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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended October 28, 2001
Commission File Number: 0-11514
Max & Erma's Restaurants, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware No. 31-1041397
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4849 EVANSWOOD DRIVE COLUMBUS, OHIO 43229
-------------------------------------- ----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 431-5800
---------------------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, $.10 Par Value
-----------------------------
(title of class)
Indicate by checkmark 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, and (2) has been subject to the filing requirements for
at least the past 90 days. YES X NO
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value has been computed by reference to the
closing bid price of such stock, as of December 31, 2001.
Total shares outstanding 2,407,149
Number of shares owned beneficially
and/or of record by directors and officers(1) 1,741,582
Number of shares held by persons
other than directors or officers 1,013,567
Closing bid price $ 12.53
Market value of shares held by $12,699,995
persons other than directors or officers
(1) For purposes of this computation all officers and directors are included.
Includes options to purchase 348,000 shares of common stock, all of which are
presently exercisable.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
2,407,149 Common Shares
were outstanding at December 31, 2001
DOCUMENTS INCORPORATED BY REFERENCE
1. Annual Report to Shareholders for the Fiscal Year Ended October 28, 2001
(in pertinent parts, as indicated).....Parts II and IV.
2. Proxy Statement for 2002 Annual Meeting of Shareholders (in pertinent
parts, as indicated).....Part III.
PART I
ITEM 1. BUSINESS
Max & Erma's Restaurants, Inc. (the "Company"), owns, operates and
franchises (nine) a chain of seventy-one Max & Erma's restaurants at December
31, 2001. The Company is a Delaware corporation organized in 1982, as the
successor to a restaurant business founded in 1971. The Company has registered
the phrase "Max & Erma's - Neighborhood Gathering Place" and its associated logo
as a service mark with the United States Patent and Trademark Office.
The Company's executive offices are located at 4849 Evanswood Drive,
Columbus, Ohio 43229, and its telephone number is (614) 431-5800.
DESCRIPTION OF BUSINESS
Max & Erma's restaurants are famous for gourmet burgers, overstuffed
sandwiches, homemade pasta dishes, chargrilled steak and chicken specialties,
super salads and taste-tempting munchies. Unique to the Max & Erma's concept is
the Build-Your-Own-Sundae Bar, a bathtub filled with vanilla ice cream, special
sauces and lots of toppings. In addition, the restaurants offer a full
complement of alcoholic and non-alcoholic beverages. Management believes that
the decor and theme of Max & Erma's restaurants allow the introduction of a
broad range of menu items, thus permitting rapid adjustment to changing customer
preferences.
Antique artifacts and local paraphernalia make Max & Erma's a fun,
unique place to take friends and family. The use of brick, a combination of
light and dark colors, and dropped lighting creates a roomy, yet cozy feel for
customers to enjoy while dining. The neighborhood atmosphere of each restaurant
is enhanced by inclusion of local items in each restaurant's decor, including
sports team paraphernalia and historical artifacts. Additional decor items
include a giant bubble gum machine, a three-dimensional burger, an antique love
tester and many other things. Giant murals, both inside and outside the
restaurant, combine the history and tradition of each market with the Max &
Erma's story.
Max & Erma's restaurants are open for both lunch and dinner seven days a
week. Hours of operation are generally 11:00 a.m. to midnight. During fiscal
2001, the average check was approximately $9.96 at lunch and $10.72 at dinner.
The lunch and dinner meal periods accounted for approximately 39% and 61% of net
sales, respectively. Alcoholic beverages constituted approximately 11.0% of net
sales in fiscal 2001. Generally, the Company's business does not experience
seasonal fluctuations of sales.
The Company's strategy is to compete in the casual dining segment of
the restaurant industry by offering a variety of high quality food in a casual,
comfortable and fun atmosphere and with a uniquely personable service style. The
philosophy of the Company is to focus on the details of the customer experience
that instill customer loyalty and promote repeat business. The purpose of every
associate is to "help our guests enjoy their total dining experiences so they
can't wait to come back.." The Company believes the dining experience starts
with the food and therefore uses only the freshest, high quality ingredients in
every menu item.
1
Freshness and quality are truly the foundations upon which Max & Erma's
was built. The Company strives to do things the right way, not the easy way. It
believes this dedication makes it better and that its guests return more often.
Market research indicates that customers often know what they are going to order
before they get to the restaurants because they crave certain signature items.
Being a "purpose-driven" company requires an ability to understand what
guests want, and a dedication to focus all associates' energies on exceeding
those expectations. Management believes that the best expressions of guests'
desires can be translated to a phrase that captures Max & Erma's character.
Specifically, the concept of the "Hometown Favorite" evokes images of trust,
friendliness and wholesomeness. This means that associates treat guests with
respect, like friends or neighbors, and provide them with the kind of food,
service and atmosphere that will make them want to return often.
Management believes that Max & Erma's reputation is built every day
with every customer served and that a key to customer loyalty is the server.
Food is delivered to the table by the server instead of a food runner, and
servers are required to recheck the table two minutes after delivering the meal.
Moreover, the wait staff is empowered to address customer problems without the
assistance of restaurant management.
Max & Erma's restaurants have always been known for gourmet hamburgers
and specialty sandwiches; however, one part of the Company's focus on the
customer is an evolving menu that changes to meet consumer tastes. The Company
believes its menu should be fun as well as innovative, and reviews and revises
the menu twice each year, and in addition offers seasonal menu inserts at
various times of the year. By periodically modifying its menu through the
introduction of a broad range of appealing new menu items the Company has
achieved a more diversified sales mix.
The Company makes use of consumer focus groups to conduct marketing
research. Management incorporates the findings of this market research in its
advertising, menu development, employee training, and building design and decor.
According to customers, the major point of difference between the Company and
its competitors is that Max & Erma's restaurants are perceived as being more of
a "fun place," an image the Company tries to foster in its advertising. The
Company spent approximately 2.1% of sales on advertising in 2001. It primarily
uses special events and localized store marketing designed to increase customer
awareness and repeat business and to a lesser extent billboards, direct mail and
radio.
The Company owns the business, exclusive of the real estate, for
sixty-one of the Max & Erma's restaurants in operation at December 31, 2001. The
business and real estate for one restaurant is owned by a separate affiliated
partnership. In addition to a 56% interest in the profits and losses of the
affiliated partnership, the Company is paid an annual fee equal to 6% of gross
revenues for managing the Max & Erma's restaurant owned by the partnership. The
management contract provides for monthly payments to the Company for an initial
term of two years and renewal terms aggregating 20 additional years upon the
mutual agreement of the parties. As general partner the Company is potentially
liable for 100% of the partnership losses.
2
The Company franchises nine restaurants to unaffiliated franchisees.
The first two franchised restaurants opened in 1998 in the Columbus and
Cleveland, Ohio airports. Three franchised restaurants opened in fiscal 2000,
two on the Ohio Turnpike and one in St. Louis, Missouri. In fiscal 2001, four
franchised locations opened in the Dayton, Ohio airport, Sandusky, Ohio, Green
Bay, Wisconsin and Columbus, Ohio. Terms of the agreements call for an initial
franchise fee plus a monthly royalty of up to 5% of sales.
At December 31, 2001 two franchised restaurants were under construction
in St. Louis, Missouri and Wilmington, Ohio. The Company anticipates the opening
of those restaurants plus two to three additional franchised restaurants during
the remainder of fiscal 2002. Multi-unit franchise agreements have been signed
for the Milwaukee/Green Bay and St. Louis markets which require the opening of a
total of four restaurants over a five year period in each market. At December
31, 2001 the Company is negotiating several additional multi-unit franchise
agreements.
During 1998 the Company initiated a test of a second restaurant
concept, Ironwood Cafe. The first Ironwood Cafe did not achieve a profitable
sales level and was closed during the second quarter of 1999. Two additional
Ironwood Cafes opened during 1999 in Cleveland and Cincinnati, Ohio, also did
not achieve profitable sales levels and were closed during the first quarter of
fiscal 2000.
COMPETITION
The restaurant business, particularly in the casual dining segment, is
highly competitive in terms of quality and value of products served, type and
variety of menu offered, quality and efficiency of service, ambiance and
attractiveness of facilities and site location. Max & Erma's restaurants compete
with food service operations of various types within their respective locations,
including national and regional chains as well as locally-owned and operated
restaurants. Many of the Company's competitors are substantially larger and have
greater financial resources than the Company.
EMPLOYEES
At October 28, 2001, the Company had 4,495 employees, of which 2,655
were full-time restaurant employees, 1,521 were part-time restaurant employees,
79 were corporate staff personnel and 240 were restaurant managerial personnel.
None of the Company's employees are represented by a labor union or a collective
bargaining unit. The Company considers relations with its employees to be good.
RESTAURANT OPERATIONS
The Company strives to maintain quality and uniformity in its
restaurants through careful training and supervision of personnel. All
restaurants are operated in accordance with uniform Company specifications,
which are set forth in detailed operating manuals relating to food and beverage
preparation, maintenance of premises and employee conduct. The Company utilizes
an independent shopping service to monitor implementation of Company operating
standards. The Company and the shopping service have developed testing standards
for the major aspects of
3
restaurant operation, including physical appearance, cleanliness, wait staff and
food quality. The shopping service has "mystery shoppers" visit each restaurant
four times each quarter to evaluate and grade the restaurant. A report is
prepared by the shopping service for each visit and is reviewed by the Company's
Chief Operating Officer and the respective regional and general managers. A
portion of the bonus for each regional and general manager is based on the
scores received on the shopping service reports. The Company also makes
available at each table postage-paid comment cards addressed to the restaurant's
Regional Manager, who responds to any negative comments.
Restaurant operations are administered by a management staff headed by
the Chief Operating Officer. A Regional Vice President of Operations reports to
the Chief Operating Officer. Fourteen regional managers, each of whom supervises
the operations of four to five restaurants, report to either the Chief Operating
Officer or the Regional Vice President of Operations. Each restaurant has a
general manager, who is responsible for training and supervising approximately
40 to 100 employees, and two or three assistant managers. Regional managers are
responsible for hiring their general and assistant managers. General managers,
with the assistance of the regional manager, are responsible for hiring
restaurant employees. The Company seeks to hire experienced restaurant personnel
who must complete a 14-week training program conducted by the Company before
becoming an assistant manager. The Company has historically promoted from within
to fill its regional and general manager positions.
Both regional and general managers receive a base salary plus a bonus
based upon performance against budget and average independent shopping service
scores. General managers prepare quarterly budgets for their stores and regional
managers prepare quarterly budgets for their regions. Bonuses are based on
specific goals derived from these quarterly budgets. Both regional and general
managers are eligible for a cash bonus equal to one-half of the purchase price
of the first 1,000 shares of the Company's common stock they purchase each
quarter. Management believes that its bonus system and the ability to purchase
common stock promote loyalty and highly motivate managers to meet Company goals.
Management believes that the combination of the authority delegated to
its regional and general managers, particularly with respect to hiring
employees, together with its goal-specific bonus plans, results in a positive
work environment and has contributed to relatively low management turnover.
MANAGING PARTNER PROGRAM
At the start of 1999 the Company introduced its Managing Partner
Program on a test basis. Nine eligible general managers and the Company entered
into five-year agreements in which the general manager places 1,000 shares of
Max & Erma's common stock which he or she owns in escrow with the Company and
agrees to manage their restaurant for a five year period. The shares of stock
are forfeited if the general manager terminates their employment during the term
of the agreement. In return the Company agrees to not relocate the general
manager during the term of the agreement. During the term of the agreement the
general manager's base salary is fixed. As additional compensation they receive
25% of the increase in profit before fixed expenses over a pre-established base
profit (generally the average of profit before fixed expenses for the most
recent three fiscal years). The Company believes the program encourages the
general manager to both
4
build sales and control margins, creates a sense of ownership, reduces
management turnover and promotes a longer-term perspective. Additional Managing
Partner Agreements were entered into at the start of both fiscal 2000 and 2001.
At the start of fiscal 2001, the Company had a total of 21 Managing Partners.
The Company added nine additional Managing Partners at the start of fiscal 2002.
PURCHASING AND INVENTORY CONTROLS
Meat and most other food and restaurant supply items are purchased
through one major distributor in order to obtain favorable prices and to ensure
consistent quality and delivery. For major items, the Company typically
negotiates prices directly with producers. For other items, the Company provides
the distributor with specifications and receives monthly prices for such items,
generally based upon a "cost plus" formula. Restaurant managers purchase these
items directly from the distributor, and each restaurant is billed directly for
its purchases. Although most of the Company's food and supplies are presently
furnished by one distributor, the Company believes alternate food suppliers are
available and has not experienced a shortage of food or supplies. A daily
inventory is taken for high cost items, such as steaks, ground meat, seafood and
liquor. A physical inventory of all items is made at the end of each four-week
accounting period.
5
FUTURE EXPANSION
The Company intends to open six to eight additional Max & Erma's
restaurants during fiscal 2002, three of which were under construction at
October 28, 2001. All but four of the existing Max & Erma's restaurants are
located in suburban areas. Of the existing Company-owned Max & Erma's
restaurants, 46 are freestanding and 16 are in-line shopping center/mall
locations. The following table sets forth the location of each Company-owned Max
& Erma's restaurant as of December 31, 2001 and the locations of restaurants
currently under negotiation or development and scheduled to open during fiscal
2002 or 2003:
MAX & ERMA'S
------------
EXISTING UNDER DEVELOPMENT
-------- -----------------
GEORGIA
Atlanta 2 ---
ILLINOIS
Chicago 8 ---
INDIANA
Indianapolis 5 ---
KENTUCKY
Lexington 2 ---
Louisville 2 1
MICHIGAN
Ann Arbor 1 ---
Detroit 7 1
Grand Rapids 2 ---
Lansing --- 1
NORTH CAROLINA
Charlotte 2 ---
OHIO
Akron 1 ---
Cincinnati 3 1
Cleveland 3 2
Columbus 10 1
Dayton 3 ---
Toledo 1 1
Niles 1 ---
PENNSYLVANIA
Pittsburgh 7 2
Erie 1 ---
TENNESSEE
Nashville --- 1
VIRGINIA
Norfolk 1 ---
TOTAL 62 11
6
The Company's preference is to acquire the land and build new
freestanding restaurants for Max & Erma's. However, in order to acquire suitable
sites, the Company will utilize ground leases, or lease and convert existing
premises. All sites under development are freestanding. Management believes that
the clustering of three or more restaurants in markets of sufficient size
increases customer awareness, enhances the effectiveness of advertising and
improves management efficiency.
GOVERNMENT REGULATION
The Company is subject to Federal, state and local laws affecting the
operation of its restaurants, including zoning, health, sanitation and safety
regulations and alcoholic beverage licensing requirements. Each restaurant is
operated in accordance with standardized procedures designed to assure
compliance with all applicable codes and regulations. The suspension of a food
service or liquor license could cause an interruption of operations at affected
restaurants.
BUSINESS RISKS
The Company desires to take advantage of the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Many
of the following important factors have been discussed in the Company's prior
filings with the Securities and Exchange Commission.
In addition to the other information in this Report, readers should
carefully consider that the following important factors, among others, in some
cases have affected, and in the future could affect, the Company's actual
results and could cause the Company's actual results of operations for fiscal
2002 and beyond, to differ materially from those expressed in any
forward-looking statements made by, or on behalf of the Company.
1. Dependence on Senior Management. The Company's three senior management
officials have over 73 years combined experience with the Company. Although the
Company has attempted to develop additional management capabilities, the loss of
one or more of the three senior executives could have a material adverse effect
on the Company.
2. Competition. The casual dining segment of the restaurant industry is highly
competitive with respect to price, service, food quality, location, and
employees, including restaurant managers. Many of the Company's competitors are
larger in size, have greater financial and other resources, and have longer
operating histories.
3. Restaurant Industry Changes. The restaurant industry is affected by changes
in consumer tastes and attitudes, economic conditions, traffic patterns and
changes, and other factors, which requires regular changes in the operation of
restaurants to remain competitive. There is a risk that the Company will not
effectively adapt to changes in the industry.
7
4. Cost of Doing Business. The restaurant business is subject to sudden cost
changes, particularly for food, energy, labor and insurance. The Company may not
be able to recover cost increases from increase prices for its menu items.
5. Legal. The Company is exposed to various tort and other claims, including
notably liability claims resulting from the sale of alcoholic beverages. While
the Company currently maintains insurance for such claims, there can be no
assurance that such insurance will be adequate or available in the future. An
uninsured or excess claim could have a material adverse effect on the Company.
6. Government Regulation. The restaurant industry is subject to extensive
government regulations relating to the sale of food and alcoholic beverages, and
sanitation, fire and building codes. Suspension or inability to renew any of the
related license and permits could adversely affect the Company's operations.
Also, government actions affecting minimum wages, payroll tax rates, and
mandated benefits could adversely affect operating results.
7. Franchising. The Company intends to expand the franchising of the Max &
Erma's concept. Failure to properly select, train, and supervise franchisees
could have a detrimental effect on the overall reputation and results of
operations of the restaurants owned by the Company.
8. Unfavorable Publicity. Adverse publicity resulting from poor food quality,
illness, injury or other health concerns or operations at one or a limited
number of the Company's or franchisee's restaurants could have a material
adverse effect on the Company's business, results of operations and financial
condition.
9. Acts of God, Terrorism. The Company's business could be materially adversely
affected by acts of God, including extremely harsh weather or natural disasters,
and by terrorist acts such as the events of September 11, 2001.
10. Consumer Perceptions of Food Safety. The Company's business could be
materially adversely affected by consumer perceptions of food safety in the
United States or in the market areas in which the Company operates, whether such
perceptions are based on fact or not and whether such perceptions are caused by
acts of terrorism or other events.
ITEM 2. PROPERTIES
All but one of the Company's restaurants are occupied under leases
expiring from 2002 to 2025, with most leases having renewal options for five to
twenty additional years. Restaurant leases
8
are generally collateralized by liens on leasehold improvements, equipment,
furniture and fixtures. The Company leases its executive offices (24,000 square
feet) and general warehouse and storage facilities (17,000 square feet) in
Columbus, Ohio under an operating lease expiring in January 2009.
The last 44 Max & Erma's restaurants to open are based on one of two
similar prototype designs. The prototype gives Max & Erma's restaurants a
distinct identity and emphasizes an unpretentious neighborhood ambiance. The
prototype design downplays the use of brass, Tiffany lamps and other design
features common to many other casual dining restaurants. Max & Erma's
restaurants established prior to the introduction of the prototype vary in
design and appearance, but average 6,000 square feet and seat an average of 160
customers. Most of the older restaurants have been remodeled or redecorated to
the prototype look. The freestanding prototype is approximately 6,800 or 5,500
square feet depending on the size of the site and its sales potential and seats
210 or 175 patrons, respectively, for dining in addition to the bar area. A 30
to 40 seat seasonal patio area is optional depending on the site and location.
The prototype design is readily adaptable to a variety of sites including
shopping center and mall locations.
The Company believes that its focus on selecting high profile
restaurant sites is critical to its success. The Company's present site
selection strategy is to locate its restaurants in prime, high visibility, high
traffic suburban locations. Management believes that selection of high profile
sites along with the implementation of its prototype restaurant will result in
improved unit economics.
ITEM 3. LEGAL PROCEEDINGS
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
9
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information contained under the captions "SELECTED QUARTERLY
FINANCIAL DATA" and "SHAREHOLDER INFORMATION" is incorporated herein by
reference to the inside back cover of the Company's Annual Report to
Shareholders for the fiscal year ended October 28, 2001.
ITEM 6. SELECTED FINANCIAL DATA
Information required under this Item is incorporated herein by
reference to the Company's Annual Report to Shareholders for the fiscal year
ended October 28, 2001, page 5.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Information required under this Item is incorporated herein by
reference to the Company's Annual Report to Shareholders for the fiscal year
ended October 28, 2001, pages 6 through 8.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
As of October 28, 2001, the Company's total long-term indebtedness
(including current maturities) was approximately $27.0 million, which represents
the balance due under the Company's revolving credit agreement and bears
interest at variable rates. A one percentage point increase or decrease in
interest rates could increase or decrease the Company's pre-tax income by
approximately $270,000. Based upon quarter ending balances, the average
borrowings under the Company's revolving credit agreement during 2001 was $29.9
million. The high and low balance outstanding under the revolving credit
agreement during 2001 was $32.1 million and $27.0 million, respectively. As
required under the Company's revolving credit agreement, the Company has entered
into a $20,000,000 partial interest rate protection agreement. The agreement
converts $20,000,000 of the Company's borrowings from variable rate to fixed
rate beginning November 1, 2001, unless LIBOR exceeds 7.0%. If LIBOR exceeds
7.0%, then the interest rate is increased by the excess. For a further
description of the Company's indebtedness, see Item 8, Financial Statements and
Supplementary Data - Notes 3 and 4 to the Consolidated Financial Statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated balance sheets as of October 28, 2001 and October 29,
2000, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended October 28, 2001,
and the related notes to the consolidated financial statements together with the
independent auditors' report thereon and the Selected Quarterly Financial Data
are incorporated by reference to the Company's Annual Report to Shareholders for
the fiscal year ended October 28, 2001, pages 9 through 20 and the inside back
cover.
10
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
ITEMS 10, 11, 12 AND 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT: EXECUTIVE COMPENSATION: SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT: AND CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Information required under these Items is incorporated herein by
reference to the Company's Proxy Statement for 2002 Annual Meeting of
Stockholders to be held on April 11, 2002, pursuant to Regulation 14A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) and (2) and (d): Financial Statements
The financial statements listed in the accompanying index to
financial statements on page 13 are filed as part of this
report.
(a)(3) and (c): Exhibits
The exhibits listed in the accompanying index to exhibits on
pages 14 through 15 are filed as part of this report.
(b): Reports on Form 8-K
Reference is made to Form 8-K filed November 1, 2001.
11
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this amended Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: January 15, 2002 Max & Erma's Restaurants, Inc.
By: */s/Todd B. Barnum
------------------------------
Todd B. Barnum
Chairman of the Board,
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated and on the 15th day of January, 2002.
SIGNATURE TITLE
- --------- -----
*/s/ Todd B. Barnum Chairman of the Board, Chief Executive
- --------------------------------
Todd B. Barnum Officer and President, Director (Principal
Executive Officer)
*/s/ Mark F. Emerson Chief Operating Officer, Director
- --------------------------------
Mark F. Emerson
*/s/ William C. Niegsch, Jr. Executive Vice President and Chief
- --------------------------------
William C. Niegsch, Jr. Financial Officer, Director,
(Principal Financial and Accounting Officer)
*/s/ William E. Arthur Director
- --------------------------------
William E. Arthur
*/s/ Robert A. Rothman Director
- --------------------------------
Robert A. Rothman
*/s/ Roger D. Blackwell Director
- --------------------------------
Roger D. Blackwell
*/s/ Michael D. Murphy Director
- --------------------------------
Michael D. Murphy
*/s/ Thomas R. Green Director
- --------------------------------
Thomas R. Green
*/s/ William C. Niegsch, Jr.
- --------------------------------
William C. Niegsch, Jr.
Attorney-in-Fact
12
MAX & ERMA'S RESTAURANTS, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
ITEMS 8, 14(a)(1)
REFERENCE PAGE
ANNUAL REPORT
TO SHAREHOLDERS
---------------
The following items are required to be
included in Items 8 and 14(a)(1) and are
incorporated by reference from the attached
Annual Report to Shareholders of Max
& Erma's Restaurants, Inc. for the
fiscal year ended October 28, 2001:
- -Consolidated Balance Sheets as of
October 28, 2001 and October 29, 2000
- -For the years ended October 28, 2001, 9 - 10
October 29, 2000 and October 31, 1999
-Consolidated Statements of Income 11 - 12
-Consolidated Statements of Stockholders' Equity 13
-Consolidated Statements of Cash Flows 14
- -Notes to Consolidated Financial Statements 15 - 19
- -Independent Auditors' Report 20
- -No financial statement schedules are required
to be filed because the conditions requiring
their filing do not exist or because the
information is given in the consolidated
financial statements or notes thereto.
13
REPORT ON FORM 10-K
MAX & ERMA'S RESTAURANTS, INC.
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION PAGE NO.
------- ----------- --------
NO.
---
2 Plan and Agreement of Reorganization, as amended October 15, Reference is made to Exhibit 2 of
1991. Report on Form 10-K filed January
24, 1992.
3(a) Restated Certificate of Incorporation, as amended April 4, 1985. Reference is made to Exhibit 4(c) of
Report on Form 10-Q filed June 26,
1985.
3(b) Restated By-Laws, as amended April 4, 1985. Reference is made to Exhibit 4(d) of
Report on Form 10-Q filed June 26,
1985.
3(c) Certificate of Amendment of Certificate of Incorporation Reference is made to Exhibit 3(c) of
September 22, 1986. Report on Form 10-K filed January
23, 1987.
3(d) Certificate of Amendment of Certificate of Incorporation May Reference is made to Exhibit 3(d) of
30, 1990. Report on form 10-K filed January
25, 1991.
4 Form of Common Stock Certificate. Reference is made to Exhibit 4(a) of
Registration Statement on Form S-1
(Registration No. 2-85585).
10(a) Max & Erma's Ltd. Agreement of Limited Partnership, dated May Reference is made to Exhibit 10(b)
17, 1972. of Registration Statement on Form
S-1 (Registration No. 2-85585).
10(b) First Amendment to Agreement of Limited Partnership of Max & Reference is made to Exhibit 10(b)
Erma's Ltd., dated September 9, 1974. of Registration Statement on Form
S-1 (Registration No. 2-85585).
10(c) Letter Agreement between Nine Limited Leasing, Max & Erma's, Reference is made to Exhibit 10(bb)
Inc., and Max & Erma's Indianapolis, Ltd., dated April 24, 1977. of Registration Statement on Form
S-1 (Registration No. 2-85585).
10(d) Letter Agreement between Nine Limited Leasing, Max & Erma's, Reference is made to Exhibit 10(dd)
Inc., and Max & Erma's East, Ltd., dated May 27, 1977. of Registration Statement on Form
S-1 (Registration No. 2-85585).
10(e) Letter Agreement between Nine Limited Leasing, Max & Erma's, Reference is made to Exhibit 10(ee)
Inc., and Max & Erma's Dayton, Ltd., dated October 1, 1977. of Registration Statement on Form
S-1 (Registration No. 2-85585).
10(f) Letter Agreement between Nine Limited Leasing, Max & Erma's, Reference is made to Exhibit 10(gg)
Inc., and Max & Erma's North, Ltd., dated December 28, 1981. of Registration Statement on Form
S-1 (Registration No. 2-85585).
10(g)* 1992 Stock Option Plan. Reference is made to Exhibit 10(q)
of Report on Form 10-K filed January
25, 1993.
10(h)* 1996 Stock Option Plan. Reference is made to Exhibit 10(p)
of Report on Form 10-K filed January
1996.
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10(i)* Indemnification Agreement (form) between Max & Erma's Reference is made to Exhibit 10(y)
Restaurants, Inc. and each of its directors dated as of June of Report on Form 10-K filed January
18, 1986. 23, 1987.
10(j)* Written description of split dollar life insurance program for Reference is made to footnote 3 to
officers. the Summary Compensation Table
presented in the Company's Proxy
Statement for the 2001 Annual
Meeting of Shareholders, which is
incorporated by Reference herein.
10(k)* Board of Directors' Resolution adopted November 2, 1987 Reference is made to Exhibit 10(dd)
relating to split dollar life insurance program for officers. of Report on Form 10-K filed January
25, 1993.
10(l)* Board of Directors' Resolution adopted October 19, 1992 Reference is made to Exhibit 10(ee)
relating to split dollar life insurance program for officers. of Report on Form 10-K filed January
25, 1993.
10(m)* Form of Severance Agreement in Event of Change In Control for Reference is made to Exhibit 10(m)
Senior Executive Officers. of Report on Form 10-K filed January
18, 2000.
10(n)* List of Senior Executive Officers with Severance Agreements in Reference is made to Exhibit 10(n)
the form of Exhibit 10(m). of Report on Form 10-K filed January
18, 2000.
10(o)* Form of Severance Agreement in Event of Change In Control for Reference is made to Exhibit 10(o)
Officers. of Report on Form 10-K filed January
18, 2000.
10(p)* List of Officers with Severance Agreements. Reference is made to Exhibit 10(o)
of Report on Form 10-K filed January
24, 2001.
10(q) Fourth Amended and Restated Revolving Credit Agreement dated
October 19, 2001, between Max & Erma's Restaurants, Inc. and
The Provident Bank.
13 Portions of the Annual Report to Stockholders for the
Fiscal Year ended October 28, 2001, incorporated herein
by reference (except for those pages which are
specifically incorporated by reference, the Company's
Annual Report to stockholders is not to be deemed as
filed as part of this report).
23 Consents of Experts and Counsel.
24 Power of Attorney.
*Management contract or compensatory plan or arrangement required to be filed as
an exhibit to this Report on Form 10-K pursuant to Item 14(c) of the Report on
Form 10-K.
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