital 62,941 62,849 Accumulated other comprehensive income (loss) (87) (79) Accumulated deficit (21,061) (27,146) Less treasury stock at cost, 2,631,482 shares at October 1, 2000 and 1,381,190 shares at January 2, 2000 (46,854) (23,624) --------- --------- Total stockholders' equity (deficit) (4,993) 12,068 --------- --------- $ 115,106 $ 114,361 ========= =========
See accompanying notes to consolidated financial statements. 4 MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Income (amounts in thousands, except per share data)
Three Months Ended Nine Months Ended October 1, October 3, October 1, October 3, 2000 1999 2000 1999 ---- ---- ---- ---- (unaudited) (unaudited) Revenues $ 56,314 $ 45,688 $ 178,510 $ 147,209 Food and beverage costs 19,522 15,538 60,550 50,176 Restaurant operating expenses 25,542 21,246 77,045 65,265 Pre-opening costs, depreciation, amortization and non-cash charges 2,455 1,750 8,473 4,472 General and administrative expenses 4,435 3,594 14,365 11,703 Marketing and promotional expenses 1,342 1,174 4,887 4,114 Nonrecurring benefit -- (159) -- (159) Interest expense, net 1,696 1,116 4,497 3,097 --------- --------- --------- --------- Income before income taxes and cumulative effect of a change in an accounting principle 1,322 1,429 8,693 8,541 Income tax expense 397 357 2,608 2,135 --------- --------- --------- --------- Income before cumulative effect of a change in an accounting principle 925 1,072 6,085 6,406 Cumulative effect of a change in an accounting principle, net of income tax benefit of $1,357 -- -- -- 2,281 --------- --------- --------- --------- Net income $ 925 $ 1,072 $ 6,085 $ 4,125 ========= ========= ========= ========= Net income per share - basic: Before cumulative effect of a change in an accounting principle $ 0.21 $ 0.19 $ 1.29 $ 1.06 Cumulative effect of a change in an accounting principle -- -- -- (0.38) --------- --------- --------- --------- Net income $ 0.21 $ 0.19 $ 1.29 $ 0.68 ========= ========= ========= ========= Net income per share - diluted: Before cumulative effect of a change in an accounting principle $ 0.20 $ 0.18 $ 1.25 $ 1.03 Cumulative effect of a change in an accounting principle -- -- -- (0.37) --------- --------- --------- --------- Net income $ 0.20 $ 0.18 $ 1.25 $ 0.66 ========= ========= ========= ========= Weighted average common and potential common shares outstanding: Basic 4,322 5,777 4,704 6,056 ========= ========= ========= ========= Diluted 4,548 5,920 4,886 6,208 ========= ========= ========= =========
See accompanying notes to consolidated financial statements. 5 MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (amounts in thousands)
Nine Months Ended October 1, October 3, 2000 1999 ---- ---- (unaudited) Cash flows from operating activities: Net income $ 6,085 $ 4,125 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of a change in an accounting principle -- 2,281 Depreciation, amortization and other non-cash charges 5,629 3,191 Deferred income taxes 1,775 1,306 Change in assets and liabilities: Accounts receivable 183 (79) Inventories 570 787 Prepaid expenses and other assets (298) (50) Accounts payable, accrued expenses and other liabilities (6,006) (3,817) Accrued income taxes 135 (220) -------- -------- Net cash provided by operating activities 8,073 7,524 -------- -------- Cash flows from investing activities: Purchases of property and equipment (10,879) (5,726) -------- -------- Net cash used by investing activities (10,879) (5,726) -------- -------- Cash flows from financing activities: Principal reduction on obligations to financial institutions and capital leases (7,723) (11,376) Proceeds from obligations to financial institutions 29,877 23,058 Purchases of treasury stock (23,230) (13,026) Net proceeds from issuance of stock 92 111 -------- -------- Net cash used by financing activities (984) (1,233) -------- -------- Effect of exchange rate changes on cash (14) (57) -------- -------- Net (decrease) increase in cash and cash equivalents (3,804) 508 Cash and cash equivalents at beginning of period 5,806 2,117 -------- -------- Cash and cash equivalents at end of period $ 2,002 $ 2,625 ======== ========
See accompanying notes to consolidated financial statements. 6 MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements October 1, 2000 and October 3, 1999 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. and subsidiaries (the "Company") for the fiscal year ended January 2, 2000 filed by the Company on Form 10-K with the Securities and Exchange Commission on March 31, 2000. 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 $4,090,000 and $2,736,000, and income taxes, net of refunds, of approximately $810,000 and $929,000, for the nine months ended October 1, 2000 and October 3, 1999, respectively. During the first nine months of fiscal 2000 and 1999, the Company entered into capital lease arrangements for approximately $2,730,000 and $2,057,000, respectively, for restaurant equipment. In addition, during the third quarter of fiscal 1999 the Company entered into sale-leaseback transactions for existing restaurant equipment aggregating $6,000,000. 3) Based on a strategic assessment of trends and a downturn in comparable revenues of Bertolini's Authentic Trattorias, during the fourth quarter of fiscal 1998, pursuant to the approval of the Board of Directors, the Company recorded a nonrecurring, pre-tax charge of $19,925,000 representing the write-down of impaired Bertolini's restaurant assets, the write-down and accrual of lease exit costs associated with the closure of specified Bertolini's restaurants as well as the write-off of the residual interests in Mick's and Peasant restaurants. The Company performed an in-depth analysis of historical and projected operating results and, as a result of significant operating losses, identified several nonperforming restaurants which have all been closed. At October 1, 2000 and January 2, 2000, included in "Accrued expenses" in the accompanying consolidated balance sheets is approximately $2,295,000 and $2,582,000 representing the lease disposition liabilities related to the closing of these nonperforming restaurants. Additionally, the analysis identified several underperforming restaurants, which reflected a pattern of historical operating losses and negative cash flow, as well as continued projected negative cash flow and operating results for 1999 and 2000. Accordingly, the Company recorded an impairment charge in the fourth quarter of fiscal 1998 to write-down these impaired assets and will contemplate their potential closure based upon future operating results. One such underperforming restaurant was closed in September 1999 and one in September 2000. (See "Part II - Other Information, Item 1. Legal Proceedings".) 7 4) Beginning in fiscal 1999, in accordance with its adoption of Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of Start-up Activities", the Company expenses all costs incurred during start-up activities, including pre-opening costs, as incurred. In connection with the adoption, the Company recorded a charge for the cumulative effect of an accounting change of approximately $2,281,000, net of income tax benefits of approximately $1,357,000 in the first quarter of fiscal 1999. 5) During fiscal 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income". The components of comprehensive income for the nine months ended October 1, 2000 and October 3, 1999 are as follows:
October 1, 2000 October 3, 1999 --------------- --------------- (amounts in thousands) Net income $ 6,085 $ 4,125 Other comprehensive income (loss): Foreign currency translation (8) (83) ------- ------- Total comprehensive income $ 6,077 $ 4,042 ======= =======
6) Effective April 3, 2000, the Company changed the estimated useful lives for depreciation of computer equipment and software, from periods ranging from three to ten years to periods ranging from three to five years, so as to more accurately reflect the relative replacement periods. As a result of such change, the quarters ended July 2, 2000 and October 1, 2000 each included approximately $48,000 of additional depreciation expense. 7) The Company is involved in various legal actions. See "Part II - Other Information, Item 1. Legal Proceedings" on page 14 of this Form 10-Q for a discussion of these legal actions. 8 MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Revenues increased $10.6 million, or 23.3%, to $56.3 million for the three month period ended October 1, 2000, from $45.7 million during the comparable 1999 period. Of the increase in revenues, $6.9 million was attributable to incremental restaurant revenues from ten new restaurants opened after January 4, 1999 and $4.5 million, or 10.7%, was attributable to additional comparable revenues from restaurants open all of both periods. Revenues for the six closed Bertolini's restaurants (see Note 3) decreased by $0.8 million compared to the third quarter of fiscal 1999. Average revenue per restaurant open for a full period increased 11.9% for the quarter ended October 1, 2000. Higher revenues for the third quarter of fiscal 2000 reflect the impact of price increases of approximately 1% in each of September 1999, February 2000, and May 2000. Revenues increased $31.3 million, or 21.3%, to $178.5 million for the nine month period ended October 1, 2000, from $147.2 million for the comparable 1999 period. Of the increase in revenues, $20.6 million was attributable to incremental restaurant revenues from ten new restaurants opened after January 4, 1999 and $13.4 million, or 9.8%, was attributable to additional comparable revenues from restaurants open all of both periods. Revenues for the six closed Bertolini's restaurants (see Note 3) decreased by $2.7 million compared to the first nine months of fiscal 1999. Average revenue per restaurant open for a full period increased 11.0% for the nine months ended October 1, 2000. Higher revenues for the first nine months of fiscal 2000 reflect the impact of price increases of approximately 1% in each of September 1999, February 2000, and in May 2000. Percentage changes in comparable restaurant revenues for the three and nine month periods ended October 1, 2000 versus October 3, 1999 for restaurants open all of both periods are as follows:
Three Months Nine Months Ended October 1, 2000 Ended October 1, 2000 Percentage Change Percentage Change ----------------- ----------------- Morton's 12.3% 11.5% Bertolini's 0.5% -1.2% Total 10.7% 9.8%
Food and beverage costs increased from $15.5 million for the three month period ended October 3, 1999 to $19.5 million for the three month period ended October 1, 2000 and increased from $50.2 million for the nine month period ended October 3, 1999 to $60.5 million for the nine month period ended October 1, 2000. These costs as a percentage of revenues increased from 34.0% for the three month period ended October 3, 1999 to 34.7% for the comparable 2000 period and decreased from 34.1% for the nine month period ended October 3, 1999 to 33.9% for the comparable 2000 period. Restaurant operating expenses, which include labor, occupancy and other operating expenses, increased from $21.2 million for the three month period ended October 3, 1999 to $25.5 million for the three month period ended October 1, 2000, an increase of $4.3 million. For the nine months ended October 1, 2000, these costs increased from $65.3 million during the 1999 period, to $77.0 million for the comparable 2000 period. Those costs as a percentage of revenues decreased 1.1% from 46.5% for the three month period ended October 3, 1999 to 45.4% for the three month period ended October 1, 2000 and 9 decreased 1.1% from 44.3% for the nine month period ended October 3, 1999 to 43.2% for the comparable 2000 period. Included in the second quarter of fiscal 2000 is a gain of approximately $1.1 million resulting from the disposition of certain restaurant assets. Pre-opening costs, depreciation, amortization and non-cash charges increased from $1.8 million for the three month period ended October 3, 1999 to $2.5 million for the three month period ended October 1, 2000 and increased as a percentage of revenues by 0.5%. For the nine months ended October 1, 2000, such costs were $8.5 million versus $4.5 million for the comparable 1999 period. Beginning in fiscal 1999, in accordance with the adoption of SOP 98-5 (see Note 4), the Company expenses all costs incurred during start-up activities, including pre-opening costs, as incurred. Pre-opening costs incurred and recorded as expense for the three month periods ended October 1, 2000 and October 3, 1999 were $1.2 million and $0.7 million, respectively, and for the nine month period ended October 1, 2000 and October 3, 1999 were $2.8 million and $1.3 million, respectively. The timing of restaurant openings, as well as costs per restaurant, affected the amount of such costs. Included in the first quarter of fiscal 2000 are charges of approximately $0.5 million related to the March 2000 disposition of one Bertolini's restaurant and included in the second quarter of fiscal 2000 are charges of approximately $0.6 million related to the write-down, to net realizable values, of another Bertolini's restaurant. Such charges were not previously provided for in the fiscal 1998 charge. (See Note 3.) Effective April 3, 2000, the Company changed the estimated useful lives for computer equipment and software. (See Note 6). As a result of such change, the second and third quarters of 2000 each included approximately $48,000 of additional depreciation expense. General and administrative expenses for the three month period ended October 1, 2000 were $4.4 million, which increased from $3.6 million for the three month period ended October 3, 1999. For the nine months ended October 1, 2000, such costs were $14.4 million versus $11.7 million for the comparable 1999 period. Increases in such costs are driven by incremental costs associated with increased restaurant development, training and salary costs. Such costs as a percentage of revenues were 7.9% for the three month period ended October 1, 2000, which is consistent with the three month period ended October 3, 1999 and 8.0% for the nine months ended October 1, 2000, an increase of 0.1% from the nine month period ended October 3, 1999. Marketing and promotional expenses were $1.3 million for the three month period ended October 1, 2000, an increase of $0.2 million from the comparable 1999 period, and $4.9 million for the nine month period ended October 1, 2000, an increase of $0.8 million from the comparable 1999 period. Such costs as a percentage of revenues were 2.4% for the three month period ended October 1, 2000, a decrease of 0.2% from the comparable 1999 period and 2.7% for the nine month period ended October 1, 2000, a decrease of 0.1% from the comparable 1999 period. During the third quarter of fiscal 1999, the Company settled all claims relating to a lawsuit. The amount of the final settlement, including all related legal and other costs, resulted in the Company recording a nonrecurring benefit of approximately $159,000. Interest expense, net of interest income, increased to $1.7 million for the three month period ended October 1, 2000 from $1.1 million for the three month period ended October 3, 1999. For the nine month periods ended October 1, 2000 and October 3, 1999, interest expense was $4.5 million and $3.1 million, respectively. The increase in interest expense was due to increased borrowings and higher interest rates. Income tax expense of $2.6 million for the nine month period ended October 1, 2000 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 2000, as well as state income taxes. The Company's effective tax rate increased in part due to higher state income taxes. 10 LIQUIDITY AND CAPITAL RESOURCES At present and in the past, the Company has had, and may have in the future, negative working capital balances. The working capital deficit is produced principally as a result of the Company's investment in long-term restaurant operating assets and real estate. 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 Fleet National Bank ("Fleet") (formally BankBoston, N.A.) 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 (the "Credit Agreement"), pursuant to which the Company's credit facility (the "Credit Facility") is $77,500,000, consisting of a $24,500,000 term loan (the "Term Loan") and a $53,000,000 revolving credit facility (the "Revolving Credit"). 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 October 1, 2000, calculated pursuant to the Credit Agreement, the Company's applicable margin, on the Revolving Credit was 0.00% on base rate loans and 2.00% on Eurodollar Rate loans and the Company's applicable margin on the Term Loan was 0.25% on base rate loans and 2.25% on Eurodollar Rate loans. 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. Fleet has syndicated portions of the Credit Facility to First Union National Bank, Imperial Bank and Chase Manhattan Bank. As of October 1, 2000 and January 2, 2000, the Company had outstanding borrowings of $65,575,000 and $41,625,000, respectively, under the Credit Facility. At October 1, 2000, $292,000 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 $11,633,000 and the weighted average interest rate on all borrowings under the Credit Facility was 8.6%. Quarterly principal installments on the Term Loan of $250,000 will be due at the end of each calendar quarter from September 30, 2001 through December 31, 2003. Quarterly principal installments of $2,500,000 will be due from March 31, 2004 through December 31, 2004 and $3,000,000 from March 31, 2005 through December 31, 2005. The Revolving Credit will be payable in full on December 31, 2005. Total amounts of principal payable by the Company under the Credit Agreement during the five years subsequent to October 1, 2000 amount to $0 in 2000, $500,000 in 2001, $1,000,000 in 2002, $1,000,000 in 2003 and $10,000,000 in 2004. The borrowings under the Credit Agreement have been classified as non-current on the Company's consolidated balance sheet since the Company may borrow amounts due under the Term Loan from the Revolving Credit, including the Term Loan principal payments commencing in September 2001. Borrowings under the Credit Agreement are secured by all tangible and intangible assets of the Company. The Credit Agreement, among other things, contains certain restrictive covenants with respect to the Company that 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 certain investments; (iii) mergers, dispositions of assets or consolidations; (iv) prepayment of certain other indebtedness; (v) making capital expenditures above specified amounts; (vi) the repurchase of the Company's outstanding common stock; and (vii) 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 October 1, 2000, the Company believes it was in compliance with such covenants. 11 On April 7, 1998 and May 29, 1998, the Company entered into interest rate swap agreements with Fleet on notional amounts of $10,000,000 each. Interest rate swap agreements are used to reduce the potential impact of interest rate fluctuations relating to $20,000,000 of variable rate debt. The term of the agreements are for three years and may be extended for an additional two years at the option of Fleet. 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 10.002% per annum interest rate. Principal and interest payments will be made over the term of the loan. At October 1, 2000 and January 2, 2000 the outstanding principal balance of the CNL Loan was approximately $1,889,000 and $2,039,000, respectively, of which approximately $217,000 and $202,000, respectively, has been included in "Current portion of obligations to financial institutions and capital leases" in the accompanying consolidated balance sheets. During 1999 and 1998, various subsidiaries of the Company and FFCA Acquisition Corporation ("FFCA") entered into loan commitments, aggregating $27,000,000, to fund the purchases of land and construction of restaurants. During 2000, 1999 and 1998, $1,927,000, $4,757,000 and $5,315,000, respectively, was funded, with the interest rates ranging from 7.68% to 9.26% per annum. Monthly principal and interest payments have been scheduled over twenty-year periods. At October 1, 2000 and January 2, 2000 the aggregate outstanding principal balance due to FFCA was approximately $11,641,000 and $9,943,000, respectively, of which approximately $276,000 and $206,000, respectively, of principal is included in "Current portion of obligations to financial institutions and capital leases" in the accompanying consolidated balance sheets. During the first nine months of fiscal 2000, the Company's net investment in fixed assets and related investment costs, including pre-opening costs, net of capitalized leases approximated $13.7 million. The Company estimates that it will expend up to an aggregate of $15.0 million in 2000 to finance ordinary refurbishment of existing restaurants and capital expenditures, net of landlord development and rent allowances and net of equipment lease and mortgage financing, for new restaurants. During the first nine months of fiscal 2000, the Company opened Morton's of Chicago steakhouses in Denver, CO; the second in that metropolitan area, Hartford, CT and in Jacksonville, FL and relocated the Morton's in Las Vegas, NV. During October 2000, the Company opened Morton's of Chicago steakhouses in Great Neck (Long Island), NY; San Juan, PR and Vancouver, Canada. The Company has also executed agreements to open Morton's in Honolulu, HI; La Jolla, CA; Louisville, KY; New Orleans, LA; Reston, VA; Salt Lake City, UT; and our second in Hong Kong. The Company has entered into various equipment lease, sale-leaseback and mortgage financing agreements with several financial institutions of which approximately $19.9 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 funds available under the Credit Agreement will be sufficient to fund planned expansion. In fiscal 1999 and 1998, the Company's board of directors authorized repurchases of the Company's outstanding common stock of up to approximately 1,930,600 shares. In March 2000, the board of directors increased the Company's authorization by an additional 500,000 shares. In July 2000, the board of directors increased the Company's authorization by an additional 500,000 shares. As of October 1, 2000, the Company had repurchased 2,635,090 shares at an average stock price of $17.80. NEW ACCOUNTING PRONOUNCEMENT Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("Statement 133"), as amended by Statement 137 "Accounting for Derivative Instruments and Hedging Activities Deferral of the Effective Date of SFAS No. 133" and 12 Statement 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No. 133", is effective for fiscal quarters of fiscal years beginning after June 15, 2000. Statement 133 standardizes the accounting for derivative instruments and requires that all derivative instruments be carried at fair value. The Company believes the impact that Statement 133 will have on its consolidated financial statements will not be material at the date of initial adoption on January 1, 2001. FORWARD-LOOKING STATEMENTS This Form 10-Q contains various "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, 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," "thinks," "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, including a highly competitive environment and 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, 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. Item 3. Quantitative and Qualitative Disclosure about Market Risk The inherent risk in market risk sensitive instruments and positions primarily relates to potential losses arising from adverse changes in foreign currency exchange rates and interest rates. As of October 1, 2000, the Company operated three international locations, one in Singapore (opened May 1998), one in Toronto (opened September 1998), and one in Hong Kong (opened December 1999). As a result, the Company is subject to risk from changes in foreign exchange rates. These changes result in cumulative translation adjustments which are included in other comprehensive income. The potential loss resulting from a hypothetical 10% adverse change in quoted foreign currency exchange rates, as of October 1, 2000, is not considered material. The Company is subject to market risk from exposure to changes in interest rates based on its financing activities. This exposure relates to borrowings under the Company's Credit Facility which are payable at floating rates of interest. The Company has entered into interest rate swap agreements to manage some of its exposure to interest rate fluctuations. The change in fair value of long-term debt resulting from a hypothetical 10% fluctuation in interest rates as of October 1, 2000 is not considered material. 13 MORTON'S RESTAURANT GROUP, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION Item 1. Legal Proceedings During fiscal 1998, the Company identified several under performing Bertolini's restaurants and authorized a plan for the closure or abandonment of specified restaurants which have all been closed. The Company is involved in various legal actions relating to such closures, however, the Company does not believe that the ultimate resolution of these actions will have a material effect beyond that recorded during fiscal 1998. The Company is 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, results of operations, liquidity or capital resources. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 4.04 (q) Thirteenth Amendment to the Second Amended and Restated Revolving Credit and Term Loan Agreement, dated September 29, 2000 among the Registrant, Peasant Holding Corp., Morton's of Chicago, Inc. and Fleet National Bank, individually and as agent. 27.0 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. 14 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 14, 2000 By: /s/ ALLEN J. BERNSTEIN ------------------ ------------------------------------ Allen J. Bernstein Chairman of the Board, President and Chief Executive Officer Date November 14, 2000 By: /s/ THOMAS J. BALDWIN ------------------ ------------------------------------ Thomas J. Baldwin Executive Vice President, Chief Financial Officer and Director 15 INDEX TO EXHIBITS The following is a list of all exhibits filed as part of this report. Exhibit Number Page Document ------ ---- -------- 4.04(q) Thirteenth Amendment to the Second Amended and Restated Revolving Credit and Term Loan Agreement, dated September 29, 2000 among the Registrant, Peasant Holding Corp., Morton's of Chicago, Inc. and Fleet National Bank, individually and as agent. 27.0 Financial Data Schedule 16 EX-4.04(Q) 2 a2029918zex-4_04q.txt EXHIBIT 4.04(Q) EXHIBIT 4.04(q) AMENDMENT NO. 13 TO SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT This AMENDMENT NO. 13 (this "Amendment"), executed, delivered, and dated as of September 29, 2000 (and effective as of the 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"), FLEET NATIONAL BANK (formerly known as BankBoston, N.A.), as Agent and Administrative Agent (the "Agent") for the Lenders (as defined in the Credit Agreement referred to below), FLEET NATIONAL BANK (formerly known as BankBoston, N.A. and referred to sometimes in the Credit Agreement, as defined below, as "Fleet" or "FNBB") in its individual capacity as a Lender ("Fleet"), IMPERIAL BANK, THE CHASE MANHATTAN BANK, and FIRST UNION NATIONAL BANK, as Lenders, and FIRST UNION NATIONAL BANK, as documentation agent (the "Documentation Agent") for the Lenders, amends the Second Amended and Restated Revolving Credit and Term Loan Agreement dated as of June 19, 1995, as the same is amended, modified, or supplemented from time to time (the "Credit Agreement"), by and among the Borrowers, the Administrative Agent, the Documentation 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 that the Lenders agree to increase the amount of their revolving credit commitments and 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 do so; NOW THEREFORE, the parties hereto hereby agree as follows: -2- SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT. Subject to the satisfaction of the conditions precedent set forth in SECTION 3 hereof, the Credit Agreement is hereby amended as follows: SECTION 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 place in the alphabetical sequence: "ADDITIONAL COMMITMENT AMOUNT. See SECTION 17A." "ADDITIONAL COMMITMENT CONDITIONS. The following conditions, as determined after giving effect to the proposed Additional Commitment Amounts of the relevant, prospective New Lender: (a) no Default or Event of Default shall have occurred and be continuing either immediately before or immediately after giving effect to any such Additional Commitment Amounts; and (b) the total of all Additional Commitment Amounts, on an aggregate, cumulative basis, shall not exceed $22,500,000." "CHASE. The Chase Manhattan Bank, in its capacity as a Lender." "FLEET. Fleet National Bank, in its capacity as a Lender." "INSTRUMENT OF ADHERENCE. See SECTION 17A." "LLC ASSIGNMENT AGREEMENT. See SECTION 3." "NEW LENDER. See SECITON 17A." "THIRTEENTH AMENDMENT CLOSING DATE. September __, 2000." SECTION 1.2. CHANGES IN CERTAIN DEFINITIONS. Section 1 of the Credit Agreement is hereby further amended as follows: (a) The definition of "Commitment Percentages" in Section 1 of the Credit Agreement is hereby amended to read as follows: "COMMITMENT PERCENTAGES. With respect to each Lender, the percentage set forth beside its name below (subject to adjustment upon any assignments permitted by SECTION 17 hereof and upon any increases in the Revolving Credit Commitment Amount permitted by SECTION 17A hereof): LENDER PERCENTAGE ------ ---------- Fleet 39.09678% First Union 32.04365% Imperial Bank 12.81688% Chase 16.04269% -3- (b) The definition of "Fee Letter" in Section 1 of the Credit Agreement is hereby amended to read as follows: "FEE LETTER. The Fee Letter by and among the Borrowers and Fleet initially dated as of June 19, 1995, as amended, modified, supplemented, restated or extended and in effect from time to time." (c) The definition of "Final Maturity Date" in Section 1 of the Credit Agreement is hereby amended to read as follows: "FINAL MATURITY DATE. December 31, 2005." (d) The definition of "FNBB" in Section 1 of the Credit Agreement is hereby amended to read as follows: "FNBB. Fleet (formerly known as BankBoston, N.A.), in its capacity as a Lender." (e) The definition of "Morton Subsidiaries" in Section 1 of the Credit Agreement is hereby amended by amending clause (ii) thereof to read as follows: "(ii) any other corporation, limited liability company, or other similar business entity which becomes a Subsidiary of Porterhouse or a Subsidiary of Morton's after the date hereof." (f) The definition of "Net Cash Proceeds" in Section 1 of the Credit Agreement is hereby amended by inserting after each instance of the words "capital stock" the phrase "or other equity interests". (g) The definition of "Revolving Credit Commitment" in Section 1 of the Credit Agreement is hereby amended by replacing the phrase "$50,000,000" with the phrase "$53,000,000". (h) The definition of "Revolving Credit Commitment Amount" in Section 1 of the Credit Agreement is hereby amended to read as follows: "REVOLVING CREDIT COMMITMENT AMOUNT. Fifty-Three Million Dollars ($53,000,000), as the same may be increased pursuant to SECTION 17A or reduced by the amount of any reductions effected pursuant to the terms of this Agreement." (i) The definition of "Security Documents" in Section 1 of the Credit Agreement is hereby amended by inserting after the phrase "Trademark Collateral Assignment Agreements" the phrase ", the LLC Assignment Agreement". (j) The definition of "Subsidiary" in Section 1 of the Credit Agreement is hereby amended by inserting immediately before the period at the end of such definition the phrase "or other equity interests". (k) The definition of "Term Loan Maturity Date" in Section 1 of the Credit Agreement is hereby amended to read as follows: -4- "TERM LOAN MATURITY DATE. December 31, 2005." (l) The table contained in the definition of "Term Loan Percentage" in Section 1 of the Credit Agreement is hereby amended to read as follows: "LENDER PERCENTAGE ------ ---------- Fleet 40.00000% First Union 33.33334% Imperial Bank 13.33333% Chase 13.33333%" SECTION 1.3. TERM LOAN PRINCIPAL PAYMENTS. Section 2.6 of the Credit Agreement is hereby amended by amending the table contained in SECTION 2.6(c)(i) to read as follows: -------------------------------- ----------------------- Date Installment Amount -------------------------------- ----------------------- -------------------------------- ----------------------- September 30. 2001 $250,000 -------------------------------- ----------------------- -------------------------------- ----------------------- December 31, 2001 $250,000 -------------------------------- ----------------------- -------------------------------- ----------------------- March 31, 2002 $250,000 -------------------------------- ----------------------- -------------------------------- ----------------------- June 30. 2002 $250,000 -------------------------------- ----------------------- -------------------------------- ----------------------- September 30, 2002 $250,000 -------------------------------- ----------------------- -------------------------------- ----------------------- December 31, 2002 $250,000 -------------------------------- ----------------------- -------------------------------- ----------------------- March 31, 2003 $250,000 -------------------------------- ----------------------- -------------------------------- ----------------------- June 30, 2003 $250,000 -------------------------------- ----------------------- -------------------------------- ----------------------- September 30, 2003 $250,000 -------------------------------- ----------------------- -------------------------------- ----------------------- December 31, 2003 $250,000 -------------------------------- ----------------------- -------------------------------- ----------------------- March 31, 2004 $2,500,000 -------------------------------- ----------------------- -------------------------------- ----------------------- June 30, 2004 $2,500,000 -------------------------------- ----------------------- -------------------------------- ----------------------- September 30, 2004 $2,500,000 -------------------------------- ----------------------- -------------------------------- ----------------------- December 31, 2004 $2,500,000 -------------------------------- ----------------------- -------------------------------- ----------------------- March 31, 2005 $3,000,000 -------------------------------- ----------------------- -------------------------------- ----------------------- June 30, 2005 $3,000,000 -------------------------------- ----------------------- -------------------------------- ----------------------- September 30, 2005 $3,000,000 -------------------------------- ----------------------- -------------------------------- ----------------------- December 31, 2005 $3,000,000 -------------------------------- ----------------------- SECTION 1.4. SECURITY AND GUARANTIES. Section 3 of the Credit Agreement is hereby amended as follows: (a) by inserting after the phrase "(collectively, the "Trademark Collateral Assignment Agreements")" the phrase ", and a certain Collateral Assignment of Limited Liability Company Interests by Morton's of Chicago Holding, Inc. and Morton's of Chicago/Pittsburgh, Inc. (the "LLC Assignment Agreement"), in each case as amended, modified, supplemented, or restated and in effect from time to time"; and (b) by inserting after the phrase "plant, equipment, shares of stock of" the phrase ", or other equity interests in," -5- SECTION 1.5. COMMITMENT FEE. Section 4.5 of the Credit Agreement is hereby amended by deleting the figure "$40,000,000" and replacing it with the phrase "the amount equal to the applicable Revolving Credit Commitment Amount minus $10, 000, 000". SECTION 1.6. REPRESENTATION AS TO LEGAL EXISTENCE. Section 6.1 of the Credit Agreement is hereby amended to read as follows: "SECTION 6.1. EXISTENCE. (a) Each of the Companies is a corporation or limited liability company (as applicable) duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, as applicable. Each of the Companies has adequate corporate or limited liability company (as applicable) power and authority to own or to hold under lease its properties and to carry on the business in which it is presently engaged and will be engaged. Each of the Companies is qualified as a foreign corporation or limited liability company (as applicable) and is licensed, admitted or approved to do business as a foreign corporation or limited liability company (as applicable) in each jurisdiction wherein the character of the properties owned or held under lease by it, or the nature of the business conducted by it, makes such qualification necessary, except where such failure to qualify would not have a material adverse effect on the Companies taken as a whole, and would not have any effect on the enforceability of the Loan Documents. (b) Each of the Companies has the corporate or limited liability company (as applicable) power and authority to enter into each of the Loan Documents to which it is or pursuant hereto is to become a party, to perform, observe and comply with all of its agreements and obligations under each of such documents, and, in the case of each of the Borrowers, to make all of the borrowings contemplated by this Agreement." SECTION 1.7. REPRESENTATION AS TO AUTHORITY, ETC. Section 6.3 of the Credit Agreement is hereby amended to read as follows: "SECTION 6.3. AUTHORITY, ETC. The execution and delivery by each of the Companies of each of the Loan Documents to which it is or pursuant hereto is to become a party, the performance by each of all of its agreements and obligations under each of such documents and the making by each of the Borrowers of all of the borrowings contemplated by this Agreement, as applicable, have been duly authorized by all necessary corporate or limited liability company (as applicable) action on the part of each of the Companies and its shareholders, members or other holders of equity securities (as applicable), and do not and will not (i) contravene any provision of its Charter or by-laws (each as from time to time in effect), (ii) conflict with, or result in a breach of any material term, condition or provision of, or constitute a default under or result in the creation of any mortgage, lien, pledge, charge, security interest or other encumbrance upon any of its property under, any agreement, deed of trust, indenture, mortgage or other instrument to which it is a party or by which it or any of its or their property is bound or affected, the consequences of which -6- would have a material adverse effect on the Companies taken as a whole, (iii) violate or contravene any provision of any law, regulation, order, ruling or interpretation thereunder or any decree, order or judgment of any court or governmental or regulatory authority, bureau, agency or official (all as from time to time in effect and applicable), except where such violation or contravention would not materially adversely affect the Companies taken as a whole, and would not have any effect on the enforceability of the Loan Documents, (iv) except as set forth in SCHEDULE 6.3, require any waivers, consents or approvals by any creditors which have not been obtained, except where the failure to obtain the same would not have a material adverse effect on the Companies taken as a whole, and would not have any effect on the enforceability of the Loan Documents, (v) require any consents or approvals by any of the shareholders, members or other holders of equity securities (as applicable) of any of the Companies (except such as will be duly obtained on or prior to the Closing Date and will be in full force and effect on and as of the Closing Date), or (vi) except as set forth in SCHEDULE 6.3, require any approval, consent, order, authorization or license by, or giving notice to, or taking any other action with respect to, any governmental or regulatory authority or agency under any provision of any applicable law except those actions which have been taken or will be taken prior to the Closing Date or where the failure to do so would not result in a material adverse effect on the Companies taken as a whole and would not have any effect on the enforceability of the Loan Documents." SECTION 1.8. COVENANT AS TO LEGAL EXISTENCE, ETC. Section 9.2 of the Credit Agreement is hereby amended as follows: (a) the first sentence is hereby amended by inserting after the word "incorporation" the phrase "or organization". (b) The fifth sentence is hereby amended to read as follows: "Except as permitted by SECTION 10.11(f) or SECTION 10.11(g) hereof, Morton's or Morton's of Chicago Holding, Inc. shall at all times be the record and beneficial owner of 100% of the outstanding capital stock of, or other equity interests in, each of the Morton Subsidiaries on a fully diluted basis except that Morton's of Chicago/Pittsburgh Inc. shall be permitted to be the record and beneficial owner of 100% of the outstanding equity interests in Morton's of Chicago/Pittsburgh LLC on a fully diluted basis; and, further, Morton's shall at all times be the record and beneficial owner of 100% of the outstanding equity interests in Morton's of Chicago Holding, Inc. on a fully diluted basis." SECTION 1.9. INDEBTEDNESS Section 10.1(f) of the Credit Agreement is hereby amended by deleting the figure "$40,000,000" and replacing it with the figure "$80,000,000". SECTION 1.10. DISTRIBUTIONS. Section 10.5(b) of the Credit Agreement is hereby amended by amending the second sentence thereof to read as follows: "In addition, Quantum may make Distributions (consisting of the repurchase by Quantum of shares of its outstanding common stock from its -7- shareholders) at a maximum purchase price not to exceed $30 per share (such maximum price per share to be proportionately adjusted from time to time to take into account the effect of stock splits, reverse stock splits, stock dividends, and similar applicable, proportional stock transactions occurring from time to time), PROVIDED that (i) no Default or Event of Default is then existing and none would exist after giving effect to any such Distribution, (ii) the aggregate cumulative amount of such Distributions made during the period from the Closing Date through the Thirteenth Amendment Closing Date does not exceed $46,893,725.84, and the aggregate cumulative amount of such Distributions made during the period from and after the Thirteenth Amendment Closing Date does not exceed an additional $33,106,274.16, and (iii) the pro forma Cash Flow Leverage Ratio (computed for this purpose on a PRO FORMA basis, the numerator of such ratio for this purpose being the Funded Indebtedness that would be then outstanding on the date of such proposed Distribution immediately after giving effect to such proposed Distribution and any related Indebtedness to be incurred in connection with the financing thereof, and the denominator of such ratio for this purpose being the Consolidated EBITDA for the Reference Period ending on the most recent Fiscal Quarter end date for which there shall have been delivered by the Companies the financial statements and Compliance Certificates required under SECTION 9.4 hereof prior to the time of any such proposed Distribution) shall be less than 3.00 to 1.00." SECTION 1.11. CHANGE IN TERMS AND PAYMENT OF SUBORDINATED DEBT AND CAPITAL STOCK. Section 10.10(b) of the Credit Agreement is hereby amended by inserting after each instance of the words "capital stock" the phrase "or other equity interests". SECTION 1.12. INVESTMENTS. Section 10.11 of the Credit Agreement is hereby amended as follows: (a) Section 10.11(f) is hereby amended as follows: (i) by inserting after each instance of the words "capital stock" the phrase "or other equity interests"; (ii) by inserting after each instance of the word "stockholder" the phrase "or equity interest holder"; and (iii) by inserting after each instance of the word "stockholders" the phrase "or equity interest holders". (b) Section 10.11(g) is hereby amended as follows: (i) by inserting after the phrase "Quantum, Peasant Holding, Morton's" the phrase ", Morton's of Chicago Holding, Inc., or Morton's of Chicago/Pittsburgh Inc. (solely in the case of its Subsidiary, Morton's of Chicago/Pittsburgh LLC)"; (ii) by inserting after each instance of the word "corporation" the phrase ", limited liability company, or other similar business entity"; -8- (iii) by inserting after each instance of the word "corporations" the phrase ", limited liability companies, or other similar business entities"; (iv) by inserting after each instance of the words "capital stock" the phrase "or other equity interests"; (v) by inserting after each instance of the word "stockholder" the phrase "or equity interest holder"; (vi) by inserting after each instance of the word "stockholders" the phrase "or equity interest holders"; and (vii) by inserting after the words "stock acquisition" the phrase "or acquisition otherwise effected by acquiring equity interests". SECTION 1.13. SHARES AND INDEBTEDNESS OF SUBSIDIARIES. Section 10.13 of the Credit Agreement is hereby amended by inserting after each instance of the phrase "shares of the capital stock" the phrase "or other equity interests". SECTION 1.14. PROVISIONS WITH RESPECT TO NEW LENDERS. The Credit Agreement is hereby amended by inserting the following new Section 17A immediately after SECTION 17: "SECTION 17A. NEW LENDERS. Except as otherwise provided herein, any Person who qualifies as an Eligible Assignee hereunder may, prior to March 1, 2001, join this Agreement as an additional Lender with a Revolving Credit Commitment (such Person, which may for the purposes of this SECTION 17A be an existing Lender, being herein referred to (with respect to its status under this SECTION 17A as an additional Lender) as the "New Lender") and be entitled to all the rights and interests, and obligated to perform all of the obligations and duties of, a Lender with respect to a specified additional amount of Revolving Credit Commitment hereunder, incremental to the total Revolving Credit Commitment Amount as then existing immediately prior to giving effect to such additional amount, PROVIDED that (a) the Additional Commitment Conditions are satisfied in connection therewith, (b) the New Lender, the Agent, and the Borrowers shall have executed and delivered an instrument of adherence (the "Instrument of Adherence") in form and substance reasonably satisfactory to the New Lender, the Agent and the Borrowers pursuant to which such New Lender shall agree to be bound as a Lender (as to the applicable Additional Commitment Amount and the corresponding Revolving Credit Commitment) by the terms and conditions hereof and the other Loan Documents, and to make Revolving Credit Loans and to participate in the issuance, extension, and renewal of Letters of Credit, all in accordance with this Agreement, and which Instrument of Adherence shall specify the maximum amount of credit in addition to the then existing Revolving Credit Commitment Amount that such New Lender agrees to provide hereunder (in each case, the "Additional Commitment Amount") and the New Lender's address for notices, (c) the Additional Commitment Amount provided by any New Lender must total at least $5,000,000 (in integral multiples of $500,000, if in excess of $5,000,000), (d) after giving effect to such Additional Commitment Amount, the Revolving Credit Commitment Amount and the corresponding, aggregate Revolving Credit Commitment shall not exceed -9- $75,500,000 (or, if less, the amount equal to the sum of the Revolving Credit Commitment Amount as in existence immediately prior to giving effect to such Additional Commitment Amount, plus such Additional Commitment Amount), (e) such New Lender and the Agent shall have received such opinions of counsel to the Borrowers, such evidence of proper corporate organization, existence, power and authority, and appropriate corporate proceedings with respect to the Borrowers, and such other certificates, instruments, and documents, as they shall have reasonably requested in connection with such Instrument of Adherence and any related Revolving Credit Notes, (f) the Agent shall have received from the New Lender or the Company a processing fee of $3,000 in connection with such Instrument of Adherence, (g) any applicable fees provided for in the Fee Letter payable at such time shall be paid to the applicable Persons entitled thereto, (h) unless the New Lender is also an existing Lender, the Agent shall have given its prior written consent with respect to such New Lender, which consent is not to be unreasonably withheld or delayed, (i) an appropriate Revolving Credit Note shall be issued to the New Lender at such time in the applicable amount provided in SECTION 2.1(c), and (j) such New Lender shall have confirmed to and agreed with the Agent, for the benefit of itself and the Lenders, and with the Borrowers, as follows: (i) the Agent and the Lenders have made no representation or warranty and shall have no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the other Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency, collectibility or value of this Agreement, the other Loan Documents, any Collateral, or any other instrument or document furnished pursuant hereto; (ii) the Agent and the Lenders have made no representation or warranty and shall have no responsibility with respect to the financial condition of the Borrowers and their Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations, or the performance or observance by the Borrowers and their Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations or any of their other obligations under this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (iii) such New Lender confirms that it has received a copy of this Agreement, and the other Loan Documents, together with copies of the most recent financial statements referred to in SECTION 6.7 and SECTION 9.4 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Instrument of Adherence; (iv) such New Lender will, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; -10- (v) such New Lender represents and warrants that it qualifies as an Eligible Assignee; (vi) such New Lender appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; (vii) such New Lender agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender having a Revolving Credit Commitment; and (viii) such New Lender represents and warrants that it is legally authorized to enter into such Instrument of Adherence. Upon the execution and delivery of an Instrument of Adherence with a New Lender effected in accordance with all of the foregoing provisions of this SECTION 17A, and the occurrence of the effective date of such Instrument of Adherence, the Revolving Credit Commitment Amount and the corresponding aggregate amount of the Revolving Credit Commitment shall be increased by the Additional Commitment Amount, and the Commitment Percentage of each Lender shall be recalculated by the Agent, such that the Commitment Percentage of each Lender having a Revolving Credit Commitment shall be recalculated so as to equal the quotient of the amount of such Lender's individual Revolving Credit Commitment then in effect divided by the resulting Revolving Credit Commitment Amount after giving effect to the Additional Commitment Amount. Promptly thereafter, this Agreement shall be amended by the Agent (each of the Borrowers and the Lenders hereby consenting to such amendment) to reflect (1) the name, address, and Commitment Percentage of such New Lender, (2) the Revolving Credit Commitment Amount as increased by the Additional Commitment Amount, (3) the resulting changes to the other Lenders' respective Commitment Percentages and the principal amount of the Revolving Credit Loans owing to each such Lender resulting from such Instrument of Adherence, such Additional Commitment Amount, such increased Revolving Credit Commitment Amount, and the changes in the various Commitment Percentages. Promptly thereafter, the Agent shall notify each of the Lenders of the joinder hereunder of such New Lender, the resulting increase in the Revolving Credit Commitment Amount, the Additional Commitment Amount, each Lender's new Commitment Percentage, and the Agent shall provide to each of the Lenders a copy of the executed Instrument of Adherence, and shall also make appropriate notations in the Register in accordance with SECTION 17(c) hereof. Upon the effective date of any Instrument of Adherence effected in accordance with all of the foregoing provisions of this SECTION 17A, the New Lender shall make all (if any) such payments to the other Lenders as may be necessary to result in the respective Revolving Credit Loans held by such New Lender and the other Lenders being equal to such applicable Lender's Commitment Percentage (as then in effect) of the aggregate principal amount of all Revolving Credit Loans -11- outstanding to the Borrowers as of such date. The Borrowers hereby agree that any New Lender so paying any such amount to the other Lenders pursuant to this SECTION 17A shall be entitled to all the rights of a Lender hereunder in respect of such amounts and such payments to such other Lenders shall constitute Revolving Credit Loans held by such New Lender hereunder, owed jointly and severally by the Borrowers, and that such New Lender may, to the fullest extent permitted by law, exercise all of its right of payment (including the right of set-off) with respect to such amounts as fully as if such New Lender had initially advanced to the Borrowers directly, on a joint and several basis, the amount of such payments. If any such adjustment payments are made to a Lender pursuant to this SECTION 17A at a time other than the end of an Interest Period in the case of all or any portion or portions of Revolving Credit Loans constituting Eurodollar Rate Loans, the Borrowers shall jointly and severally pay to each of the Lenders at the time that such payments are made pursuant to this SECTION 17A the amount that would be required to be paid by the Borrowers pursuant to SECTION 4.12 hereof had such payments been made directly by the Borrowers." SECTION 1.15. CERTAIN AMENDMENT PROVISIONS. Section 21 of the Credit Agreement is hereby further amended as follows: (a) Clause (a) of Section 21 of the Credit Agreement is hereby amended to read as follows: "(a) increase the principal amount of the Loans or of the Reimbursement Obligations (or subject the Lenders to any additional obligations) except pursuant to and in accordance with the terms of SECTION 17A". (b) Clause (e) of Section 21 of the Credit Agreement is hereby amended to read as follows: "(e) amend SECTIONS 13, 14, 17, 17A, the definition of "Additional Commitment Conditions", or this SECTION 21". (c) Clause (f) of Section 21 of the Credit Agreement is hereby amended to read as follows: "(f) change the Commitment Percentage, Term Loan Percentage or Total Percentage of any lender, except pursuant to and in accordance with the terms of SECTIONS 17 or 17A". (d) Clause (ii) of Section 21 of the Credit Agreement is hereby amended by inserting after each instance of the words "capital stock" the phrase "or other equity interests". SECTION 1.16. CONTINUATION OF OBLIGATIONS. Section 24 of the Credit Agreement is hereby amended by inserting after each instance of the words "capital stock" the phrase "or other equity interests". -12- SECTION 2. TRANSITIONAL ARRANGEMENTS; ALLOCATIONS. Effective as of the Effective Date, 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 Effective Date (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). Upon the occurrence of the Adjustment, (a) the Agent shall appropriately adjust its records to reflect each Lender's Adjusted Amount and (b) each of the Lenders shall promptly thereafter return to the Agent its existing Revolving Credit Note or Amended and Restated Revolving Credit Note, as the case may be, as replaced by an Amended and Restated Revolving Credit Note in connection with this Amendment and the contemplated reallocation of the Revolving Credit Commitment Amount. The Lenders shall make any appropriate adjustments in payments received in respect of the Obligations which are allocable to periods prior to the Effective Date directly among themselves as shall be necessary to effect the proper allocation of such payments among the Lenders, reflecting their respective portions of the applicable Obligations held by them from time to time. 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. 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 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. No Default or Event of Default has occurred and is continuing. (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 the date hereof (the "Effective Date"), subject to: -13- (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 jointly and severally by the Borrowers in favor of each Lender in the amounts of its respective Commitment Percentage of the aggregate Revolving Credit Commitment Amount, which shall (from and after the Effective Date) be deemed to constitute the Revolving Credit Notes held by such Persons as 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 (x) the charter documents and by-laws, each as amended, of each of the Borrowers, (y) the corporate actions taken by each of the Borrowers authorizing the execution, delivery, and performance hereof, and (z) 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 the Lenders, dated as of the date hereof, from outside special counsel (in New York and Illinois) to the Borrowers, with respect to such matters as to the Borrowers and the Loan Documents as the Agent and the Lenders may reasonably request, including (without limitation) opinions as to the corporate authority of each of the Borrowers to execute, deliver, and perform this Amendment, the Revolving Credit Notes, and the other documents contemplated hereby, and the enforceability hereof and thereof; (v) such evidence as the Agent may reasonably request such that the Agent shall be satisfied that the representations and warranties contained in SECITON 3 hereof are true and correct on and as of date hereof and as of the Effective Date; (vi) legal existence and good standing certificates issued by the appropriate public officials as to each of the Borrowers, and such other certificates, documents, or instruments with respect to this Amendment, the Revolving Credit Notes, the other Loan Documents, the Borrowers, and the Guarantors as the Agent or any of the Lenders may reasonably request; and (vii) an updating amendment to the Fee Letter signed by the Borrowers, the Guarantors and the Agent; -14- (b) the payment by the Borrowers of an amendment fee in an amount equal to $193,750, to be paid to the Agent, for allocation among the Lenders as they have separately agreed: and (c) the reimbursement by the Borrowers for the amount of the fees and expenses of the Agent's Special Counsel for services rendered to the Agent and related expenses in connection with this Amendment. 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, supplemented, and increased 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. RETURN OF REVOLVING CREDIT NOTES. Promptly upon the effectiveness of this Amendment, each Lender holding a Revolving Credit Note previously delivered to such Lender under the Credit Agreement (prior to giving effect to this Amendment) that has been superseded and replaced by a Revolving Credit Note delivered to such Lender pursuant to this Amendment shall return such superseded note, marked "cancelled", to the Borrowers. SECTION 7. 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. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized. FLEET NATIONAL BANK (formerly known as BankBoston, N. A.), for itself and as Administrative Agent By: /S/ROBERT W. MACELHINEY --------------------------------------------- Name: ROBERT W. MACELHINEY ------------------------------------------- Title: VICE PRESIDENT FIRST UNION NATIONAL BANK, for itself and as Documentation Agent By: --------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------ THE CHASE MANHATTAN BANK By: --------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------ IMPERIAL BANK By: --------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------ IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized. FLEET NATIONAL BANK (formerly known as BankBoston, N. A.), for itself and as Administrative Agent By: --------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------ FIRST UNION NATIONAL BANK, for itself and as Documentation Agent By: /S/JOEL THOMAS --------------------------------------------- Name: JOEL THOMAS ------------------------------------------- Title: VICE PRESIDENT ------------------------------------------ THE CHASE MANHATTAN BANK By: --------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------ IMPERIAL BANK By: --------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------ IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized. FLEET NATIONAL BANK (formerly known as BankBoston, N. A.), for itself and as Administrative Agent By: --------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------ FIRST UNION NATIONAL BANK, for itself and as Documentation Agent By: --------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------ THE CHASE MANHATTAN BANK By: /S/WILLIAM DEMILT --------------------------------------------- Name: WILLIAM DEMILT ------------------------------------------- Title: VICE PRESIDENT ------------------------------------------ IMPERIAL BANK By: --------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------ IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized. FLEET NATIONAL BANK (formerly known as BankBoston, N. A.), for itself and as Administrative Agent By: --------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------ FIRST UNION NATIONAL BANK, for itself and as Documentation Agent By: --------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------ THE CHASE MANHATTAN BANK By: --------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------ IMPERIAL BANK By: /S/CORNELIA NEWELL --------------------------------------------- NAME: CORNELIA NEWELL ------------------------------------------- TITLE: VICE PRESIDENT ------------------------------------------ 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 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 EX-27.1 3 a2029918zex-27_1.txt EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE OCTOBER 1, 2000 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-2000 JAN-03-2000 OCT-01-2000 2,002 0 905 0 6,553 18,677 89,484 15,600 115,106 29,401 78,612 0 0 68 (5,061) 115,106 178,510 178,510 60,550 146,068 19,252 0 4,497 8,693 2,608 6,085 0 0 0 6,085 1.29 1.25
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