Panera Bread 2003 Annual Report Download - page 51

PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
markets. The agreement entitles the minority interest owner to a speciÑed percentage of the cash Öows from
the bakery-cafes developed and operated by the LLC. He is required to make mandatory capital contributions
toward each bakery-cafe developed under the agreement. In addition, he may make additional voluntary
contributions towards each bakery-cafe developed under the agreement and receive a proportionate increase in
his share of the cash Öows. Although he receives no salary for his services, he receives an operating fee equal
to the diÅerence between (a) the sum of 4% of the gross sales and $40,000 (increased by 3.5% annually
beginning in 2003) for each bakery-cafe opened by the LLC, and (b) expenses incurred by the LLC in
connection with bakery-cafe operations other than license and administrative fees and expenses which relate
solely to an individual bakery-cafe. Applicable expenses include, without limitation, all costs relating to
district, regional, and area supervision above the store level, bakery supervision, Ñeld training, training
functions, neighborhood marketing, and recruiting and relocation. Operating fee payments were $1.4 million,
$0.5 million, and $0.1 million in 2003, 2002, and 2001, respectively, and were classiÑed as ""Other Expense'' in
the Consolidated Statements of Operations. He may not sell or transfer his LLC interest to another party
without the Company's consent. If his employment with the LLC terminates within the Ñrst Ñve years of the
operating agreement, the Company has the right to purchase his LLC interest. The purchase price is
established either by appraisal or by one of several formulas, depending upon the timing and reason for
termination of his employment. After Ñve years, the Company and the minority interest owner each have
rights which could, if exercised, permit/require the Company to purchase the bakery-cafes at contractually
determined values based on multiples of cash Öows. The results of operations of these bakery-cafes have been
included in the Consolidated Financial Statements since the date of formation. The former president's interest
in the LLC is reÖected as minority interest.
13. Stockholders' Equity
Common Stock
On June 6, 2002, the stockholders approved an increase in the number of authorized shares of the
Company's Class A and Class B common stock enabling the Company to complete a two-for-one common
stock split in the form of a stock dividend. On June 24, 2002, stockholders received one additional share of
common stock for each share of common stock held of record on June 10, 2002. The stock split has been
reÖected in the Consolidated Financial Statements, Notes to the Consolidated Financial Statements, and
Management's Discussion and Analysis of Financial Condition and Results of Operations. All applicable
references to the number of common shares and per share information have been restated to reÖect the two-
for-one split on a retroactive basis.
Each share of Class B Common Stock has the same dividend and liquidation rights as each share of
Class A Common Stock. The holders of Class B Common Stock are entitled to three votes for each share
owned. The holders of Class A Common Stock are entitled to one vote for each share owned. Each share of
Class B Common Stock is convertible, at the stockholder's option, into Class A Common Stock on a one-for-
one basis. The Company had reserved at December 27, 2003 5,887,075 shares of its Class A Common Stock
for issuance upon conversion of Class B Common Stock and exercise of awards granted under the Company's
1992 Equity Incentive Plan, Formula Stock Option Plan for Independent Directors, and 2001 Employee,
Director, and Consultant Stock Option Plan.
Registration Rights
Certain holders of Class A and Class B Common Stock, pursuant to stock subscription agreements, can
require the Company, under certain circumstances, to register their shares under the Securities Exchange Act
of 1933, or have included in certain registrations all or part of such shares, at the Company's expense.
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