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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 25, 1998
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
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(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. [ ]
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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, 1998.
Total shares outstanding 3,683,722
Number of shares owned beneficially 1,828,553
and/or of record by directors
and officers (1)
Number of shares held by persons 2,279,569
other than directors or
officers
Closing bid price $7.125
Market value of shares held by $16,241,929
persons other than directors
or officers
(1) For purposes of this computation all officers and directors are included,
although not all are necessarily "affiliates." Includes options to purchase
424,400 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.
3,683,722 Common Shares
were outstanding at December 31, 1998
DOCUMENTS INCORPORATED BY REFERENCE
1. Annual Report to Shareholders for the Fiscal Year Ended October 25, 1998
(in pertinent parts, as indicated).....Parts II and IV.
2. Proxy Statement for 1999 Annual Meeting of Shareholders (in pertinent
parts, as indicated).....Part III.
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PART I
Item 1. BUSINESS
- ----------------
Max & Erma's Restaurants, Inc. (the "Company"), directly and through an
affiliated partnership, owns, operates and franchises (two) a chain of
forty-nine Max & Erma's restaurants at December 31, 1998. In addition, Ironwood
Cafe, LLC, a wholly-owned limited liability company owns and operates one
Ironwood Cafe. 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 is enhanced by
local items where each restaurant is located, including sports team
paraphernalia and historical artifacts as well as 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 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
1998, the average check was approximately $8.21 at lunch and $9.72 at dinner.
The lunch and dinner meal periods accounted for approximately 37.3% and 62.7% of
net sales, respectively. Alcoholic beverages constituted approximately 12.0% of
net sales in fiscal 1998.
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
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of every associate is to "help our guests enjoy their total dining experiences
so they can't wait to come back." The Company believes that experience starts
with the food. That's why it uses only the freshest, high quality ingredients in
every menu item.
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
as necessary the menu twice each year, and in addition offers an annual summer
menu. 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 extensive 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 2.3% of sales on advertising in 1998 but anticipates
increasing its marketing expenditures during 1999 as it redirects dollars
previously spent on discounting and couponing. It primarily uses radio, direct
mail, billboards, special events and localized store marketing designed to
increase customer awareness and repeat business.
The Company owns forty-six of the Max & Erma's restaurants currently in
operation. One is owned by a separate affiliated partnership. In addition to the
specified percentage 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
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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.
During 1998 two separate franchised Max & Erma's restaurants opened in
the Columbus, Ohio airport and in the Cleveland, Ohio airport. Terms of the
agreements call for an initial franchise fee plus a monthly royalty of 4 or 5%
of sales. Total franchise fees and royalty payments for 1998 were $55,000 and
$137,000 respectively. Additionally, in July 1998, the Company promoted a
veteran regional manager to the position of director of franchising with the
purpose of developing a complete franchising program. Beginning in 1999, the
Company expects to begin actively marketing Max & Erma's franchises primarily to
potential multi-unit operators.
During 1998 the Company also initiated a test of a second restaurant
concept, Ironwood Cafe. A typical Ironwood Cafe will occupy approximately 3,500
to 4,000 square feet of leased space, is open for dinner only, and primarily
serves pasta and gourmet pizzas prepared in a wood-burning oven. The Company
anticipates opening an additional two Ironwood Cafes during 1999. At the end of
1999 the Company will evaluate its expansion potential.
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 25, 1998, the Company had 3,899 employees, of which 574 were
full-time restaurant employees, 3,104 were part-time restaurant employees, 74
were corporate staff personnel and 147 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 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
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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 Company's President. The President responds to
any negative comments on a weekly basis.
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. Eleven 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. Managers may elect to
receive some or all of their bonuses in the Company's common stock at a one-half
discount from fair market value. In addition, all regional managers and general
managers are eligible to receive stock options on a periodic basis. 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
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three fiscal years). The Company believes the program will encourage the general
manager to both build sales and control margins, create a sense of ownership,
reduce management turnover and promote a longer term perspective.
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.
Future Expansion
- ----------------
The Company intends to open eight additional Max & Erma's restaurants
per year during fiscal 1999 and fiscal 2000 and two Ironwood Cafes during fiscal
1999. All but four of the existing Max & Erma's restaurants are located in
suburban areas. Of the existing Max & Erma's restaurants, 32 are free-standing
and 15 are in-line shopping center/mall locations. The following table sets
forth the location of each Company-owned existing Max & Erma's restaurants and
Ironwood Cafes and the locations of restaurants currently under development and
scheduled to open during 1999 and 2000:
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Max & Erma's Ironwood Cafe
------------ -------------
Existing Under Development Existing Under Development
-------- ----------------- -------- -----------------
GEORGIA
Atlanta 2 --- --- ---
ILLINOIS
Chicago 7 --- --- ---
INDIANA
Indianapolis 3 2 --- ---
KENTUCKY
Lexington 2 --- --- ---
MICHIGAN
Ann Arbor 1 --- --- ---
Detroit 6 1 --- ---
Grand Rapids 1 --- --- ---
NORTH CAROLINA
Charlotte 1 --- --- ---
OHIO
Akron 1 --- --- ---
Cincinnati 1 2 --- 1
Cleveland 3 2 --- 1
Columbus 9 1 1 ---
Dayton 3 --- --- ---
Toledo 1 --- --- ---
Niles --- 1 --- ---
PENNSYLVANIA
Pittsburgh 5 2 --- ---
Erie --- 1 --- ---
SOUTH CAROLINA
Greenville 1 --- --- ---
VIRGINIA
Norfolk --- 1 --- ---
TOTAL 47 13 1 2
The Company's preference is to acquire the land and build new
free-standing 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 free-standing. 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.
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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
1999 and beyond, to differ materially from those expressed in any
forward-looking statements made by, or on behalf of the Company.
1. Dependence on Management - The Company's senior management has over 70 years
experience with the Company. The loss of one or more key executives could
have an adverse effect on the Company.
2. Competition - The casual dining segment of the restaurant industry is highly
competitive. Many of the Company's competitors are larger national chains
with greater financial resources.
3. Restaurant Industry - The restaurant industry is affected by changing trends,
economic conditions, traffic patterns and weather. Increases in food, labor
and benefits costs along with the availability of employees and suitable
restaurant sites could affect future operating results.
4. Legal - The Company is exposed to various tort and other claims, most notably
liability claims resulting from the sale of alcoholic beverages. While the
Company currently maintains insurance for such claims, there is no assurance
of its adequacy or future availability. An uninsured or excess claim could
have a material adverse affect on the Company.
5. 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 licenses and permits could adversely affect the Company's
operations. Further more, government actions affecting minimum wage rates,
payroll tax rates and mandated benefits could affect operating results.
6. Ironwood Cafe - The Company is testing a new concept, Ironwood Cafe. There
is no assurance that this concept will become profitable or achieve expected
results.
7. Franchising - The Company has begun and will expand franchising the Max &
Erma's concept. Failure to properly train, control and supervise franchisees
could have a detrimental effect on the overall reputation and results of
operations of Max & Erma's Company-owned restaurants. Additionally, there is
no assurance that franchised restaurants will open or generate franchise fees
as projected.
Item 2. PROPERTIES
- ------------------
All but five of the Company's restaurants are occupied under leases
expiring from 2000 to 2025, with renewal options for five to twenty additional
years. The affiliated partnership which owns one of the restaurants in Columbus,
Ohio also owns the premises on which it is located. Restaurant leases are
generally collateralized by liens on leasehold improvements, equipment,
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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.
During 1998 the Company completed a sale-leaseback of 13 Max & Erma's
restaurant properties. The Company received net proceeds from the sale of
approximately $25.5 million, which was approximately $1.4 million in excess of
net book value of the properties. The related leases are for an initial term of
twenty years with three five-year renewal options.
The last 29 Max & Erma's restaurants opened since mid-1993 are based on
a standard prototype design. 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 the Company's 18 older restaurants and 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. The freestanding prototype is
approximately 6,800 square feet and seats 210 patrons for dining in addition to
the bar area. A 30 to 40 seat seasonal patio area is optional. 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.
The Company is currently under contract to lease two additional sites
for Ironwood Cafe. The restaurants will generally occupy 3,500 to 4,000 square
feet in neighborhood locations. Since Ironwood Cafe is open for dinner only, a
convenient neighborhood location is the most important aspect of the site
selection criteria. The leases are generally for an initial term of five years
with two five-year renewal options.
Item 3. LEGAL PROCEEDINGS
- -------------------------
The Company is a defendant in various legal proceedings regarded as
normal to its business, and in the opinion of management, the ultimate outcome
of such proceedings will not materially affect the Company's financial position
or the results of its operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
None.
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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 25, 1998.
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
25, 1998, page 10.
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 25, 1998, pages 11 through 13.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
- ------------------------------------------------------------------
None.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ---------------------------------------------------
The balance sheets as of October 25, 1998 and October 26, 1997 and the
related statements of income, stockholders' equity and cash flows for each of
the three years in the period ended October 25, 1998, and the related notes to
the 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 25,
1998, pages 14 through 24 and the inside back cover.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
- -----------------------------------------------------
ON ACCOUNTING AND FINANCIAL DISCLOSURES
---------------------------------------
None.
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PART III
Items 10, 11, 12 and 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE
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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 1999 Annual Meeting of
Stockholders to be held on April 8, 1999, 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 14 are filed as part of this
report.
(a)(3) and (c): Exhibits
The exhibits listed in the accompanying index to exhibits on
pages 15 through 16 are filed as part of this report.
(b): Reports on Form 8-K
Report dated 9-13-98, filed 9-14-98, reporting that the Board
of Directors authorized the Company to repurchase 500,000
shares of the Company's common stock.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: January 15, 1999 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 dates indicated.
Signature Title
- --------- -----
/s/Todd B. Barnum Chairman of the Board, Chief Executive
- -------------------------------- Officer and President, Director (Principal
Todd B. Barnum Executive Officer)
*/s/Mark F. Emerson Chief Operating Officer, Director
- --------------------------------
Mark F. Emerson
/s/William C. Niegsch, Jr. Executive Vice President and Chief
- -------------------------------- Financial Officer, Director,
William C. Niegsch, Jr. (Principal Financial Officer)
*/s/William E. Arthur Director
- --------------------------------
William E. Arthur
*/s/Donald W. Kelley Director
- --------------------------------
Donald W. Kelley
*/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
*By /s/William C. Niegsch, Jr.
- --------------------------------
William C. Niegsch, Jr.
Attorney-in-Fact
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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 25, 1998:
- -Consolidated Balance Sheets as of
October 25, 1998 and October 26, 1997
- -For the years ended October 25, 1998, 14 - 15
October 26, 1997 and October 27, 1996
-Consolidated Statements of Income
-Consolidated Statements of Stockholders' Equity 16
-Consolidated Statements of Cash Flows 17
18
- -Notes to Consolidated Financial Statements
- -Independent Auditors' Report
- -No financial statement schedules are required 19 - 23
to be filed because the conditions requiring 24
their filing do not exist or because the information
is given in the consolidated financial statements or
notes thereto.
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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) of
17, 1972. 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) of
Erma's Ltd., dated September 9, 1974. Registration Statement on Form S-1
(Registration No. 2-85585).
10(c) Max & Erma's Convention Center Ltd. Agreement of Limited Reference is made to Exhibit 10(k) of
Partnership, dated July 27, 1981. 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(bb)
Inc., and Max & Erma's, Indianapolis, Ltd., dated April 24, 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(dd)
Inc., and Max & Erma's East, Ltd., dated May 27, 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(ee)
Inc., and Max & Erma's Dayton, Ltd., dated October 1, 1977. of Registration Statement on Form S-1
(Registration No. 2-85585).
10(g) 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).
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10(h)* Employment Agreement with Todd Barnum, dated December 12, 1984. Reference is made to Exhibit 10(b) of
Report on Form 10-K filed January 25,
1985.
10(i)* Employment Agreement with Mark F. Emerson, dated December 12, Reference is made to Exhibit 10(c) of
1984. Report on Form 10-K filed January 25,
1985.
10(j)* Employment Agreement with William C. Niegsch, Jr., dated Reference is made to Exhibit 10(d) of
December 12, 1984. Report on Form 10-K filed January 25,
1985.
10(k)* 1992 Stock Option Plan. Reference is made to Exhibit 10(q) of
Report on Form 10-K filed January 25,
1993.
10(l)* 1996 Stock Option Plan. Reference is made to Exhibit 10(p) of
Report on Form 10-K filed January
1996.
10(m)* Indemnification Agreement (form) between Max & Erma's Reference is made to Exhibit 10(y) of
Restaurants, Inc. and each of its directors dated as of June Report on Form 10-K filed January 23,
18, 1986. 1987.
10(n) Lease between Max & Erma's Dublin, Inc. and Mango Investments, Reference is made to Exhibit 10(ee)
dated February 9, 1989. of Report on Form 10-K filed January
26, 1990.
10(o)* 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 1996 Annual Meeting
of Shareholders, which is
incorporated by Reference herein.
10(p)* 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(q)* 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(r) Amended and Restated Revolving Credit Agreement dated January
30, 1998 between Max & Erma's Restaurants, Inc. and The
Provident Bank.
10(s) First Amendment to Amended and Restated Revolving Credit
Agreement dated December 11, 1998 between Max & Erma's
Restaurants, Inc. and The Provident Bank.
10(t)* Compensation Committee of the Board of Directors
resolution adopted October 5, 1998 relating to officers'
bonuses.
13 Portions of the Annual Report to Stockholders for the
Fiscal Year ended October 25, 1998, 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.
27 Financial Data Schedule.
*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.
16