Panera Bread 2010 Annual Report Download - page 74

approximately $24.3 million as of December 28, 2010. The obligation from these leases will generally continue to
decrease over time as these operating leases expire. The Company has not recorded a liability for certain of these
guarantees as they arose prior to the implementation of the accounting requirements for guarantees and, unless
modified, are exempt from its requirements. The Company has not recorded a liability for those guarantees issued
after the effective date of the accounting requirements because the fair value of each such lease guarantee was
determined by the Company to be insignificant based on analysis of the facts and circumstances of each such lease
and each such franchisee’s performance, and the Company did not believe it was probable it would be required to
perform under any guarantees at the time the guarantees were issued. The Company has not had to make any
payments related to any of these guaranteed leases. Au Bon Pain or the applicable franchisees continue to have
primary liability for these operating leases. As of December 28, 2010, future commitments under these leases were
as follows (in thousands):
2011 2012 2013 2014 2015 Thereafter Total
$3,304 3,084 3,068 2,937 2,149 9,736 $24,278
Employee Commitments
The Company has executed Confidential and Proprietary Information and Non-Competition Agreements
(“Non-Compete Agreements”) with certain employees. These Non-Compete Agreements contain a provision
whereby employees would be due a certain number of weeks of their salary if their employment was terminated by
the Company as specified in the Non-Compete Agreement. The Company has not recorded a liability for these
amounts potentially due employees. Rather, the Company will record a liability for these amounts when an amount
becomes due to an employee in accordance with the appropriate authoritative literature. As of December 28, 2010,
the total amount potentially owed employees under these Non-Compete Agreements was $12.8 million.
Related Party Credit Agreement
On September 10, 2008, the Company’s Canadian subsidiary, Panera Bread ULC, as lender, entered into a
Cdn.$3.5 million secured revolving credit facility agreement and franchise agreements with Millennium Bread Inc.,
(“Millennium”), as borrower, and certain of Millennium’s present and future subsidiaries (the “Franchisee
Guarantors”), pursuant to which Millennium would operate three Panera Bread bakery-cafes in Ontario, Canada.
On April 7, 2009, Millennium requested a Cdn.$3.5 million advance under the credit agreement for payment of the
costs to develop the bakery-cafes, which was included in other accounts receivable in the Consolidated Balance
Sheet as of December 29, 2009. The proceeds from the credit facility were used by Millennium to pay costs to
develop and construct the Franchisee Guarantors bakery-cafes and for their day-to-day operating requirements. On
March 31, 2010, the credit facility was terminated through a separate transaction with Millennium, as described in
Note 4.
Legal Proceedings
On January 25, 2008 and February 26, 2008, purported class action lawsuits were filed against the Company
and three of the Company’s current or former executive officers by the Western Washington Laborers-Employers
Pension Trust and Sue Trachet, respectively, on behalf of investors who purchased the Company’s common stock
during the period between November 1, 2005 and July 26, 2006. Both lawsuits were filed in the United States
District Court for the Eastern District of Missouri, St. Louis Division. Each complaint alleges that the Company and
the other defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and Rule 10b-5 under the Exchange Act in connection with the Company’s disclosure of system-
wide sales and earnings guidance during the period from November 1, 2005 through July 26, 2006. Each complaint
seeks, among other relief, class certification of the lawsuit, unspecified damages, costs and expenses, including
attorneys’ and experts’ fees, and such other relief as the Court might find just and proper. On June 23, 2008, the
lawsuits were consolidated and the Western Washington Laborers-Employers Pension Trust was appointed lead
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PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)