<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant[ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
MAX & ERMA'S RESTAURANTS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of Securities to which transaction
applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 2
MAX & ERMA'S RESTAURANTS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
APRIL 12, 2000
AND
PROXY STATEMENT
IMPORTANT
PLEASE MARK, SIGN AND DATE YOUR PROXY
AND PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE
<PAGE> 3
MAX & ERMA'S RESTAURANTS, INC.
P.O. BOX 297830
4849 EVANSWOOD DRIVE
COLUMBUS, OHIO 43229
(614) 431-5800
February 28, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders of Max & Erma's Restaurants, Inc. on April 12, 2000, at 2:30 p.m.,
at the Company's corporate office at 4849 Evanswood Drive, Columbus, Ohio. We
look forward to greeting those stockholders who are able to attend.
At the meeting, you are being asked to elect Roger D.
Blackwell, William C. Niegsch, Jr. and Robert A. Rothman for three-year terms as
Class II members of the Board of Directors and to ratify the selection of
Deloitte & Touche LLP as the Company's independent public accountants for the
2000 fiscal year.
It is very important that your shares are represented and
voted at the meeting, whether or not you plan to attend. Accordingly, please
sign, date and return your proxy in the enclosed envelope at your earliest
convenience.
Your interest and participation in the affairs of the Company
are greatly appreciated. Thank you for your continued support.
Sincerely,
Todd B. Barnum
Chairman of the Board,
Chief Executive Officer and President
<PAGE> 4
MAX & ERMA'S RESTAURANTS, INC.
P.O. BOX 297830
4849 EVANSWOOD DRIVE
COLUMBUS, OHIO 43229
(614) 431-5800
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 12, 2000
February 28, 2000
To the Stockholders of
Max & Erma's Restaurants, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
of Max & Erma's Restaurants, Inc., a Delaware corporation (the "Company"), will
be held at the Company's corporate office at 4849 Evanswood Drive, Columbus,
Ohio, on the 12th day of April, 2000, at 2:30 p.m., local time, for the
following purposes:
1. To elect three Class II Directors, each for a term of
three years and until their successors are duly elected
and qualified.
2. To ratify the selection of Deloitte & Touche LLP as the
Company's independent public accountants for the 2000
fiscal year.
3. To transact such other business as may properly come
before the meeting or any adjournment thereof.
Owners of Common Stock of the Company of record at the close
of business on February 18, 2000, will be entitled to vote at the meeting.
Whether or not you plan to attend the meeting, please date,
sign and mail the enclosed proxy in the envelope provided. Thank you for your
cooperation.
By Order of the Board of Directors
Todd B. Barnum
Chairman of the Board,
Chief Executive Officer and President
---------------------------------------------------------------------------
PLEASE SIGN AND MAIL THE ENCLOSED PROXY
IN THE ACCOMPANYING ENVELOPE
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES
---------------------------------------------------------------------------
<PAGE> 5
MAX & ERMA'S RESTAURANTS, INC.
P.O. BOX 297830
4849 EVANSWOOD DRIVE
COLUMBUS, OHIO 43229
(614) 431-5800
February 28, 2000
PROXY STATEMENT FOR
2000 ANNUAL MEETING OF STOCKHOLDERS
INTRODUCTION
This Proxy Statement is furnished to the stockholders of Max & Erma's
Restaurants, Inc., a Delaware corporation (the "Company"), in connection with
the solicitation by the Board of Directors of the Company of proxies to be used
at the Annual Meeting of Stockholders (the "Annual Meeting") to be held on April
12, 2000, and at any adjournment thereof, and is being mailed to the
stockholders on or about the date set forth above.
All shares represented by properly executed proxies received by the
Board of Directors pursuant to this solicitation will be voted in accordance
with the stockholder's directions specified on the proxy or, in the absence of
specific instructions to the contrary, will be voted in accordance with the
Board of Directors' unanimous recommendations, which are FOR the election of
Roger D. Blackwell, William C. Niegsch, Jr. and Robert A. Rothman as Class II
Directors of the Company; FOR the ratification of the selection of Deloitte &
Touche LLP as the independent public accountants of the Company for the 2000
fiscal year; and, at the discretion of the persons acting under the proxy, to
transact such other business as may properly come before the meeting or any
adjournment thereof. A proxy may be revoked, without affecting any vote
previously taken, by written notice mailed to the Company (attention William C.
Niegsch, Jr.) or delivered in person at the meeting, by filing a duly executed,
later dated proxy, or by attending the meeting and voting in person.
VOTING RIGHTS
Only stockholders of record at the close of business on February 18,
2000, are entitled to notice of and to vote at the Annual Meeting and any
adjournment thereof. Each share so held entitles the holder thereof to one vote
upon each matter to be voted on. As of December 31, 1999, the Company had
outstanding 2,664,935 shares of Common Stock, $.10 par value. There are no
cumulative voting rights in the election of directors.
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the only persons known by the Company to
be the beneficial owners of more than five percent (5%) of the outstanding
shares of Common Stock of the Company on December 31, 1999 (unless otherwise
noted):
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS(2)
- ------------------- --------------------- -----------
Todd B. Barnum 467,958(3) 16.6%
4849 Evanswood Drive
Columbus, Ohio 43229
Mark F. Emerson 362,108(4) 13.2%
4849 Evanswood Drive
Columbus, Ohio 43229
Roger D. Blackwell 524,422(5) 19.5%
3380 Tremont Road
Columbus, Ohio 43221
William C. Niegsch, Jr. 182,627(6) 6.6%
4849 Evanswood Drive
Columbus, Ohio 43229
- ---------------------------
(1) For purposes of the above table, a person is considered to "beneficially
own" any shares with respect to which he exercises sole or shared voting or
investment power or of which he has the right to acquire the beneficial
ownership within 60 days of December 31, 1999. Unless otherwise indicated,
voting power and investment power are exercised solely by the person named
above or shared with members of his household.
(2) "Percentage of Class" is calculated on the basis of the number of
outstanding shares plus the number of shares a person has the right to
acquire within 60 days of December 31, 1999.
(3) Includes 154,000 shares which Mr. Barnum has a right to purchase under
presently exercisable options. Also includes 402 shares owned by Mr.
Barnum's spouse, as to which Mr. Barnum disclaims beneficial ownership.
(4) Includes 87,000 shares which may be purchased under presently exercisable
options.
(5) Includes 19,000 shares which may be purchased under presently exercisable
options.
(6) Includes 87,000 shares which may be purchased under presently exercisable
options. Also includes 11,000 shares owned by Mr. Niegsch's spouse and
10,494 shares owned by Mr. Niegsch's children, as to which Mr. Niegsch
disclaims beneficial ownership.
2
<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of December 31, 1999, the beneficial
ownership of the Company's Common Stock by each officer and/or director of the
Company and by all officers and directors as a group:
NAME OF NUMBER OF SHARES PERCENTAGE
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS(2)
---------------- --------------------- -----------
Todd B. Barnum 467,958(3) 16.6%
Mark F. Emerson 362,108(3) 13.2%
Bonnie J. Brannigan 26,666(4) 1.0%
William C. Niegsch, Jr. 182,627(3) 6.6%
Gregory L. Heywood 80,476(5) 3.0%
Larry B. Fournier 25,372(6) 0.9%
William E. Arthur 70,653(7) 2.6%
Roger D. Blackwell 524,422(3) 19.5%
Robert A. Rothman 71,800(8) 2.7%
Michael D. Murphy 22,800(9) 0.9%
Thomas R. Green 29,686(10) 1.1%
All directors and officers
as a group (11 persons) 1,864,568(11) 59.3%
- ---------------------------
(1) For purposes of the above table, a person is considered to "beneficially
own" any shares with respect to which he exercises sole or shared voting or
investment power or of which he or she has the right to acquire the
beneficial ownership within 60 days of December 31, 1999. Unless otherwise
indicated, voting power and investment power are exercised solely by the
person named above or shared with members of his or her household.
(2) "Percentage of Class" is calculated on the basis of the number of
outstanding shares plus the number of shares a person has the right to
acquire within 60 days of December 31, 1999.
(3) See preceding table and notes thereto.
(4) Includes 20,000 shares which may be purchased under presently exercisable
options.
(5) Includes 21,000 shares which may be purchased under presently exercisable
options.
3
<PAGE> 8
(6) Includes 15,200 shares which may be purchased under presently exercisable
options.
(7) Includes 19,000 shares which may be purchased under presently exercisable
options. Also includes 25,572 shares owned by Mr. Arthur's spouse, as to
which Mr. Arthur disclaims beneficial ownership.
(8) Includes 19,000 shares which may be purchased under presently exercisable
options. Also includes 2,475 shares owned by Mr. Rothman's spouse, as to
which Mr. Rothman disclaims beneficial ownership.
(9) Includes 22,300 shares which may be purchased under presently exercisable
options.
(10)Includes 16,000 shares which may be purchased under presently exercisable
options. Also includes 962 shares owned by Mr. Green's spouse and 150
shares owned by Mr. Green's children, as to which Mr. Green disclaims
beneficial ownership.
(11)Includes 479,500 shares which may be purchased pursuant to presently
exercisable options.
4
<PAGE> 9
ELECTION OF DIRECTORS
The Board of Directors has designated Roger D. Blackwell, William C.
Niegsch, Jr. and Robert A. Rothman as nominees for election as Class II
Directors of the Company to serve for terms of three years and until their
successors are duly elected and qualified. If for any reason any nominee should
not be a candidate for election at the time of the meeting, the proxies may be
voted for a substitute nominee at the discretion of those named as proxies. The
Board of Directors has no reason to believe that any nominee will be
unavailable. The shares represented by the enclosed proxy, if returned duly
executed and unless instructions to the contrary are indicated thereon, will be
voted for the nominees listed below. The affirmative vote of a majority of the
votes entitled to be cast by the holders of the Company's Common Stock present
in person or represented by proxy is required to elect each nominee. Abstentions
and broker non-votes are not counted in the election of directors and thus have
no effect.
The following table sets forth (i) the nominees for election as Class
II Directors of the Company, and (ii) the Class I and Class III Directors of the
Company whose terms in office will continue.
<TABLE>
<CAPTION>
DIRECTOR
CONTINUOUSLY
NAME AND AGE SINCE PRINCIPAL OCCUPATION
- ------------ ------------ -------------------------------------------------
<S> <C> <C>
NOMINEES - TERMS TO EXPIRE 2003 (CLASS II)
Roger D. Blackwell, 59 1984 Professor of Marketing, The Ohio State University
William C. Niegsch, Jr., 47 1982 Executive Vice President, Chief
Financial Officer, Treasurer and Secretary
Robert A. Rothman, 58 1982 President, Amusement Concepts, Inc., a corporation engaged in
the video and electronic games business
CONTINUING DIRECTORS - TERMS TO EXPIRE 2001 (CLASS III)
William E. Arthur, 71 1982 Of Counsel, Porter, Wright, Morris & Arthur,
Attorneys at Law
Todd B. Barnum, 57 1982 Chairman of the Board, Chief Executive
Officer and President
Thomas R. Green, 45 1996 Chief Executive Officer
Lancaster Pollard & Company
CONTINUING DIRECTORS - TERMS TO EXPIRE 2002 (CLASS I)
Mark F. Emerson, 52 1982 Chief Operating Officer
Michael D. Murphy, 55 1995 Private Investor
</TABLE>
5
<PAGE> 10
INFORMATION CONCERNING BOARD OF DIRECTORS
During fiscal 1999, four meetings of the Board of Directors were held.
All directors attended 75% or more of the total Board of Directors' meetings.
In fiscal 1999, the members of the Compensation Committee were Messrs.
Arthur, Blackwell and Green. The Compensation Committee's function is to
recommend to the directors the annual compensation of the Company's executive
officers, the number and terms of any stock options to be granted under the
Company's stock option plans, and any other actions or policies with respect to
compensation. The Compensation Committee met once during fiscal 1999. All
Compensation Committee members were in attendance at such meeting.
In fiscal 1999, the members of the Audit Committee were Messrs. Rothman
and Murphy. The Audit Committee's function is to recommend to the directors a
firm of accountants to serve as the Company's auditors and to review with the
independent auditors and the appropriate corporate officers on matters relating
to corporate financial reporting and accounting procedures and policies,
adequacy of financial, accounting and operating controls, and the scope of the
audit. The Audit Committee met once during fiscal 1999. All Audit Committee
members were in attendance at such meeting.
For 1999, each outside director was paid $1,250 per quarter. In
addition, in October 1999, each outside director was granted an option to
purchase 6,000 shares of Common Stock. Such options are exercisable for a
four-year period beginning on the first anniversary of the date of grant.
Directors who are also employees of the Company do not receive additional
compensation for serving as directors. All directors are reimbursed for any
reasonable expenses incurred in connection with their duties as directors of the
Company.
The Company has entered into indemnification contracts with each of its
present directors, which contracts were ratified and authorized by the
stockholders on September 9, 1986. The indemnification contracts with the
directors (i) confirm the present indemnity provided to them by the Company's
By-laws and give them assurances that this indemnity will continue to be
provided despite future changes in the By-laws, and (ii) provide that, in
addition, the directors shall be indemnified to the fullest possible extent
permitted by law against all expenses (including attorneys' fees), judgments,
fines and settlement amounts, paid or incurred by them in any action or
proceeding, including any action by or in the right of the Company, on account
of their service as a director of the Company or as a director or officer of any
subsidiary of the Company or as a director or officer of any other company or
enterprise when they are serving in such capacities at the request of the
Company. No indemnity will be provided under the indemnification contract to any
director on account of willful misconduct or conduct which is adjudged to have
been knowingly fraudulent or deliberately dishonest.
Mr. Blackwell is also a trustee of The Flex-Funds and a director of
CheckPoint Systems, Inc., Intimate Brands, Inc., AirNet Systems, Inc., Applied
Industrial Technologies, Inc., Anthony & Sylvan Pools Corporation, and The Bank
Stock Group, each with a class of equity securities registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended.
6
<PAGE> 11
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Arthur, a member of the Compensation Committee, is Of Counsel in
the law firm of Porter, Wright, Morris & Arthur, Columbus, Ohio, which firm
serves as general counsel to the Company.
The Company believes that the terms of all of the transactions and
existing arrangements set forth above are no less favorable to the Company, its
subsidiaries and affiliated partnerships than similar transactions and
arrangements which might have been entered into with unrelated parties.
EXECUTIVE OFFICERS
In addition to Messrs. Barnum, Emerson, and Niegsch, the following
persons are executive officers of the Company.
GREGORY L. HEYWOOD, age 48, has been the Company's Regional Vice
President of Operations since March 1994. Prior to becoming the Company's
Regional Vice President of Operations, Mr. Heywood had been a Regional Manager
of the Company since September 1983.
LARRY FOURNIER, age 53, has been the Company's Vice President of
Development since 1996. Prior to becoming the Company's Vice President of
Development, Mr. Fournier served as the Director of Development of the Company
since 1993. Prior to joining the Company in 1993, Mr. Fournier served as the
Regional Manager of Land Development for M/I Schottenstein Homes, Inc., a
homebuilder/land developer.
BONNIE BRANNIGAN, age 36, has been the Company's Vice President -
Marketing and Planning, since November 1996. From November 1994 to July 1996,
Ms. Brannigan served as the General Manager of The Executive Gallery, a
catalog/direct mail company. From March 1990 to August 1994, Ms Brannigan served
as the Sales Development Manager of McMaster-Carr Supply Company, an industrial
supply company.
7
<PAGE> 12
EXECUTIVE COMPENSATION
The table below sets forth all compensation paid for each of the
Company's last three completed fiscal years ended October 31, 1999, to the
Company's Chief Executive Officer and each of the Company's other most highly
compensated executive officers who received compensation (based on salary and
bonus) exceeding $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
---------------------------------- -------------
(e) (i)
Other All
Annual Other
(a) (c) (d) Compen- (g) Compen-
Name and (b) Salary Bonus sation Options sation
Principal Position Year ($) ($)(1) ($)(2) (#) ($)(3)
------------------ ---- --- ------ ------ --- ------
<S> <C> <C> <C> <C> <C> <C>
Todd B. Barnum 1999 $245,508 $80,000 $ 10,111 -- $30,000
Chairman, Chief Executive 1998 220,000 134,421 6,653 -- 30,000
Office and President 1997 200,000 70,000 4,875 50,000 22,570
1999 $170,575 $40,000 $4,143 -- $10,000
Mark F. Emerson 1998 150,000 54,000 2,790 -- 10,000
Chief Operating Officer 1997 137,500 35,000 2,818 25,000 6,264
William C. Niegsch, Jr.
Executive Vice President, 1999 $152,258 $40,000 $3,721 -- $10,000
Chief Financial Officer, 1998 130,000 66,460 2,677 -- 10,000
Treasurer and Secretary 1997 115,400 35,000 2,505 25,000 6,264
1999 $79,390 $33,625 $2,249 10,000 $2,000
Bonnie J. Brannigan 1998 70,000 59,656 1,581 10,000 2,000
Vice President, Marketing 1997 65,500 17,500 -- 10,000 -
Gregory L. Heywood 1999 $92,179 $54,672 $2,438 -- $2,000
Regional Vice President 1998 82,000 37,312 1,666 3,000 2,000
of Operations 1997 77,000 30,403 1,605 5,000 -
</TABLE>
- ---------------------------
(1) Amounts paid as bonuses are included for the year in which the bonus is
earned, whether or not it is paid in that year or in a subsequent year. For
the 1997 fiscal year, the Company paid an aggregate bonus to Messrs.
Barnum, Emerson, and Niegsch, and Ms. Brannigan, out of a bonus pool
comprised (calculated cumulatively) of one percent of net income before tax
from $1 to 1,238,000; five percent of net income before tax from $1,238,001
to $2,477,000; ten percent of net income before tax from $2,477,001 to
$3,715,000; and 25% of net income before tax over $3,715,001. For the 1998
fiscal year, the Company paid an aggregate bonus to Messrs. Barnum, Emerson
and Niegsch, and Ms. Brannigan, out of a bonus pool comprised (calculated
cumulatively) of one percent of net income before tax from $1 to
$1,486,000; five percent of net income before tax from $1,486,001 to
$2,974,000; 15% of net income before tax from $2,974,001 to $4,461,000; and
20% of net income before tax over $4,461,000. For the 1999 fiscal year, the
Company paid an aggregate bonus to Messrs. Barnum, Emerson and Niegsch, and
Ms. Brannigan, out of a bonus pool comprised (calculated cumulatively) of
one percent of net income before tax from $1 to $1,783,000; seven percent
of net income before tax from $1,783,001 to $3,566,000; fifteen percent of
net income before tax from $3,566,001 to $5,349,000; and twenty-five
percent of net income before tax over $5,349,000. The aggregate bonus was
shared 40% by Mr. Barnum and 20% by each of Messrs. Emerson and Niegsch for
1997, 1998, and 1999. Ms. Brannigan received 10% of the bonus pool in 1997
and 15% of the bonus pool in 1998 and 1999. In addition, for the 1997,
1998, and 1999 fiscal years, the Compensation Committee capped the bonus
pool at an amount equal to 125%, respectively, of
8
<PAGE> 13
the aggregate base salaries of Messrs. Barnum, Emerson and Niegsch, and Ms.
Brannigan. In addition to the bonus paid under the above formula, Messrs.
Barnum and Niegsch received a tax offset bonus, under the Company's
Incentive Stock Option Plan, equal to $26,421 and $12,460, respectively,
during 1998. Ms. Brannigan received an additional bonus equal to $3,625 and
$19,156, which represented 50% of the purchase price of common stock
acquired by her during 1999 and 1998, respectively. Mr. Heywood's bonus is
based upon the performance of the restaurant and regional managers
reporting to him.
(2) The Company maintains a medical reimbursement plan which provides for the
reimbursement of substantially all of the uninsured medical and dental
expenses of the Chief Executive Officer and President of the Company and
his immediate family. The amount shown is the amount of reimbursements made
by the Company during the fiscal year. The amount shown also includes
amounts allocated to the executive officer pursuant to the Company's 401(k)
and Supplemental Deferred Compensation Plans, in amounts for Mr. Barnum of
$6,404, $4,380, and $4,343, Mr. Emerson of $4,143, $2,790, and $2,818, Mr.
Niegsch of $3,721, $2,677, and $2,505, Ms. Brannigan of $2,249, $1,581, and
$.00, and Mr. Heywood of $2,438, $1,666, and $1,605, for fiscal 1999, 1998,
and 1997, respectively.
(3) Amounts shown represent the annual full amount of premiums paid by the
Company on split dollar life insurance policies on the lives of each of
Messrs. Barnum, Emerson, Niegsch and Heywood and Ms. Brannigan. Premiums
paid by the Company will be repaid from the death benefit and the balance
will be paid to the employee's beneficiaries. In the event of termination
of employment, other than for cause or on death, the employee has the right
to purchase the policy from the Company for the Company's cash value;
provided, however, that beginning in 1993 for Messrs. Barnum, Emerson and
Niegsch, and in 1998 for Mr. Heywood and Ms. Brannigan, ownership of the
Company's cash value of the policy vests in the employee at the rate of 10%
per year, so that the employee will only be required to pay the unvested
portion of the Company's cash value on termination.
SEVERANCE AGREEMENTS
On January 10, 2000, the Company entered into severance agreements in
the event of a change in control with William C. Niegsch, Jr., Todd B. Barnum,
and Mark F. Emerson (collectively the "Senior Executives"), and with Bonnie J.
Brannigan and Gregory L. Heywood (collectively the "Officers"). The agreements
provide that in the event of the Senior Executive's or Officer's termination of
employment under certain circumstances during the "Effective Period" (as defined
in the agreement) following a "Change in Control" (as defined in the agreement)
of the Company, he or she will be entitled to severance benefits. The "Effective
Period" is the 12-month period following a Change in Control, except for the
Senior Executives who have a 13-month Effective Period, including a "Window
Period" in the 13th month following a Change in Control in which the Senior
Executives may terminate their employment for any reason and be entitled to
severance benefits.
If an Officer terminates employment during the Effective Period for
"Good Reason" (as defined in the agreement), or if a Senior Executive terminates
his employment during the Effective Period for Good Reason or during the Window
Period for any reason, or if the Company terminates employment during such
period for any reason other than for Cause (as defined in the agreement) or as a
result of death, retirement or disability, the Company will be obligated to pay
his base salary and prorated bonus through the date of termination and to make a
lump-sum payment equal to 2.99 times (for Senior Executives) or 1.5 times (for
Officers) the average annual compensation (including salary and bonus) which was
payable to such executive for the five taxable years ending prior to the date on
which the Change of Control occurred.
9
<PAGE> 14
STOCK OPTION PLANS
The Company's 1996 and 1992 Stock Option Plans provide for the issuance
of options to purchase up to 400,000 and 412,500 shares of the Common Stock,
$.10 par value per share, of the Company, respectively, subject to adjustment
for stock splits and other changes in the Company's capitalization, which
options either meet the requirements of Section 422A of the Internal Revenue
Code of 1986, as amended ("Incentive Options"), or do not meet such requirements
("Nonqualified Options"). Key employees of the Company, officers and directors
of the Company, and certain other persons who provide services to the Company
are eligible to receive options under the 1996 and 1992 Stock Option Plans.
Options are granted to persons selected by the Compensation Committee of the
Company's Board of Directors (the "Committee"). The Committee determines the
number of shares subject to option, the exercise price, and exercise period of
such option and whether the option is intended to be a Nonqualified Option or an
Incentive Option. The Committee also has the discretion under the 1996 and 1992
Stock Option Plans to make cash grants to optionholders that are intended to
offset a portion of the taxes payable upon the exercise of Nonqualified Options
or upon certain dispositions of shares acquired under Incentive Options. The
tables set forth below provide additional information with respect to the grants
and exercises of stock options by the named executive officers of the Company.
As of December 31, 1999, the Company had options for 387,000 and 377,650 shares
of Common Stock, respectively, under the 1996 and 1992 Stock Option Plans
outstanding.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants (f)
-------------------------------------------------------
Potential Realizable Value
(c) At Assumed Annual Rates
% of Total Of Stock Price Appreciation
Options For Option Term(3)
Granted -------------------------
(b) To (d)
Options Employees Exercise (e)
(a) Granted In Fiscal Price Expiration
Name (#)(1) Year ($/Sh)(2) Date 5%($) 10%($)
- ------------------------ ------------ ------------ ----------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Bonnie J. Brannigan 10,000 25.0% $7.38 10/11/05 $25,100 $56,900
</TABLE>
- ---------------------------
(1) All options are first exercisable October 19, 2002. Options not exercisable
as of the date of a change in control of the Company will become
exercisable immediately as of such date. Options not yet exercised are
cancelled after 30 days following termination of employment other than by
death or for cause. In the event of termination of employment by death, the
option may be exercised for up to one year but not later than the
expiration date. Options not yet exercised are immediately cancelled upon
the termination of employment for cause. Generally, the exercise price of
options may be paid for in cash or in shares of Common Stock of the Company
with the consent of the Committee. In addition, any tax which the Company
is required to withhold in connection with the exercise of any stock option
may be satisfied by the optionholder by electing, with the consent of the
Committee, to have the number of shares to be delivered on the exercise of
the option reduced by, or otherwise by delivering to the Company, such
number of shares of Common Stock having a fair market value equal to the
amount of the withholding requirements.
10
<PAGE> 15
(2) In all cases, the exercise price was equal to or greater than the closing
market price of the underlying shares on the date immediately prior to the
date of grant.
(3) The assumed rates of growth were selected by the Securities and Exchange
Commission for illustration purposes only and are not intended to predict
or forecast future stock prices.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
(e)
Value of
(d) Unexercised
Number of In-the-Money
Unexercised Options at
(b) (c) Options at FY-End(#) FY-end($)(1)
Shares Value
(a) Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
---- ------------ -------- -------------------- -------------
<S> <C> <C> <C> <C>
Todd B. Barnum -- -- 154,000/0 $0/0
Mark F. Emerson -- -- 87,000/0 $0/0
William C. Niegsch, Jr. -- -- 87,000/0 $0/0
Gregory L. Heywood -- -- 18,000/3,000 $0/1,125
Bonnie J. Brannigan -- -- 10,000/20,000 $0/3,750
</TABLE>
- ---------------------------
(1) As of October 31, 1999, no unexercised options that were exercisable were
in-the-money, meaning that the fair market value of the underlying
securities exceeded the exercise price of the option at that date.
11
<PAGE> 16
The following Board Compensation Committee Report on Executive Compensation
and Performance Graph will not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any of
the Company's filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and will not
otherwise be deemed filed under such Acts.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee reviews and evaluates individual senior
executive officers and determines the compensation for each. In general,
compensation is designed to attract and retain qualified key executives, reward
individual performance, relate compensation to Company goals and objectives and
enhance shareholder value.
Compensation for the executive officers includes base salary, bonus and
stock option awards. Base salary is reviewed annually in light of the
Committee's perception of individual performance, performance of the Company as
a whole and industry analysis and comparison. No specific weight is given to any
of these factors in the evaluation of an executive officer's base salary.
However, since 1991, the Committee has felt that a significant portion of each
senior executive officer's compensation should be in the form of bonuses based
upon Company performance.
Beginning in fiscal 1991, a formula was established in advance for
determining the amount of bonus to be paid to the Company's senior officers. In
1992, that formula was modified to allow for the creation of a bonus pool. The
dollar amount of the pool was originally equal to 1% of the first $500,000 in
pre-tax earnings; 5% of the next $500,000; 10% of the next $500,000 and 25% of
pre-tax earnings in excess of $1,500,000. In line with the Committee's
established goal of a 20% annual growth in earnings, the breakpoints for each
earnings increment in the bonus formula was increased 20% for each year through
1999. For fiscal 1998, the 10% bonus level was increased to 15% and the 25%
bonus level was decreased to 20%. For fiscal 1999, the 5% bonus level was
increased to 7% and the 20% bonus level was increased to 25%. In addition, since
1996, the Committee has capped the bonus pool at an amount equal to 125% of the
aggregate base salaries of the four senior officers.
For fiscal 2000, the bonus formula has been changed. Due to the amount
of interest expense incurred for the repurchase of the Company's common stock
during 1999, the Compensation Committee believes that a more appropriate bonus
formula should be based upon operating income (as adjusted for one-time gains
and losses), which is generally defined to be income before taxes and interest
expense. For fiscal 2000, the bonus pool will equal 4% of operating income up to
$4,650,000, 13% of operating income between $4,650,001 and $6,200,000, and 20%
of operating income in excess of $6,200,000. In addition, the bonus pool will be
shared 40% by Mr. Barnum, 20% by each of Messrs. Emerson and Niegsch and Ms.
Brannigan. The bonus pool will not be capped for fiscal 2000.
Mr. Heywood, the Company's Regional Vice President of Operations, will
be paid a bonus equal to the cash bonuses paid to the regional managers assigned
to report to him. Mr.
12
<PAGE> 17
Fournier, the Company's Vice President of Development, will be paid a cash bonus
of $5,000 for each new Max & Erma's restaurant opened during 2000. Mr.
Fournier's bonus may be paid in cash or in the Company's common stock valued at
one-half of fair market value under the Company's Manager Stock Bonus Plan.
The Committee also awards stock options to executive officers to
encourage share ownership and to give them a stake in the performance of the
Company's stock. Stock option awards are considered annually. The specific
number of stock options granted to individual executive officers is determined
by the Committee's perception of relative contributions or anticipated
contributions to overall corporate performance. The Committee also reviews the
total number of options already held by individual executive officers at the
time of grant.
Compensation for Mr. Barnum, the Company's CEO, during the 1999 fiscal
year included salary and bonus. Mr. Barnum's base salary was determined by
reviewing the previous level of his base salary, industry analysis and
comparison and increases in the cost of living. No specific weight was given to
any of these factors in the evaluation of Mr. Barnum's base salary. Mr. Barnum's
bonus was determined solely by the formula established in advance for
determining executive officers' bonuses. No stock options were awarded to Mr.
Barnum in 1999.
The Budget Reconciliation Act of 1993 amended the Code to add Section
162(m) which bars a deduction to any publicly held corporation for compensation
paid to a "covered employee" in excess of $1,000,000 per year. The Committee
does not believe that this law will impact the Company in the near term because
the current level of compensation for each of the Company's executive officers
is well below the $1,000,000 salary limitation.
Compensation Committee:
William E. Arthur
Roger D. Blackwell
Thomas R. Green
13
<PAGE> 18
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
-----------------------------FISCAL YEAR ENDING----------------------------
COMPANY/INDEX/MARKET 10/28/1994 10/27/1995 10/31/1996 10/24/1997 10/23/1998 10/29/1999
<S> <C> <C> <C> <C> <C> <C>
Max & Erma's Rest 100.00 89.71 77.94 74.26 75.00 77.94
Eating Places 100.00 121.01 133.06 139.94 170.79 190.31
NASDAQ Market Index 100.00 118.62 139.30 182.56 206.42 340.72
</TABLE>
The above Performance Graph compares the performance of the Company
with that of the NASDAQ Market Index and a Peer Group Index, which is an index
of SIC Code 5812 - Eating Places. Both the NASDAQ Market Index and the Peer
Group Index include stocks of companies that were public as of October 31, 1999,
and during the entire five-year period illustrated on the Performance Graph.
14
<PAGE> 19
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and greater than 10%
shareholders, to file reports of ownership and changes in ownership of the
Company's securities with the Securities and Exchange Commission. Copies of the
reports are required by SEC regulation to be furnished to the Company. Based on
its review of such reports and written representations from reporting persons,
the Company believes that all filing requirements were complied with during
fiscal 1999.
CERTAIN TRANSACTIONS
Mr. Rothman, a director of the Company, owns a 40% equity interest in,
and is President of, Amusement Concepts, Inc., which has exclusive licenses to
install and operate coin-operated amusement games in seven Max & Erma's
restaurants. Under the licenses, the restaurant owner receives a license fee
equal to 50% of the gross revenues generated by the games installed in the
restaurant. All of the licenses are presently on a year-to-year basis. The
Company received games revenues of $75,181 during the fiscal year ended October
31, 1999, under the various licenses with Amusement Concepts, Inc.
Mr. Arthur, a director of the Company, is Of Counsel in the law firm of
Porter, Wright, Morris & Arthur, Columbus, Ohio, which firm serves as general
counsel to the Company.
The Company believes that the terms of all of the transactions and
existing arrangements set forth above are no less favorable to the Company, its
subsidiaries and affiliated partnerships than similar transactions and
arrangements which might have been entered into with unrelated parties.
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected, subject to the approval of the
stockholders of the Company, Deloitte & Touche LLP as independent public
accountants for the Company for the fiscal year ending October 29, 2000. It is
intended that persons acting under the accompanying proxy will vote the shares
represented thereby in favor of ratification of such appointment. It is
anticipated that representatives of Deloitte & Touche LLP will be present at the
Annual Meeting to respond to appropriate questions and to make a statement if
such representatives so desire. Deloitte & Touche LLP has performed audits of
the Company's financial statements since 1980.
Ratification of the selection of the independent public accountants
requires the affirmative vote of the holders of a majority of the shares of
Common Stock voting on the matter. The Board of Directors recommends a vote FOR
ratification of the selection of the independent public accountants. Abstentions
have the same effect as votes cast against ratification, and broker non-votes
have no effect. Unless a contrary choice is specified, proxies solicited by the
Board of Directors will be voted for ratification of the selection of the public
accountants.
15
<PAGE> 20
REPORTS TO BE PRESENTED AT THE MEETING
There will be presented at the meeting the Company's Annual Report to
Stockholders for the fiscal year ended October 31, 1999, containing financial
statements for such year and the signed opinion of Deloitte & Touche LLP,
independent public accountants, with respect to such financial statements. The
Annual Report is not to be regarded as proxy soliciting material and management
does not intend to ask, suggest or solicit any action from the stockholders with
respect to such report.
COST OF SOLICITATION OF PROXIES
The cost of this solicitation will be paid by the Company. In addition
to the solicitation of proxies by mail, the directors, officers and employees of
the Company may solicit proxies personally or by telephone or telegraph. The
Company may request persons holding shares in their names for others to forward
soliciting materials to their principals to obtain authorization for the
execution of proxies, and the Company may reimburse such persons for their
expenses in doing so. The Company may also retain a professional proxy
solicitation firm to assist in the solicitation of proxies at a maximum total
cost to be borne by the Company of $10,000 plus out-of-pocket expenses.
STOCKHOLDER PROPOSALS
Each year the Board of Directors submits its nominations for election
of directors at the Annual Meeting of Stockholders. Other proposals may be
submitted by the Board of Directors or the stockholders for inclusion in the
Proxy Statement for action at the Annual Meeting. Any proposal submitted by a
stockholder for inclusion in the Proxy Statement for the Annual Meeting of
Stockholders to be held in 2001 must be received by the Company (addressed to
the attention of the Secretary) on or before January 7, 2001. To be submitted at
the meeting, any such proposal must be a proper subject for stockholder action
under the laws of the State of Delaware, and must otherwise conform to
applicable requirements of the proxy rules of the Securities and Exchange
Commission.
16
<PAGE> 21
OTHER MATTERS
The only business which the management intends to present at the
meeting consists of the matters set forth in this statement. The management
knows of no other matters to be brought before the meeting by any other person
or group. If any other matter should properly come before the meeting, the proxy
holders will vote thereon in their discretion.
All proxies received duly executed will be voted. You are requested to
sign and date the enclosed proxy and mail it promptly in the enclosed envelope.
If you later desire to vote in person, you may revoke your proxy, either by
written notice to the Company or in person at the meeting, without affecting any
vote previously taken.
BY ORDER OF THE BOARD OF DIRECTORS
TODD B. BARNUM
CHAIRMAN OF THE BOARD,
CHIEF EXECUTIVE OFFICER AND PRESIDENT
17
<PAGE> 22
MAX & ERMA'S RESTAURANTS, INC.
4849 Evanswood Drive
Columbus, Ohio 43229
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
APRIL 12, 2000
The undersigned stockholder of Max & Erma's Restaurants, Inc. (the
"Company") hereby appoints, Todd B. Barnum and William C. Niegsch, Jr. or either
of them, as attorneys and proxies, with full power of substitution to each, to
vote all shares of Common Stock of the Company which the undersigned is entitled
to vote at the Annual Meeting of Stockholders of the Company to be held at the
Company's headquarters located at 4849 Evanswood Drive, Columbus, Ohio on
Wednesday, April 12, 2000, at 2:30 p.m. local time, and at any adjournment or
adjournments thereof, with all of the powers such undersigned stockholder would
have if personally present, for the following purposes:
1. ELECTION OF ROGER D. BLACKWELL, WILLIAM C. NIEGSCH, JR., AND ROBERT A.
ROTHMAN AS CLASS II DIRECTORS.
[ ] FOR
[ ] WITHHOLD AUTHORITY FOR EACH NOMINEE
(INSTRUCTION: To withhold authority for a specific nominee, write that
nominee's name here:
----------------------------------------------------------------- .
2. RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP AS THE INDEPENDENT
PUBLIC ACCOUNTS OF THE COMPANY FOR THE 2000 FISCAL YEAR
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on other side.)
(Continued from other side.)
3. IN THEIR DISCRETION TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING.
THIS PROXY, WHEN EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2, AND 3.
The undersigned hereby acknowledges receipt of the Notice of the Annual
Meeting of Stockholders, dated February 28, 2000, the Proxy Statement and the
Annual Report of the Company furnished therewith. Any proxy heretofore given to
vote said shares is hereby revoked.
PLEASE SIGN AND DATE THIS PROXY BELOW AND RETURN IN THE ENCLOSED ENVELOPE.
Dated:
--------------------------, 2000
--------------------------------
(Signature)
--------------------------------
(Signature)
Signature(s) shall agree with
the name(s) printed on this
Proxy. If shares are registered
in two names, both stockholders
should sign this Proxy. If
signing as attorney, executor,
administrator, trustee or
guardian, please give your full
title as such.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Proxy Card
