Panera Bread 2010 Annual Report Download - page 26

deposited by our primary directors and officers liability insurer into the settlement fund of $5.7 million is included
in other accounts receivable and accrued expenses in our Consolidated Balance Sheets.
On February 22, 2008, a shareholder derivative lawsuit was filed against us as nominal defendant and against
certain of our current or former officers and certain current directors. The lawsuit was filed by Paul Pashcetto in the
Circuit Court of St. Louis, Missouri. The complaint alleges, among other things, breach of fiduciary duty, abuse of
control, waste of corporate assets and unjust enrichment between November 5, 2006 and February 22, 2008. The
complaint seeks, among other relief, unspecified damages, costs and expenses, including attorneys’ fees, an order
requiring us to implement certain corporate governance reforms, restitution from the defendants and such other
relief as the Court might find just and proper. We believe that we and the other defendants have meritorious defenses
to each of the claims in this lawsuit. On July 18, 2008, we filed a motion to dismiss all of the claims in this lawsuit,
which, on December 14, 2009, the Court denied. We filed an answer to the complaint on January 27, 2010 and the
case subsequently moved into discovery. On July 28, 2010, we filed a motion for summary judgment. The Court
held a hearing on the motion for summary judgment on November 19, 2010. On December 20, 2010, the parties
filed a joint motion requesting that the Court defer its ruling on the motion for summary judgment pending the
finalization of a settlement agreement. On January 18, 2011, the parties advised the Court in a status conference that
they intended to submit a stipulation of settlement and plaintiff’s motion for preliminary approval by February 14,
2011. On February 22, 2011, the parties filed with the Court a Stipulation of Settlement regarding the shareholder
derivative lawsuit. Under the terms of the Stipulation of Settlement, we agreed, among other things, to implement
and maintain certain corporate governance additions, modifications and/or formalizations, and our insurer will pay
plaintiff’s attorneys’ fees and expenses of $1.4 million. The Stipulation of Settlement contains no admission of
wrongdoing. We and the other defendants have maintained and continue to deny liability and wrongdoing of any
kind with respect to the claims made in the shareholder derivative action. However, given the potential cost and
burden of continued litigation, we believe the settlement is in our best interests and the best interests of our
stockholders. On February 22, 2011, the Court preliminarily approved the settlement and scheduled a settlement
hearing on April 8, 2011. If the Court grants final approval of the Stipulation of Settlement, the Court will dismiss
the shareholder derivative lawsuit with prejudice and the plaintiff will be deemed to have released all claims against
us relating to the allegations in the derivative action. We can provide no assurance that the Court will approve the
Stipulation of Settlement. If the Court does not approve the Stipulation of Settlement, we will continue to defend
against these claims, which could have a material adverse effect on our financial condition and business. If these
matters were concluded in a manner adverse to us, we could be required to pay substantially more in damages than
the amount provided for in the Stipulation of Settlement. In addition, the costs to us of defending any litigation or
other proceeding, even if resolved in our favor, could be substantial. Such litigation could also substantially divert
the attention of our management and our resources in general. The amount to be deposited by our primary directors
and officers liability insurer into the settlement fund of $1.4 million is included in other accounts receivable and
accrued expenses in our Consolidated Balance Sheets.
On December 9, 2009, a purported class action lawsuit was filed against us and one of our subsidiaries by Nick
Sotoudeh, a former employee of ours. The lawsuit was filed in the California Superior Court, County of Contra Costa.
The complaint alleges, among other things, violations of the California Labor Code, failure to pay overtime, failure to
provide meal and rest periods and termination compensation and violations of California’s Unfair Competition Law.
The complaint seeks, among other relief, collective and class certification of the lawsuit, unspecified damages, costs
and expenses, including attorneys’ fees, and such other relief as the Court might find just and proper. We believe we
and the other defendant have meritorious defenses to each of the claims in this lawsuit and we are prepared to
vigorously defend the lawsuit. There can be no assurance, however, that we will be successful, and an adverse
resolution of the lawsuit could have a material adverse effect on our consolidated financial position and results of
operations in the period in which the lawsuit is resolved. We are not presently able to reasonably estimate potential
losses, if any, related to the lawsuit and as such, have not recorded a liability in our Consolidated Balance Sheets.
On December 16, 2010, a purported class action lawsuit was filed against us by Denarius Lewis and Corey
Weiner, former employees of one of our subsidiaries, and Caroll Ruiz, an employee of one of our franchisees. The
lawsuit was filed in the United States District Court for Middle District of Florida. The complaint alleges, among
other things, violations of the Fair Labor Standards Act. The complaint seeks, among other relief, collective and
class certification of the lawsuit, unspecified damages, costs and expenses, including attorneys’ fees, and such other
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