PANERA BREAD CO, 10-K, 2000-04-10

PANERA BREAD CO
10-K, 2000-04-10
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549

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FORM 10-K

(MARK ONE)

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/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
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FOR THE FISCAL YEAR ENDED DECEMBER 25, 1999, OR

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/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 0-19253

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PANERA BREAD COMPANY

(Exact name of registrant as specified in its charter)

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DELAWARE 04-2723701
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

7930 BIG BEND BOULEVARD, ST. LOUIS, MO 63119
(Address of principal executive offices) (Zip code)
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(314) 918-7779
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None.

Securities registered pursuant to Section 12(g) of the Act:

CLASS A COMMON STOCK, $.0001 PAR VALUE
(Title of class)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 and 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-k or any
amendment to this Form. /X/

Aggregate market value of the registrant's voting stock held by
non-affiliates as of March 17, 2000: Class A Common Stock, $.0001 par value:
$82,150,888

Number of shares outstanding of each of the registrant's classes of common
stock, as of March 17, 2000: Class A Common Stock, $.0001 par value: 10,639,978
shares, Class B Common Stock, $.0001 par value: 1,530,524 shares.

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DOCUMENTS INCORPORATED BY REFERENCE

The registrant's definitive proxy statement for its Annual Meeting of
Stockholders, to be filed in connection with the Annual Meeting of Stockholders
is incorporated by reference in response to Part III, Items 10, 11, 12, and 13.

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PART I

ITEM 1. BUSINESS

GENERAL

Panera Bread Company ("the Company") is the new name for what previously was
Au Bon Pain Co., Inc. Such name change occurred as a result of the sale of the
Au Bon Pain Division to private investors effective May 16, 1999. The Company
now consists of the Panera Bread/Saint Louis Bread Co. concept, with the Company
doing business as Saint Louis Bread Co. in the Saint Louis and Atlanta areas,
and as Panera Bread outside those areas. As of December 25, 1999, the Company
had 81 Company-operated bakery-cafes (including 2 specialty bakery-cafes), and
100 franchise-operated bakery-cafes. The concept specializes in high quality
food for breakfast and lunch, including fresh baked goods, made-to-order
sandwiches on freshly baked breads, soups, salads, custom roasted coffees, and
other cafe beverages, and targets suburban dwellers and workers by offering a
premium specialty bakery and cafe experience with a neighborhood emphasis.

The Company's bakery-cafes are principally located in suburban, strip mall
and regional mall locations. The concept is currently operating in Florida,
Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Maryland, Massachusetts,
Michigan, Minnesota, Missouri, Nebraska, New Hampshire, New Jersey, North
Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas,
Virginia, and Wisconsin (see "Properties"). System wide sales for Panera Bread
were approximately $202.1 million for the fiscal year ended December 25, 1999.

The Company sold the Au Bon Pain Division to ABP Corporation for
$73 million in cash before contractual purchase price adjustments of
$1 million. The sale was effective May 16, 1999. Results of operations for the
fifty-two week period ending December 25, 1999, includes the results of the
divested Au Bon Pain Division for the period December 27, 1998 through May 16,
1999. The Au Bon Pain Division had $51.5 million of revenue and $3.2 million of
operating earnings through May 16, 1999. For the fifty-two week period ended
December 25, 1999, the Company recorded a pre-tax loss of $5.5 million related
to the transaction, and a $0.6 million pre-tax ($0.4 million after tax)
extraordinary loss related to the early extinguishment of debt from the proceeds
of the sale.

CONCEPT AND STRATEGY

The Company's concept focuses on the emerging "Specialty Bread/Bakery-Cafe"
category. Its artisan sourdough breads, which are breads made with a craftsman's
attention to quality and detail, and overall award-winning bakery expertise are
at the heart of the concept's menu. The concept is designed to deliver against
the key consumer trends of today, specifically the need for an efficient but
more esthetically pleasing experience than that offered by traditional fast
food. The concept aims to become a nationally recognized brand name, and in
doing so, hopes to reap the economic benefits that a strong brand name offers.
Its menu, prototype, operating systems, design and real estate strategy allow it
to compete successfully in four sub-businesses: breakfast, lunch, day-time
"chill out" (the time between breakfast and lunch and between lunch and dinner
when customers visit our bakery-cafes to take a break from their daily
activities), and take home specialty retailing. Average revenue per
Company-operated bakery-cafe open for the full fiscal year ended December 25,
1999, was approximately $1,296,000 (excluding the two specialty cafes) for the
Panera Bread/Saint Louis Bread Co. concept compared to average revenue per cafe
of approximately $1,249,000 for those cafes open for the full year ended
December 26, 1998.

The Company believes that excellence in execution is a key to success in the
restaurant industry. The distinctive nature of the Company's menu offerings, the
quality of its restaurant operations, the company's unique cafe design and the
prime locations of its cafes are integral to the Company's success. The
Company's concept has tremendous growth potential in the suburban markets which
will be realized through both Company and franchise efforts. Franchising is a
key component of the Company's success. At

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year end, there were 100 franchised bakery-cafes opened and signed commitments
to open an additional 543 bakery-cafes. The average unit volume per franchised
bakery-cafe open for the full fiscal year ended December 25, 1999, was
approximately $1,426,000 compared to approximately $1,281,000 for those cafes
open for the full year ended December 26, 1998.

The menu seeks to provide the Company's target customers with products which
build on the strength of the Company's bakery expertise and meet customers' new
and ever-changing taste profiles. The key menu groups are fresh baked goods,
made-to-order sandwiches, soups, and cafe beverages. Included within these menu
groups are: a variety of freshly baked bagels, breads, croissants, muffins,
scones, rolls, and sweet goods; made-to-order sandwiches; hearty, unique soups;
custom roasted coffees and cafe beverages such as espresso and cappuccino. The
Company's concept emphasizes the sophisticated specialty and sourdough breads
which supports a significant take-home business.

The Company regularly reviews and revises its menu offerings to satisfy
changing customer preferences and to maintain customer interest amongst its
target customer groups--the "Trend-Setters" and the "Good Food Traditionalists".
Both of these target customers seek a quality experience that reflects their
discriminating tastes. The major characteristic that sets these two groups apart
is the more enthusiastic embrace of new and nutritional menu items by the
"Trend-Setters". New menu items are developed in corporate test kitchens and
then introduced in a limited number of the Company's bakery-cafes to determine
customer response and verify that preparation and operating procedures maintain
consistency, high quality standards and profitability. If successful, they are
then introduced in the Company's bakery-cafes.

MARKETING

The Company believes it competes on the basis of providing an entire
experience rather than price. Pricing is structured so customers perceive good
value, with high quality food at reasonable prices to encourage frequent visits.
The average customer purchase is approximately $5.44 at the Company's bakery-
cafes. Breakfast and lunch checks average $3.76 and $6.41, respectively.
Historically, the Company has not relied on external media to promote its
bakery-cafes. The Company attempts to increase its per location sales through
menu development, promotions, and by sponsorship of local community charitable
events.

SITE SELECTION

During 1999, the Company increased the number of Company-operated
bakery-cafes by 12 to 81 locations by expanding in both new and existing
markets. The franchise-operated locations increased by 56 to 100 locations.

The bakery-cafe concept relies on a substantial volume of repeat business.
In evaluating a potential location, the Company studies the surrounding trade
area, obtaining demographic information within that area and information on
quick service breakfast and lunch competitors. Management evaluates the
Company's ability to establish a dominant presence within that area in order to
create entry barriers to other competitors. Based on this information, sales and
return on investment are projected.

The Company uses sophisticated fixtures and materials in the bakery-cafe
design for its concept. The design visually reinforces the distinctive
difference between the Company's bakery-cafes and other quick services
restaurants serving breakfast and lunch. Many of the Company's cafes also
feature outdoor cafe seating. The average construction and equipment cost for
the 12 bakery-cafes opened in 1999 was approximately $656,000 after landlord
allowance.

The average bakery-cafe size ranges between 3,000 and 4,000 square feet.
Currently all company-owned bakery-cafes are in leased premises. Lease terms are
typically ten years with one or two five-year

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renewal option periods thereafter. Leases typically have a minimum base
occupancy charge, charges for a proportionate share of building operating
expenses and real estate taxes, and contingent percentage rent based on sales
above a stipulated sales level.

FRESH DOUGH PRODUCTION

The Company's bakery-cafes use fresh dough for their sourdough breads and
bagels. Fresh dough is supplied daily by the Company's commissary system for
both Company-owned and franchise-operated bakery-cafes. The Company operated 10
regional commissaries as of December 25, 1999.

The remaining baked goods are prepared with frozen dough. During 1996, the
Company completed construction of a state of the art frozen dough production
facility in Mexico, Missouri to supply frozen dough. On March 23, 1998, the
Company sold the Mexico production facility and its wholesale frozen dough
business to Bunge Food Corporation ("Bunge") for approximately $13 million in
cash. Concurrent with the sale, the Company entered into a five-year supply
agreement with Bunge for the supply of substantially all of its frozen dough
needs, excluding bagels. The agreement automatically renews on an annual basis
unless either party provides written cancellation notice to the other. Pricing
is based on Bunge's cost plus a specified mark-up calculated on each individual
product that is purchased. The agreement contains minimum volume commitments,
and provides for financial penalties if either party cancels the agreement
before the initial term is complete.

The sale of the frozen dough production facility provides economies of scale
in plant production which are reflected in the economics of the five-year
agreement and allow the Company to take advantage of Bunge's significant
purchasing power. The five-year supply agreement allows the bakery-cafes to
continue to offer the same high quality fresh baked goods, as the frozen dough
products purchased from Bunge are made on the same equipment, by the same
management team, using the same proprietary processes and specifications as
prior to the sale.

The net proceeds from the sale were used to reduce the Company's debt. The
Company recognized a pre-tax loss on the sale of the facility of approximately
$735,000 in the Company's 1998 results of operations.

COMPETITION

The Company experiences competition from numerous sources in its trade
areas. The Company's bakery-cafes compete with bread only stores, supermarkets,
and other bakeries that supply high quality breads and with other restaurants
that seek to use quality breads to define a breakfast, lunch, and light dinner
menu. The competitive factors are price, service, and quality of products. The
Company competes for leased space in desirable locations. Certain of the
Company's competitors may have capital resources exceeding those available to
the Company.

MANAGEMENT INFORMATION SYSTEMS

Each Company-operated bakery-cafe has computerized cash registers to collect
point-of-sale transaction data, which is used to generate pertinent marketing
information, including product mix and average check. All product prices are
programmed into the system from the Company's corporate office.

The Company's in-store personal computer-based management support system is
designed to assist in labor scheduling and food cost management, to provide
corporate and retail operations management quick access to retail data, and to
reduce managers' administrative time. The system supplies sales, bank deposit,
and variance data to the Company's accounting department in St. Louis on a daily
basis. The Company uses this data to generate weekly consolidated reports
regarding sales and other key elements, as well as detailed profit and loss
statements for each bakery-cafe every four weeks. Additionally, the Company
monitors the average check, customer count, product mix, and other sales trends.
The commissaries have

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computerized systems which allow the commissaries to accept electronic orders
from the bakery-cafes and deliver the ordered product back to the bakery-cafe.

The Company has network/integration systems which are corporate office
electronic systems and tools which link various information subsystems and
databases, encompassing e-mail and all major financial systems, such as general
ledger database systems and all major operational systems, such as store
operating performance database systems. See Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for information
pertaining to the "Year 2000" issue.

DISTRIBUTION

The Company currently utilizes independent distributors to distribute frozen
dough products and other materials to Company-operated bakery-cafes. By
contracting with independent distributors, the Company has been able to
eliminate investment in distribution systems and to focus its managerial and
financial resources on its retail operations. The distributor picks up frozen
dough products throughout the week from the plants and delivers to the cafes.
Virtually all other supplies for retail operations, including paper goods,
coffee, and small-wares, are contracted for by the Company and delivered by the
vendors to the distributor for delivery to the bakery-cafes. The individual
bakery-cafes order directly from a distributor two to three times per week.

Franchised bakery-cafes operate under individual contracts with either the
Company's distributor or other regional distributors.

JOINT VENTURES

The Company is not currently operating under any joint venture agreements.
The divested Au Bon Pain Division operated 14 bakery-cafes in New York City
under a joint venture agreement with a private investor group. This joint
venture was part of the sale of the Au Bon Pain Division which was effective
May 16, 1999. For the period December 27, 1998, through May 16, 1999, the joint
venture had sales of $7.8 million and a pre-tax loss of approximately $(81,000).

FRANCHISE OPERATIONS

The Company began a broad-based franchising program in 1996. The Company is
actively seeking to extend its franchise relationships beyond its current
franchisees. The franchise agreement typically requires the payment of an
up-front franchise fee of $35,000 and continuing royalties of 4% to 5% on sales
from each bakery-cafe. The franchisees are required to purchase all of their
dough products from sources approved by the Company. The Company's commissary
system supplies fresh dough products to substantially all franchise-operated
bakery-cafes.

The Company has entered into 34 separate franchise area development
agreements for a total of 643 bakery-cafes of which 100 have been opened as of
December 25, 1999. The Company's strategy is to execute growth in a controlled
and disciplined manner. Under the terms of the franchise development agreements,
a schedule is determined with respect to a set number of franchise openings as
to which the developer pays a non-refundable fee. In the event that the schedule
is not adhered to, the developer will lose development exclusivity in the
territory. At the present time, the Company does not have any international
franchise development agreements in force having decided to focus on domestic
opportunities for expansion. All former international franchise operations were
part of the Au Bon Pain Division, which has been divested.

EMPLOYEES

The Company has 599 full-time employees, of whom 134 are employed in general
or administrative functions principally at or from the Company's executive
offices in St. Louis, Missouri, or Waltham,

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Massachusetts; 242 are employed in the Company's commissary operations; and 223
are employed in the Company's bakery-cafe operations. The Company also has
2,337 hourly employees at the bakery-cafes, including bakers and associates.
There are no collective bargaining agreements. The Company considers its
employee relations to be excellent.

TRADEMARKS

The "Panera Bread" and "Saint Louis Bread Company" names are of material
importance to the Company and are trademarks registered with the United States
Patent and Trademark Office. In addition, other marks of lesser importance have
been filed with the United States Patent and Trademark Office.

GOVERNMENT REGULATION

Each Company-operated and franchised bakery-cafe is subject to regulation by
federal agencies and to licensing and regulation by federal agencies as well as
to licensing and regulation by state and local health, sanitation, safety, fire,
alcoholic beverage control and other departments. Difficulties or failures in
obtaining and retaining the required licensing or approval could result in
delays or cancellations in the opening of restaurants.

The Company is also subject to federal and a substantial number of state
laws regulating the offer and sale of franchises. Such laws impose registration
and disclosure requirements on franchisors in the offer and sale of the
franchises and may also apply substantive standards to the relationship between
franchisor and franchisee. The Company does not believe that current or
potential future regulations of franchises have or will have any material impact
on the Company's operations. The Company is subject to the Fair Labor Standards
Act and various state laws governing such matters as minimum wages, overtime,
and other working conditions.

The Company's commissaries are subject to various federal, state, and local
environmental regulations. Compliance with applicable environmental regulations
is not believed to have any material effect on capital expenditures, earnings or
the competitive position of the Company. Estimated capital expenditures for
environmental compliance matters are not material.

The Americans with Disabilities Act prohibits discrimination in employment
and public accommodations on the basis of disability. Under the Americans with
Disabilities Act, the Company could be required to expend funds to modify its
bakery-cafes to provide service to, or make reasonable accommodations for the
employment of, disabled persons. The Company believes that compliance with the
requirements of the Americans with Disabilities Act will not have a material
adverse effect on its financial condition, business or operations.

ITEM 2. PROPERTIES

All Company-operated bakery-cafes are located in leased premises with lease
terms typically for ten years with one or two five-year renewal option periods
thereafter. Leases typically have a minimum base occupancy charge, charges for a
proportionate share of building operating expenses, and real estate taxes and a
contingent percentage rent based on sales above a stipulated sales level.

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Information with respect to our leased commissaries as of December 25, 1999
is set forth below:

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FACILITY SQUARE FOOTAGE
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St. Louis, MO Commissary.................................... 12,100
Dallas, TX Commissary....................................... 1,000
Washington, DC Commissary................................... 8,900
Atlanta, GA Commissary...................................... 4,100
Detroit, MI Commissary...................................... 5,200
Minneapolis, MN Commissary.................................. 4,800
Cincinnati, OH Commissary................................... 8,500
Warren, OH Commissary....................................... 11,300
Chicago, IL Commissary...................................... 12,100
Orlando, FL Commissary...................................... 5,900
</TABLE>

In 1998, the Company leased short-term office space in Waltham, MA, to house
its Legal and Development functions. The annual rent is approximately $42,000
and the lease expires in October, 2000.

In 1997, the Company leased new office space in Webster Groves, MO, for its
corporate offices. The space occupies approximately 10,300 square feet. The
annual rent is approximately $150,000. The lease expires, assuming exercise of
renewal options, in 2007.

The Company leases additional space in St. Louis, MO, to house its
information systems staff and training functions. The annual rent is
approximately $46,000. The lease expires in November, 2001.

The Company considers its physical properties to be in good operating
condition and suitable for the purpose for which they are used.

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PANERA BREAD/SAINT LOUIS BREAD CO. BAKERY-CAFES

COMPANY-OPERATED: 81 TOTAL (INCLUDING SPECIALTY CAFES) AS OF DECEMBER 25, 1999

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GREATER ST. LOUIS MARKET AREA: 35
Ballas, Creve Coeur, MO Kirkwood, MO
Belleville, IL Main, St. Charles, MO
Baxter, Ballwin, MO Market, St. Louis, MO
Bogey Hills, St. Charles, MO Northwest Plaza, St. Ann, MO
Brentwood, St. Louis, MO Pine, St. Louis, MO
Cape Girardeau, MO Soulard, St. Louis, MO
Carondelet, Clayton, MO South 9(th) Street, Columbia, MO
Central West End, St. Louis, MO South Central, Clayton, MO
Chesterfield Mall, Chesterfield, MO St. Clair Square, Fairview Heights, IL
Columbia Mall, Columbia, MO Sunset Hills, Sunset Hills, MO
Crestwood Plaza, St. Louis, MO Surrey Plaza, Florissant, MO
Delmar, University City, MO Telegraph Road, St. Louis, MO
Esquire, Clayton, MO Tesson Ferry, St. Louis, MO
Four Seasons, Chesterfield, MO West County, Des Peres, MO
Galleria, Richmond Heights, MO Westport Plaza, Maryland Heights, MO
Gateway One, St. Louis, MO Wildwood Crossing, Wildwood, MO
Grand, St. Louis, MO Winchester, MO
Highway K, O'Fallon, MO

ATLANTA MARKET AREA: 9
Briarcliff, Atlanta, GA Lenox Square, Atlanta, GA
Dunwoody, GA Peachtree, Atlanta, GA
Emory Village, Atlanta, GA Sandy Springs, Atlanta, GA
Gwinnett Place, Duluth, GA Town Center, Kennesaw, GA
Haywood Mall, Greenville, SC

CHICAGO MARKET AREA: 20
Diversey, Chicago, IL Orland Square Mall, Orland Park, IL
Downer's Grove, IL Park Ridge, IL
Elmwood Park, Elmwood, IL Plaza del Grato, Arlington Heights, IL
Evanston, IL Scharrington Square, Schaumburg, IL
Four Flaggs, Niles, IL Stratford Square Mall, IL
Fox Valley, Aurora, IL Two Rivers Plaza, Bolingbrook, IL
Glen Ellyn Marketplace, Glen Ellyn, IL Vernon Hills, IL
Golf & Meacham, Schaumburg, IL Wheaton, IL
LaGrange Park, IL Wilmette, IL
Niles Amlings, Niles, IL Winnetka, IL

MASSACHUSETTS MARKET AREA: 2
Arlington Heights, Arlington, MA Vinnin Square, Swampscott, MA

MICHIGAN MARKET AREA: 12
Campus Corners, Rochester Hills, MI Newburgh Plaza, Livonia, MI
City Center, Novi, MI Orchard Mall, West Bloomfield, MI
Clocktower Place, Southfield, MI Oakland Plaza, Troy, MI
KT Plaza, Farmington, MI Troy Commons, Troy, MI
Lakeside Mall, Sterlington Heights, MI Twelve Mile & Halsted, Farmington Hills, MI
Lathrup Village, Bloomfield, MI Twelve Oaks Mall, Novi, MI
</TABLE>

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WASHINGTON DC MARKET AREA: 1
Hechinger Commons, Alexandria, VA

SPECIALTY STORES: 2 (INCLUDED IN TOTAL STORE COUNT)
City Museum, St. Louis, MO Rendezvous Cafe, Richmond Heights, MO

FRANCHISE-OPERATED: 100 TOTAL AS OF DECEMBER 25, 1999

THE BREADBOX, L.L.C.: 1
Baymeadows, Jacksonville, FL

BREADS OF THE WORLD, L.L.C.: 8
Blacklick Crossing, Columbus, OH Five Points, Columbus, OH
Crosswoods Commons, Columbus, OH Founder's Plaza, Gahanna, OH
Easton Town Center, Columbus, OH Olengtangy Plaza, Columbus, OH
Festival at Sawmill, Dublin, OH Tuttle Crossing Mall, Columbus, OH

BREADS OF THE WORLD, L.L.C.: 2
Festival Market, Cincinnati, OH Kenwood Pavilion, Cincinnati, OH

BREADWINNERS OF THE TRIANGLE, L.L.C.: 1
Crabtree Mall, Raleigh, NC

CADLE, L.L.C.: 4
East State Street, Hermitage, PA Keystone Drive, Erie, PA
Freeport Road, Pittsburgh, PA Murray Avenue, Pittsburgh, PA

CANDALL, INC.: 11
Beldon Village Road, Canton, OH Golden Gate Plaza, Mayfield Heights, OH
Boardman Poland Rd., Boardman, OH Hudson Plaza, Hudson, OH
Center Ridge Road, Rocky River, OH Medina Road, Akron, OH
Detroit Road, Westlake, OH 44145 Tower City, Cleveland, OH
Edgerton Road, Broadview Heights, OH Van Aken Blvd., Shaker Heights, OH
Elm Road, Warren, OH

CARLON CORPORATION, L.L.C.: 3
N. Calhoun Road, Brookfield, WI West Layton Avenue, Greenfield, WI
Westfield Way, Pewaukee, WI

CHICAGO BREAD, L.L.C.: 5
Northwest Highway, Crystal Lake, IL Waukegan Road, Glenview, IL
Randall Square, Geneva, IL West Dundee, Buffalo Grove, IL
Waukegan Road, Deerfield, IL

COVELLI FAMILY LIMITED PARTNERSHIP: 6
Altamonte Springs, FL North Eola Drive, Orlando, FL
International Parkway, Lake Mary, FL University Blvd, Orlando, FL
Michigan & Orange, Orlando, FL West Fairbanks, Winter Park, FL

COVELLI FAMILY LIMITED PARTNERSHIP: 1
Brandon Town Center, Brandon, FL

CSC INVESTMENTS, L.L.C.: 2
Market Street, Chattanooga, TN Mercedes Place, Knoxville, TN
</TABLE>

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FENWICK GROUP, L.L.C.: 3
East Broad Street, Westfield, NJ Paramus Park Mall, Paramus, NJ
Essex Green Mall, West Orange, NJ

KNEAD BREAD, L.L.C.: 3
East 69(th) Street, Fishers, IN Rivertown Pkwy, Grandville, MI
Merchants Square, Carmel, IN

LEMEK, L.L.C.: 2
Mall of Columbia, Columbia, MD Towson Place Center, Towson, MD

OKLAHOMA CITY BAKERY, INC.: 2
Northwest Expressway, Oklahoma City, OK South Bryant Avenue, Edmond, OK

ORIGINAL BREAD, INC.: 9
Metcalf, Overland Park, KS Oak Park Mall, Overland Park, KS
Mill Street, Kansas City, MO West 23(rd) Street, Lawrence, KS
Mission Road, Prairie Village, KS West 75(th), Overland Park, KS
Nall Ave., Leawood, KS West 119(th) Street, Olathe, KS
North Rock Road, Wichita, KS

OZARK BREADS, INC.: 2
Missouri, Jefferson City, MO North Bishop, Rolla, MO

PANEBRASKA, L.L.C.: 2
Beverly Plaza, Omaha, NE Oakview Plaza, Omaha, NE

PR RESTAURANTS, L.L.C.: 3
Colby Court, Bedford, NH Woodbury Avenue, Portsmouth, NH
Framingham Mall, Framingham, MA

SHOW ME BREAD, L.L.C.: 1
Penny Road, High Point, NC

SLB OF CENTRAL ILLINOIS, L.L.C.: 4
East John Street, Champaign, IL Old Farm Shops, Champaign, IL
North Green Briar Dr., Normal, IL West White Oaks Blvd., Springfield, IL

SLB OF IOWA, L.L.C.: 6
Coral Ridge Mall, Coralville, IA Elmore Crossing, Davenport, IA
Council Street, NE, Cedar Rapids, IA 38(th) Avenue, Moline, IL
85(th) Street, Urbandale, IA Westown Parkway, Des Moines, IA

SLB OF MINNESOTA, L.L.C.: 4
City Center East, Woodbury, MN Poppy Street, Coon Rapids, MN
Country Road 24, Plymouth, MN Promenade Ave., Eagan, MN

ST. LB, INC.: 2
Hurstbourne, KY Mall of St. Matthews, Louisville, KY
</TABLE>

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TEXAS BREAD, L.L.C.: 2
Preston Road, Dallas, TX Vista Ridge Mall, Lewisville, TX

TRADITIONAL BAKERY, INC.: 5
East Battlefield, Springfield, MO South Campbell, Springfield, MO
East Sunshine, Springfield, MO South National, Springfield, MO
East 32(nd) Street, Joplin, MO

TRADITIONAL BAKERY, INC.: 5
East 15(th) Street, Tulsa, OK South Lewis Ave., Tulsa, OK
East 51(st) Street, Tulsa, OK Woodland Hills Mall, Tulsa, OK
East 41(st) Street, Tulsa, OK

WHOLESOME GROUP, L.L.C.: 1
West Dussel, Maumee, OH
</TABLE>

The following table sets forth the number of Company-operated and
franchise-operated Panera Bread and Saint Louis Bread bakery-cafes which were
open as of the dates indicated:

<TABLE>
<CAPTION>
DEC. 30, 1995 DEC. 28, 1996 DEC. 27, 1997 DEC. 26, 1998 DEC. 25, 1999
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<S> <C> <C> <C> <C> <C>
Company-operated................. 50 52 57 70 81
Franchise-operated............... 8 10 19 45 100
-- -- -- --- ---
Total............................ 58 62 76 115 181
== == == === ===
</TABLE>

The following table sets forth the number of Company-operated and
franchise-operated bakery-cafes for the Au Bon Pain Division which were open as
of the dates indicated.

<TABLE>
<CAPTION>
DEC. 30, 1995 DEC. 28, 1996 DEC. 27, 1997 DEC. 26, 1998 MAY 16, 1999
------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Company-operated................. 192 177 160 151 147
Franchise-operated............... 29 48 96 114 120
--- --- --- --- ---
Total............................ 221 225 256 265 267
=== === === === ===
</TABLE>

ITEM 3. LEGAL PROCEEDINGS

The Company is subject to claims and legal action in the ordinary course of
its business. The Company believes that all such claims and actions currently
pending against it are either adequately covered by insurance or would not have
a material adverse effect on the Company if decided in a manner unfavorable to
the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Company submitted no matters to a vote of security holders during the
fourth quarter of the fiscal year ended December 25, 1999.

12
<PAGE>
PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED MATTERS.

(a) Market Information.

The Company's Class A Common Stock is traded on The Nasdaq National Market
tier of the Nasdaq Stock Market under the symbol PNRA. The following table sets
forth the high and low sale prices as reported by Nasdaq for the fiscal periods
indicated.

<TABLE>
<CAPTION>
1998 HIGH LOW
- ---- ----------- ---------
<S> <C> <C>
First Quarter............................................... 8 5/8 7 1/2
Second Quarter.............................................. 11 5/8 8
Third Quarter............................................... 11 5/8 5 1/4
Fourth Quarter.............................................. 7 5/16 4 1/8
</TABLE>

<TABLE>
<CAPTION>
1999 HIGH LOW
- ---- --------- ----------
<S> <C> <C>
First Quarter............................................... 7 1/8 5
Second Quarter.............................................. 9 5
Third Quarter............................................... 7 5/8 6 3/16
Fourth Quarter.............................................. 8 1/2 6 1/2
</TABLE>

On March 17, 2000, the last sale price for the Class A Common Stock, as
reported on the Nasdaq National Market System, was $6.750.

(b) Holders.

On March 17, 2000, the Company had 1,383 holders of record of its Class A
Common Stock and 80 holders of its Class B Common Stock.

The Company has never paid cash dividends on its capital stock and has no
intention of paying cash dividends in the foreseeable future.

13
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED
----------------------------------------------------
DEC. 25, DEC. 26, DEC. 27, DEC. 28, DEC. 30,
1999(1) 1998 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Restaurant sales................................. $156,738 $237,102 $233,212 $225,625 $216,411
Franchise sales and other revenues............... 7,384 6,161 5,974 3,556 3,306
Commissary sales to franchisees.................. 7,237 6,397 11,704 7,753 6,749
-------- -------- -------- -------- --------
171,359 249,660 250,890 236,934 226,466
Costs and expenses:
Cost of food and paper products.................. 52,445 81,140 82,578 77,330 74,610
Restaurant operating expenses.................... 79,677 123,060 119,537 115,364 112,161
Commissary cost of sales......................... 6,490 6,100 7,807 8,301 2,640
Depreciation and amortization.................... 6,379 12,667 16,862 16,195 14,879
General and administrative....................... 17,104 18,769 16,417 14,979 12,818
Non-recurring charges............................ 5,545 26,236 -- 4,435 8,500
-------- -------- -------- -------- --------
167,640 267,972 243,201 236,604 225,608
-------- -------- -------- -------- --------
Operating profit (loss)............................ 3,719 (18,312) 7,689 330 858
Interest expenses, net............................. 2,745 6,396 7,204 5,140 3,363
Other (income) expense, net........................ 735 1,445 212 2,513 2,016
Minority interest/(income)......................... (25) (127) (42) (40) (94)
Income (loss) before provision (benefit) for income
taxes and extraordinary items.................... 264 (26,026) 315 (7,283) (4,427)
Provision (benefit) for income taxes............... 511 (5,532) (1,492) (2,918) (2,813)
-------- -------- -------- -------- --------
Income (loss) before extraordinary items........... (247) $(20,494) $ 1,807 $ (4,365) $ (1,614)
-------- -------- -------- -------- --------
Extraordinary loss on the early extinguishment of
debt, net of tax of $197......................... 382 -- -- -- --
-------- -------- -------- -------- --------
Net income (loss).................................. $ (629) $(20,494) $ 1,807 $ (4,365) $ (1,614)
======== ======== ======== ======== ========
Per common share:
Basic:
Income (loss) before extraordinary item.......... $ (.02) $ (1.72) $ .15 $ (.37) $ (.14)
Net income (loss)................................ $ (.05) $ (1.72) $ .15 $ (.37) $ (.14)
Diluted:
Income (loss) before extraordinary item.......... $ (.02) $ (1.72) $ .15 $ (.37) $ (.14)
Net income (loss)................................ $ (.05) $ (1.72) $ .15 $ (.37) $ (.14)
Weighted average shares of common stock
outstanding:
Basic............................................ 12,137 11,943 11,766 11,705 11,621
Diluted.......................................... 12,137 11,943 11,913 11,705 11,621
Comparable restaurant sales percentage increase for
Company-operated bakery-cafes.................... 3.3%(2) 2.1% 3.6% 0.7% 0.5%
</TABLE>

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

(1) Includes the results of the Au Bon Pain Division until it was sold on
May 16, 1999.

(2) 1999 comparable restaurant sales consist of Panera Bread Company
bakery-cafes only.

<TABLE>
<CAPTION>
AS OF
----------------------------------------------------
DEC. 25, DEC. 26, DEC. 27, DEC. 28, DEC. 30
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT COMPANY-OPERATED
BAKERY-CAFES OPEN)
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Working capital.................................... $ (3,215) $ (8,239) $ (58) $ (1,748) $ 846
Total assets....................................... 91,029 153,618 186,516 196,428 193,018
Long-term debt, less current maturities............ -- 34,089 42,527 49,736 42,502
Convertible subordinated notes..................... -- 30,000 30,000 30,000 30,000
Stockholders' equity............................... 73,246 73,327 92,274 90,056 93,238
Company-operated bakery-cafes open................. 81(3) 219 217 229 242
</TABLE>

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

(3) Consists of Panera Bread Company-owned stores only at the end of 1999.

14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following table sets forth the percentage relationship to total revenue,
except where otherwise indicated, of certain items included in the Company's
consolidated statements of operations for the periods indicated. Percentages may
not add due to rounding:

<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED
---------------------------------------
DECEMBER 25 DECEMBER 26 DECEMBER 27
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Restaurant sales....................................... 91.5% 95.0% 93.0%
Franchise and other revenues........................... 4.3 2.5 2.4
Commissary sales to franchisees........................ 4.2 2.5 4.6
----- ----- -----
Total Revenues....................................... 100.0% 100.0% 100.0%
===== ===== =====
Cost and Expenses:
Restaurant cost of sales (1)
Cost of food and paper products...................... 33.4% 34.2% 35.4%
Labor................................................ 29.0 28.4 27.3
Occupancy............................................ 9.9 11.8 12.2
Other................................................ 12.0 11.7 11.8
----- ----- -----
Total Restaurant Cost of Sales..................... 84.3% 86.1% 86.7%
----- ----- -----
Commissary cost of sales (2)............................. 89.7% 95.4% 66.7%
Depreciation and amortization............................ 3.7 5.1 6.7
General and administrative............................... 10.0 7.5 6.5
Non-recurring charges.................................... 3.2 10.5 --
----- ----- -----
Operating profit (loss).................................. 2.2 (7.3) 3.1
Interest expenses, net................................... 1.6 2.6 2.9
Other expense, net....................................... 0.4 0.3 0.1
Loss on sale of assets................................... -- 0.3 --
Minority interest........................................ -- (0.1) --
----- ----- -----
Income (loss) before income taxes and extraordinary
item................................................... 0.2 (10.4) 0.1
Income tax provision (benefit)........................... 0.3 (2.2) (0.6)
Income (loss) before extraordinary item.................. (0.1) (8.2) 0.7
Extraordinary loss ffrom early extinguishment of debt,
net of tax............................................. 0.2 -- --
----- ----- -----
Net (loss)/income........................................ (0.4)% (8.2)% 0.7%
===== ===== =====
</TABLE>

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

(1) As a percentage of Company restaurant sales.

(2) As a percentage of commissary sales to franchisees.

INTRODUCTION

Panera Bread Company (referred to as "the Company", "Panera Bread", or in
the first person notation of "we", "us", and "our") began operations in
October 1987 as the Saint Louis Bread Company with the opening of its first
bakery-cafe in Saint Louis, Missouri. On December 22, 1993, the Saint Louis
Bread Company was acquired by Au Bon Pain, Co., Inc. At the time of the
acquisition the Saint Louis Bread Company had 19 company-operated bakery-cafes
and one franchised unit. Through 1998, Saint Louis Bread Company continued to
grow while owned by Au Bon Pain, expanding the concept into other markets
through the opening of 51 Company owned bakery-cafes and 44 franchise-operated
bakery-cafes. In August, 1998, the Company entered into a Stock Purchase
Agreement to sell the Au Bon Pain Division

15
<PAGE>
to ABP Corporation (the "Buyer"). The transaction was consummated on May 16,
1999 and is detailed more completely later in this document. The Company now
consists of the Panera Bread/Saint Louis Bread Company bakery-cafes and its
related franchise operations. At the end of fiscal year 1999, there were 81
company-owned (including two specialty bakery-cafes) and 100 franchised
bakery-cafes operating in 24 states.

The Company intends to continue to expand the number of company-owned and
franchised restaurants. Our expansion strategy is to develop markets that
complement our existing commissary operations enabling us to take advantage of
operational and distribution efficiencies. In addition, we will continue to
expand into new markets where an adequate return on capital can be obtained.

The Company's commissary system is a significant competitive advantage for
the Company. While requiring a major commitment of capital, the commissaries
assure both consistent quality and supply of fresh dough products to both
company-owned and franchised bakery-cafes. In order to develop a specific market
with our concept, a commissary must be available to service the market. A
commissary may begin operations by serving one bakery-cafe, however, as our
target markets are developed and built out over time, the commissary becomes
more efficient. In addition, the commissary system allows the company to control
product quality for both company-owned and franchised bakery-cafes thereby
increasing product consistency and enhancing brand identity. It is the intention
of the Company to focus its immediate growth in areas that allow it to continue
to gain efficiencies within its current commissary structure by focusing in
areas that geographically complement markets already served by an existing
commissary unit.

The Company's revenues are derived from restaurant sales, commissary sales
to franchisees and franchise and other revenues. Commissary sales to franchisees
are the sales of commissary fresh dough products to our franchisees. Franchise
and other revenues include royalty income and franchise fees. The cost of food
and paper products, labor, occupancy, and other operating expenses relate
primarily to restaurant sales. The cost of commissary sales relates to the sale
of dough products to our franchisees. General and administrative and
depreciation expenses relate to all areas of revenue generation.

The Company's fiscal year ends on the last Saturday in December. The
Company's fiscal year normally consists of 13 four-week periods, with the first,
second, and third quarters ending 16 weeks, 28 weeks, and 40 weeks,
respectively, into the fiscal year.

RESULTS OF OPERATIONS

As noted earlier, in August 1998, the Board of Directors of Au Bon Pain
entered into a Stock Purchase agreement whereby the Au Bon Pain Division was
sold to ABP Corporation (the "Buyer"). On May 16, 1999, the Company completed
its transaction to sell the Au Bon Pain Division. For the fiscal year ended
December 25, 1999, the Company has recorded a pre-tax loss of $5.5 million
related to the transaction and a $0.6 million pre-tax ($0.4 million after-tax)
extraordinary loss related to the early extinguishment of debt from the proceeds
of the sale. Results of operations in the third and fourth quarters of 1999
reflect the results of the Panera Bread Company as a stand alone entity while
results of operations for the fiscal year ended December 25, 1999, also include
the results of the divested Au Bon Pain Division for the period December 27,
1998, through May 16, 1999.

FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998

REVENUES

Total restaurant sales from company-operated bakery-cafes declined 33.9% to
$156.7 million in 1999 from $237.1 million in 1998. The reason for this decline
was the sale of the Au Bon Pain Division as of May 16, 1999. As a stand-alone
entity, Panera Bread's 1999 restaurant sales increased 25.7% to $97.4 million
from $77.5 million in 1998. Several factors contributed to the growth in Panera
Bread's restaurant

16
<PAGE>
sales including the opening of 12 new bakery-cafes in 1999, and a 3.3% increase
in comparable restaurant sales.

Franchise and other revenues rose to $7.4 million in 1999 from $6.2 million
in 1998, a 19.4% increase. For Panera Bread on a stand-alone basis, franchise
and other revenues rose to $6.4 million in 1999, from $3.5 million in 1998, an
increase of 82.9%. This increase was primarily driven by a 170.6% rise in
franchise royalties to $4.6 million in 1999 from $1.7 million in 1998. The
increase in royalty activity can be attributed to the addition of 56 franchised
bakery-cafes in 1999 and the higher sales volumes achieved in 1999. The average
annualized sales volume for all franchised bakery-cafes in 1999 was
$1.5 million compared to $1.3 million in 1998.

During 1999, 4 franchise area development agreements were signed
representing commitments for the development of 60 bakery-cafes. As of
December 25, 1999, there were franchise commitments in place for the development
of an additional 543 bakery-cafes. In 1999, the Company opened 68 new
bakery-cafes including 12 company-owned and 56 franchised bakery-cafes
representing a 57% increase in the number of bakery-cafes opened as of the end
of fiscal year 1999 compared to prior year-end.

Commissary sales to franchisees increased 12.5% in 1999 to $7.2 million from
$6.4 million in 1998. On a stand-alone basis, Panera Bread's commissary sales to
franchisees increased to $6.3 million in 1999, a 215.0% increase from 1998 sales
of $2.0 million. The increase in sales to franchisees can be attributed to the
addition of 56 franchised bakery-cafes in 1999 and higher bakery-cafe unit
volumes achieved in 1999.

COSTS AND EXPENSES

The cost of food and paper products was $52.4 million, or 33.4% of Company
restaurant sales, in 1999 compared to $81.1 million, or 34.2% of Company
restaurant sales, in 1998. The cost of food and paper products does not include
food costs that are associated with the commissary operations that sell fresh
dough products to franchised bakery-cafes. The primary reason for the decline
was that the Au Bon Pain units historically ran at a higher food cost percentage
than the Panera Bread units. With the sale of the Au Bon Pain Division in May,
1999, the full year results were more heavily weighted to the Panera Bread
units.

The costs associated with the sale of fresh dough products to franchises are
included in commissary cost of sales, and include the cost of sales, salaries,
benefits, and other operating expenses, excluding depreciation associated with
the sale of fresh dough products to our franchisees. In 1999, commissary cost of
sales as a percentage of commissary sales to franchisees declined to 89.7% from
95.4% in 1998. The decline is due to the commissaries becoming more efficient as
they service more bakery-cafes. Only one new commissary was opened in 1999 while
Panera Bread added 68 new bakery-cafes on a system-wide basis.

The cost of labor as a percentage of restaurant revenues increased to 29.0%
in 1999 from 28.4% in 1998. The overall increase in labor for the year is
primarily due to an increase in the average hourly wage rate driven by low
unemployment and a highly competitive labor market.

The cost of occupancy as a percentage of restaurant revenue decreased to
9.9% in 1999 from 11.8% in 1998. The decrease is due primarily to increased
sales volumes at company-operated bakery-cafes and the sale of the Au Bon Pain
Division, which had historically run higher occupancy costs due to their
locations in the downtown areas of larger cities.

Other restaurant operating expenses increased as a percentage of restaurant
revenues to 12.0% in 1999 from 11.7% in 1998. The increase is primarily due to
increases in the fixed costs associated with the opening of 12 new bakery-cafes
in 1999 and a small increase in advertising at the Panera Bread bakery-cafes
during the year.

Depreciation and amortization decreased as a percentage of total revenue to
3.7% in 1999 from 5.1% in 1998. The decrease was primarily due to the sale of
the Au Bon Pain Division assets and to the

17
<PAGE>
suspension of depreciation and amortization associated with those assets held
for sale after August 12, 1998.

General and administrative expenses increased as a percentage of total
revenues to 10.0% in 1999 from 7.5% in 1998. The increase included a charge for
transitional overhead services provided to Panera Bread by the buyer of the Au
Bon Pain business unit through the end of the year at the same time that Panera
Bread was experiencing increased costs associated with building its accounting
and information systems infrastructure.

Operating income (loss) increased to $3.7 million in 1999 from $(18.3)
million in 1998. Operating income in 1999 was reduced by a $5.5 million
non-recurring charge related to the sale of the Au Bon Pain Division. Operating
income in 1999 was increased by $4.7 million due to the elimination of
depreciation and amortization expense associated with the Au Bon Pain Division
assets sold in 1999. The operating loss in 1998 included non-recurring charges
recorded by the Company of $26.2 million, including a charge of $24.2 million,
related principally to the write down of certain assets under Statement of
Financial Accounting Standards, 121 "Accounting for the Impairment of Long-Lived
Assets and for the Long-Lived Assets to be Disposed of" ("SFAS 121") related to
the planned sale of assets and the closing of eight underperforming Au Bon Pain
cafes and one Panera Bread bakery-cafe. Operating income in 1998 was favorably
impacted by approximately $4.5 million as a result of the suspension of
depreciation and amortization of the Au Bon Pain Division assets held for sale
as of August 12, 1998, the date of the agreement to sell that business. Before
the non-recurring charges and suspension of depreciation and amortization,
operating income increased by 32.4% in 1999 to $4.5 million in 1999 from
$3.4 million in 1998.

Interest expense as a percentage of total revenue decreased to 1.6% in 1999
from 2.6% in 1998. This reduction is due primarily to the repayment of the
Company's outstanding debt with the proceeds of the sale of the Au Bon Pain
Division.

In connection with the early extinguishment of debt, the Company recorded a
$.4 million extraordinary loss net of $.2 million of taxes. The debt was repaid
with the proceeds from the sale of the Au Bon Pain Division.

INCOME TAXES

The income tax provision was $.5 million in 1999 compared to an income tax
benefit of $5.5 million in 1998. The 1999 effective tax rate was 194% primarily
due to State income taxes, the non-deductible meals and entertainment allowance
as well as non-deductible goodwill. The $5.5 million benefit in 1998 was
primarily due to a $24.2 million charge taken to write-down the value of the Au
Bon Pain Division assets in connection with the sale offset principally by a
valuation allowance related to state net operating loss carryforwards and
capital losses related to the sale.

As of December 25, 1999, the Company had federal net operating loss
carryforwards of approximately $24.8 million, as well as approximately
$4.9 million of federal tax credit carryforwards available to reduce future
income taxes. The federal net operating loss carryforwards expire principally in
the year 2018. The tax credit carryforwards include approximately $3.7 million
of federal Alternative Minimum Tax Credits which have an indefinite life and
$1.2 million of federal jobs tax credits which expire in the years beginning
with 2009-2010. The Company provided a valuation allowance of $4.7 million to
reduce its deferred tax assets to a level which, more likely than not, will be
realized. The valuation allowance is primarily attributable to the potential for
the non-deductibility of capital losses related to the taxable loss on the Sale
of the Au Bon Pain Division and the expectation that certain deferred state tax
assets will be unrealizable following the Sale. The Company reevaluates the
positive and negative evidence impacting the realization of its deferred tax
assets on an annual basis.

18
<PAGE>
NET LOSS

The net loss in 1999 was $.6 million compared to a net loss of
$20.5 million in 1998. The net loss in 1999 included a $5.5 million
non-recurring charge related to the sale of the Au Bon Pain Division and a
$.4 million after tax extraordinary loss from the early extinguishment of debt
from the proceeds from the sale. 1998's results included a $26.2 million charge
taken as a result of the write-down of the value of the Au Bon Pain Division
assets in connection with the sale as well as closure of eight underperforming
Au Bon Pain Cafes and one Panera Bread Bakery Cafe.

Other than the non-recurring charges, net income in 1999 was higher than
1998 primarily due to higher operating earnings and lower interest expense.

FISCAL YEAR 1998 COMPARED TO FISCAL YEAR 1997

REVENUES

Total restaurant sales from Company-operated bakery-cafes increased 1.7% to
$237 million in 1998 from $233 million in 1997 and other revenue decreased 29%
to $12.6 million in 1998 from $17.7 million in 1997.

Total restaurant sales for Panera Bread as a stand-alone entity increased to
$77.5 million in 1998 from $67.2 million in 1997, an increase of 15.3%, and
other revenue associated with the Company increased to $5.5 million in 1998 from
$3.1 million in 1997, an increase of 77%. The growth in restaurant sales was due
to several factors, including incremental sales of $4.5 million generated from
the opening of 11 new Panera Bread-operated bakery-cafes opened during 1998 and
6 Panera Bread-operated bakery-cafes opened during 1997 and strong comparable
restaurant sales growth of 3.63%, on top of the 9.3% increase in 1997. Other
revenue growth was impacted by an increase in franchise fees and royalties to
$3.5 million in 1998 compared to $2.2 million in 1997, driven by the execution
of new franchise area development agreements, fees from opening new franchise
locations and higher royalty income. Commissary sales to franchises decreased to
$6.4 million in 1998 from $11.7 million in 1997. The decrease was primarily due
to the sale of the Mexico, Missouri plant to Bunge Foods in March, 1998. As a
result, a third party was selling product to franchisees instead of the Company.

Sales from Company-owned restaurants in the Au Bon Pain Division decreased
3.8% to $159.6 million compared to $166.0 million in 1997, and other revenue
associated with the Au Bon Pain Division decreased 51% to $7.1 million compared
to $14.6 million in 1997. An increase in comparable restaurant sales of 1.5% was
more than offset by the effect of the disposition throughout 1997 and 1998 of a
number of underperforming bakery-cafes and the franchising of 11 Company-owned
restaurants in the third quarter of 1997. The decrease in other revenue was
principally due to a decrease in wholesale sales to $3.1 million in 1998, down
from $8.5 million in 1997, due to the sale of the wholesale frozen dough
business included in the sale of the Mexico, Missouri manufacturing facility.

COSTS AND EXPENSES

The cost of food and paper products was $81.1 million, or 34.2% of Company
restaurant sales in 1998 compared to $82.6 million, or 35.4% of Company
restaurant sales in 1997. The cost of food and paper products does not include
costs that are associated with the commissary operations that sell fresh dough
products to franchisees. The costs associated with those sales are included in
commissary costs of sales. Commissary cost of sales increased from 66.7% in 1997
to 95.4% in 1998. The increase was due to sale of the Mexico, Missouri
production facility in the first quarter of 1998.

Labor costs as a percentage of restaurant sales increased to 28.4% in 1998
from 27.3% in 1997. The overall increase is due primarily to an increase in the
average hourly wage driven by a highly competitive labor market.

19
<PAGE>
Occupancy costs as a percentage of restaurant sales decreased to 11.8% in
1998 from 12.2% in 1997. This decrease was primarily due to an increase in
restaurant sales and the closing of nine Au Bon Pain Division cafes in 1998.

Other operating expenses remained relatively stable at 11.8% of restaurant
sales in 1997 versus 11.7% in 1998.

During 1998, the Company recorded $2.0 million in non-recurring, non-cash
charges to write-down the book value of eight underperforming Au Bon Pain
Division cafes whose leases expired in 1998 and were not renewed, and to record
the closing of one Saint Louis Bread/Panera Bread location. The charge is
included as a separate component of operating expenses and includes a
$1.6 million fixed asset write-down and a $0.4 million other asset write-down.

In the first quarter of 1998 the Company sold the Mexico, Missouri
production facility and its wholesale frozen dough business to Bunge Foods
Corporation ("Bunge") for approximately $13 million in cash. In conjunction with
the sale, the Au Bon Pain Division and the Saint Louis Bread Co. Division
entered into five-year supply agreements with Bunge for the supply of
substantially all their frozen dough needs, excluding bagels, for their domestic
bakery-cafes. The Company recognized a pre-tax loss on the sale of the facility
of approximately $735,000 in the Company's results of operations.

Operating income/(loss) decreased to $(18.3) million in 1998 from
$7.7 million in 1997. Operating loss in 1998 included non-recurring charges
recorded by the Company of $26.2 million, including a charge of $24.2 million,
related principally to the write-down of certain assets under Statement of
Financial Accounting Standards, 121 "Accounting for the Impairment of Long-Lived
Assets and for the Long-Lived Assets to be Disposed of" ("SFAS 121"), related to
the planned sale of assets, and the closing of eight under-performing Au Bon
Pain Division cafes and one Saint Louis Bread/Panera Bread bakery-cafe.
Operating income in 1998 was favorably impacted by approximately $4.5 million
due to the suspension of depreciation and amortization of the Au Bon Pain
Division assets held for sale as of August 12, 1998, the date of the agreement
to sell that business. Before the non-recurring charges and suspension of
depreciation and amortization, operating income decreased 55% in 1998 to
$4.3 million below 1997.

The decline in operating income (before non-recurring charges and suspension
of depreciation) was a result of lower contribution in the Au Bon Pain Division
of $4.3 million, as the Saint Louis Bread Co. Division contribution was
essentially the same in 1998 versus 1997. The lower contribution in the Au Bon
Pain Division was due to several factors. First, the comparable restaurant sales
of 1.5% produced a negative leverage against the normal inflationary cost
elements, reducing contribution. Second, results were impacted by inefficiencies
in the manufacturing facility prior to the sale at the end of the first quarter
of 1998. In addition, the level of franchise contribution from the Au Bon Pain
International & Trade Channels area was reduced by 55% due both to the Asian
economic crisis and to the pending sale of the Au Bon Pain Division overall.

Before the non-recurring charge, operating profit in the Saint Louis Bread
Co. Division in 1998 was essentially the same at $6.5 million compared to 1997,
as increases in store profit from Company-owned cafes and greater franchise
income in 1998 were largely offset by higher overhead costs, particularly
related to the field organization which increased approximately $1.4 million
over 1997, and an increase in commissary infrastructure expenses, in
anticipation of the projected growth in both the Company-owned and franchise
operated cafes.

During 1998, 12 Saint Louis Bread Co. Division franchise area development
agreements were signed and 4 existing agreements were amended, representing
commitments for the development of 259 bakery-cafes and increasing the number of
franchise commitments to a total of 562 remaining bakery-cafes to be developed.
In addition, 37 Saint Louis Bread Co. Division bakery-cafes were opened in 1998,
including 11 company-owned cafes and 26 franchise-operated cafes. Within the Au
Bon Pain Division, 27 franchise-operated units were opened in 1998.

20
<PAGE>
INCOME TAXES

The income tax benefit was $5.5 million in 1998 compared to $1.5 million in
1997. The 1998 effective income tax benefit of 21.3% was primarily due to the
$24.2 million charge taken to write down the value of the Au Bon Pain Division
assets in connection with the sale, offset principally by a valuation allowance
related to state net operating loss carryforwards and capital losses related to
the sale.

NET INCOME (LOSS)

Lower operating income in 1998 versus 1997, as well as a $26.2 million
charge taken as a result of the writedown of the value of the Au Bon Pain assets
in connection with the sale as well as closure of eight underperforming Au Bon
Pain Cafes and one Panera Bread Bakery-Cafe partially offset by deferred tax
benefits and lower interest costs incurred in 1998, produced a significant
decrease in net income for the year ended December 26, 1998. The net loss for
the year ended December 26, 1998 was $(20.5) million versus net income of
$1.8 million for the year ended December 27, 1997.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents were unchanged at $1.9 million at December 25,
1999, versus $1.9 million at December 26, 1998. The Company's principal
requirements for cash are capital expenditures for constructing and equipping
new bakery-cafes and maintaining or remodeling existing bakery-cafes and working
capital. To date, the Company has met its requirements for capital with cash
from operations, proceeds from the sale of equity and debt securities, and bank
borrowings.

Effective May 16, 1999, the Company completed its transaction to sell the Au
Bon Pain Division. In the second quarter of 1999 the Company repaid all of its
outstanding debt with the proceeds from the Sale. In connection with the early
retirement of debt, in the second quarter of 1999, the Company recorded an after
tax extraordinary non-cash charge of approximately $.4 million.

Concurrently with the sale of the Au Bon Pain business unit effective
May 16, 1999, the Company amended its existing credit facility to reduce the
unsecured revolving line of credit to $10.0 million, reflecting reduced needs
for debt financing. Amounts outstanding under the amended facility bear interest
at either LIBOR plus 2.25% or the commercial bank's prime rate plus .75%, at the
Company's option. As of December 25, 1999, the Company had $9.4 million
available to it under the $10.0 million revolving line of credit, reduced by a
$0.6 million outstanding standby letter of credit.

Excluding the non-recurring charges, operating income plus depreciation and
amortization was $16.0 million in 1999 versus $21.2 million in 1998. A total of
$6.7 million was provided by operating activities in 1999 compared to
$20.5 million in 1998. In 1999, funds provided by operating activities decreased
primarily as a result of a decrease in depreciation, and an increase in accounts
receivable. This decrease was partially offset in an increase in deferred
revenue of $2.0 million related to an upfront payment received from a soft drink
provider.

The Company received $57.3 million and utilized $11.2 million for investing
activities in 1999 and 1998, respectively. The investing activities in 1999
consisted primarily of additions to property and equipment, and the sale of the
assets of the Au Bon Pain business unit. The Company used the proceeds of the
sale to repay its outstanding debt.

Total capital expenditures in 1999 of $15.3 million were related primarily
to the opening of 12 new company-operated bakery-cafes, the construction of 1
commissary, and to maintaining or remodeling the existing bakery-cafes. The
expenditures were mainly funded by net cash from operating activities of
$6.7 million, and cash remaining from the sale of the Au Bon Pain business unit
after repayment of all outstanding debt.

21
<PAGE>
The Company utilized $63.9 million and $8.3 million from financing
activities in 1999 and 1998, respectively. The financing activities in 1999
included repayment of all outstanding debt with the proceeds from the sale of Au
Bon Pain, proceeds from and payments on the revolving line of credit, and the
issuance of common stock under the Company's employee stock option and employee
stock purchase plan. The financing activities in 1998 included proceeds from and
principal payment on long term debt, and the issuance of common stock under the
Company's employee stock option and employee stock purchase plans.

The Company had a working capital deficit of $3.2 million and $8.2 million
for the years ended December 25, 1999, and December 26, 1998, respectively. The
decrease in the deficit in 1999 was primarily due to an increase in deferred
income taxes, a decrease in assets held for sale in connection with the sale of
the Au Bon Pain Division partially offset by an increase in accrued expenses.
The Company has experienced no short term or long term liquidity difficulties
having been able to finance its operations through internally generated cash
flow and its revolving line of credit.

In 2000, the Company currently anticipates spending approximately
$16-17 million principally for the opening of new bakery-cafes, the opening of
one to two additional commissaries, and for maintaining and remodeling existing
cafes. The Company expects to fund these expenditures principally through
internally generated cash flow.

YEAR 2000 ISSUE

The Year 2000 Issue relates to how dates are stored and used in computer
systems, applications, and embedded systems. As the century date change
occurred, certain date-sensitive systems had to recognize the year as 2000, not
as 1900. This inability to recognize and properly treat the year as 2000 could
have caused these systems to process critical financial and operational
information incorrectly. In prior years, we discussed our plans and progress to
be Year 2000 ready. We completed the installation, implementation, and testing
of our systems in late 1999, and made modifications as deemed necessary. As a
result of our planning and implementation efforts, we experienced no significant
disruptions in business critical information technology and non-information
technology systems, and the Company believes these systems responded
successfully to the Year 2000 date change. In addressing the Year 2000 issue,
the Company incurred internal labor costs as well as consulting and other
expenses. As of December 25, 1999, the Company expended approximately $725,000
in external costs (consulting fees and related costs). We are not aware of any
material problems resulting from Year 2000 issues regarding our internal
systems, the products and services of third parties, or the businesses operated
by our franchisees. The Company will continue to monitor date-sensitive systems
as certain key dates occur throughout the year to ensure that any Year 2000
matters that may arise are addressed promptly.

IMPACT OF INFLATION

In the past, the Company has been able to recover inflationary cost and
commodity price increases through increased menu prices. There have been and
there may be in the future, delays in implementing such menu price increases,
and competitive pressures may limit the Company's ability to recover such cost
increases in their entirety. Historically, the effects of inflation on the
Company's net income have not been materially adverse.

A majority of the Company's employees are paid hourly rates related to
federal and state minimum wage laws. Although the Company has and will continue
to attempt to pass along any increased labor costs through food price increases,
there can be no assurance that all such increased labor costs can be reflected
in its prices or that increased prices will be absorbed by consumers without
diminishing to some degree consumer spending at the bakery-cafes. However, the
Company has not experienced to date a significant reduction in gross profit
margins as a result of changes in such laws, and management does not anticipate
any related future significant reductions in gross profit margins.

22
<PAGE>
FORWARD LOOKING STATEMENTS

Matters discussed in this report which relate to events or developments that
are expected to occur in the future, including any discussion of growth or
anticipated operating results are forward-looking statements within the meaning
of Section 27A of the Securities Exchange Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 (identified by the words "estimate", "project",
"anticipates", "expects", "intends", "believes", "future", and similar
expressions). These are statements which express management's belief,
expectations or intentions regarding the Company's future performance. Moreover,
a number of factors could cause the Company's actual results to differ
materially from those set forth in the forward-looking statements due to known
and unknown risks and uncertainties. The Company's operating results may be
negatively affected by many factors, included but not limited to the lack of
availability of sufficient capital to it and the developers party to franchise
development agreements with the Company, variations in the number and timing of
bakery-cafe openings, public acceptance of new bakery-cafes, consumer
preferences, competition, commodity costs, and other factors that may affect
retailers in general. The foregoing list of important factors is not exclusive.

RECENT ACCOUNTING PRONOUNCEMENTS

None which will have a material impact on the Company's financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company had no holdings of derivative financial or commodity instruments
at December 25, 1999. The Company's unsecured revolving line of credit bears an
interest rate using the commercial bank's prime rate or LIBOR as the basis, and
therefore is subject to additional expense should there be an increase in prime
or LIBOR interest rates. Panera Bread has no foreign operations and accordingly,
no foreign exchange rate fluctuation risk. The Au Bon Pain Division did have
foreign operations; however, these were sold with the Au Bon Pain Division on
May 16, 1999.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following described consolidated financial statements of the Company are
included in response to this item:

Report of Independent Accountants.

Consolidated Balance Sheets as of December 25, 1999, and December 26, 1998.

Consolidated Statements of Operations for the fiscal years ended
December 25, 1999, December 26, 1998, and December 27, 1997.

Consolidated Statements of Cash Flows for the fiscal years ended
December 25, 1999, December 26, 1998, and December 27, 1997.

Consolidated Statements of Stockholders' Equity for the fiscal years ended
December 25, 1999, December 26, 1998, and December 27, 1997.

Notes to Consolidated Financial Statements.

Valuations and Qualifying Accounts.

23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS

OF PANERA BREAD COMPANY

In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Panera Bread Company and its subsidiaries at December 25, 1999, and
December 26, 1998, and the results of their operations and their cash flows for
each of the three years in the period ended December 25, 1999, in conformity
with accounting principles generally accepted in the United States. In addition,
in our opinion, the financial statement schedules listed in the accompanying
index present fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements. These financial statements and financial statement schedules are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for the
opinion expressed above.

/s/ PricewaterhouseCoopers LLP

St. Louis, Missouri
March 19, 2000

24
<PAGE>
PANERA BREAD COMPANY

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
DECEMBER 25, DECEMBER 26,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 1,936 $ 1,860
Accounts receivable, less allowance of $197 and $208 in
1999 and 1998, respectively............................. 2,686 1,302
Inventories (Note 3)...................................... 1,880 1,662
Prepaid expenses.......................................... 484 1,781
Refundable income taxes................................... 98 115
Deferred income taxes (Note 10)........................... 5,473 1,500
------- --------
Total current assets.................................... 12,557 8,220
------- --------
Property and equipment, net (Note 4)........................ 47,191 38,856
Other assets:
Assets held for sale, net, non-current (Note 5)........... -- 69,395
Notes receivable.......................................... 35 20
Intangible assets, net of accumulated amortization of
$5,932 and $4,944 in 1999 and 1998 respectively......... 18,779 19,787
Deferred financing costs.................................. 88 768
Deposits and other (Note 11).............................. 3,960 4,138
Deferred income taxes (Note 10)........................... 8,419 12,434
------- --------
Total other assets...................................... 31,281 106,542
------- --------
Total assets............................................ $91,029 $153,618
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable.......................................... $ 3,535 $ 4,020
Liabilities held for sale, net (Note 5)................... -- 6,469
Accrued Expenses (Note 6)................................. 12,237 5,929
Current maturities of long term debt...................... -- 41
------- --------
Total current liabilities............................... 15,772 16,459
Deferred revenue (Note 17).................................. 2,011 --
Long term debt, less current maturities (Note 7)............ -- 34,089
Convertible subordinated notes (Note 8)..................... -- 30,000
------- --------
Total liabilities....................................... 17,783 80,548
Minority interest........................................... -- (257)
Commitments and contingencies (Note 9)...................... -- --
Stockholders' equity (Note 12):
Common stock, $.0001 par value:
Class A, shares authorized 50,000,000; issued and
outstanding 10,630,717 and 10,518,213 in 1999 and 1998,
respectively.............................................. 1 1
Class B, shares authorized 2,000,000; issued and outstanding
1,535,821 and 1,557,658 in 1999 and 1998, respectively.... -- --
Additional paid-in capital.................................. 70,581 70,033
Retained earnings........................................... 2,664 3,293
------- --------
Total stockholders' equity.............................. 73,246 73,327
------- --------
Total liabilities and stockholders' equity.............. $91,029 $153,618
======= ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

25
<PAGE>
PANERA BREAD COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
------------------------------------------
DECEMBER 25, DECEMBER 26, DECEMBER 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Restaurant sales...................................... $156,738 $ 237,102 $233,212
Franchise and other revenues.......................... 7,384 6,161 5,974
Commissary sales to franchisees....................... 7,237 6,397 11,704
-------- --------- --------
Total revenue..................................... 171,359 249,660 250,890
-------- --------- --------
Costs and expenses:
Restaurant Expenses:
Cost of food and paper products..................... 52,445 81,140 82,578
Labor............................................... 45,385 67,218 63,593
Occupancy........................................... 15,552 28,016 28,514
Other operating expenses............................ 18,740 27,826 27,430
-------- --------- --------
132,122 204,200 202,115
Commissary cost of sales.............................. 6,490 6,100 7,807
Depreciation and amortization......................... 6,379 12,667 16,861
General and administrative expenses................... 17,104 18,769 16,418
Non-recurring charge (Note 5)......................... 5,545 26,236 --
-------- --------- --------
Total costs and expenses.......................... 167,640 267,972 243,201
-------- --------- --------
Operating profit (loss)................................. 3,719 (18,312) 7,689
Interest expense, net................................... 2,745 6,396 7,204
Other expense, net...................................... 735 710 212
Loss on sale of assets.................................. -- 735 --
Minority interest....................................... (25) (127) (42)
-------- --------- --------
Income (loss) before income taxes and extraordinary
item.................................................. 264 (26,026) 315
Income tax provision (benefit) (Note 10)................ 511 (5,532) (1,492)
-------- --------- --------
Income (loss) before extraordinary item................. (247) (20,494) 1,807
Extraordinary loss from early extinguishments of debt,
net of tax of $197.................................... 382 -- --
-------- --------- --------
Net Income (loss)....................................... $ (629) $ (20,494) $ 1,807
======== ========= ========
Per common share:
Basic:
Income (loss) before extraordinary item............... $ (.02) $ (1.72) $ .15
Net income (loss)..................................... $ (.05) $ (1.72) $ .15

Diluted:
Income (loss) before extraordinary item............... $ (.02) $ (1.72) $ .15
Net income (loss)..................................... $ (.05) $ (1.72) $ .15

Weighted average shares of common stock outstanding
Basic................................................. 12,137 11,943 11,766
Diluted............................................... 12,137 11,943 11,913
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

26
<PAGE>
PANERA BREAD COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED
------------------------------
DEC. 25, DEC. 26, DEC. 27,
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operations:
Net income (loss)......................................... $ (629) $(20,494) $ 1,807
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................. 6,379 12,667 16,861
Amortization of deferred financing costs.................. 406 683 619
Provision for losses on accounts receivable............... 93 56 49
Minority interest......................................... (25) (127) (42)
Deferred income taxes..................................... 42 (6,589) (1,883)
Loss on early extinguishment of debt...................... 382 -- --
Gain on sale of assets.................................... -- -- (986)
Gain on sale of investment................................ -- -- (930)
Non-recurring charge...................................... 5,545 26,236 --
Loss on disposal of assets................................ -- 735 308
Changes in operating assets and liabilities:
Accounts receivable....................................... (1,596) 15 (1,185)
Inventories............................................... (65) 212 (294)
Prepaid expense........................................... (3,560) (535) 952
Refundable income taxes................................... -- 480 1,521
Accounts payable.......................................... (3,037) 4,069 (4,070)
Accrued expenses.......................................... 769 3,104 769
Deferred revenue.......................................... 2,011 -- --
-------- -------- -------
Net cash provided by operating activities............... 6,715 20,512 13,496
-------- -------- -------
Cash flows from investing activities:
Additions to property and equipment....................... (15,306) (21,706) (14,681)
Proceeds from sale of assets.............................. 72,163 12,694 6,044
Proceeds from sale of investment.......................... -- -- 2,000
Change in cash included in net current liabilities held
for sale................................................ (466) (1,305) --
Payments received on notes receivable..................... 114 240 139
Increase in intangible assets............................. (50) (139) (122)
Increase in deposits and other............................ 855 (956) (1,058)
Increase in notes receivable.............................. (30) (45) --
-------- -------- -------
Net cash provided by (used in) investing activities..... 57,280 (11,217) (7,678)
-------- -------- -------
Cash flow from financing activities:
Exercise of employee stock options........................ 96 1,203 168
Proceeds from long-term debt issuance..................... 41,837 75,418 57,530
Principal payments on long-term debt...................... (106,073) (84,253) (65,003)
Proceeds from issuance of common stock.................... 148 268 243
Common stock issued for employee stock bonus.............. 304 -- --
Increase in deferred financing costs...................... (110) (506) (189)
Increase (decrease) in minority interest.................. (121) (418) (293)
-------- -------- -------
Net cash used in financing activities................... (63,919) (8,288) (7,544)

Net increase (decrease) in cash and cash equivalents........ 76 1,007 (1,726)
Cash and cash equivalents at beginning of year.............. 1,860 853 2,579
-------- -------- -------
Cash and cash equivalents at end of year.................... $ 1,936 $ 1,860 $ 853
======== ======== =======

Supplemental cash flow information:
Cash paid during the year for:
Interest................................................ $ 4,250 $ 5,544 $ 6,602
Income taxes............................................ $ 241 $ 268 $ 700
Note received from sale of property and equipment......... $ -- $ -- $ 2,591
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

27
<PAGE>
PANERA BREAD COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE FISCAL YEARS ENDED

DECEMBER 25, 1999, DECEMBER 26, 1998, AND DECEMBER 27, 1997 (IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED STOCK
COMMON STOCK $.0001 PAR
$.0001 PAR VALUE VALUE
----------------------------------------- -------------------
CLASS A CLASS B CLASS B ADDITIONAL
------------------- ------------------- ------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
-------- -------- -------- -------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, Dec. 28, 1996............ 10,067 $ 1 1,647 $ -- 20 $ -- $68,075 $ 21,980
Exercise of employee stock
options......................... 23 152
Income tax benefit related to
stock option plan............... 16
Issuance of common stock.......... 40 243
Conversions of Class B to Class
A............................... 37 (37)
Conversions of preferred stock to
Class A common stock............ 20 (20)
Net income........................ 1,807
------- ---- ----- ---- --- ---- ------- --------

Balance, Dec. 27, 1997............ 10,187 $ 1 1,610 $ -- 0 $ -- $68,486 $ 23,787

Exercise of employee stock
options......................... 178 1,204
Income tax benefit related to
stock option plan............... 75
Exercise of Warrants.............. (323)
Issuance of common stock.......... 101 591
Conversions of Class B to Class
A............................... 52 (52)
Net loss.......................... (20,494)
------- ---- ----- ---- --- ---- ------- --------
Balance, Dec. 26, 1998............ 10,518 $ 1 1,558 $ -- -- $ -- $70,033 $ 3,293
Exercise of employee stock
options......................... 14 96
Issuance of common stock.......... 29 148
Issuance of common stock for
employee bonus.................. 48 304
Conversions of Class B to Class
A............................... 22 (22)
Net loss.......................... (629)
------- ---- ----- ---- --- ---- ------- --------
Balance, Dec. 25, 1999............ 10,631 $ 1 1,536 $ -- -- $ -- $70,581 $ 2,664
======= ==== ===== ==== === ==== ======= ========

TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Balance, Dec. 28, 1996............ $ 90,056
Exercise of employee stock
options......................... 152
Income tax benefit related to
stock option plan............... 16
Issuance of common stock.......... 243
Conversions of Class B to Class
A...............................
Conversions of preferred stock to
Class A common stock............
Net income........................ 1,807
--------
Balance, Dec. 27, 1997............ $ 92,274
Exercise of employee stock
options......................... 1,204
Income tax benefit related to
stock option plan............... 75
Exercise of Warrants.............. (323)
Issuance of common stock.......... 591
Conversions of Class B to Class
A...............................
Net loss.......................... (20,494)
--------
Balance, Dec. 26, 1998............ $ 73,327
Exercise of employee stock
options......................... 96
Issuance of common stock.......... 148
Issuance of common stock for
employee bonus.................. 304
Conversions of Class B to Class
A...............................
Net loss.......................... (629)
--------
Balance, Dec. 25, 1999............ $ 73,246
========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

28
<PAGE>
PANERA BREAD COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS

Panera Bread Company operates a retail bakery-cafe business and franchising
business under the concept names "Panera Bread Company" and "Saint Louis Bread
Company". Up until the year ended December 26, 1998, the Company operated under
the name Au Bon Pain Co., Inc. and consisted of two retail bakery-cafe
businesses and two franchising businesses operating under the concept names "Au
Bon Pain" and "Saint Louis Bread Company". Included in franchise sales and other
revenues are sales of product to franchisees and others of $7.2 million,
$6.4 million and $11.7 million for the fiscal years ended December 25, 1999,
December 26, 1998 and December 27, 1997, respectively.

2. SUMMARY OF ACCOUNTING POLICIES

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

For the year ended December 25, 1999, the consolidated financial statements
consist of the accounts of Panera Bread Company, Panera Bread Company, Inc., a
wholly owned subsidiary, and ABP Midwest Manufacturing Co, Inc., a wholly owned
subsidiary and Au Bon Pain Co., Inc. and ABP Holdings, Inc., which were both
wholly owned subsidiaries through the date of their sale on May 16, 1999 (See
Note 5). For the years ended December 26, 1998 and December 27, 1997, the
consolidated statements include the accounts of Au Bon Pain Co., Inc., ABP
Holdings, Inc., a wholly owned subsidiary, Saint Louis Bread Company, Inc.
("Saint Louis Bread"), a wholly owned subsidiary, ABP Midwest Manufacturing Co.,
Inc, a wholly owned subsidiary, and investments in joint ventures in which a
majority interest is held (the "Company"). All intercompany balances and
transactions have been eliminated. Due to the pending sale of the Au Bon Pain
Division (see Note 5), the assets and liabilities of that business were
presented on a net current and non-current basis in the December 26, 1998
balance sheet. The Company operates in one material business segment, the retail
bakery-cafe business.

PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

RECLASSIFICATIONS

Certain items in the prior year financial statements have been reclassified
to conform to current year presentation.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity at the
time of purchase of three months or less to be cash equivalents.

ACCOUNTS RECEIVABLE

Substantially all accounts receivable are due from franchisees for purchases
of food and paper products and for royalties from December sales. The Company
generally does not require collateral and

29
<PAGE>
PANERA BREAD COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
maintains reserves for potential uncollectable accounts, which in the aggregate
have not exceeded management's expectation.

INVENTORIES

Inventories, which consist of food products, paper goods and supplies,
smallwares and promotional items are valued at the lower of cost, or market,
determined under the first-in, first-out method.

PROPERTY, EQUIPMENT AND LEASEHOLDS

Property, equipment and leaseholds are stated at cost. Depreciation is
provided using the straight-line method over the estimated useful lives of the
assets. Leasehold improvements are amortized using the straight-line method over
the shorter of their estimated useful lives or the remaining terms of the leases
(including available option periods).The estimated useful lives used for
financial statement purposes are:

<TABLE>
<S> <C>
Machinery and equipment..................................... 3-10 years
Furniture and fixtures...................................... 3-10 years
Leasehold improvements...................................... 10-23 years
Signs....................................................... 10 years
</TABLE>

Interest is capitalized in connection with the construction of new locations
or facilities. The capitalized interest is recorded as part of the asset to
which it relates and is amortized over the asset's estimated useful life.
Capitalized interest amounted to $96,279, $114,928 and $70,780 in 1999, 1998 and
1997, respectively.

Upon retirement or sale, the cost of assets disposed of and their related
accumulated depreciation are removed from the accounts. Any resulting gain or
loss is credited or charged to operations. Maintenance and repairs are charged
to expense when incurred, while betterments are capitalized.

INTANGIBLE ASSETS

Intangible assets consist of goodwill arising from the excess of cost over
the fair value of net assets acquired at the original acquisition of the
Company. Goodwill is amortized on a straight-line basis over twenty-five years.
Periodically management assesses, based on undiscounted cash flows, if there has
been a permanent impairment in the carrying value of its intangible assets and,
if so, the amount of any such impairment, by comparing anticipated discounted
future operating income from acquired businesses with the carrying value of the
related intangibles. In performing this analysis, management considers such
factors as current results, trends, future prospects and other economic factors.

INCOME TAXES

The provision for income taxes is determined in accordance with the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes". Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted income tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled.
Any effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.

30
<PAGE>
PANERA BREAD COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
DEFERRED FINANCING COSTS

Costs incurred in connection with obtaining debt financing are amortized
over the terms of the related debt.

FRANCHISE AND DEVELOPMENT FEES

Franchise fees are the result of sales of area development rights and the
sale of individual franchise locations to third parties, both domestically and
internationally. Fees from the sale of area development rights are fully
recognized as revenue upon completion of all commitments related to the
agreements. Fees from the sale of individual franchise locations are fully
recognized as revenue upon the commencement of franchise operations.

CAPITALIZATION OF CERTAIN DEVELOPMENT COSTS

The Company capitalizes certain expenses associated with the development and
construction of new store locations. Capitalized costs of $.8 million and
$2.2 million as of December 25, 1999 and December 26, 1998, respectively, are
recorded as part of the asset to which they relate and are amortized over the
asset's useful life.

ADVERTISING COSTS

Advertising costs are expensed when incurred. The Company incurred
advertising costs in the amount of $1.8 million, $1.9 million and $2.0 million
for the years ended December 25, 1999, December 26, 1998 and December 27, 1997,
respectively.

PRE-OPENING COSTS

All pre-opening costs associated with the opening of new retail locations
are expensed when incurred.

FISCAL YEAR

The Company's fiscal year ends on the last Saturday in December. Fiscal
years for the consolidated financial statements included herein include 52 weeks
for the fiscal years ended December 25, 1999, December 26, 1998 and
December 27, 1997.

EARNINGS PER SHARE DATA

Earnings per share is based on the weighted average number of shares
outstanding during the period after consideration of the dilutive effect, if
any, for common stock equivalents, including stock options, warrants and
preferred stock.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of the Company's long term debt, including current
maturities, approximates fair value because the interest rates on these
instruments change with market interest rates. The carrying amounts for accounts
receivable and accounts payable approximate their fair values due to the short
maturity of these instruments.

31
<PAGE>
PANERA BREAD COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. INVENTORIES

Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 25, 1999 DECEMBER 26, 1998
----------------- -----------------
<S> <C> <C>
Commissaries................................ $ 178 $ 131
Bakery-cafes................................ 729 590
Paper goods................................. 134 113
Smallwares.................................. 768 767
Other....................................... 71 61
------ ------
$1,880 $1,662
====== ======
</TABLE>

4. PROPERTY AND EQUIPMENT

Major classes of property and equipment consist of the following (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 25, 1999 DECEMBER 26, 1998
----------------- -----------------
<S> <C> <C>
Leasehold improvements...................... $33,080 $25,621
Machinery and equipment..................... 21,995 15,366
Furniture and fixtures...................... 6,350 5,345
Construction in progress.................... 2,701 3,603
Signage..................................... 1,320 968
------- -------
65,446 50,903
Less accumulated depreciation and
amortization.............................. 18,255 12,047
------- -------
Property and equipment, net................. $47,191 $38,856
======= =======
</TABLE>

The Company recorded depreciation expense related to these assets of
$5.4 million and $5.0 million and $15.4 million in 1999, 1998 and 1997,
respectively.

5. SALE OF AU BON PAIN DIVISION AND NON-RECURRING CHARGES

The Company, together with its wholly-owned subsidiary ABP Holdings, Inc.
("ABPH") entered into a Stock Purchase Agreement dated August 12, 1998 and
amended October 28, 1998 with ABP Corporation (the "Buyer"), an affiliate of
Bruckmann, Rosser, Sherrill & Co., L.P., relative to the transfer of
substantially all of the assets and liabilities of the Company's Au Bon Pain
Division business (the "Au Bon Pain Division") and sale of all of the
outstanding capital stock of ABPH to the Buyer, whereby the Buyer would become
the owner of the Au Bon Pain Division (the "Sale"). The Sale was effective
May 16, 1999 for $73 million in cash before contractual purchase price
adjustments of approximately $1 million. The Company, which now consists of the
Panera Bread/Saint Louis Bread Co. Business Unit only, has been renamed Panera
Bread Company. The proceeds from the sale were used to repay all outstanding
debt and provide cash for growth. In addition, the Company recorded an
extraordinary loss net of taxes of $0.4 million associated with the early
extinguishment of debt outstanding in the second quarter of 1999.

In conjunction with the sale, the Company recorded a non-cash,
non-recurring, pre-tax charge of $5.5 million in the first quarter of 1999 and
$24.2 million in 1998. This charge was to reflect a write-down under Statement
of Financial Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for the Long-Lived Assets to be Disposed of" ("SFAS 121"). The charge
is included as a separate

32
<PAGE>
PANERA BREAD COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. SALE OF AU BON PAIN DIVISION AND NON-RECURRING CHARGES (CONTINUED)
component of operating expenses. The non-cash charge was taken to record an
impairment for long lived assets to be disposed of as a result of the agreement
entered into for the subsequent sale of the Au Bon Pain Division. Operating
income for the years ended December 25, 1999, and December 26, 1998, were
favorably impacted by $4.7 million and $4.5 million due to the suspension of
depreciation and amortization associated with the Au Bon Division assets held
for sale after August 12, 1998.

The assets and liabilities of the Au Bon Pain Division were presented in the
consolidated balance sheet as of December 26, 1998 as assets held for sale,
non-current, net, and as current liabilities, net, and included the following:

<TABLE>
<CAPTION>
DECEMBER 26, 1998
-----------------
(000'S)
<S> <C>
Current assets:
Cash and cash equivalents................................. $ 1,305
Accounts receivable....................................... 5,584
Inventories............................................... 5,011
Other current assets...................................... (98)
-------
Total current assets.................................... 11,802

Current liabilities:
Accounts payable.......................................... 7,120
Accrued expenses.......................................... 11,151
-------
Total liabilities....................................... 18,271

Net current liabilities..................................... $ 6,469
=======

Non-current assets:
Property and equipment
Leasehold improvements.................................. $71,679
Machinery and equipment................................. 53,920
Furniture and fixtures.................................. 13,717
Other................................................... 3,506
Accumulated depreciation and amortization................. (83,281)
-------
Property and equipment, net............................. 59,541

Other assets:
Notes receivable.......................................... 4,097
Deposits and other........................................ 5,757
-------
Total other assets...................................... 9,854

Total non-current assets.................................... $69,395
=======
</TABLE>

Restaurant sales and net operating loss (before non-recurring charges and
the suspension of depreciation and amortization) in the Au Bon Pain Division
held for sale as of December 26, 1998 were $159.6 million and $3.0 million,
respectively. In fiscal year 1999, revenues and net operating income (before
non-recurring charges and the suspension of depreciation and amortization) in
the Au Bon Pain Division through the time of its sale on May 16, 1999, were
$51.5 million and $3.2 million respectively.

During 1998, the Company recorded $2.0 million in non-recurring, non-cash
charges in accordance with SFAS 121, to write-down the book value of eight
underperforming Au Bon Pain stores whose leases

33
<PAGE>
PANERA BREAD COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. SALE OF AU BON PAIN DIVISION AND NON-RECURRING CHARGES (CONTINUED)
expired in 1998 and were not renewed, and to record the closing of one Panera
Bread location. The charge is included as a separate component of operating
expenses and includes a $1.6 million fixed asset write-down and a $0.4 million
other asset write-down.

In the first quarter of 1998 the Company sold the Mexico, Missouri
production facility and its wholesale frozen dough business to Bunge Foods
Corporation ("Bunge") for approximately $13 million in cash. The Company
recognized a pre-tax loss on the sale of the facility of approximately $735,000
in the Company's results of operations.

6. ACCRUED EXPENSES

Accrued expenses consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 25, 1999 DECEMBER 26, 1998
----------------- -----------------
<S> <C> <C>
Accrued insurance........................... $ 881 $ 501
Rent........................................ 780 751
Payroll and related taxes................... 2,594 851
Interest.................................... -- 1,505
Taxes, other than income taxes.............. 4,383 189
Other....................................... 3,599 2,132
------- ------
$12,237 $5,929
======= ======
</TABLE>

7. LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 26, 1998
-----------------
<S> <C>
Revolving credit line at prime plus .25% (8.00% at
December 26, 1998)........................................ $17,260
Loan with Cigna Insurance at prime less .75% (7.00% at
December 26, 1998)........................................ 2,000
Term loan at 7.0% payable in annual installments of $50,000
including interest, due January 2001...................... 131
Senior subordinated debenture (14.00% at December 26,
1998)..................................................... 14,739
-------
Total debt.................................................. 34,130
Less current maturities..................................... 41
-------
Total long-term debt........................................ $34,089
=======
</TABLE>

In 1999, the Company repaid all of its outstanding debt with the proceeds
from the Sale.

The Company had a $10.0 million and $22.0 million unsecured revolving line
of credit at December 25, 1999 and December 26, 1998, respectively. The
revolving credit agreement contains restrictions relating to future
indebtedness, liens, investments, distributions, the merger, acquisition or sale
of assets and certain leasing transactions. The agreement also requires the
maintenance of certain financial ratios and covenants, the most restrictive
being a minimum consolidated EBITDA amount and debt to net worth

34
<PAGE>
PANERA BREAD COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. LONG-TERM DEBT (CONTINUED)
ratio at December 25, 1999 and December 26, 1998, respectively. The revolving
credit agreement also contains a commitment fee of 1/2% and 3/8% of the unused
portion of the revolving line of credit at December 25, 1999 and December 26,
1998, respectively. Available unused borrowings totaled approximately
$9.4 million at December 25, 1999 and $3.6 million at December 26, 1998. At
December 25, 1999 and December 26, 1998, the Company had outstanding letters of
credit against the revolving line of credit aggregating $.6 million and
$1.1 million, respectively. Interest-only payments are due under the revolving
credit line monthly, in arrears, with the principal balance payable at maturity
on December 31, 2000. There were no outstanding borrowings under the revolving
credit agreement at December 25, 1999.

On July 24, 1996, the Company issued $15 million senior subordinated
debentures maturing in July, 2000. The debentures accrued interest at varying
fixed rates over the four year term, ranging from 11.25% to 14.0%. In connection
with the private placement, warrants with an exercise price of $5.62 per share
were issued to purchase between 400,000 and 580,000 shares of the Company's
Class A Common Stock, depending on the term which the debentures remained
outstanding and certain future events. At December 25, 1999 and December 26,
1998, 392,500 and 210,000 warrants were issued and outstanding, respectively,
all of which were vested.

8. CONVERTIBLE SUBORDINATED NOTES

In December 1993, the Company issued $30.0 million of its unsecured 4.75%
Convertible Subordinated Notes due 2001 ("1993 Notes"). The 1993 Notes were
convertible at the holders' option into shares of the Company's Class A Common
Stock at $25.50 per share. The note agreement required the Company to maintain
minimum permanent capital, as therein defined. The Company used the proceeds
from the Sale to redeem all the outstanding notes during the year ended
December 25, 1999.

9. COMMITMENTS AND CONTINGENT LIABILITIES

The Company is obligated under noncancelable operating leases for
commissaries and retail stores. Lease terms are generally for ten years with
renewal options at certain locations and generally require the Company to pay a
proportionate share of real estate taxes, insurance, common area and other
operating costs. Substantially all store leases provide for contingent rental
payments based on sales in excess of specified amounts. In addition, the Company
is contingently liable for certain of the operating leases of the Au Bon Pain
Division.

Aggregate minimum requirements under these leases are, as of December 25,
1999, approximately as follows (in thousands):

<TABLE>
<S> <C>
2000........................................................ $ 6,301
2001........................................................ 6,004
2002........................................................ 5,755
2003........................................................ 5,412
2004........................................................ 5,126
Thereafter.................................................. 14,977
-------
$43,575
=======
</TABLE>

35
<PAGE>
PANERA BREAD COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
Rental expense under operating leases was approximately $14.0 million,
$19.7 million and $24.5 million in 1999, 1998 and 1997, respectively, which
included contingent rentals of approximately $1.1 million, $3.1 million and
$3.0 million, respectively.

10. INCOME TAXES

The provision (benefit) for income taxes in the consolidated statements of
operations is comprised of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 25, 1999 DECEMBER 26, 1998 DECEMBER 27, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Current:
Federal.................... $ -- $ -- $ 259
State...................... 469 1,057 132
---- ------- -------
469 1,057 391
---- ------- -------

Deferred:
Federal.................... (13) (8,220) (1,433)
State...................... 55 1,631 (450)
---- ------- -------
42 (6,589) (1,883)
---- ------- -------
Tax provision (benefit)
before extraordinary
item....................... $511 $(5,532) $(1,492)
==== ======= =======
</TABLE>

A reconciliation of the statutory federal income tax rate and the effective
tax rate as a percentage of income (loss) before income taxes provision and
extraordinary item follows:

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Statutory rate provision (benefit).................. 34.0% (34.0)% 34.0%
State income taxes, net of federal tax benefit...... 68.3 1.7 (432.8)
Charitable contributions............................ -- (0.7) (89.9)
Company-owned life insurance (See Note 12).......... 32.8 (4.4) (451.0)
Non-deductible goodwill and meals and
entertainment..................................... 58.7 0.8 51.0
Other, net.......................................... (0.2) 2.1 (0.4)
Change in valuation allowance....................... -- 13.2 415.4
----- ----- ------
193.6% (21.3)% (473.7)%
===== ===== ======
</TABLE>

36
<PAGE>
PANERA BREAD COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. INCOME TAXES (CONTINUED)
The tax effects of the significant temporary differences which comprise the
deferred tax assets (liabilities) are as follows (in thousands):

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Current assets:
Receivables reserve..................................... $ -- $ --
Accrued expenses........................................ 2,353
Net operating loss carryforward......................... 3,120 1,500
------- -------
Total current......................................... 5,473 1,500

Non-current assets/liabilities:
Property, plant and equipment........................... (333) (190)
Accrued expenses........................................ 1,182 9,215
Goodwill................................................ (1,611) (1,868)
Tax credit carryforward................................. 5,079 4,941
Net operating loss carryforward......................... 6,951 4,485
Charitable contribution carryforward.................... 1,571 141
Other reserves.......................................... 322 452
------- -------
Total non-current..................................... 13,161 17,176

Total deferred tax asset.............................. 18,634 18,676
Valuation allowance................................... (4,742) (4,742)
------- -------
Total net deferred tax asset.............................. $13,892 $13,934
======= =======
</TABLE>

A valuation allowance is provided to reduce the deferred tax assets to a
level which, more likely than not, will be realized. The valuation allowance is
primarily attributable to the potential for the non-deductibility of capital
losses related to the taxable loss on sale of the Au Bon Pain Division, the
expectation that deferred state tax assets will be unrealizable in states where
the Company no longer operates and that the Company will be unable to utilize
certain charitable contribution carryforwards prior to their expiration. In the
current year, all of the charitable contribution carryforward has been
appropriately categorized as such; in 1998, certain charitable contribution
carryforwards were included within the net operating loss carryforward. As of
December 25, 1999 and December 26, 1998, the Company has net operating losses of
approximately $24.8 million and $13.6 million, respectively, which can be
carried forward twenty years to offset Federal taxable income. At December 25,
1999 and December 26, 1998, the Company had Federal jobs tax credit
carryforwards of approximately $1.2 million which expire in the years 2014-2015
and charitable contribution carryforwards of approximately $3.8 million which
expire in the years 2000-2003. In addition, the Company has Federal alternative
minimum tax credit carryforwards of approximately $3.7 million and $3.5 million
at December 25, 1999 and December 26, 1998, respectively, which are available to
reduce future regular Federal income taxes over an indefinite period. The
Company reevaluates the positive and negative evidence impacting the
realizability of its deferred income tax assets on an annual basis.

37
<PAGE>
PANERA BREAD COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. DEPOSITS AND OTHER

During fiscal 1997, the Company established a $4.3 million deposit with its
distributor. This financial arrangement allows the Company to receive lower
distribution costs. The savings exceed the carrying value of the deposit. The
deposit is flexible and the Company may at times decrease the amount on deposit,
at its discretion. The deposit outstanding was $1.3 million at December 25, 1999
and December 26, 1998.

During fiscal year 1994, the Company established a company-owned life
insurance program ("COLI") covering a substantial portion of its employees. At
December 25, 1999 and December 26, 1998, the cash surrender value of
$77.7 million and $75.4 million, respectively, and the insurance policy loans of
$75.7 million and $73.2 million, respectively, were netted and included in other
assets on the consolidated balance sheet. The loans are collateralized by the
cash values of the underlying life insurance policies and require interest
payments at a rate of 9.07%. In 1996, tax law changes adopted as part of the
Health Insurance Portability and Accountability Act significantly reduced the
level of tax benefits recognized under the Company's COLI program. The Company
included $0.4 million and $0.3 million of expenses in other (income) expense,
net, relating to COLI in 1999 and 1998, respectively.

In the third quarter of 1997, the Company sold its interest in Peet's Coffee
and Teas, Incorporated back to Peet's for $2 million in cash, resulting in a
pre-tax gain of $930,000. The gain was recognized as a component of other
expense, net.

12. STOCKHOLDERS' EQUITY

COMMON STOCK

Each share of Class B Common Stock has the same dividend and liquidation
rights as each share of Class A Common Stock. The holders of Class B Common
Stock are entitled to three votes for each share owned. The holders of Class A
Common Stock are entitled to one vote for each share owned. Each share of
Class B Common Stock is convertible, at the shareholder's option, into Class A
Common Stock on a one-for-one basis. The Company had reserved at December 25,
1999 and December 26, 1998, 7,389,041 and 7,589,719 shares, respectively, of its
Class A Common Stock for issuance upon conversion of Class B Common Stock and
exercise of awards granted under the Company's 1992 Equity Incentive Plan,
Formula Stock Option Plan for Independent Directors and conversion of the 1993
Notes (see Note 8).

REGISTRATION RIGHTS

Certain holders of Class A and Class B Common Stock, pursuant to stock
subscription agreements, can require the Company, under certain circumstances,
to register their shares under the Securities Act of 1933 or have included in
certain registrations all or part of such shares, at the Company's expense.

13. STOCK OPTIONS

1992 EQUITY INCENTIVE PLAN

In May 1992, the Company adopted its Equity Incentive Plan ("Equity Plan")
to replace its Non-Qualified Incentive Stock Option Plan. Under the Equity Plan,
a total of 950,000 shares of Class A Common Stock were initially reserved for
awards under the Equity Plan. The Equity Plan was subsequently amended by the
Board of Directors and the stockholders to increase the number of shares
available thereunder from 950,000 to 4,300,000. Awards under the Equity Plan can
be in the form of stock

38
<PAGE>
PANERA BREAD COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. STOCK OPTIONS (CONTINUED)
options (both qualified and non-qualified), stock appreciation rights,
performance shares, restricted stock or stock units.

Activity under the Equity Plan and its predecessor is summarized below:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at December 28, 1996................... 1,932,034 $7.42
Granted.......................................... 1,226,169 $7.49
Exercised........................................ (23,148) $6.56
Cancelled........................................ (143,537) $8.05
--------- -----
Outstanding at December 27, 1997................... 2,991,518 $7.44
--------- -----
Granted.......................................... 841,583 $8.84
Exercised........................................ (151,060) $6.69
Cancelled........................................ (376,710) $9.17
--------- -----
Outstanding at December 26, 1998................... 3,305,331 $8.18
--------- -----
Granted.......................................... 200,678 $6.65
Exercised........................................ (14,057) $6.85
Cancelled........................................ (201,003) $7.52
--------- -----
Outstanding at December 25, 1999................... 3,290,949 $7.56
--------- -----
</TABLE>

FORMULA STOCK OPTION PLAN FOR INDEPENDENT DIRECTORS

On January 27, 1994, the Company's Board of Directors authorized the Formula
Stock Option Plan for Independent Directors, as defined in the agreement. This
plan authorized a one-time grant of an option to purchase 10,000 shares of the
Company's Class A Common Stock at its closing price on January 26, 1994.

Each independent director who is first elected as such after the effective
date of the Directors' Plan shall receive, as of the date he or she is so
elected, a one-time grant of an option to purchase 5,000 shares of Class A
Common Stock at a price per share equal to the closing price of the Class A
Common Stock as reported by the NASDAQ/National Market System for the trading
day immediately preceding the date of the person's election to the board.

In addition, all independent directors serving in such capacity as of the
last day of each fiscal year commencing with the fiscal year ending
December 31, 1994 receive an option to purchase 5,000 shares of Class A Common
Stock at the closing price for the prior day.

Each option granted is fully vested at the grant date, and is exercisable,
either in whole or in part, for 10 years following the grant date. The Company
had granted 123,606 and 113,248 options under this plan as of December 25, 1999
and December 26, 1998.

STOCK-BASED COMPENSATION

In accordance with SFAS 123, "Accounting for Stock-Based Compensation", the
Company has elected to follow the provisions of Accounting Principles Board
Opinion No. 25 ("APB25"), "Accounting for Stock

39
<PAGE>
PANERA BREAD COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. STOCK OPTIONS (CONTINUED)
Issued to Employees", and provide the required pro-forma disclosure in the
footnotes to the financial statements as if the measurement provisions of
SFAS 123 had been adopted. Accordingly, no compensation costs have been
recognized for the stock option plans as the exercise price of stock options
equals the market price of the underlying stock on the date of grant. Had
compensation costs for the Company's stock option plans been determined based on
the fair value at the grant date for awards since 1995 consistent with the
provisions of SFAS 123, the Company's net income (loss) for the years ended
December 25, 1999, December 26, 1998 and December 27, 1997 would have been as
follows:

<TABLE>
<CAPTION>
1999 1997 1998
-------------------------- -------------------------- ---------------------------
NET LOSS NET LOSS NET LOSS NET LOSS NET INCOME NET INCOME
(IN THOUSANDS) PER SHARE (IN THOUSANDS) PER SHARE (IN THOUSANDS) PER SHARE
-------------- --------- -------------- --------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
As reported..................... $ (629) $(.05) $(20,494) $(1.72) $1,807 $.15
Pro forma....................... $(1,941) $(.16) $(21,642) $(1.81) $ 953 $.08
</TABLE>

The effects of applying SFAS 123 in this pro-forma disclosure are not likely
to be representative of the effects on reported net income for future years.
SFAS 123 does not apply to awards prior to 1995 and additional awards in future
years are anticipated.

The fair value of the options granted during 1999, 1998 and 1997 was $3.22
per share, $4.12 per share and $3.69 per share, respectively, on the date of
grant using the Black-Scholes option-pricing model with the following
assumptions: dividend yield 0%, volatility of 40%, risk-free interest rate of
5.68% in 1999, 5.14% in 1998 and 6.38% in 1997, and an expected life of
6 years.

The following table summarizes information concerning currently outstanding
and exercisable options:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------- ---------------------------
WEIGHTED AVERAGE
RANGE OF NUMBER REMAINING WEIGHTED NUMBER WEIGHTED
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE AVERAGE PRICE EXERCISABLE AVERAGE PRICE
- --------------------- ----------- ---------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
$ 6.00-6.87 672,646 8.39 $ 6.44 156,343 $6.35
$ 6.88-10.93 2,365,058 6.20 7.49 1,988,647 7.47
$ 10.94-13.44 252,069 8.31 11.07 179,279 11.08
$ 13.45-21.25 1,176 3.93 21.25 1,176 21.25
--------- ---- ------ --------- -----
3,290,949 6.81 $ 7.56 2,325,445 $7.68
</TABLE>

Options vest over a five year period and must be exercised within ten years
from the date of the grant. Of the options at December 25, 1999, December 26,
1998 and December 27, 1997, 2,325,445, 1,418,994 and 1,168,134, respectively,
were vested and exercisable with a weighted average exercise price at
December 25, 1999, December 26, 1998 and December 27, 1997 of $7.68, $7.34 and
$7.20, respectively.

1992 EMPLOYEE STOCK PURCHASE PLAN

In May 1992, the Company adopted its 1992 Employee Stock Purchase Plan
("1992 Purchase Plan") to replace its Employee Stock Purchase Plan. The 1992
Purchase Plan was subsequently amended by the Board of Directors and
Stockholders to increase the number of shares of Class A Common Stock reserved
for issuance from 150,000 to 350,000. The 1992 Purchase Plan gives eligible
employees the option to purchase Class A Common Stock (total purchases in a year
may not exceed 10% of an employee's prior

40
<PAGE>
PANERA BREAD COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. STOCK OPTIONS (CONTINUED)
year compensation) at 85% of the fair market value of the Class A Common Stock
at the date of purchase. There were 28,492 and 36,474 shares purchased with a
weighted average fair value of purchase rights of $.92 and $1.25 as of
December 25, 1999 and December 26, 1998, respectively.

14. DEFINED CONTRIBUTION BENEFIT PLAN

The Au Bon Pain Employee 401(k) Plan ("Savings Plan") was adopted by the
Company in 1991 under Section 401(k) of the Internal Revenue Code of 1986, as
amended (Code). All employees of the Company, including executive officers, are
eligible to participate in the Savings Plan. A participating employee may elect
to defer on a pre-tax basis up to 15% of his or her salary, subject to the
limitations imposed by the Code. This amount is contributed to the Savings Plan.
All amounts vest immediately and are invested in various funds as directed by
the participant. The full amount in a participant's account will be distributed
to a participant upon termination of employment, retirement, disability or
death. The Company does not currently contribute to the Savings Plan.

The Saint Louis Bread Company Employee 401(k) Plan ("Saint Louis Bread
Savings Plan") was adopted by the former Saint Louis Bread Company in 1993 under
Section 401(k) of the Internal Revenue Code of 1986, as amended. In 1997 the
"Saint Louis Bread Savings Plan" was merged into the Au Bon Pain "Savings Plan".
Plan participants of the "Saint Louis Bread Savings Plan" retained the matching
contributions made through 1996 with a vesting schedule of seven years. There
has been no further matching in 1999 and 1998.

15. LEGAL PROCEEDINGS

The Company is subject to legal proceedings and claims which arise in the
normal course of business. In the opinion of management, the ultimate
liabilities with respect to these actions will not have a material adverse
effect on the Company's financial condition, results of operations or cash
flows.

During the third quarter of 1997, the Company entered into a definitive
agreement to settle a lawsuit filed by a former vendor of the Company. The
Company recognized a charge of $675,000 in the third quarter of 1997 as a
component of other expense (income), net, to cover the settlement and other
expenses incurred in connection therewith.

16. NET INCOME (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted earnings
per share (in thousands, except per share data):

<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED
---------------------------------------------------------
DECEMBER 25, 1999 DECEMBER 26, 1998 DECEMBER 27, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net income (loss) used in net income (loss)
per common share--basic.................... $ (629) $(20,494) $1,807
Net income (loss) used in net income (loss)
per common share--diluted.................. $ (629) $(20,494) $1,807
</TABLE>

41
<PAGE>
PANERA BREAD COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16. NET INCOME (LOSS) PER SHARE (CONTINUED)

<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED
---------------------------------------------------------
DECEMBER 25, 1999 DECEMBER 26, 1998 DECEMBER 27, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Weighted average number of shares
outstanding--basic......................... 12,137 11,943 11,766
Effect of dilutive securities:
Employee stock options................... -- -- 42
Stock warrants........................... -- -- 105
Weighted average number of shares
outstanding--diluted....................... 12,137 11,943 11,913

Per common share:
Basic:
Income (loss) before extraordinary item.... $ (.02) $ (1.72) $ .15
Net income (loss).......................... $ (.05) $ (1.72) $ .15

Diluted:
Income (loss) before extraordinary item.... $ (.02) $ (1.72) $ .15
Net income (loss).......................... $ (.05) $ (1.72) $ .15
</TABLE>

During 1998 and 1997, options to purchase 1,176,000 shares of common stock
at $25.50 per share were outstanding in conjunction with the issuance of
$30 million of convertible subordinated notes (see Note 8). These shares were
not included in the computation of diluted earnings per share for the fiscal
years ended December 26, 1998 or December 27, 1997 because the addition of
interest expense, after the effect of income taxes, of $855,000 to net income
(loss) would have been antidilutive. These options were no longer outstanding as
of December 25, 1999, as the convertible subordinated notes have been repaid.

Options to purchase 18,333 and 248,450 shares of common stock, respectively,
at an average price of $6.35 and $5.77 per share and warrants to purchase 45,608
and 96,000 shares of common stock at $5.62 per share were outstanding but were
not included in the computation of diluted earnings per share for the fiscal
years ended December 25, 1999 or December 26, 1998 because the effect would have
been antidilutive.

17. DEFERRED REVENUE

During 1999, the Company changed soft drink providers. As a result of this
change, the Company received an upfront payment of $2,530,000. These funds are
available for both company-owned and franchised bakery-cafes to cover costs of
conversion and transition. The upfront payments are being allocated at a rate of
$3,000 per applicable company-owned and franchised bakery-cafe. The Company is
then recognizing the $3,000 per company owned bakery-cafe over the five year
life of the soft drink contract. As of December 25, 1999, the Company had paid
$303,000 to franchisees and is recognizing $216,000 of income over the life of
the contract.

ITEM 9. CHANGE IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

None.

42
<PAGE>
PART III

Information required by Part III (items 10 through 13) is incorporated by
reference to the Company's definitive proxy statement for its 2000 annual
meeting of stockholders which is expected to be filed with the Securities and
Exchange Commission on or before May 1, 2000. If for any reason such a statement
is not filed within such period, this report will be appropriately amended.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORT ON FORM 8-K

(a) 1. FINANCIAL STATEMENTS

The following described consolidated financial statements of the Company are
included in this report:

Report of Independent Accountants

Consolidated Balance Sheets as of December 25, 1999, and December 26, 1998.

Consolidated Statements of Operations for the fiscal years ended
December 25, 1999, December 26, 1998, and December 27, 1997.

Consolidated Statements of Cash Flows for the fiscal years ended
December 25, 1999, December 26, 1998, and December 27, 1997.

Consolidated Statements of Stockholders' Equity for the fiscal years ended
December 25, 1999, December 26, 1998, and December 27, 1997.

Notes to Consolidated Financial Statements.

(a) 2. FINANCIAL STATEMENT SCHEDULE

The following financial statement schedule for the Company is filed
herewith:

SCHEDULE II--Valuations and Qualifying Accounts

PANERA BREAD COMPANY
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE AT BALANCE
BEGINNING AT END OF
DESCRIPTION OF PERIOD ADDITIONS DEDUCTIONS PERIOD
- ----------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Allowance for Doubtful accounts
Fiscal Year ended December 27, 1997................... $ 104 $ 49 $ 19 $ 134
Fiscal year ended December 26, 1998................... $ 134 $ 96 $ 22 $ 208
Fiscal Year ended December 25, 1999................... $ 208 $ 93 $104 $ 197

Deferred Tax Valuation Allowance
Fiscal Year ended December 27, 1997................... $ -- $1,308 $ -- $1,308
Fiscal Year ended December 26, 1998................... $1,308 $3,434 $ -- $4,742
Fiscal Year ended December 25, 1999................... $4,742 $ -- $ -- $4,742
</TABLE>

(a) 3. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C> <C>
</TABLE>

43
<PAGE>
<TABLE>
<S> <C> <C>
2.1 Asset Purchase Agreement by and among Au Bon Pain Co., Inc.,
ABP Midwest Manufacturing Co., Inc. and Bunge Foods
Corporation dated as of February 11, 1998; Amendment to
Asset Purchase Agreement, dated as of March 23, 1998.
Incorporated by reference to Exhibit 2.1 to the Company's
Annual Report on Form 10-K for the year ended December 27,
1997.

2.2.1 Stock Purchase Agreement dated August 12, 1998 by and
between the Company, ABP Holdings, Inc. ("ABPH") and ABP
Corporation. Incorporated by reference to the Company's
Report on Form 8-K filed August 21, 1998.

2.2.2 Amendment to Stock Purchase Agreement dated October 28, 1998
by and among the Company, ABPH and ABP Corporation.
Incorporated by reference to the Company's Report on Form
8-K filed November 6, 1998.

3.1 Certificate of Incorporation of Registrant, as amended to
June 2, 1991. Incorporated by reference to Exhibit 3.1 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.

3.1.1 Certificate of Amendment to Certificate of Incorporation,
dated and filed June 3, 1991. Incorporated by reference to
Exhibit 3.1.1 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994.

3.1.2 Certificate of Amendment to the Certificate of Incorporation
filed on June 2, 1994. Incorporated by reference to Exhibit
3.1.2 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994.

3.1.3 Certificate of Designations, Preferences and Rights of the
Class B Preferred Stock (Series 1), filed November 30, 1994.
Incorporated by reference to Exhibit 3.1.3 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994.

3.2 Bylaws of Registrant, as amended to date. Incorporated by
reference to Registrant's registration statement on Form S-1
(File No. 33-40153), Exhibit 3.2.

4.1.1 Amended and Restated Revolving Credit Agreement dated as of
February 13, 1998 among the Issuer, Saint Louis Bread
Company, Inc., ABP Midwest Manufacturing Co., Inc.,
BankBoston, N.A., USTrust and BankBoston N.A. as Agent.
Incorporated by reference to Exhibit 4.1.1 to the Company's
Annual Report on Form 10-K for the year ended December 27,
1997.

4.1.2 Amended and Restated Revolving Credit Note dated as of
February 13, 1998 of the Issuer, Saint Louis Bread Company,
Inc. and ABP Midwest Manufacturing Co., Inc. in favor of
BankBoston, N.A. Incorporated by reference to Exhibit 4.1.2
to the Company's Annual Report on Form 10-K for the year
ended December 27, 1997.

4.1.3 Amended and Restated Revolving Credit Note dated as of
February 13, 1998 of the Issuer, Saint Louis Bread Company,
Inc. and ABP Midwest Manufacturing Co., Inc. in favor of
USTrust. Incorporated by reference to Exhibit 4.1.3 to the
Company's Annual Report on Form 10-K for the year ended
December 27, 1997.

4.1.4 First Amendment to Amended and Restated Revolving Credit
Agreement dated as of June 30, 1998.

4.1.5 Second Amendment and Waiver to Amended and Restated
Revolving Credit Agreement dated as of October 14, 1998.

4.1.6 Third Amendment and Waiver to Amended and Restated Revolving
Credit Agreement dated as of January 20, 1999.
</TABLE>

44
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C> <C>
4.1.7 Fourth Amendment to Amended and Restated Revolving Credit
Agreement dated as of March 25, 1999.

4.1.8 Fifth Amendment to Amended and Restated Revolving Credit
Agreement dated as of May 14, 1999. *

4.2 Form of 4.75% Convertible Subordinated Note due 2001.
Incorporated by reference to Registrant's Form 8-K filed
December 22, 1993, Exhibit 4.

10.3.3 Registrant's 1992 Employee Stock Purchase Plan. Incorporated
by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 30, 1995.

10.3.4 Registrant's Formula Stock Option Plan for Independent
Directors and form of option agreement thereunder, as
amended. Incorporated by reference to the Registrant's
Annual Report on Form 10-K for the year ended December 30,
1995.

10.4 Amended and Restated Coffee Supply Agreement by and among
Registrant and Peet's Companies, Inc., Peet's Coffee and
Tea, Inc., and Peet's Trademark Company, dated as of the
26th day of October, 1994. Incorporated by reference to
Exhibit 10.8 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994.

10.5 Indenture of Trust dated as of July 1, 1995 by and between
the Industrial Development Authority of the City of Mexico,
Missouri and Mark Twain Bank, as Trustee. Incorporated by
reference to the Registrant's Annual Report on Form 10-K for
the year ended December 30, 1995.

10.5.1 Loan Agreement dated as of July 1, 1995 by and between the
Industrial Development Authority of the City of Mexico,
Missouri and ABP Midwest Manufacturing Co., Inc.
Incorporated by reference to the Registrant's Annual Report
on Form 10-K for the year ended December 30, 1995.

10.5.2 Promissory Note issued by ABP Midwest Manufacturing Co.,
Inc. in the face amount of $8,741,370. Incorporated by
reference to the Registrant's Annual Report on Form 10-K for
the year ended December 30, 1995.

10.6.1 Employment Agreement between the Registrant and Richard
Postle. Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the year ended December 30, 1995.+

10.6.2 Employment Agreement between the Registrant and Robert Taft.
Incorporated by reference to the Registrant's Annual Report
on Form 10-K for the year ended December 28, 1996.+

10.6.3 Employment Agreement between the Registrant and Maxwell
Abbott. Incorporated by reference to Exhibit 10.6.3 of the
Registrant's Annual Report on Form 10-K for the year ended
December 28, 1996.+

10.6.4 Employment Letter between the Registrant and Samuel Yong.
Incorporated by reference to Exhibit 10.6.4 of the
Registrant's Annual Report on Form 10-K for the year ended
December 28, 1996.+

10.6.5 Employment Letter between the Registrant and William
Moreton.*+

10.6.6 Employment Letter between the Registrant and Michael
Kupstas.*+

10.6.7 Employment Letter between the Registrant and
Thomas Howley.*+
</TABLE>

45
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C> <C>
10.7.1 Form of Stock Purchase Warrant from Au Bon Pain Co., Inc. to
Allied Capital Corporation, Allied Capital Corporation II,
and Capital Trust Investments, Ltd. Incorporated by
reference to Exhibit 10.7.1 of the Registrant's Annual
Report on Form 10-K for the year ended December 28, 1996.

10.7.2 Form of Contingent Stock Purchase Warrant from Au Bon Pain
Co., Inc. to Allied Capital Corporation, Allied Capital
Corporation II and Capital Trust Investments, Ltd.
Incorporated by reference to Exhibit 10.7.2 of the
Registrant's Annual Report on Form 10-K for the year ended
December 28, 1996.

10.7.3 Form of Stock Purchase Warrant from Au Bon Pain Co, Inc. to
Princes Gate Investors, L.P., Acorn Partnership I L.P., PG
Investments Limited, PGI Sweden AB and Gregor Von Open.
Incorporated by reference to Exhibit 10.7.3 of the
Registrant's Annual Report on Form 10-K for the year ended
December 28, 1996.

10.7.4 Registration Rights Agreement dated as of July 24, 1996
among Allied Capital Corporation, Allied Capital Corporation
II, Capital Trust Investments, Ltd., Princes Gate Investors,
L.P., Acorn Partnership I, L.P., PGI Investments Limited,
PGI Sweden AB, Gregor Von Open and Au Bon Pain Co., Inc.,
Incorporated by reference to Exhibit 10.7.4 of the
Registrant's Annual Report on Form 10-K for the year ended
December 28, 1996.

10.8.4 Form of Rights Agreement, dated as of October 21, 1996
between the Registrant and State Street Bank and Trust
Company. Incorporated by reference to the Registrant's
Registration Statement on Form 8-A (File No. 000-19253).

10.9 Bakery Product Supply Agreement by and between Bunge Foods
Corporation and Saint Louis Bread Company, Inc. dated as of
March 23, 1998. Incorporated by reference to Exhibit 10.9 to
the Company's Annual Report on Form 10-K for the year ended
December 27, 1997.

10.10 Bakery Product Supply Agreement by and between Bunge Foods
Corporation and Au Bon Pain Co., Inc. dated as of March 23,
1998. Incorporated by reference to Exhibit 10.10 to the
Company's Annual Report on Form 10-K for the year ended
December 27, 1997.

10.11 Executive Employment Agreement between the Company and Sam
Yong dated June 16, 1998. Incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the period ended
July 11, 1998.+

21 Registrant's Subsidiaries.*

23.1 Consent of PricewaterhouseCoopers L.L.P.*

27 Financial Data Schedule.*
</TABLE>

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

* Filed herewith.

+ Management contract or compensatory plan required to be filed as an exhibit
to this Form 10-K pursuant to Item 14(c).

(b) Form 8-K

No reports on Form 8-K have been filed during the fourth quarter of the
fiscal year ended December 25, 1999.

46
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

<TABLE>
<S> <C> <C>
PANERA BREAD COMPANY

BY: /S/ RONALD M. SHAICH
-----------------------------------------
Ronald M. Shaich
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
</TABLE>

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed by the following persons on
behalf of the registrant and in the capacities and on the date indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ RONALD M. SHAICH Chairman and Chief Executive
------------------------------------------- Officer April 10, 2000
Ronald M. Shaich

/s/ GEORGE E. KANE Director
------------------------------------------- April 10, 2000
George E. Kane

/s/ HENRY J. NASELLA Director
------------------------------------------- April 10, 2000
Henry J. Nasella

/s/ DOMENIC COLASACCO Director
------------------------------------------- April 10, 2000
Domenic Colasacco

/s/ WILLIAM W. MORETON Senior Vice President,
------------------------------------------- Treasurer, and Chief April 10, 2000
William W. Moreton Financial Officer
</TABLE>

47
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C> <C>
2.1 Asset Purchase Agreement by and among Au Bon Pain Co., Inc.,
ABP Midwest Manufacturing Co., Inc. and Bunge Foods
Corporation dated as of February 11, 1998; Amendment to
Asset Purchase Agreement, dated as of March 23, 1998.
Incorporated by reference to Exhibit 2.1 to the Company's
Annual Report on Form 10-K for the year ended December 27,
1997.

3.1 Certificate of Incorporation of Registrant, as amended to
June 2, 1991. Incorporated by reference to Exhibit 3.1 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.

3.2 Bylaws of Registrant, as amended to date. Incorporated by
reference to Registrant's registration statement on Form S-1
(File No. 33-40153), Exhibit 3.2.

4.1.4 First Amendment to Amended and Restated Revolving Credit
Agreement dated as of June 30, 1998.

4.1.5 Second Amendment and Waiver to Amended and Restated
Revolving Credit Agreement dated as of October 14, 1998.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C> <C>
4.1.6 Third Amendment and Waiver to Amended and Restated Revolving
Credit Agreement dated as of January 20, 1999.

4.1.7 Fourth Amendment to Amended and Restated Revolving Credit
Agreement dated as of March 25, 1999.

4.1.8 Fifth Amendment to Amended and Restated Revolving Credit
Agreement dated as of May 14, 1999. *

4.2 Form of 4.75% Convertible Subordinated Note due 2001.
Incorporated by reference to Registrant's Form 8-K filed
December 22, 1993, Exhibit 4.

10.3.3 Registrant's 1992 Employee Stock Purchase Plan. Incorporated
by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 30, 1995.

10.6.1 Employment Agreement between the Registrant and Richard
Postle. Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the year ended December 30, 1995.+

10.6.2 Employment Agreement between the Registrant and Robert Taft.
Incorporated by reference to the Registrant's Annual Report
on Form 10-K for the year ended December 28, 1996.+

10.6.4 Employment Letter between the Registrant and Samuel Yong.
Incorporated by reference to Exhibit 10.6.4 of the
Registrant's Annual Report on Form 10-K for the year ended
December 28, 1996.+

10.6.5 Employment Letter between the Registrant and William
Moreton.*+

10.6.6 Employment Letter between the Registrant and
Michael Kupstas.*+

10.6.7 Employment Letter between the Registrant and
Thomas Howley.*+
</TABLE>

<PAGE>

21 Registrant's Subsidiaries.*

23.1 Consent of PricewaterhouseCoopers L.L.P.*

27 Financial Data Schedule.*
</TABLE>

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

* Filed herewith.

+ Management contract or compensatory plan required to be filed as an exhibit
to this Form 10-K pursuant to Item 14(c).

<PAGE>

Exhibit 4.1.8

- --------------------------------------------------------------------------------
FIFTH AMENDMENT AND CONSENT
TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
- --------------------------------------------------------------------------------

This Fifth Amendment and Consent to Amended and Restated Revolving
Credit Agreement (this "FIFTH AMENDMENT") is made and entered into as of May 14,
1999, by and among AU BON PAIN CO., INC., a Delaware corporation ("ABP"), SAINT
LOUIS BREAD COMPANY, INC., a Delaware corporation ("SAINT LOUIS BREAD"), ABP
MIDWEST MANUFACTURING CO., INC., a Delaware corporation ("ABP MIDWEST", and,
collectively with ABP and Saint Louis Bread, the "BORROWERS"), and BANKBOSTON,
N.A., a national banking association ("BKB") and the other lending institutions
listed on SCHEDULE 1 hereto (collectively with BKB, the "BANKS"), and
BANKBOSTON, N.A. as agent for the Banks (in such capacity, the "AGENT"),
amending certain provisions of the Amended and Restated Revolving Credit
Agreement dated as of February 13, 1998 (as amended by the First Amendment to
Amended and Restated Revolving Credit Agreement dated as of June 30, 1998, the
Second Amendment and Waiver to Amended and Restated Revolving Credit Agreement
dated as of October 14, 1998, the Third Amendment and Waiver to Amended and
Restated Revolving Credit Agreement dated as of January 20, 1999, the Fourth
Amendment and Waiver to Amended and Restated Revolving Credit Agreement dated as
of March 25, 1999 and as further amended and in effect from time to time, the
"CREDIT AGREEMENT") by and among the Borrowers, the Banks and the Agent. Terms
not otherwise defined herein which are defined in the Credit Agreement shall
have the same respective meanings herein as therein.

WHEREAS, immediately prior to the effectiveness of this Fifth
Amendment, the BKB has accepted an assignment of the entire interest of USTrust
under the Credit Agreement pursuant to that certain Assignment and Acceptance
(the "Assignment") of even date herewith, by and among BKB, USTrust, the
Borrowers, and the Agent;

WHEREAS, simultaneously with the effectiveness of this Fifth Amendment
the Borrowers are closing a transaction (the "Sale") to sell the part of their
business generally known as Au Bon Pain (the "Sale"); and

WHEREAS, the Borrowers, the Banks and the Agent have agreed to modify
certain terms and conditions of the Credit Agreement as specifically set forth
in this Fifth Amendment;

NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

<PAGE>

-2-

SECTION 1. AMENDMENT TO SECTION 1 OF THE CREDIT AGREEMENT. Section 1.1 of
the Credit Agreement is hereby amended as follows:

(a) by deleting the definition of "ABP" in its entirety and hereby
replacing it with the following definition:

ABP. Au Bon Pain Co., Inc., a Delaware corporation, PROVIDED that the
name of such corporation may change to Panera Bread Company.

(b) by deleting the definition of "Applicable Margin" in its entirety
and hereby replacing it with the following definition:

APPLICABLE MARGIN. The Applicable Margin for Base Rate Loans shall be
the percentage 0.75%. The Applicable Margin for Eurodollar Loans shall
be the percentage 2.25%.

BANKS. BankBoston and the other lending institutions listed on
SCHEDULE 1 hereto, any other Person who becomes an assignee of any
rights and obligations of a Bank pursuant to Section 17 and any
other permitted successors or assigns.

(d) by deleting the definition of "Borrowers" in its entirety and
hereby replacing it with the following definition:

BORROWERS. Au Bon Pain Co., Inc., a Delaware corporation, provided
that the name of such corporation may change to Panera Bread Company,
Saint Louis Bread Company, Inc., a Delaware corporation, and ABP
Midwest Manufacturing Co., Inc., a Delaware corporation, collectively,
and if the context requires, individually.

(e) by deleting the definition of "Consolidated EBITDA" in its entirety
and hereby replacing it with the following definition:

CONSOLIDATED EBITDA. For any specified period, the sum of (a)
Consolidated Net Income for such period, PLUS (b) to the extent
deducted from the calculation of Consolidated Net Income, income tax
expenditures for such period, PLUS (c) to the extent deducted in the
calculation of Consolidated Net Income for such period, Consolidated
Total Interest Expense for such period, PLUS (d) to the extent
deducted in the calculation of Consolidated Net Income for such
period, the aggregate amount of depreciation and amortization for such
period, PLUS (e) to the extent deducted in the calculation of
Consolidated Net Income for such period, other extraordinary
nonrecurring non-cash charges, in each case determined on a
consolidated basis for the Borrowers

<PAGE>

-3-

and their Subsidiaries in accordance with generally accepted
accounting principles.

(f) by deleting the definition of "Consolidated Net Income (or
Deficit)" in its entirety and hereby replacing it with the following definition:

CONSOLIDATED NET INCOME (OR DEFICIT). For any specified period, the
net income (or deficit) (after taxes) of the Borrowers and their
Subsidiaries determined on a consolidated basis in accordance with
generally accepted accounting principles after eliminating all
extraordinary nonrecurring non-cash items of income, all extraordinary
nonrecurring non-cash items of expense, and all inter-company items.

(g) by deleting from the definition of "Maturity Date" the date
"December 31, 1999" and replacing it with "December 31, 2000".

SECTION 2. AMENDMENT TO SECTION 2 OF THE CREDIT AGREEMENT. Section 3 of
the Credit Agreement is hereby amended as follows:

(a) Section 2.2 of the Credit Agreement is hereby amended by deleting
the text "at the per annum rate of 0.375%" in the first sentence thereof and
replacing it with the text "at the per annum rate of 0.5%"

(b) Section 2.5 of the Credit Agreement is hereby amended by deleting
the text of clause (a) in the first sentence thereof in its entirety and
replacing it with the following:

(a) on the same day of the proposed Drawdown Date of any Base Rate
Loan and

(c) Section 2.8 of the Credit Agreement is hereby amended by deleting
the second sentence thereof in its entirety and replacing it with the following:

The Borrowers shall give the Agent notice of any proposed repayment of
Revolving Credit Loans, no later than 11:00 a.m. (Boston time) (a) on
the date of any proposed repayment of Base Rate Loans and (b) at least
three (3) Eurodollar Business Days' notice of any proposed repayment
of Eurodollar Rate Loans, in each case specifying the proposed date of
repayment and the principal amount to be paid, which notice, if not in
writing, shall be promptly confirmed in writing.

SECTION 3. AMENDMENT TO SECTION 3 OF THE CREDIT AGREEMENT. Section 3
of the Credit Agreement is hereby amended as follows:

(a) Section 3.1(a) of the Credit Agreement is hereby amended by
deleting the text of clause (x) in its entirety and replacing it with the
following:

<PAGE>

-4-

(x) the sum of the aggregate Maximum Drawing Amount and all Unpaid
Reimbursement Obligations shall not exceed $3,000,000 at any one time
and

(b) Section 3.6 of the Credit Agreement is hereby amended by deleting
the text "in advance" after "The Borrowers shall pay" in the first sentence
thereof and replacing it with "quarterly in arrears"

(c) Section 3.6 of the Credit Agreement is hereby amended by deleting
in its entirety the text of clause (i) in the first sentence thereof and
replacing it with the following:

(i) 2.25% per annum of the Maximum Drawing Amount of each Letter of
Credit, or

SECTION 4. AMENDMENT TO SECTION 4 OF THE CREDIT AGREEMENT. Section
4.11 of the Credit Agreement is hereby amended by deleting the text of Section
4.11 in its entirety and replacing it with the following:

SECTION 4.11. INTEREST ON OVERDUE AMOUNTS. Overdue principal and
(to the extent permitted by applicable law) interest on the Revolving
Credit Loans and all other overdue amounts payable hereunder or under
any of the other Loan Documents shall bear interest compounded daily
and payable on demand at a rate per annum equal to two percent (2.0%)
above the Base Rate until such amount shall be paid in full (after as
well as before judgment).

SECTION 5. AMENDMENT TO SECTION 6 OF THE CREDIT AGREEMENT. Section 6.18
of the Credit Agreement is hereby amended by deleting the date "December 13,
1994" and replacing it with "December 22, 1998".

SECTION 6. AMENDMENT TO SECTION 7 OF THE CREDIT AGREEMENT. Section 7 of
the Credit Agreement is hereby amended as follows:

(a) Section 7.1(g) of the Credit Agreement is hereby amended by
replacing ";" at the end of such clause with "; and";

(b) Section 7.1(h) of the Credit Agreement is hereby amended by
replacing ";" at the end of such clause with ".";

(c) Sections 7.1(i), 7.1(j) and 7.1(k) of the Credit Agreement are
hereby amended by deleting the text of such clauses in their entirety;

(d) Section 7.3(iv) is hereby amended by deleting the text of such
clause in its entirety and replacing it with the following:

(iv) liens in respect of judgments or awards, the Indebtedness with
respect to which is permitted by Section 7.1(f);

<PAGE>

-5-

(e) Section 7.3(viii) is hereby amended by deleting the text of such
clause in its entirety and replacing it with the following:

(viii) [Intentionally omitted];

(f) Section 7.3(ix) is hereby amended by deleting the text of such
clause in its entirety and replacing it with the following:

(ix) liens in respect of purchase money indebtedness permitted under
Section 7.1(h); and

(g) Section 7.4(b) of the Credit Agreement is hereby amended by
replacing ";" at the end of such clause with "; and";

(h) Section 7.4(c) of the Credit Agreement is hereby amended by
replacing ";" at the end of such clause with ".";

(i) Sections 7.4(d) and 7.4(e) of the Credit Agreement are hereby
amended by deleting the text of such clauses in their entirety; and

(j) Section 7.11 of the Credit Agreement is hereby amended by deleting
the text of Section 7.11 in its entirety.

SECTION 7. AMENDMENT TO SECTION 8 OF THE CREDIT AGREEMENT. Section 8 of
the Credit Agreement is hereby amended as follows:
--------- -- -- -- --- ------ ---------

(a) Section 8.1 of the Credit Agreement is hereby amended by deleting
the text of Section 8.1 in its entirety and replacing it with the following:

Section 8.1. MINIMUM ALLOWABLE CONSOLIDATED EBITDA. The Borrower
will not permit Consolidated EBITDA calculated for each fiscal quarter
ending on a date set forth below to be less than the amount set forth
opposite such date in the table below:

<TABLE>
<CAPTION>
----------------------------------------------------------------
FISCAL QUARTER CONSOLIDATED
ENDING EBITDA
----------------------------------------------------------------
<S> <C>
10/02/1999 $1,500,000
----------------------------------------------------------------
12/27/1999 $2,500,000
----------------------------------------------------------------
4/05/2000 $2,500,000
----------------------------------------------------------------
7/01/2000 $2,000,000
----------------------------------------------------------------
9/30/2000 $2,000,000
----------------------------------------------------------------
12/23/2000 $3,000,000
----------------------------------------------------------------
</TABLE>

(b) Section 8.2 of the Credit Agreement is hereby amended by deleting
the text of Section 8.2 in its entirety and replacing it with the following:

<PAGE>

-6-

Section 8.2. MAXIMUM CAPITAL EXPENDITURES. The Borrowers will not
permit Consolidated Capital Expenditures to exceed $25,000,000 for any
period consisting of four (4) consecutive fiscal quarters of the
Borrowers ending on or after October 2, 1999.

(c) Sections 8.3 and 8.4 of the Credit Agreement are hereby amended by
deleting the text of Sections 8.3 and 8.4 in their entirety.

SECTION 8. AMENDMENT TO SECTION 11 OF THE CREDIT AGREEMENT. Section
11 of the Credit Agreement is hereby amended by deleting clause (k) in its
entirety and replacing it with the following:

(k) [Intentionally omitted];

SECTION 9. AMENDMENT TO SECTION 17 OF THE CREDIT AGREEMENT. Section
17 of the Credit Agreement is hereby amended by deleting the last sentence of
Section 17 in its entirety and replacing it with the following:

Each Bank shall have the right to assign or transfer at any time its
rights and benefits and obligations or any portion thereof under this
Credit Agreement or any other Loan Document with the prior written
consent of the Borrowers (unless a Default or Event of Default shall
occur and be then continuing or unless such Bank is required to do so
under applicable laws in which case the prior written consent of the
Borrowers will not be required) and the Agent. Assignments or transfers
of commitment obligations of a Bank which require the consent of the
Borrowers shall be in integral multiples of $5,000,000.

SECTION 10. AMENDMENT TO SCHEDULE 1.1(a) OF THE CREDIT AGREEMENT.
SCHEDULE 1.1(a) of the Credit Agreement is hereby amended by deleting SCHEDULE
1.1(a) in its entirety and replacing it with SCHEDULE 1.1(a) attached hereto.

SECTION 11. CONSENT. Notwithstanding anything to the contrary set
forth in Section 7.6, Section 7.7 or Section 7.9 of the Credit Agreement, ABP
may transfer substantially all of the operating assets, store leases,
contracts and liabilities associated with ABP's bakery cafe food service
business concept generally known as Au Bon Pain (but in any event excluding
the capital stock of Saint Louis Bread) to its wholly-owned subsidiaries, ABP
Holdings, Inc. and ABP Equipment, Inc. and ABP Equipment, Inc. may merge into
ABP Holdings, Inc. immediately prior to the sale of the common stock of ABP
Holdings, Inc. to ABP Corporation, a Delaware corporation controlled by
Bruckman, Rosser, Sherill & Co., Inc., a private equity investment firm based
in New York, pursuant to the terms of a Stock Purchase Agreement dated August
12, 1998 and amended on October 28, 1998, by and among ABP, ABP Holdings,
Inc. and ABP Corporation and may sell the common stock of ABP Holdings, Inc.
to ABP Corporation as provided in such Stock Purchase Agreement for a
purchase price equal to $73,000,000 as adjusted as provided therein; PROVIDED

<PAGE>

-7-

that the proceeds of the sale of such common stock (net of any costs and
expenses payable by the Borrowers in connection with such sale and the principal
amounts of any indebtedness secured by such assets and required to be repaid in
connection with such sale) shall be applied by the Borrowers to repay the
outstanding principal amount of the Revolving Credit Loans and any and all
amounts due under the terms of this Fifth Amendment before such proceeds are
used to pay any Subordinated Debt.

SECTION 12. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers
hereby repeats, on and as of the date hereof, each of the representations and
warranties made in ss.5 of the Credit Agreement as though such representations
and warranties refer specifically to such Borrower, except to the extent of
changes resulting from transactions contemplated or permitted by this Fifth
Amendment or the Credit Agreement and except to the extent that such
representations and warranties relate expressly to an earlier date; provided,
that all references therein to the Credit Agreement shall refer to such Credit
Agreement as amended hereby. No Default or Event of Default has occurred and is
continuing under the Credit Agreement after giving effect to this Fifth
Amendment.

SECTION 13. PAYMENT OF 4.75% SUBORDINATED CONVERTIBLE NOTES. No Bank
shall have any obligation to make any Revolving Credit Loan and the sum of the
aggregate Maximum Drawing Amount and all Unpaid Reimbursement Obligations for
all Letters of Credit issued after the date hereof shall not exceed $500,000
unless and until the prior payment in full or other satisfaction of all amounts
owing under the 4.75% Subordinated Convertible Notes and the Agent has received
evidence in form and substance satisfactory to the Agent that the obligations of
the Borrowers under such 4.75% Subordinated Convertible Notes have been
terminated.

SECTION 14. TRANSITIONAL ARRANGEMENTS. All commitment and other fees
which accrued prior to the date hereof under the Credit Agreement but which
remain unpaid on the date hereof shall be calculated as of the date hereof (PRO
RATED in the case of any fractional periods) and paid by the Borrowers hereunder
in accordance with the method and on the dates specified in the Credit Agreement
and shall be allocated PRO RATA between USTrust and BKB in accordance with their
respective "Commitment Percentages", as defined in the Credit Agreement as in
effect immediately prior to the effectiveness of the Assignment. All interest on
Revolving Credit Loans which accrued prior to the date hereof under the Credit
Agreement will be calculated and paid on the date hereof and shall be allocated
PRO RATA between USTrust and BKB in accordance with their respective "Commitment
Percentages", as defined in the Credit Agreement as in effect immediately prior
to the effectiveness of the Assignment.

<PAGE>

-8-

SECTION 15. CHANGE OF NAME. The Borrowers shall deliver to the Agent
certified copies of any documents filed with or received
from the State of Delaware related to a change of any Borrower's name.

SECTION 16. EFFECTIVENESS. The effectiveness of this Fifth Amendment
shall be subject to the satisfaction of the following
conditions precedent:

Section 16.1 LOAN DOCUMENTS. This Fifth Amendment shall have
been duly executed and delivered to the Agent by each of the parties to
the Credit Agreement.

Section 16.2. NO DEFAULT. No Default or Event of Default has
occurred and is continuing under the Credit Agreement immediately after
giving effect to this Fifth Amendment.

Section 16.3. PAYMENT OF FEES. The Borrowers shall have paid
to the Agent any and all fees payable in connection with the
transactions contemplated by this Fifth Amendment.

Section 16.4. IMPERIO TERM LOAN AGREEMENT. All amounts owing
to USTrust in connection with the Assignment and Release dated as of
May 13, 1999 by USTrust to ABP Holdings, Inc and ABP shall have been
paid in full and all obligations of USTrust under the Imperio Term Loan
Agreement shall have been extinguished.

Section 16.5. USTRUST ISSUED LETTERS OF CREDIT. The Agent
shall have received evidence satisfactory to USTrust and the Agent that
all letters of credit issued by USTrust have either been returned or
the beneficiaries to such letters of credit will not submit drafts
thereon.

Section 16.6. APPLICATION OF PROCEEDS FROM SALE. The Agent
shall have received (a) payoff letters from all other lenders being
paid on the date hereof, indicating the amount of the debt obligations
of the Borrowers to be discharged on the date hereof and an
acknowledgement by such exiting lenders that upon receipt of such
funds the Borrowers will be released from any and all obligations due
to such exiting lenders; and (b) a memorandum from the Borrowers
outlining the flow of funds received as proceeds from the Sale.

SECTION 17. RATIFICATION, ETC. Except as expressly amended hereby, the
Credit Agreement and all documents, instruments and agreements related thereto,
including, but not limited to the Loan Documents, are hereby ratified and
confirmed in all respects and shall continue in full force and effect. The
Credit Agreement and this Fifth Amendment shall be read and construed as a
single agreement. All references in the Credit Agreement or any related
agreement or instrument to the Credit Agreement shall hereafter refer to the
Credit Agreement as amended hereby.

<PAGE>

-9-

SECTION 18. NO WAIVER. Nothing contained herein shall constitute a
waiver of, impair or otherwise affect any Obligations, any other obligation of
the Borrowers or any rights of the Agent or the Banks consequent thereon.

SECTION 19. COUNTERPARTS. This Fifth Amendment may be executed in one
or more counterparts, each of which shall be deemed an original but which
together shall constitute one and the same instrument.

SECTION 20. GOVERNING LAW. THIS FIFTH AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Fifth
Amendment as a document under seal as of the date first above written.

AU BON PAIN CO., INC.

By: /s/ Ronald M. Shaich
-----------------------------------------
Name: Ronald M. Shaich
Title: Chairman/Chief Executive Officer

SAINT LOUIS BREAD COMPANY, INC.

By: /s/ Ronald M. Shaich
-----------------------------------------
Name: Ronald M. Shaich
Title: Chairman/Chief Executive Officer

ABP MIDWEST MANUFACTURING CO., INC.

By: /s/ Ronald M. Shaich
-----------------------------------------
Name: Ronald M. Shaich
Title: Chairman/Chief Executive Officer

BANKBOSTON, N.A.
INDIVIDUALLY AND AS AGENT

By: /s/ Thomas P. Tansi
-----------------------------------------
Name: Thomas P. Tansi
Title: Vice President

<PAGE>

SCHEDULE 1.1(a)

REVOLVING CREDIT COMMITMENTS

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COMMITMENT
LENDER COMMITMENT PERCENTAGE
- --------------------------------------------------------------------------------
<S> <C> <C>
BANKBOSTON, N.A. $10,000,000.00 100%
100 Federal Street
Boston, Massachusetts 02110
Telefax Number: (617) 434-4426
Telex: 940581
Answerback: BOSTONBK BSN
Attention: Thomas P. Tansi, 01-09-05
- --------------------------------------------------------------------------------
</TABLE>

<PAGE>

Exhibit 10.6.5

September 29, 1998

Mr. William Moreton
15921 Presswick Lane
Granger, IN 46530

Dear Bill,

Based on your experience, background presented and the excellent impression that
you have given us, Au Bon Pain Co., Inc., is pleased to offer you the position
of Chief Financial Officer, St. Louis Bread, reporting directly to Ron Shaich,
Chairman and Chief Executive Officer. We would like this position to be
effective on or before Monday, October 19, 1998.

Your salary for this position will be payable upon continued employment at the
weekly rate of $5,288.46 ($275,000 per annum). Your next scheduled review, based
on your performance and/or the profitability of the Company will be no later
than January 15, 2000; any applicable adjustments will be contingent on business
conditions and/or your performance. In addition, your compensation will include
for fiscal year 1999, a $25,000 guaranteed bonus payable upon continued
employment on March 17, 2000.

- Consideration for 150,000 stock options which vest to you over a
period of 5 years. The price per share depends on the value per share
on the date of the Board of Director's meeting.

- You will receive a car allowance of $96.16 per week.

- A severance agreement to cover the involuntary termination of your
employment by the Company other than "for cause" will provide 12
months of salary continuance at the annual base compensation rate plus
car allowance and medical and/or dental benefits in effect at the time
of termination. Incentive payments are not included as part of your
severance agreement, new options cease being awarded on your last day
worked, and existing options cease to vest. Further, severance is paid
out weekly, mitigated by future employment and provided after a signed
release from you. A document for your signature will follow to confirm
this portion of your offer, which will include a non-compete clause.

- We will provide you with a relocation assistance package which
includes three househunting trips, including transportation, lodging,
meals and auto rental for a period not to exceed four days/three
nights; movement of household goods, final move trip and a $15,000.00
allowance to cover such expenses as additional househunting trips,
temporary living, temporary storage, and costs

<PAGE>

associated with home purchase or rental in your new location. This
allowance includes any gross up applicable for taxes. Enclosed is Au
Bon Pain's relocation policy and guidelines. Please review them and
Leanne Strong will contact you to assist you with your move and answer
any questions. This relocation package will contain a provision that
you reimburse Au Bon Pain a prorated portion of your relocation
expenses should you voluntarily resign your employment with ST. Louis
Bread within one year of your start date.

As a full-time St. Louis Bread employee, you will be eligible to participate in
the following benefits: medical, dental, life insurance, and short term
disability, Employee Stock Purchase Plan and a 401(k) Plan (eligible after one
year of service). The waiting periods and premiums related to these benefits and
specific information about plan content will be explained during the orientation
process. Our benefit and insurance package is subject to ongoing review and
modification from time to time. You will receive an Employee Handbook at your
benefits orientation which will explain our vacation and holiday schedules. St.
Louis Bread is a nonsmoking work facility. If you have specific questions about
our benefits, please contact Maria Mastrangelo of our Human Resource group at
extension 1331.

This offer is contingent on your ability to provide employment eligibility
documentation as required by law and outlined on the enclosed information.
Nothing in this letter is intended, or should be construed to execute a contract
for a definite term. Either you or the Company are free to terminate the
employment relationship at any time. Please indicate your acceptance of this
offer by signing and returning one original of this letter no later than Friday,
October 2, 1998, after which time this offer will expire.

We believe that your background and experience will provide a solid foundation
for success with St. Louis Bread. We are extremely enthusiastic about our future
growth and expansion and anticipate that you will be an important factor in that
growth. If you have any questions about the enclosed information, please let me
know. Once again, Bill, we welcome you to St. Louis Bread and we look forward to
your participation, energy, and contributions.

Sincerely,

/s/ Ronald M. Shaich /s/ Mariel Clark
Ron Shaich Mariel Clark
Chairman and Senior Vice President
Chief Executive Officer Human Resources

I have read and accept the provisions as outlined above.

10/1/98 /s/ William W. Moreton
- ------- ----------------------
Date William W. Moreton

<PAGE>

Exhibit 10.6.6

December 22, 1995

Mr. Michael J. Kupstas
5049 West 128 Terrace
Leawood, KS 66209

Dear Mike,

Based on your experience, background presented and excellent impression that you
have given us, Au Bon Pain Co., Inc. is pleased to offer you the position of
Vice President of Operations - St. Louis Bread Co. We would like you to start on
or before February 5, 1996, you will report directly to Richard Postle,
President, St. Louis Bread Co.

Your base salary for this position will be payable upon continued employment at
the weekly rate of $2,884.62. Your next scheduled review, based on your
performance and/or the profitability of the Company will be prorated by date of
hire and no later than, January 15, 1997. In addition, your compensation will
include the following.

- You will be included in our incented contingent Pay for Performance
Program for 1997. This program incorporates both a dollar payout and
stock option grant that rewards you for the completion and quality of
agreed upon objectives. Your eligibility for the monetary portion is
at a plan of 20% ($30,000.00) with a maximum potential of 40%
($60,000.00) of your base rate and can be paid out in full or any
portion thereof, including 0% according to the attached plan
description highlights. This amount will be payable on or before March
15, 1998 and you must be employed as a full time employee on this date
to be eligible for the payout. For fiscal year 1996, you will receive
a guaranteed bonus of a plan at 20% ($30,000.00) with a maximum
potential of 40% ($60,000.00) of your base rate to be paid on or
before March 15, 1997 and you must be employed as a full time employee
on this date to be eligible for the payout.

- Consideration for Stock Options of 11,500 shares, at the next Board of
Director's meeting following your date of hire. The price per share
depends on the value per share on your exact start date.

- You will receive a car allowance of $96.16 per week.

- A one year term of employment with a severance package of one year to
cover the involuntary termination of your employment by the Company
other than "for cause" will provide one year of salary continuance at
the annual base

<PAGE>

compensation rate plus car allowance and medical and/or dental
benefits in effect at the time of termination. Incentive payments are
not included as part of your severance agreement and new options cease
being awarded on your last day worked. Further, severance is paid out
weekly, mitigated by future employment and provided after a signed
release from you. A document for your signature will follow to confirm
this portion of your offer.

- Au Bon Pain will reimburse you for twelve (12) months of your COBRA
expenses. Please let us know what your expenses will be for an
individual plan or if you require selecting a "family" plan.

- We will provide you with a relocation assistance package which
includes one househunting trip, including transportation for you and
your family; lodging, meals and auto rental for a period not to exceed
four days/three nights; movement of household goods, closing costs
associated with the closing of your existing home and a $35,000.00
allowance to cover such expenses as additional househunting trips,
temporary living, temporary storage, costs associated with home
purchase or rental in your new location. This allowance includes any
gross up applicable for taxes. Enclosed is Au Bon Pain's relocation
policy and guidelines. Please review them and Leanne Strong in Human
Resources will contact you to assist you with your move and answer any
questions. This relocation package will contain a provision that you
reimburse Au Bon Pain a pro-rated portion of your relocation expenses
should you voluntarily resign your employment with Au Bon Pain within
one year of your start date.

As part of your orientation process, we would like you to train extensively in
our retail environment. A training schedule will be developed for you within the
next couple of weeks and forwarded to you at your home.

As a full-time Au Bon Pain employee, you will be eligible to participate in the
following benefits: medical, dental, life insurance, short term disability,
Employee Stock Purchase Plan and 401(k) Plan. The waiting periods and premiums
related to these benefits and specific information about plan content will be
explained during the orientation process. Our benefit and insurance package is
subject to ongoing review and modification from time to time. You will receive
an Employee Handbook at your benefits orientation which will explain our
vacation and holiday schedules. Au Bon Pain is a nonsmoking work facility. If
you have specific questions about our benefits, please contact Joanne Dobson of
our Human Resource group at extension 1331.

This offer is contingent on your ability to provide employment eligibility
documentation as required by law and outlined on the enclosed information.
Nothing in this letter is intended, or should be construed to execute a contract
for a definite term. In addition, Au Bon Pain has a ninety (90) day probationary
period. Either you or the Company are free to terminate the employment
relationship at any time. Please indicate your acceptance of this offer by
signing and returning one original of this letter and the enclosed forms no
later than Friday, January 12, 1996, after which time this offer will expire.

<PAGE>

We believe that your background and experience will provide a solid foundation
for success with Au Bon Pain. We are extremely enthusiastic about our future
growth and expansion and anticipate that you will be an important factor in that
growth. If you have any questions about the enclosed information, please let me
know. Once again, Mike, we welcome you to Au Bon Pain and we look forward to
your participation, energy, and contributions.

Sincerely,

Mariel Clark
Senior Vice President
Human Resources

I have read and accept the provisions as outlined above.

- -------------- ---------------------------------
Date Michael J. Kupstas

<PAGE>

Exhibit 10.6.7

September 22, 1992

Mr. Thomas Howley
19 Grove Street
Winchester, MA 01890

Dear Tom,

Based on your experience, background presented and the excellent impression that
you have given us, Au Bon Pain Co., Inc., is pleased to offer you the position
of Vice President and General Counsel. Your salary will be payable upon
continued employment at the weekly rate of $1,538.46 and a car allowance of
$500.00 will be paid to you monthly. We would like you to start on or before
November 2, 1992 and you will report directly to Louis Kane and Ronald Shaich,
Co-Chairmen.

This offer is contingent on your ability to provide employment eligibility
documentation as required by law and outlined on the enclosed information. In
addition, Au Bon Pain has a ninety (90) day probationary period.

As a full-time Au Bon Pain employee you will be eligible to participate in the
following benefits: medical, dental, life insurance, short term disability, long
term disability, an Employee Stock Purchase Plan and a 401(k) Plan. The waiting
periods and premiums related to these benefits and specific information about
plan content will be explained during the orientation process. Our benefit and
insurance package is subject to ongoing review and modification from time to
time. Vacation time is earned semiannually, based on date of hire and length of
service. As a Vice President of Au Bon Pain, you will be considered for stock
options valued at $200,000, at the next Board of Director's meeting. The price
per share and corresponding number of shares granted depends on the value per
share on your exact start date.

As discussed, you will be eligible to participate in a bonus program starting in
January 1993, the details of which will be discussed at that time. The bonus
calculation will be based on your performance and the profitability of the
Company for fiscal year 1993.

On October 2 and 3, 1992, we will be holding an off-site Operations Committee
meeting in Maine. Your attendance at this meeting would be very beneficial to
you and your peers. We will plan on your attendance, accordingly a map has been
enclosed. If you have questions about this or are unable to attend, please call
me.

Tom, we believe that your background and experience will provide a solid
foundation for success with Au Bon Pain. We are extremely enthusiastic about our
future growth and expansion and anticipate that you will be an important factor
in that growth.

Nothing in this offer letter is intended, or should be construed to execute a
contract for a definite term. Either you or the Company are free to terminate
the employment relationship at any time.

Please indicate your acceptance of this offer by signing and returning one
original of this letter no later than Wednesday, October 7, 1992, after which
time this offer will expire. If you have any questions about Au Bon Pain or the
enclosed offer, please do not hesitate to call.

Once again, Tom, we would like to welcome you to Au Bon Pain and we look forward
to your participation, energy, and contributions.

Sincerely,

/s/ Mariel Clark
- ----------------------
Mariel Clark
V.P. Human Resources

Enclosure (2)

I have read and accept your offer of employment as outlined above.

10/1/92 /s/ Thomas R. Howley
- ------- -----------------------
Date Thomas R. Howley

<PAGE>

Exhibit 21

SUBSIDIARIES

NAME PERCENTAGE (VOTING POWER) OWNED
- ---- -------------------------------
Panera, Inc. 100%
ABP Midwest Manufacturing Co., Inc. 100%
Panera Bread Foundation, Inc. 100%
Pain Francais, Inc. 75%

<PAGE>
23.1 CONSENT OF PRICEWATERHOUSECOOPERS LLP*

We consent to the incorporation by reference in the registration statements
of Panera Bread Company and Au Bon Pain Co., Inc. on form S-8
(File Nos. 33-41989, 33-41990, 33-46682, 33-46683, 33-96510, 33-96506,
333-01668, 333-31855, 333-31857) and Form S-3 (File Nos. 33-82292 and 333-80927)
of our report dated March 19, 2000 on our audit of the consolidated financial
statements and financial statement schedules of Panera Bread Company as of
December 25, 1999, and for each of the three years in the period ended
December 25, 1999, which report is included in the Annual Report on Form 10-K.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP

Saint Louis, Missouri
April 6, 2000

<PAGE>
<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-END> DEC-25-1999
<CASH> 1,936,053
<SECURITIES> 0
<RECEIVABLES> 2,882,629
<ALLOWANCES> 196,623
<INVENTORY> 1,879,887
<CURRENT-ASSETS> 12,557,647
<PP&E> 65,445,286
<DEPRECIATION> 18,254,717
<TOTAL-ASSETS> 91,028,405
<CURRENT-LIABILITIES> 15,771,264
<BONDS> 0
0
0
<COMMON> 1,215
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 91,028,405
<SALES> 156,738,394
<TOTAL-REVENUES> 171,359,116
<CGS> 52,445,319
<TOTAL-COSTS> 167,640,553
<OTHER-EXPENSES> 709,939
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,744,996
<INCOME-PRETAX> 263,628
<INCOME-TAX> 510,417
<INCOME-CONTINUING> (246,789)
<DISCONTINUED> 0
<EXTRAORDINARY> 382,428
<CHANGES> 0
<NET-INCOME> (629,217)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)

</TABLE>