Panera Bread 2010 Annual Report Download - page 76

Settlement, the Company agreed, among other things, to implement and maintain certain corporate governance
additions, modifications and/or formalizations, and its insurer will pay plaintiff’s attorneys’ fees and expenses of
$1.4 million. The Stipulation of Settlement contains no admission of wrongdoing. The Company 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, the
Company believes the settlement is in its 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 the Company relating to the
allegations in the derivative action. The Company can provide no assurance that the Court will approve the
Stipulation of Settlement. If the Court does not approve the Stipulation of Settlement, it 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 the Company, it could be required to pay substantially more in
damages than the amount provided for in the Stipulation of Settlement. In addition, the costs to the Company of
defending any litigation or other proceeding, even if resolved in its favor, could be substantial. Such litigation could
also substantially divert the attention of its management and resources in general. The amount to be deposited by the
Company’s primary directors and officers liability insurer into the settlement fund of $1.4 million is included in
other accounts receivable and accrued expenses in the Company’s Consolidated Balance Sheets.
On December 9, 2009, a purported class action lawsuit was filed against the Company and one of its
subsidiaries by Nick Sotoudeh, a former employee of the Company. 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. The Company believes it and the other defendant have meritorious defenses to each of
the claims in this lawsuit and the Company is prepared to vigorously defend the lawsuit. There can be no assurance,
however, that the Company will be successful, and an adverse resolution of the lawsuit could have a material
adverse effect on the Company’s consolidated financial position and results of operations in the period in which the
lawsuit is resolved. The Company is not presently able to reasonably estimate potential losses, if any, related to the
lawsuit and as such, has not recorded a liability in its Consolidated Balance Sheets.
On December 16, 2010, a purported class action lawsuit was filed against the Company by Denarius Lewis and
Corey Weiner, former employees of one of the Company’s subsidiaries, and Caroll Ruiz, an employee of one of the
Company’s 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 relief as the Court might find just and proper. The Company believes it and the other
defendant have meritorious defenses to each of the claims in this lawsuit and the Company is prepared to vigorously
defend the lawsuit. There can be no assurance, however, that the Company will be successful, and an adverse
resolution of the lawsuit could have a material adverse effect on the Company’s consolidated financial position and
results of operations in the period in which the lawsuit is resolved. The Company is not presently able to reasonably
estimate potential losses, if any, related to the lawsuit and as such, has not recorded a liability in its Consolidated
Balance Sheets.
In addition, the Company is subject to other routine legal proceedings, claims, and litigation in the ordinary
course of its business. Defending lawsuits requires significant management attention and financial resources and the
outcome of any litigation, including the matters described above, is inherently uncertain. The Company does not,
however, currently expect that the costs to resolve these routine matters will have a material adverse effect on its
consolidated financial position, results of operations, or cash flows.
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PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)