AU BON PAIN CO INC, DEF 14A, 1997-04-25

AU BON PAIN CO INC
DEF 14A, 1997-04-25
EATING PLACES

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SCHEDULE 14A

(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by registrant |X|

Filed by a party other than the registrant |_|

Check the appropriate box:

|_| Preliminary proxy statement

|X| Definitive proxy statement

|_| Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))

|_| Definitive additional materials

|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

AU BON PAIN CO., INC.
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(Name of Registrant as Specified in Its Charter)

- -------------------------------------------------------------------------------
(Name of Person[s] Filing Proxy Statement, if other than the Registrant)

Payment of filing fee (Check the appropriate box):

|X| No fee required

|_| Fee computed on table below per Exchange Act Rules 14a-(6)(i)
(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transactions applies:

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<PAGE>

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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|_| Fee paid previously with preliminary materials.

|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.

(1) Amount previously paid:

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(2) Form, schedule or registration statement no.:

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(3) Filing party:

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(4) Date filed:

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(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.

<PAGE>

AU BON PAIN CO., INC.

Notice of Annual Meeting of Stockholders

June 12, 1997 -- 10:00 A.M.

You are hereby notified that the Annual Meeting of Stockholders of Au
Bon Pain Co., Inc. will be held on Thursday, June 12, 1997 at 10:00 A.M., at
USTrust, 40 Court Street, 12th Floor, Boston, Massachusetts, to consider and act
upon the following matters:

1. To elect two (2) Directors;

2. To ratify the action of the Directors reappointing Coopers & Lybrand
L.L.P. as auditors for the Company;

3. To approve an amendment to the Company's 1992 Equity Incentive Plan to
increase the number of shares of Class A Common Stock available for awards
from 2,500,000 to 4,300,000;

4. To approve an amendment to the Company's 1992 Employee Stock Purchase Plan
to increase the number of shares of Class A Common Stock available for
purchase from 150,000 to 350,000; and

5. To transact such other business as may properly come before the meeting.

If you are unable to attend the meeting personally, please be sure to
date, sign and return the enclosed proxy in the envelope provided to: Boston
EquiServe Limited Partnership, 150 Royall Street, Canton, Massachusetts 02021.

Only stockholders of record on the books of the Company at the close of
business on April 25, 1997, are entitled to notice of and to vote at the
meeting.

By Order of the Board of Directors,

Walter D. Wekstein, Secretary

Dated: April 25, 1997

<PAGE>

AU BON PAIN CO., INC.

EXECUTIVE OFFICES:
19 FID KENNEDY AVENUE
BOSTON, MASSACHUSETTS 02210

PROXY STATEMENT

VOTING PROCEDURES

This proxy statement and the accompanying proxy card are first being
mailed to stockholders commencing on or about April 30, 1997. The accompanying
proxy is solicited by the Board of Directors of Au Bon Pain Co., Inc. (the
"Company" or "Au Bon Pain"), for use at the Annual Meeting of Stockholders to be
held on June 12, 1997, and any adjournment or adjournments thereof. The cost of
soliciting proxies will be borne by the Company. Directors, officers and
employees of the Company may assist in the solicitation of proxies by mail,
telephone, telegraph and personal interview without additional compensation.

When a proxy is returned properly signed, the shares represented
thereby will be voted by the persons named as proxies in accordance with the
stockholder's directions. You are urged to specify your choices on the enclosed
proxy card. If a proxy is signed and returned without specifying choices, the
shares will be voted 'FOR' proposals 1, 2, 3 and 4 and in the discretion of the
persons named as proxies in the manner they believe to be in the best interests
of the Company as to other matters that may properly come before the meeting. A
stockholder giving a proxy may revoke it at any time before it is voted at the
meeting by written notice to the Company, by oral notice to the Secretary at the
meeting or by submitting a later dated proxy.

The Board of Directors has fixed April 25, 1997 as the record date for
the meeting. Only stockholders of record on the record date are entitled to
notice of and to vote at the meeting. On the record date, there were 10,092,430
shares of Class A Common Stock (each of which is entitled to one vote), and
1,632,947 shares of Class B Common Stock (each of which is entitled to three
votes) of the Company issued and outstanding. The Class A and Class B Common
Stock are referred to in this proxy statement as the "Common Stock." The holders
of Common Stock do not have cumulative voting rights.

For all Items on the agenda, the holders of a majority in interest of
the combined voting power of the Class A and Class B Common Stock issued and
outstanding and entitled to vote and present in person or represented by proxy,
will constitute a quorum. Shares represented by all proxies received, including
proxies that withhold authority for the election of directors and/or abstain
from voting on an Item, as well as "broker non-votes," discussed below, count
toward establishing the presence of a quorum.

Assuming the presence of a quorum, Directors of the Company are elected
by plurality vote of the combined voting power of the shares of Class A and
Class B Common Stock present in person or represented by proxy and voting in the
election of Directors. Shares may be voted for or withheld from each nominee for
election as a Director. Shares for which the vote is withheld and "broker
non-votes" will be excluded entirely and will have no effect on the election of
Directors of the Company.

<PAGE>

Assuming the presence of a quorum, Item 2 must be approved by
affirmative vote of a majority of the combined voting power of the shares of
Class A and Class B Common Stock present in person or represented by proxy and
voting on each matter. Shares represented by proxies which are marked "abstain"
for Item 2 on the proxy card and proxies which are marked to deny discretionary
authority on other matters will not be included in the vote totals for the
respective Items and, therefore, will have no effect on the vote.

Assuming the presence of a quorum, Items 3 and 4, the proposals to
amend the 1992 Equity Incentive Plan and the Employee Stock Purchase Plan, under
applicable Securities and Exchange Commission (the "Commission" or the "SEC")
rules, must be approved by a majority in interest of the combined voting power
of the Class A and Class B Common Stock present in person or represented by
proxy and entitled to vote on the matter. Shares represented by proxies which
are marked "abstain" for Item 3 or 4 will have the same effect as a vote
"against" such Item.

Under applicable rules, brokers who hold shares of the Company's Common
Stock in street name have the authority to vote the shares in the broker's
discretion on "routine" matters if they have not received specific instructions
from the beneficial owner of the shares. Item 1, the uncontested election of
directors, and Item 2, the ratification of independent accountants are "routine"
matters for this purpose. With respect to matters which are determined by the
appropriate broker-dealer regulatory organization to be "non-routine", namely
Items 3 and 4 on the Agenda for this meeting of the Company's stockholders,
brokers may not vote shares held in street name without specific instructions
from the beneficial owner. If a broker holding shares in street name submits a
proxy card on which the broker physically lines out the matter (whether it is
"routine" or "non-routine") or does not indicate a specific choice ("for,"
"against" or "abstain") on a matter that is "non-routine," that action is called
a "broker non-vote" as to that matter. Broker "non-votes" with respect to
"routine" matters such as Items 1 and 2 on the agenda for this meeting, or
"non-routine" matters, are not counted in determining the number of votes cast
with respect to the matter. If a broker submits a proxy but does not indicate a
specific choice on a "routine" matter, the shares will be voted as specified in
the proxy card. At this meeting of the Company's stockholders, shares
represented by such proxy card would be voted for the election of the director
nominees and for the ratification of the independent accountants.

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ELECTION OF DIRECTORS
(Item 1 On Proxy Card)

The Board of Directors currently consists of seven members, divided as
nearly as possible into three classes each having an equal number of directors,
with the terms of each class staggered so that the term of one class expires at
each annual meeting of the stockholders.

Nominees Louis I. Kane and James R. McManus, the directors whose terms
expire at the 1997 annual meeting, are both currently members of the Board.
Unless otherwise instructed in the proxy, all proxies will be voted for the
election of each of the nominees to a three-year term expiring at the 2000
annual meeting, with each to hold office until his successor has been duly
elected and qualified. Stockholders who do not wish their shares to be voted for
a particular nominee may so indicate by striking out the name of the nominee(s)
on the proxy card. Management does not contemplate that any of the nominees will
be unable to serve, but in that event, proxies solicited hereby will be voted
for the election of another person or persons to be designated by the Board of
Directors.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" EACH OF THE
NOMINEES.

Information Regarding Nominees, Directors and Executive Officers

The following table and biographical descriptions sets forth
information regarding the principal occupation, other affiliations, committee
memberships and age, for the nominees for election as a director, each director
continuing in office and the executive officers of the Company who are not
directors, based on information furnished to the Company by each director and
officer. The following information is as of March 1, 1997 unless otherwise
noted.

<TABLE>
<CAPTION>
Term as
Name Age Position with Company a Director Ends
---- --- --------------------- ---------------
<S> <C> <C> <C>
Nominees for Election:
Louis I. Kane.................. 66 Co-Chairman, Director 2000*
James R. McManus (1)(2)........ 63 Director 2000*

Directors continuing in Office:
Francis W. Hatch (1)(2)(3)..... 71 Director 1999
George E. Kane (3)............. 92 Director 1998
Henry J. Nasella (1)(2)........ 50 Director 1998
Joseph Shaich (1)(3)........... 70 Director 1998
Ronald M. Shaich............... 43 Co-Chairman, Director, Chief 1999
Executive Office
</TABLE>

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* Assuming election at this Annual Meeting.

(1) Member of the Compensation and Stock Option Committee.
(2) Member of the Committee on Nominations.
(3) Member of the Audit Committee.

Nominees for Election as Directors

LOUIS I. KANE, Director since 1981, co-founder of the Company and
Co-Chairman of the Board since January 1988. From January 1988 to May 1994, Mr.
Kane served as Co-Chief Executive Officer of the Company. From March 1981 to
January 1988, Mr. Kane served as Chairman and Chief

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Executive Officer of the Company. Beginning in August 1978, Mr. Kane was Chief
Executive Officer of Au Bon Pain Corporation, an operator of French bakeries
and a predecessor of the Company.

JAMES R. MCMANUS, Director since October 1987. Since 1971, Mr. McManus
has been Chairman, CEO and founder of Marketing Corporation of America,
Westport, Connecticut, a marketing consulting and marketing services firm which
advises companies in the consumer products and services industry. Mr. McManus is
also a director of First Brands Corporation. On February 1, 1994, Mr. McManus
resigned as President and Chief Executive Officer of Business Express, Inc., a
regional airline operating in the Northeastern United States. On January 22,
1996, a petition for Chapter XI Bankruptcy Protection was filed against Business
Express, Inc. in federal Bankruptcy Court in Manchester, New Hampshire by Saab
Aircraft of America and two of its operating subsidiaries.

Directors Continuing In Office

FRANCIS W. HATCH, Director since February 1983. Mr. Hatch is a trustee
of certain private trusts, and also serves as a director of various
corporations.

GEORGE E. KANE, Director since November 1988. Mr. Kane was a Director
of the Company from March 1981 to December 1985 and a Director Emeritus from
December 1985 to November 1988. Mr. Kane retired in 1970 as President of Garden
City Trust Company (now University Trust Company). Mr. Kane is an Honorary
Director of USTrust. Mr. Kane is the father of Louis I. Kane.

HENRY J. NASELLA, Director since June 1995. Mr. Nasella has been the
president, chief executive officer and chairman of Star Markets Company, Inc.
from September 1994. From January 1994 to September 1994, he was a principal of
Phillips-Smith Specialty Venture Capital. From 1988 to July 1993, Mr. Nasella
served as the president and chief operating officer of Staples, Inc. Mr. Nasella
served as president and chief executive officer of Staples USA (Domestic) from
1992 to July 1993. Mr. Nasella currently is a member of the Board of Visitors of
Northeastern University School of Business and a member of the Board of Trustees
of Northeastern University Corporation.

JOSEPH SHAICH, Director since March 1981. Mr. Shaich was Chief
Financial Officer and Treasurer of the Company from March 1981 to May 1984.
Until his retirement in September 1991, Mr. Shaich was a Certified Public
Accountant in private practice in New Jersey since 1954. Since September 1991,
Mr. Shaich has been a self-employed consultant. Mr. Shaich is the father of
Ronald M. Shaich.

RONALD M. SHAICH, Director since 1981, co-founder of the Company,
Co-Chairman of the Board since January 1988 and Chief Executive Officer since
May 1994. Mr. Shaich and Mr. Louis Kane are co-founders of the Company. From
January 1988 to May 25, 1994, Mr. Shaich served as Co-Chief Executive Officer of
the Company.

Executive Officers Who Are Not Directors

MAXWELL T. ABBOTT, 50, Senior Vice President Technical Services since
June 1995. Prior to that time and for the five years preceding December 28,
1996, Mr. Abbott was Senior Vice President - Research and Development of Long
John Silver's, Inc.

JOHN P. BILLINGSLEY, 37, Senior Vice President Development Services
since July 1994. Prior to that time and for the five years preceding December
28, 1996, Mr. Billingsley was employed in various positions with the Company.

MARK A. BORLAND, 44, Executive Vice President since January 1993 and
President, Manufacturing Services Division since January 1995. Prior to January
1995 and from May 1992, Mr. Borland served as Executive Vice President of Au Bon
Pain Retail Operations and Manufacturing Operations. Prior to May 1992 and for
the five years preceding December 28, 1996, Mr. Borland served as Vice President
Manufacturing Operations of the Company.

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ANTHONY J. CARROLL, 45, Vice President and Chief Financial Officer
since November 1988. Mr. Carroll has also served as Treasurer of the Company
since 1992.

MARIEL CLARK, 40, Senior Vice President Corporate Human Resources since
July 1994. Prior to that and since January 1993, Ms. Clark served as Vice
President Human Resources. From November 1990 to June 1992, Ms. Clark served as
a principal of Bridges.

THOMAS R. HOWLEY, 46, Vice President, General Counsel and Assistant
Secretary since January 1993. Prior to that time and for the five years
preceding December 28, 1996, Mr. Howley was an attorney with the law firm of
Rackemann, Sawyer and Brewster.

RICHARD C. POSTLE, 48, Executive Vice President and President, Saint
Louis Bread Company, Inc. since August 1995. From August 1994 through August
1995, Mr. Postle was President and Chief Operating Officer of Checker Drive-In
Restaurants, Inc. From January 1992 through August 1994, Mr. Postle was Senior
Vice President, Operations of KFC-USA. From 1988 through December 1991, Mr.
Postle was Chief Operating Executive of Brice Foods Inc.

ROBERT TAFT, 44, Executive Vice President since February 1997 and
President, Au Bon Pain Retail Stores Division since October 1996. From June
1996 to October 1996, Mr. Taft was Executive Vice President of Golden Corral and
from November 1993 to May 1996 he was President and Chief Executive Officer of
Papa Gino's. Mr. Taft was previously President of Skippers, Inc.

SAMUEL H. YONG, 47, Executive Vice President and President,
International and Trade Channels Division since January 1994. From April 1989 to
December 1993, Mr. Yong served as Managing Director for Burger King Asia Pacific
Private, Ltd.

The Board of Directors and Its Committees

The Company's Board of Directors held nine meetings, including one
action by written consent, during fiscal year 1996. The Board of Directors has
established an Audit Committee, a Compensation and Stock Option Committee and a
Committee on Nominations.

The Audit Committee, which held three meetings in fiscal year 1996,
meets with the Company's auditors and principal financial personnel to review
the results of the annual audit. The Audit Committee also reviews the scope of,
and establishes fees for, audit and non-audit services performed by the
independent accountants, reviews the independence of the independent accountants
and the adequacy and effectiveness of the Company's internal accounting
controls. The Audit Committee consists of three members, currently Messrs.
Joseph Shaich, George E. Kane and Francis W. Hatch, and is reconstituted
annually. All members of the Audit Committee attended all meetings in 1996.

The Compensation and Stock Option Committee ("Compensation Committee"),
which held six meetings in fiscal year 1996, establishes the compensation,
including stock options and other incentive arrangements, of the Company's
Co-Chairmen and Chief Executive Officer. It also administers the Company's 1992
Equity Incentive Plan and 1992 Employee Stock Purchase Plan. The Compensation
Committee consists of four members, currently Messrs. Francis W. Hatch, James R.
McManus, Henry J. Nasella and Joseph Shaich, and is reconstituted annually. All
members of the Compensation Committee attended at least 75% of meetings in 1996.

The Committee on Nominations was established in November 1995 and held
one meeting in 1996. The Committee on Nominations consists of three members,
currently Messrs. Francis W. Hatch, James R. McManus and Henry J. Nasella, and
is reconstituted annually. The Committee on Nominations selects nominees for

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<PAGE>

election as Directors and will consider written recommendations from any
stockholder of record with respect to nominees for Directors of the Company.

All directors attended at least 75% of the meeting of the Board and of
the committees of which they are members.

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee has interlocking or
other relationships with other boards or with the Company that would call into
question his independence as a Committee member. Joseph Shaich served as
Treasurer of the Company from March 1981 to May 1984. Mr. Shaich was engaged to
provide management and financial consulting services to the Company for fiscal
1996. Mr. Shaich's consulting arrangement, which was ratified by the Board of
Directors in January 1996 for the year ending December 28, 1996, provided for
the payment of $50,000 for services provided to the Company. This fee was
determined pursuant to negotiations between Mr. Shaich and the Company and was
not based on an hourly rate. Mr. Shaich is not employed as a consultant for
fiscal 1997.

Compensation of Directors

Directors who are not employees of the Company receive a quarterly fee
ranging from $3,000 to $3,500 for serving on the Board, plus reimbursement of
out-of-pocket expenses for attendance at each Board or committee meeting.

Under a formula-based stock option plan for independent directors (the
"Directors' Plan"), as amended by the stockholders at the 1995 Annual Meeting of
Stockholders, each current director who is not an employee or principal
stockholder of the Company ("independent director") first elected after the
effective date of the Directors' Plan will receive, upon his or her election to
the board, a one-time grant of an option to purchase 5,000 shares of Class A
Common stock. All independent directors who serve as such at the end of each of
the Company's fiscal years will receive an option to purchase 5,000 shares of
Class A Common Stock. All such options will have an exercise price per share
equal to the fair market value of a share of Class A Common Stock as of the
close of the market the trading day immediately preceding the grant date, will
be fully vested when granted, and will be exercisable for a period of 10 years.

Mr. Joseph Shaich was engaged to provide management and financial
consulting services to the Company for fiscal 1996. Mr. Shaich's consulting
arrangement, which was ratified by the Board of Directors in January 1996 for
the year ending December 28, 1996, provided for the payment of $50,000 for
services provided to the Company. This fee was determined pursuant to
negotiations between Mr. Shaich and the Company and was not based on an hourly
rate. Mr. Shaich is not employed as a consultant for fiscal 1997.

RATIFICATION OF CHOICE OF INDEPENDENT ACCOUNTANTS
(Item 2 on Proxy Card)

The Board of Directors has reappointed the firm of Coopers & Lybrand
L.L.P., independent accountants, to audit the books, records and accounts of the
Company and its subsidiaries for the fiscal year ending December 27, 1997. In
accordance with a resolution of the Board of Directors, this reappointment is
being presented to the stockholders for ratification at the meeting.

Coopers & Lybrand L.L.P. has no direct or indirect material financial
interest in the Company or its subsidiaries. Representatives of Coopers &
Lybrand L.L.P. are expected to be present at the meeting and will be

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<PAGE>

given the opportunity to make a statement on behalf of Coopers & Lybrand L.L.P.
if they so desire. The representatives also will be available to respond to
appropriate questions raised by those in attendance at the meeting.

Proxies solicited by management will be so voted unless stockholders
specify otherwise. Ratification by the stockholders is not required. If the
proposal is not approved by the stockholders, the Board of Directors will not
change the appointment for fiscal 1997, but will consider the stockholder vote
in appointing auditors for fiscal 1998.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
'FOR' THE REAPPOINTMENT OF COOPERS & LYBRAND
L.L.P. AS INDEPENDENT ACCOUNTANTS FOR FISCAL
YEAR 1997.

PROPOSAL TO INCREASE THE NUMBER OF SHARES
RESERVED FOR ISSUANCE UNDER THE 1992 EQUITY INCENTIVE PLAN
(Item 3 On Proxy Card)

The purpose of the 1992 Equity Incentive Plan (the "1992 Equity Plan")
is to provide incentives to officers, key employees and other employees of the
Company, through the granting of stock options (both qualified and
non-qualified), stock appreciation rights, performance shares, restricted stock
or stock units.

The 1992 Equity Plan was adopted by the Company's Board of Directors in
October, 1991 to be effective January 1, 1992 and was approved by the Company's
stockholders in June, 1992. The 1992 Equity Plan made 950,000 shares of Class A
Common Stock available for awards thereunder. In May, 1994 the Company's
stockholders approved an amendment to the 1992 Equity Plan to increase the
number of shares of Class A Common Stock available for awards from 950,000 to
2,500,000. The Board of Directors has approved and recommends to the
stockholders that they approve a further amendment to increase the number of
shares of Class A Common Stock authorized for issuance pursuant to the 1992
Equity Plan to 4,300,000 shares, an increase of 1,800,000 shares.

The number of employees eligible to participate under the 1992 Equity
Plan is approximately 157 persons. The number of shares currently subject to
option awards is 1,921,491. The Company's management, through the Board's
Compensation and Stock Option Committee (the "Committee"), relies on stock
options and other stock awards as an essential part of the compensation packages
necessary for the Company to attract and retain experienced officers and
employees. The Board of Directors believes that the proposed increase in the
number of shares available under the 1992 Equity Plan is essential to permit the
Company's management to continue to provide long-term, equity-based incentives
to present and future employees. The Committee estimates that the additional
shares which the proposed amendment would authorize is sufficient to satisfy the
requirements of the 1992 Equity Plan through the year 2000.

In 1996, the Company granted options under the 1992 Equity Plan with
fair-market-value exercise prices as follows: to all current executive officers
as a group, 325,590 shares; and to all non-executive officer employees, net of
cancellations, 391,173 shares. The closing price of the Company's Class A Common
Stock on April 18, 1997 as reported on the Nasdaq National Market System was
$6.38. The number of options granted to the five most highly compensated
individuals is set forth in column (e) of the Summary Compensation Table
elsewhere in this Proxy Statement. In February 1997, the Company, upon the
recommendation of the Committee, granted options for 400,000 shares each to the
Company's Co-Chairmen, subject to the approval of the amendment to the 1992
Equity Plan by the stockholders. The exercise price of such options would be the
10-day average public trading price of the Class A Common Stock calculated
immediately preceding approval of this amendment by the stockholders. No other
person has been determined to receive an award representing more than 5% of the
proposed increase in shares available under the 1992 Equity Plan.

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As of March 31, 1997, the aggregate market value of shares of Common
Stock issuable pursuant to outstanding options under the 1992 Equity Plan was
$12,369,598 based upon the closing price as quoted on the Nasdaq National Market
at the close of trading on that date.

Material Features of Plan

The 1992 Equity Plan provides that the Compensation Committee has
authority to award stock options, stock appreciation rights, performance shares,
restricted stock or stock units to eligible employees. The Compensation
Committee has the authority to fix all terms of any award or awards granted.

Eligible Participants. Under the 1992 Equity Plan, employees (including
officers and consultants) of the Company may be granted awards. To date, the
predominant awards have been options, either those which qualify as incentive
stock options ("ISOs") under federal tax rules or those which do not so qualify
("Non-Qualified Options"). ISOs and Non-Qualified Options are sometimes
collectively referred to as "options."

Administration. The 1992 Equity Plan is administered by the
Compensation Committee. Subject to the terms of the 1992 Equity Plan, the
Compensation Committee has the authority to determine the persons to whom awards
are granted, to determine the term of the award, and to determine all terms of
awards granted.

Option Price and Duration. The exercise price per share of
Non-Qualified Options granted under the 1992 Equity Plan cannot be less than
fifty percent (50%) of the fair-market value of the stock subject to the option
on the date the option is granted. The exercise price per share of ISOs cannot
be less than the fair-market value of the Common Stock on the date of grant (or,
in the case of ISOs granted to employees holding more than 10% of the voting
stock of the Company, one hundred ten percent (110%) of the fair-market value of
the Common Stock on the date of grant). The 1992 Equity Plan provides that each
option shall expire on the date specified by the Compensation Committee, but not
more than ten years from its date of grant and five years in the case of ISOs
granted to an employee or officer holding more than ten percent (10%) of the
voting stock of the Company.

Exercise of Options. Each Option granted under the 1992 Equity Plan may
either be fully exercisable at the time of grant or may become exercisable in
such installments as the Compensation Committee may specify. Each option may be
exercised from time to time, in whole or in part, up to the total number of
shares with respect to which it is then exercisable. The Board has the right to
accelerate the date of exercise of any installment of any option (subject to the
$100,000-per-year limitation on the fair-market value of stock subject to ISOs
granted to any employee which become exercisable in any calendar year).

Payment of Stock. Payment of the exercise price of an option granted
under the 1992 Equity Plan may be made (i) in cash; (ii) by tendering Class A
Common Stock of the Company; (iii) according to a deferred payment arrangement;
or (iv) in any other form of legal consideration as provided by the terms of the
option agreement. The 1992 Equity Plan contains terms providing for the exercise
of options by or on behalf of former and deceased employees, respectively, as
described below.

Non-Assignability of Options. Only the optionee may exercise an option;
no assignment or transfers are permitted except by will or by the laws of
descent and distribution.

Termination of Option Rights. If an ISO optionee ceases to be employed
by the Company other than by reason of death or disability, no further
installments of his or her ISOs will become exercisable, and the ISOs shall
terminate after the passage of 30 days from the date of termination of
employment. If an optionee is disabled, any ISO held by the optionee may be
exercised, to the extent exercisable on the date of disability, by the optionee
at any time within one year from the date of the optionee's disability. If an
optionee dies, any ISO held by the optionee may be exercised, to the extent
exercisable on the date of death, by the optionee at any time within eighteen
(18) months following the death of the optionee by the optionee's estate or by
persons to whom the optionee's rights under such option pass by will or by the
laws of descent and distribution. Non-Qualified

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Options are subject to such termination and cancellation provisions as may be
determined by the compensation Committee.

Changes in Capitalization and Other Matters. Option holders are
protected against dilution in the event of a stock dividend, recapitalization,
stock split, merger or similar transaction. The Board of Directors may from time
to time adopt amendments to the 1992 Equity Plan certain of which are subject
to stockholder approval, and may terminate the 1992 Equity Plan, at any time
(although such action shall not affect options previously granted). Any shares
subject to an option granted under the 1992 Equity Plan, which for any reason
expire or terminate unexercised, may again be available for future option
grants. Unless terminated sooner, the 1992 Equity Plan will terminate on January
1, 2002, and options may be granted under the 1992 Equity Plan at any time prior
to this date.

Amendments. The 1992 Equity Plan may be amended by the Board, except
that the stockholders of the Company must approve any amendment if such approval
is required to comply with applicable tax or regulatory authorities.

Federal Tax Considerations. The following general rules are applicable
under current federal income tax law to ISOs under the 1992 Equity Plan:

1. In general, no taxable income results to the optionee upon the grant
of an ISO or upon the issuance of shares to him or her upon the exercise of the
ISO, and no tax deduction is allowed to the Company upon either grant or
exercise of an ISO.

2. If shares acquired upon exercise of an ISO are not disposed of
within (i) two years following the date the option was granted or (ii) one year
following the date the shares are issued to the optionee pursuant to the ISO
exercise, the difference between the amount realized on any subsequent
disposition of the shares and the exercise price will generally be treated as
capital gain or loss to the optionee.

3. If shares acquired upon exercise of an ISO are disposed of before
the expiration of one or both of the requisite holding periods (a "Disqualifying
Disposition"), then in most cases the lesser of (i) any excess of the
fair-market value of the shares at the time of exercise of the ISO over the
exercise price or (ii) the actual gain or disposition will be treated as
compensation to the optionee and will be taxed as ordinary income in the year of
such disposition.

4. In any year that an optionee recognizes compensation income on a
Disqualifying Disposition of stock acquired by exercising an ISO, the Company
generally should be entitled to a corresponding deduction for income tax
purposes.

5. Any excess of the amount realized by the optionee as the result of a
Disqualifying Disposition over the sum of (i) the exercise price and (ii) the
amount of ordinary income recognized under the above rules will be treated as
capital gain.

6. Capital gain or loss recognized on a disposition of shares will be
long-term capital gain or loss if the optionee's holding period for the shares
exceeds one year.

7. An optionee may be entitled to exercise an ISO by delivering shares
of the Company's Common Stock to the Company in payment of the exercise price,
if the optionee's ISO agreement so provides. If an optionee exercises an ISO in
such a manner, special rules will apply.

8. In addition to the tax consequences described above, the exercise of
ISOs may result in a further "minimum tax" under the Code. The Code provides
that an "alternative minimum tax" (at a rate of 26% or 28%) will be applied
against a taxable base which is equal to "alternative minimum taxable income,"
reduced by a statutory exemption. In general, the amount by which the value of
the Common Stock received upon exercise of the ISO exceeds the exercise price is
included in the optionee's alternative minimum taxable income.

-9-

<PAGE>

A taxpayer is required to pay the higher of his regular tax liability or the
alternative minimum tax. A taxpayer who pays alternative minimum tax
attributable to the exercise of an ISO may be entitled to a tax credit against
his or her regular tax liability in later years.

The following general rules are applicable under current federal income
tax law to Non-Qualified Options under the 1992 Equity Plan:

1. The optionee generally does not realize any taxable income upon the
grant of an option, and the Company is not allowed a business expense deduction
by reason of such grant.

2. The optionee generally will recognize ordinary compensation income
at the time of exercise of the option in an amount equal to the excess, if any,
of the fair-market value of the shares on the date of exercise over the exercise
price.

3. When the optionee sells the shares, he or she generally will
recognize a capital gain or loss in an amount equal to the difference between
the amount realized upon the sale of the shares and his or her basis in the
stock (generally, the exercise price plus the amount taxed to the optionee as
compensation income). If the optionee's holding period for the shares exceeds
one year, such gain or loss will be a long-term capital gain or loss.

4. The Company generally should be entitled to a tax deduction when
compensation income is recognized by the optionee.

5. An optionee may be entitled to exercise a non-qualified option by
delivering shares of the Company's Common Stock to the Company in payment of the
exercise price. If any optionee exercises a non-qualified option in such
fashion, special rules will apply.

AMENDED PLAN BENEFITS *
1992 Equity Incentive Plan

Name and Position Number of Units

Ronald M. Shaich, 400,000
Co-Chairman, Chief Executive officer
and Director

Louis I. Kane, 400,000
Co-Chairman and Director

- ------------

* The Compensation Committee recommended to the Board of Directors, and the
Board has approved, the grant of options for 400,000 shares of the Class A
Common Stock to each of Messrs. Ronald Shaich and Louis Kane, provided that
stockholder approval is granted as to amendment of the 1992 Equity Plan as
described above. The exercise price of such options would be the 10-day
average public trading price of the Class A Common Stock calculated
immediately preceding approval of the amendment by the stockholders.
Neither the Compensation Committee nor the Board of Directors has made any
other determinations as to other recipients, benefits or amounts at this
time.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE 'FOR' THE APPROVAL OF THE PROPOSAL
TO AMEND THE COMPANY'S 1992 EQUITY INCENTIVE PLAN TO INCREASE FROM
2,500,000 TO 4,300,000 THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE.

-10-
<PAGE>

PROPOSAL TO INCREASE THE NUMBER OF SHARES RESERVED
FOR ISSUANCE UNDER THE 1992 EMPLOYEE STOCK PURCHASE PLAN
(Item 4 On Proxy Card)

In October 1991, the Board adopted, subject to shareholder approval,
the 1992 Employee Stock Purchase Plan ("1992 Purchase Plan"), to be effective
January 1, 1992. This action was taken in order to replace the Company's
Purchase Plan, which was terminated effective December 31, 1991, upon the
implementation of the 1992 Purchase Plan. The 1992 Purchase Plan currently
provides eligible employees of the Company with a means to purchase, through
payroll deductions or lump sum payments, up to 150,000 shares of the Company's
Class A Common Stock at a discount from market value. The Board of Directors has
approved and recommends to the stockholders that they approve an amendment to
increase the number of shares of Class A Common Stock authorized for issuance
pursuant to the 1992 Stock Purchase Plan to 350,000 shares, an increase of
200,000 shares.

Material Features of Plan

The 1992 Purchase Plan gives eligible employees the option to purchase
Class A Common Stock through payroll deductions (which typically may not exceed
10% of an employee's prior year compensation) at 85% of the fair market value of
the Class A Common Stock at the time the option is exercised. Typically, the
Committee sets a maximum number of shares which may be purchased in one year;
for 1996, the maximum was 40,000 shares. If option holders exercise options in
any one year for a number of shares in excess of such maximum, then the number
of shares to be purchased by such option holders is reduced ratably to bring the
aggregate number of shares to be purchased down to the maximum. Options must be
exercised in equal quarterly installments, on March 31, June 30, September 30
and December 31, in the year granted and are exercisable for such number of
shares of Class A Common Stock as may be specified in writing by the holder of
the option accompanied by payment of the option purchase price or a direction to
apply toward the option purchase price the accumulated payroll deductions on
that date. Any quarterly installment or portion thereof not exercised expires
and may not be cumulated with subsequently exercised quarterly installments.

A participant may withdraw from the 1992 Purchase Plan at any time and
the entire amount credited to his or her payroll deduction account will be
refunded. If a participant terminates employment, his or her participation in
the 1992 Purchase Plan ends automatically and the entire amount credited to his
or her account will be refunded.

Eligible Participants. Generally, all full time and substantially full
time employees, except holders of 5% or more of the total combined voting power
of all classes of the Company's capital stock, are eligible to participate in
the 1992 Purchase Plan. Such participation is on a purely voluntary basis. As of
December 31, 1996, approximately 1,654 employees were eligible to participate.

Plan Administration and Termination. The 1992 Purchase Plan provides
for administration by the Committee. The Committee may terminate the 1992
Purchase Plan at any time and amend it in any respect, except that the approval
of the shareholders is required for any amendment to increase the number of
shares available for purchase under the 1992 Purchase Plan, to decrease the
purchase price or to change the class of employees eligible to participate in
the Purchase Plan.

Federal Tax Considerations. The 1992 Purchase Plan is intended to
qualify as an employee stock purchase plan within the meaning of Section 423 of
the Code. Under the Code, an employee who elects to purchase shares pursuant to
the 1992 Purchase Plan will not realize income at the time the shares are
purchased. If an employee disposes of such shares after two years from the date
such shares are offered and after one year from the date of the transfer of such
shares to him or her, the employee will be required to include in income, as
compensation for the year in which such disposition occurs, an amount equal to
the lesser of (i) the excess of the fair market value of such shares at the time
of disposition over the purchase price or (ii) 15% of the fair market value of
such shares at the time the option for such shares was granted. The employee's
basis in the shares

-11-

<PAGE>

disposed of will be increased by an amount equal to the amount so includible in
his or her income as compensation, and any gain or loss computed with reference
to such adjusted basis which is recognized at the time of the disposition will
be long-term capital gain or loss. In such event, the Company will not be
entitled to any deduction from income.

If an employee disposes of the shares purchased under the 1992 Purchase
Plan within such two year or one year period, the employee will be required to
include in income, as compensation for the year in which such disposition
occurs, an amount equal to the excess of the fair market value of such shares on
the date of purchase over the purchase price. The employee's basis in such
shares disposed of will be increased by an amount equal to the amount includible
in his or her income as compensation, and any gain or loss at the time of
disposition will be capital gain or loss, either short-term or long-term,
depending on the holding period for such shares. In the event of a disposition
within such two year or one year period, the Company will be entitled to a
deduction from income equal to the amount the employee is required to include in
income as a result of such disposition.

Adoption of this proposal requires an affirmative vote by the holders
of a majority of the outstanding combined voting interest of both classes of
Common Stock.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE 'FOR' THE APPROVAL OF THE PROPOSAL
TO AMEND THE COMPANY'S 1992 EMPLOYEE STOCK PURCHASE PLAN TO INCREASE FROM
150,000 TO 350,000 THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE.

OTHER BUSINESS

In addition to the business described above, there will be remarks by
the Co-Chairmen of the Board and the Chief Executive Officer and a general
discussion period during which stockholders will have an opportunity to ask
questions about the Company.

As of the date of this proxy statement, the management of the Company
knows of no matter not specifically referred to above as to which any action is
expected to be taken at the meeting of stockholders. It is intended, however,
that the persons named as proxies will vote the proxies, insofar as they are not
otherwise instructed, regarding such other matters and the transaction of such
other business as may be properly brought before the meeting, as seems to them
to be in the best interest of the Company and its stockholders.

EXECUTIVE COMPENSATION

Report of the Compensation Committee

This report is made by the Compensation and Stock Option Committee (the
"Compensation Committee") of the Board of Directors, the committee which is
responsible for establishing the compensation, including base salary and
incentive compensation, for the Company's Co-Chairman of the Board, Louis I.
Kane and its Co-Chairman and Chief Executive Officer, Ronald M. Shaich.

Philosophy

The Compensation Committee seeks to set the compensation of the
Company's Chief Executive Officer and Co-Chairmen at levels which are
competitive with companies of similar size in the Company's industry. Messrs.
Kane and Shaich share the overall responsibilities of Chairman of the Board of
Directors. Mr. Shaich also has the overall responsibilities of Chief Executive
and Chief Operating Officer. In addition to his responsibilities as Co-Chairman,
Mr. Kane is actively involved in a number of areas of the Company, including
real estate development, finance and international franchise development. The
Compensation Committee examined compensation structures for the chief executive
and chief operating officers of companies in the

-12-

<PAGE>

restaurant industry using generally available source material from business
periodicals and other sources, and sought to structure the Chief Executive
Officer's and Co-Chairmen's compensation at a competitive level appropriate to
the comparable companies' group. The companies examined for purposes of
evaluating and setting compensation of the Chief Executive Officer and
Co-Chairmen are not necessarily included in the "Standard & Poor's 400 - MidCap
Restaurant Index" used in the Stock Performance graph set forth under "Stock
Performance" below.

Compensation Structure

As can be seen from the Summary Compensation Table included under
"Compensation Tables" below, the compensation of the Chief Executive Officer and
Co-Chairmen consists of two principal parts, salary and bonus, each of which is
reviewed annually by the Committee. The compensation of the Chief Executive
Officer and Co-Chairmen is structured to be competitive within the Company's
industry and is based upon the general performance of the Company.

Components of Compensation

Salary. The salary shown in the Summary Compensation Table represents
the fixed portion of compensation for the Chief Executive Officer and
Co-Chairmen for the year. Changes in salary depend upon overall Company
performance as well as levels of base salary paid by companies of similar size
in the Company's industry.

Bonus. The cash bonus is the principal incentive-based compensation
paid annually to the Chief Executive Officer and Co-Chairmen. The Chief
Executive Officer and Co-Chairmen will receive a bonus in a predetermined amount
if the Company achieves its net income objective for the fiscal year. A higher
bonus is paid if the Company exceeds the net income objective by a predetermined
percentage. In determining the bonus amount, the Compensation Committee seeks to
create an overall compensation package for the Chief Executive Officer and
Co-Chairmen which is at the mid-point for comparable companies in the restaurant
industry. For 1996, the Company did not achieve the net income objective and,
therefore, no cash bonuses were paid to the Chief Executive Officer and
Co-Chairmen.

The Chief Executive Officer and Co-Chairmen may elect to take their
respective bonuses in the form of 10-year, fully vested stock options for that
number of shares of the Company's Class A Common Stock that could be purchased
with an amount equal to two times the cash value of his bonus. The exercise
price of the option equals the fair market value of the Company's Class A Common
Stock on the date of grant.

Stock Options. Neither Mr. Kane nor Mr. Shaich participates in either
the Performance-Based Option Program under the Company's 1992 Equity Incentive
Plan or the 1992 Employee Stock Purchase Plan. In order to provide what the
Compensation Committee believes to be appropriate and continuing long-term
incentives to its Chief Executive Officer and Co-Chairmen, and in order to align
more fully the interests of the stockholders and the Chief Executive Officer and
Co-Chairmen, the Compensation Committee in February 1997 granted, subject to
approval by the Stockholders of the amendment to the Company's 1992 Equity
Incentive Plan, to each of Messrs. Kane and Shaich a 10-year option, vesting
equally over a five-year period (subject to continued employment), to purchase
400,000 shares of the Company's Class A Common Stock at an exercise price equal
to the 10-day average public trading price of the Class A Common Stock
calculated immediately preceding approval of this amendment by the stockholders.
These grants were made in order to retain the services of Messrs. Kane and
Shaich over the next five years, at a minimum. As these options have exercise
prices equal to the market value of the Company's Class A Common Stock on the
grant date, they provide incentive for the creation of stockholder value over
the long term since their full benefit cannot be realized unless there occurs
over time an appreciation in the price of the Company's Class A Common Stock.
The Compensation Committee considers the number of shares to be an appropriate
incentive for the Chief Executive officer and Co-Chairmen to continue to focus
on building stockholder value. The Compensation Committee has not determined
whether any ongoing program of long-term incentive compensation should or will
be adopted with respect to its Chief Executive Officer and Co-Chairmen.

-13-

<PAGE>

Deductibility of Executive Compensation

The Compensation Committee has reviewed the potential consequences for
the Company of Section 162(m) of the Code which imposes a limit on tax
deductions for annual compensation in excess of one million dollars paid to any
of the five most highly compensated executive officers. Based on such review,
the Compensation Committee believes that the limitation will have no effect on
the Company in 1997.

Respectfully submitted,

James R. McManus
Chairman
Francis W. Hatch
Henry J. Nasella
Joseph Shaich

Report of the Chief Executive Officer

This report is made by the Company's Chief Executive Officer, who is
responsible for establishing the compensation, including salary, bonus and
incentive compensation, for all of the Company's executive officers other than
the Chief Executive Officer and Co-Chairmen of the Board.

Philosophy

In compensating its executive officers, the Chief Executive Officer
seeks to structure a salary, bonus and incentive compensation package that will
help attract and retain talented individuals and align the interests of the
executive officers with the interests of the Company's stockholders.

Components of Compensation

There are two components to the compensation of the Company's executive
officers: annual cash compensation (consisting of salary and bonus incentives)
and long-term incentives.

Cash Compensation. The Company participates annually in an
industry-specific survey of executive officers, which serves as the basis for
determining total target cash compensation packages, which are crafted
individually for each executive officer. The individual's compensation consists
of a base salary and contingent compensation based on actual performance against
agreed-to expectations of performance. The individual compensation packages are
structured so that, if the executive officer attains the expected level of
achievement of each performance goal, the cash compensation of the executive
officer will be approximately at the 75th percentile of the compensation of
individuals occupying similar positions in the industry, using generally
available surveys of executive compensation within the retail industry for
companies with comparable revenues.

At the beginning of each fiscal year, the Chief Executive Officer and
each executive officer establish a series of individual performance goals which
are specific to the executive's responsibilities. These goals seek to measure
performance of each executive officer's job responsibilities: for executive
officers whose responsibilities are operational in nature, attainment of
operating group goals and objectives is stressed, and for corporate staff
officers, overall Company performance measured by earnings-per share growth is
utilized. Currently, the maximum potential cash bonus for the Company's
executive officers, as a percentage of base salary, ranges from 20% to 60%.

Thus, the Company's cash compensation practices seek to motivate
executives by requiring excellent performance measured against both internal
goals and competitive performance.

-14-

<PAGE>

Long-Term Incentive Compensation. The second element of executive
compensation, long-term incentive compensation, currently takes the form of
stock options granted under the Company's 1992 Equity Incentive Plan. Currently,
stock options are granted under the Performance-Based Option program, which
consists of a series of guidelines which provide for the periodic granting of
specific amounts of stock options, denominated in dollars rather than in numbers
of shares, depending upon the executive's position within the Company. Existing
holdings of stock or stock options are not a factor in determining the dollar
value of an individual executive officer's award.

As is the case with short-term incentive compensation, at the beginning
of each fiscal year, the Chief Executive Officer and each executive officer
establish a series of individual performance goals specifically related to the
executive's responsibilities and designed to measure execution of these
responsibilities. In addition, a Company-wide performance goal measured in
earnings-per-share growth is established. Further consideration is given to each
executive officer's accountability and/or level of responsibility for managing
one or more aspects of the Company's overall business. These factors are
weighted for each executive officer, with greater emphasis and value being
placed on those factors which could have a greater impact on the Company's
long-term profitability. An individual executive officer's performance against
each of these criteria is then graded at one of five levels: significantly less
than expected, less than expected, as expected, exceeds expectation, and
significantly exceeds expectation. Awards of options are then made based upon a
dollar value, which increases as the executive officer achieves higher grades
for overall performance.

As often as seems appropriate, but at least annually, the Chief
Executive Officer reviews the Company's executive compensation program to judge
its consistency with the Company's compensation philosophy, whether it supports
the Company's strategic and financial objectives, and whether it is competitive
within the Company's industry.

Deductibility of Executive Compensation

The Chief Executive Officer has reviewed the potential consequences for
the Company of Section 162(m) of the Code which imposes a limit on tax
deductions for annual compensation in excess of one million dollars paid to any
of the five most highly compensated executive officers. Based on such review,
the Chief Executive Officer believes that the limitation will have no effect on
the Company in 1997.

Respectfully submitted,

Ronald M. Shaich
Chief Executive Officer

Severance Arrangements

The Company has agreed to provide Mr. Postle with severance benefits
equal to one year's base salary plus car allowance and insurance benefits if his
employment is terminated other than for cause during the two-year period
following the commencement of his employment. The Company has agreed to provide
Mr. Abbott with severance benefits including six months' base salary plus car
allowance and insurance benefits for six months if his employment is terminated
other than for cause and for one year if such termination is due to a
significant change in control in which more than fifty percent (50%) of the
Company changes hands.

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<PAGE>

COMPENSATION TABLES

The following table sets forth information concerning the compensation
paid or accrued by the Company during the fiscal years ended December 31, 1994,
December 30, 1995 and December 28, 1996, to or for the Company's Chief Executive
Officer and its four other most highly compensated executive officers whose
salary and bonus combined exceeded $100,000 for fiscal year 1996 (hereinafter
referred to as the "named executive officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
----------------------------------------------------------- All Other
Year Salary Bonus Other Annual Options/SARs Compensation
Name and Principal Position ($) ($) Comp.($) (#) ($)
- --------------------------- ------- ----- ----- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Ronald M. Shaich................ 1996 249,519 - 1,428 -- --
Co-Chairman and Chief 1995 241,346 - 1,428 100,000(a)
Executive Officer 1994 250,000 - 1,428 72,293(b)

Louis I. Kane................... 1996 249,519 - 17,640 -- --
Co-Chairman 1995 241,346 - 9,828 100,000(a)
1994 250,000 - 8,450 72,293(b)

Richard C. Postle (c)........... 1996 250,000 75,000 7,436 30,000
President, Saint 1995 77,885 - 1,538 46,822 35,000(d)
Louis Bread

Maxwell T. Abbott (e)........... 1996 170,000 27,667 6,440 --
Senior Vice President -- 1995 90,577 27,983 3,134 21,617(f) 84,570(d)
Technical Services

Samuel H. Yong.................. 1996 170,000 57,375 6,600 19,798
President, International 1995 161,634 67,575 6,600 6,306
and Trade Channels 1994 128,774 48,000 4,600 22,096(g) 40,000(d)
</TABLE>

- --------------------
(a) Consists of an option for 100,000 shares granted in fiscal 1996 in order to
reflect compensation earned for performance in fiscal 1995.

(b) Consists of an option for 72,293 shares granted in fiscal 1995 in order to
reflect compensation earned for performance in fiscal 1994.

(d) Represents one-time relocation payments to Messrs. Postle, Abbott and Yong.

(e) Mr. Abbott began his employment with the Company in June 1995.

(f) Includes options for 4,423 shares granted in fiscal 1996 in order to
reflect compensation earned for performance in fiscal 1995.

(g) Includes options for 12,698 shares granted in fiscal 1995 in order to
reflect compensation earned for performance in fiscal 1994.

-16-

<PAGE>

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
Individual Grants
--------------------------
Percent of Potential Realizable
Number of Total Annual Rates of Stock
Securities Options/ Value at Assumed Price
Underlying SARs Appreciation
Options/ Granted to Prices for Option Term
SARs Employees Exercise or ($)*
Granted in Fiscal Base Price Expiration ----------------------
Name (#) Year ($/Sh) Date 5% 10%
---- ------- ------ -------- ------ ---- -----
<S> <C> <C> <C> <C> <C> <C>
Ronald M. Shaich.......... 100,000 14.0% $7.13 2/1/06 $448,402 $1,136,338

Louis I. Kane............. 100,000 14.0% $7.13 2/1/06 $448,402 $1,136,338

Samuel H. Yong............ 3,030 0.4% $8.25 12/31/05 $15,721 $39,840
2,941 0.4% $8.50 3/31/06 $15,721 $39,841
6,923 1.0% $8.73 5/31/06 $38,009 $96,322
3,333 0.5% $7.50 6/28/06 $15,721 $39,840
3,571 0.5% $7.00 9/27/06 $15,720 $39,839

Maxwell T. Abbott......... 4,423 0.6% $8.73 5/31/06 $24,283 $61,539

Richard C. Postle......... 30,000 4.2% $6.13 10/10/06 $115,654 $293,089
</TABLE>

- ---------------------
* The dollar amounts in this table are the result of calculations at stock
appreciation rates specified by the Securities and Exchange Commission
and are not intended to forecast actual future appreciation rates of the
Company's stock price.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES

Number of Securities
Underlying Unexercised
Options/SARs at FY-End (#)
--------------------------
Name Exercisable/Unexercisable
---- --------------------------
Ronald M. Shaich...................... 277,330/--

Louis I. Kane......................... 277,330/--

Samuel H. Yong........................ 7,245/52,118

Maxwell T. Abbott..................... --/21,617

Richard C. Postle..................... --/76,822

-17-

<PAGE>

OWNERSHIP OF AU BON PAIN COMMON STOCK

The following table sets forth certain information as of March 31,
1997, with respect to the Company's Class A and Class B Common Stock owned by
(1) each director of the Company, (2) the executive officers named in the
Summary Compensation Table, (3) all directors and executive officers of the
Company as a group, and (4) each person who is known by the Company to
beneficially own more than five percent of the Company's capital stock. Unless
otherwise indicated in the footnotes to the table, all stock is owned of record
and beneficially by the persons listed in the table.

<TABLE>
<CAPTION>
Class A Common Class B Common
Name and, with respect to owner ----------------------- ----------------------- Combined Voting
of more than 5%, address Number Percent (1) Number Percent (2) Percentage (3)
- ------------------------------ -------- ----------- -------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Ronald M. Shaich............................... 280,286 (4) 2.7% 1,080,111 (5) 66.2% 23.1%
Co-Chairman, Director
and Chief Executive Officer
c/o Au Bon Pain Co., Inc.
19 Fid Kennedy Avenue
Boston, MA 02210

Louis I. Kane.................................. 278,580 (6) 2.7% 153,736 9.4% 4.9%
Co-Chairman and Director
c/o Au Bon Pain Co., Inc.
19 Fid Kennedy Avenue
Boston, MA 02210

Joseph Shaich.................................. 18,542 (7) * 140,000 8.6% 2.9%
Director
4921 Jeremy Drive
Las Vegas, NV 89113

Francis W. Hatch............................... 26,542 (7)(8) * 64,356 (9) 3.9% 1.5%
Director

George E. Kane................................. 18,942 (7)(10) * 20,000 1.2% *
Director

James R. McManus............................... 18,542 (7) * -- -- *
Director

Henry J. Nasella............................... 15,080 (11) * -- -- *
Director

Samuel H. Yong................................. 7,265 (12) * -- -- *
President, International & Trade Channels

Richard C. Postle.............................. 499 * -- -- *
President, Saint Louis Bread

Maxwell T. Abbott.............................. -- -- -- -- --
Senior Vice President, Technical Services

All directors and officers as
a group (16 persons)......................... 794,236 (13) 7.2% 1,478,363 90.5% 33.2%

-18-

<PAGE>

Class A Common Class B Common
Name and, with respect to owner ----------------------- ----------------------- Combined Voting
of more than 5%, address Number Percent (1) Number Percent (2) Percentage (3)
- ------------------------------ -------- ----------- -------- ----------- --------------
Morgan Stanley Group Inc. (14)(15)............. 1,331,215 11.7% -- -- 8.2%
1251 Avenue of the Americas
New York, NY 10020

PG Investors, Inc. (14)(16).................... 1,326,468 11.6% -- -- 8.1%
1251 Avenue of the Americas
New York, NY 10020

Princes Gate Investors, L.P. (14)(17).......... 993,896 9.0% -- -- 6.2%
1251 Avenue of the Americas
New York, NY 10020

Brown Capital Management....................... 852,950 8.5% -- -- 5.7%
809 Cathedral Street
Baltimore, MD 21201

Acorn Investment Trust,
Series Designated Acorn Fund (18)............ 634,000 6.3% -- -- 4.2%
227 West Monroe Street, Suite 3000
Chicago, IL 60606

Wanger Asset Management, L.P. (19)............. 634,000 6.3% -- -- 4.2%
227 West Monroe Street, Suite 3000
Chicago, IL 60606

Fund Asset Management (20) ....................
c/o Merrill Lynch & Co., Inc. 614,300 6.1% -- -- 4.1%
World Financial Center
North Tower
250 Vesey Street
New York, NY 10281
</TABLE>

- -------------

* less one percent.

(1) Percentage ownership of Class A Common Stock is based on 10,092,430
shares issued and outstanding plus shares subject to options
exercisable within sixty days of March 31 held by the stockholder or
group.

(2) Percentage ownership of Class B Common Stock is based on 1,632,947
shares issued and outstanding plus shares subject to options
exercisable within sixty days of March 31 held by the stockholder or
group.

(3) This column represents voting power rather than percentage of equity
interest as each share of Class A Common Stock is entitled to one vote
while each share of Class B Common Stock is entitled to three votes.

(4) Consists of (a) 1,310 shares, of which 1,260 shares are owned by Mr.
Shaich's spouse and as to which Mr. Shaich disclaims beneficial
ownership; and (b) options exercisable within 60 days for 278,976
shares, of which options for 1,646 shares are owned by Mr. Shaich's
spouse and as to which Mr. Shaich disclaims beneficial ownership.

-19-

<PAGE>

(5) Includes 524 shares owned by Mr. Shaich's spouse; Mr. Shaich disclaims
any beneficial interest in such shares.

(6) Consists of (a) 1,250 shares, of which 1,200 shares are owned by Mr.
Kane's spouse and as to which Mr. Kane disclaims beneficial ownership;
and (b) options exercisable within 60 days for 277,330 shares.

(7) Includes options for 18,542 shares exercisable within sixty days of
March 31, pursuant to the Directors' Plan for independent directors.

(8) Also includes 8,000 shares, of which 4,000 shares are owned by
Mr. Hatch's spouse and as to which Mr. Hatch disclaims beneficial
ownership.

(9) Includes 22,338 shares owned by Mr. Hatch's spouse and as to which Mr.
Hatch disclaims beneficial ownership.

(10) Also includes 400 shares owned by Mr. Kane.

(11) Consists of 1,000 shares owned by Mr. Nasella and options for 14,080
shares exercisable within sixty days of March 31, pursuant to the
Directors' Plan for independent directors.

(12) Consists of (a) options for 7,245 shares exercisable within sixty days
of March 31; and (b) 20 shares owned by Mr. Yong's minor children and
as to which Mr. Yong disclaims any beneficial ownership.

(13) Includes options for 770,071 shares exercisable within sixty days of
March 31.

(14) Information included is based solely upon a Schedule 13D filed with the
Commission, jointly on behalf of Morgan Stanley Group Inc. ("MS
Group"), PG Investors, Inc. ("PGI") and Princes Gate Investors, L.P.
("Princes Gate L.P."). PGI Investors, Inc. is a wholly-owned subsidiary
of Morgan Stanley Group Inc., and is the general partner of Princes
Gate Investors, L.P. On December 22, 1993, the Company issued to
several purchasers, including Princes Gate L.P., $30,000,000 in
aggregate principal amount of 4.75% Convertible Subordinated Notes due
2001 (the "Notes"). The Notes are convertible into fully paid and
non-assessable shares of Class A Common Stock at a conversion price
(subject to adjustment) equal to $25.50 principal amount for each share
of Class A Common Stock, or currently 1,176,468 shares of Class A
Common Stock in the aggregate.

(15) Includes (a) 4,247 shares of Class A Common Stock owned by its
wholly-owned subsidiary, Morgan Stanley & Co. Incorporated ("MS & Co.")
in its capacity as a market-maker in the Company's Class A Common
Stock, (b) 500 shares of Class A Common Stock over which MS & Co.
exercises discretionary authority on behalf of customers, and (c)
since PGI exercises investment management, voting and/or disposition
control over all of the Notes and the underlying shares of Class A
Common Stock obtainable upon conversion of the Notes, 1,176,468 shares
of Class A Common Stock obtainable upon conversion of the Notes. In
connection with a financing transaction consummated in July 1996, also
includes a Class A Common Stock purchase warrant issued for 150,000
shares, exercisable at $5.62 per share through July 24, 2001.

(16) Since PGI exercises investment management, voting and disposition
control over the Notes and the underlying shares of Class A Common
Stock obtainable upon conversion of the Notes, includes 1,176,468
shares of Class A Common Stock obtainable upon conversion of the Notes.
In connection with a financing transaction consummated in July 1996,
also includes a Class A Common Stock purchase warrant issued for
150,000 shares, exercisable at $5.62 per share through July 24, 2001.

(17) Includes 881,504 shares of Class A Common Stock obtainable upon
conversion of the Notes currently held by Princes Gate L.P. In
connection with a financing transaction consummated in July 1996, also
includes a Class A Common Stock purchase warrant issued for 112,392
shares, exercisable at $5.62 per share through July 24, 2001.

(18) Power over voting and disposition of these securities is shared with
Wanger Asset Management, L.P., which is the investment adviser of Acorn
Investment Trust, Series Designated Acorn Fund.

(19) Includes 634,000 shares beneficially owned by Acorn Investment Trust,
Series Designated Acorn Fund (the "Trust"), with respect to which the
Trust has delegated to Wanger Asset Management, L.P. ("WAM") shared
voting power and shared dispositive power. WAM serves as investment
adviser to the Trust.

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<PAGE>

(20) Merrill Lynch & Co., Inc. ("ML&Co."), Merrill Lynch Group, Inc. ("ML
Group"), and Princeton Services, Inc. ("PSI"), are parent holding
companies pursuant to the Securities Exchange Act of 1934. PSI is the
general partner of Fund Asset Management, L.P. (d/b/a) Fund Asset
Management ("FAM"), and Merrill Lynch Asset Management L.P. (d/b/a)
Merrill Lynch Asset Management ("MLAM"). The following entities, (a)
ML&Co., (b) ML Group, a wholly-owned direct subsidiary of ML&Co.,
and (c) PSI, a wholly-owned direct subsidiary of ML Group, may all be
deemed to be the beneficial owner of certain of these shares by virtue
of PSI being the general partner of FAM and MLAM. FAM is an investment
adviser registered under Section 203 of the Investment Advisers Act of
1940 and may be deemed to be the beneficial owner of certain of these
shares by virtue of its acting as investment adviser to one or more
investment companies and to one or more private accounts. One
registered investment company advised by FAM, Merrill Lynch Special
Value Fund, Inc., is the beneficial owner of these shares, and is a
reporting person. MLAM is an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940 and may be deemed to
be the beneficial owner of these shares by virtue of its acting as
investment adviser to one or more investment companies registered under
Section 8 of the Investment Company Act and to one or more private
accounts. ML&Co., ML Group and PSI disclaim beneficial ownership of
these shares

TOTAL RETURN TO STOCKHOLDERS
(Assumes $100 investment on December 31, 1991)

The following graph and chart compare the cumulative annual stockholder
return on the Company's Common Stock over the period commencing December 31,
1991 through December 31, 1996 to that of the total return index for the Nasdaq
Stock Market (U.S. Companies) and the Standard & Poor's 400 - MidCap Restaurant
Index, assuming the investment of $100 on December 31, 1991. In calculating
total annual stockholder return, reinvestment of dividends is assumed. The stock
performance graph and chart below are not necessarily indicative of future price
performance.

Line graph using plot points shown in table below:

<TABLE>
<CAPTION>
12/31/91 12/31/92 12/31/93 12/30/94 12/29/95 12/28/96
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Au Bon Pain Co., Inc. $100.00 $160.61 $137.88 $96.97 $50.00 $39.39
S&P 400 - MidCap Restaurant Index $100.00 $113.58 $142.24 $98.29 $97.10 $93.14
Nasdaq Composite (US) $100.00 $114.50 $131.43 $128.23 $188.47 $231.82
</TABLE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Loans to Directors and Executive Officers. John P. Billingsley, Senior
Vice President Development, was indebted to the Company for an amount equal to
$111,630 at March 31, 1997. The loan matures on June 1, 1997 and bears interest
at the prime rate as provided by USTrust. The maximum aggregate amount
outstanding under this loan during 1996 was $139,630. The loan is a personal
loan.

STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING

Proposals of stockholders of the Company (including director
nominations) intended to be presented at the 1998 Annual Meeting of Stockholders
must be received by the Company not later than December 31, 1997 to be included
in the Company's proxy statement and form of proxy relating to the 1998 Annual
Meeting of Stockholders. Nominations and proposals of

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<PAGE>

stockholders may be submitted to the Company for consideration at the 1998
Annual Meeting of Stockholders if certain conditions set forth in the Company's
By-laws are satisfied, although such nominations and proposals will not be
included in the proxy statement and form of proxy relating to that annual
meeting unless submitted in accordance with the time limits and other
requirements set forth above and in the related rules of the Securities and
Exchange Commission.

COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and Directors, and persons who own more than 10% of the
Company's outstanding shares of Common Stock to file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC") and
Nasdaq. Officers, Directors and greater than ten percent stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.

In accordance with the provisions of Item 405 of Regulation S-K, to the
Company's knowledge, based solely on review of the copies of such reports
furnished to the Company and written representations that no other reports were
required during the fiscal year ended December 28, 1996, all Section 16(a)
filing requirements applicable to its executive officers, Directors and greater
than 10% beneficial owners were satisfied, except that (a) George E. Kane filed
a late Form 5 to report three (3) grants of stock options that should have been
earlier reported on Forms 4 and failed to file Forms 5 for 1994 and 1995; (b)
Francis W. Hatch filed a late Form 4 to report two (2) acquisitions of Class A
Common Stock, a late Form 5 to report (3) grants of stock options that should
have been earlier reported on Forms 4 and failed to file Forms 5 for 1994 and
1995; (c) James R. McManus filed a late Form 5 to report four (4) grants of
stock options that should have been reported on earlier Forms 4 and failed to
file Forms 5 for 1994 and 1995; (d) Henry J. Nasella filed a late Form 5 to
report three (3) grants of stock options that should have been reported on
earlier Forms 4 and failed to file a Form 5 for 1995; (e) Joseph Shaich
filed a late Form 5 to report three (3) grants of stock options that should have
been reported on earlier Forms 4 and failed to file Forms 5 for 1994 and 1995;
and (f) Robert Taft filed a late Form 3 to report the commencement of his
employment as an officer of the Company.

A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE FISCAL YEAR 1996 MAY BE OBTAINED WITHOUT CHARGE
UPON WRITTEN REQUEST TO INVESTOR RELATIONS COORDINATOR, AU BON PAIN CO., INC.,
19 FID KENNEDY AVENUE, BOSTON, MASSACHUSETTS 02210.

-22-

<PAGE>

[PROXY FOR CLASS A COMMON STOCK]

AU BON PAIN CO., INC

Dear Stockholder,

Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the management and operation of your
Corporation that require your immediate attention and approval. These are
discussed in detail in the enclosed proxy materials.

Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.

Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.

Your vote must be received prior to the Annual Meeting of Stockholders, to be
held on Thursday, June 12, 1997.

Thank you in advance for your prompt consideration of these matters.

Sincerely,

Au Bon Pain Co., Inc.

X Please mark
votes as in
this example.

- ----------------------------------------
Au Bon Pain Co., Inc.
Class A Common Stock
- ----------------------------------------

1.Election of Directors.
Louis I. Kane
James R. McManus
For Withhold For All Except

--- -------- --------------

NOTE: If you do not wish your shares voted "For" a particular nominee,
mark the "For All Except" box and strike a line through the nominee's
name. Your shares will be voted for the remaining nominee.

2.Ratification of the action of the Directors reappointing Coopers &
Lybrand L.L.P. as auditors for the Company.
For Against Abstain

--- ------ -------

3.Approval of an amendment to the Company's 1992 Equity Incentive Plan to
increase the number of shares of Class A Common Stock available for
awards thereunder.
For Against Abstain

--- ------ -------

4.Approval of an amendment to the Company's 1992 Employee Stock Purchase
Plan to increase the number of shares of Class A Common Stock available
for purchase thereunder.
For Against Abstain

--- ------ -------

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<PAGE>

5.In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting or at any
adjournment(s) thereof.

Mark box at right if an address change or comment has been noted on the
reverse side of this card. __________________________

Please be sure to sign and date this Proxy. Date:______________

- -------------------------- ------------------------------
Stockholder sign here Co-owner sign here

AU BON PAIN CO., INC.
19 Fid Kennedy Avenue
Boston, Massachusetts 02210

Annual Meeting of Stockholders - June 12, 1997
Proxy Solicited on Behalf of the Board of Directors

The undersigned, revoking all prior proxies, hereby appoints Ronald M. Shaich
and Louis I. Kane as Proxies, with full power of substitution to each, to vote
for and on behalf of the undersigned at the 1997 Annual Meeting of Stockholders
of Au Bon Pain Co., Inc. to be held at the offices of USTrust, 40 Court Street,
12th Floor, Boston, Massachusetts, on Thursday, June 12, 1997, at 10:00 a.m.,
and at any adjournment or adjournments thereof. The undersigned hereby directs
the said proxies to vote in accordance with their judgment on any matters which
may properly come before the Annual Meeting, all as indicated in the Notice of
Annual Meeting, receipt of which is hereby acknowledged, and to act on the
following matters set forth in such notice as specified by the undersigned.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
"FOR" PROPOSALS 1, 2, 3 and 4.

PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.

Please sign exactly as your name(s) appear(s) on the books of the Company. Joint
owners should each sign personally. Trustees, custodians, and other fiduciaries
should indicate the capacity in which they sign, and where more than one name
appears, a majority must sign. If the shareholder is a corporation, the
signature should be that of an authorized officer who should indicate his or her
title.

HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?

- ------------------------ ----------------------------------

-24-

<PAGE>

[PROXY FOR CLASS B COMMON STOCK]

AU BON PAIN CO., INC.

Dear Stockholder,

Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.

Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.

Your vote must be received prior to the Annual Meeting of Stockholders, to be
held on Thursday, June 12, 1997.

Thank you in advance for your prompt consideration of these matters.

Sincerely,

Au Bon Pain Co., Inc.

X Please mark
votes as in
this example.

- ----------------------------------------
Au Bon Pain Co., Inc.
Class A Common Stock
- ----------------------------------------

1.Election of Directors.
Louis I. Kane
James R. McManus
For Withhold For All Except

--- -------- --------------

NOTE: If you do not wish your shares voted "For" a particular nominee,
mark the "For All Except" box and strike a line through the nominee's
name. Your shares will be voted for the remaining nominee.

2.Ratification of the action of the Directors reappointing Coopers &
Lybrand L.L.P. as auditors for the Company.
For Against Abstain

--- ------ -------

3.Approval of an amendment to the Company's 1992 Equity Incentive Plan to
increase the number of shares of Class A Common Stock available for
awards thereunder.
For Against Abstain

--- ------ -------

4.Approval of an amendment to the Company's 1992 Employee Stock Purchase
Plan to increase the number of shares of Class A Common Stock available
for purchase thereunder.
For Against Abstain

--- ------ -------

-25-

<PAGE>

5.In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting or at any
adjournment(s) thereof.

Mark box at right if an address change or comment has been noted on the
reverse side of this card. _________________________

Please be sure to sign and date this Proxy. Date:______________

- -------------------------- ------------------------------
Stockholder sign here Co-owner sign here

AU BON PAIN CO., INC.
19 Fid Kennedy Avenue
Boston, Massachusetts 02210

Annual Meeting of Stockholders - June 12, 1997
Proxy Solicited on Behalf of the Board of Directors

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
"FOR" PROPOSALS 1, 2, 3 and 4.

PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.

HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?

- ------------------------ ----------------------------------

-26-