Panera Bread 2012 Annual Report Download - page 66

PANERA BREAD COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
58
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 25, 2012, the total amount potentially owed employees under these non-compete agreements was $16.7 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 Sheets 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 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 a subsidiary of the Company. The lawsuit was filed in the California Superior Court, County of Contra
Costa. On April 22, 2011, the complaint was amended to add another former employee, Gabriela Brizuela, as a plaintiff. The
complaint alleged, 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 Business and Professions. The complaint sought,
among other relief, class certification of the lawsuit, unspecified damages, costs and expenses, including attorneys’ fees, and such
other relief as the Court determines to be appropriate. On November 17, 2011, the parties entered into a Memorandum of Agreement
regarding settlement of this purported class action lawsuit and the purported class action lawsuit filed by David Carter, which is
described in the subsequent paragraph. Under the terms of the Memorandum of Agreement, the parties agreed to settle this matter
for a maximum aggregate amount of $5.0 million for settlement payments to purported class members, plaintiff's attorneys' fees,
and costs of administering the settlement. The Memorandum of Agreement contains no admission of wrongdoing. The terms and
conditions of the settlement were preliminarily approved by the Court on June 8, 2012. At a hearing on December 21, 2012, the
Court approved the terms and conditions of the settlement and the actual settlement payment amounts, except for plaintiffs'
attorneys' fees and costs, which were approved by the Court on February 5, 2013. Based upon the Court approved amounts and
the amount of attorneys' fees and costs sought by plaintiffs' counsel, the Company maintained a reserve of $3.7 million in accrued
expenses in the Company's Consolidated Balance Sheets as of December 25, 2012.
On July 22, 2011, a purported class action lawsuit was filed against the Company and one of its subsidiaries by David Carter, a
former employee of a subsidiary of the Company, and Nikole Benavides, a purported former employee of one of the Company's
franchisees. The lawsuit was filed in the California Superior Court, County of San Bernardino. 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 Business and Professions Code. 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 determines to be appropriate. This matter against the Company's subsidiary was consolidated with the lawsuit described
in the immediately preceding paragraph and is expected to be resolved under the Memorandum of Agreement described above.
On December 16, 2010, a purported class action lawsuit was filed against the Company and one of its subsidiaries by Denarius
Lewis, Caroll Ruiz, and Corey Weiner, former employees of a subsidiary of the Company. The lawsuit was filed in the United
States District Court for Middle District of Florida. The complaint alleged, among other things, violations of the Fair Labor
Standards Act. The complaint sought, 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 determines to be appropriate. On February 29,
2012, the parties agreed to settle this matter for an amount up to an aggregate of $1.5 million for settlement payments to purported
class members, plaintiffs' attorneys' fees, and costs of administering the settlement. The agreement includes no admission of
wrongdoing. The terms and conditions of the settlement were approved by the Court on June 26, 2012, and the matter was dismissed
with prejudice. The settlement amount of $1.5 million was paid into a settlement fund on July 6, 2012.