Case4:08-cv-00271 Document1 Filed 02/26/2008...

Case 4:08-cv-00271 Document 1 Filed 02/26/2008 of 31

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURIST. LOUIS DIVISION

SUE TRACHET, Individually and On Behalf of All )Others Similarly Situated, )

Plaintiff, )

vs. )

PANERA BREAD CO., RONALD M. SHAICH,MARK E. HOOD and JEFFREY W. KIP, )

Defendants.

CIVIL ACTION NO.

CLASS ACTION COMPLAINT

JURY TRIAL DEMANDED

Plaintiff, Sue Trachet ("Plaintiff'), alleges the following based upon the investigation by

Plaintiffs counsel, which included, among other things, a review of the defendants' public

documents, conference calls and announcements made by defendants, United States Securities

and Exchange Commission ("SEC") filings, wire and press releases published by and regarding

Panera Bread Co. ("Panera" or the "Company"), securities analysts' reports and advisories about

the Company, and information readily available on the Internet, and Plaintiff believes that

substantial additional evidentiary support will exist for the allegations set forth herein after a

reasonable opportunity for discovery.

NATURE OF THE ACTION AND OVERVIEW

1. This is a federal class action on behalf of purchasers of Panera's securities

between November 1, 2005 and July 26, 2006, inclusive (the "Class Period"), seeking to pursue

remedies under the Securities Exchange Act of 1934 (the "Exchange Act").

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2. Panera owns and franchises bakery-cafes under the Panera Bread Co. and Saint

Louis Bread Co. names. The Company operates as three business segments : the Company-owned

bakery-cafe operations segment, the franchise operations segment, and the fresh dough

operations segment. The Company's revenues consist of franchise royalties and fees, fresh

dough sales to franchisees , and sales at its bakery-caf .

3. On July 17, 2006, Barron's published an article which detailed some of the

financial difficulties Panera was facing. Specifically, the article discussed increased competition,

as well as existing Panera stores losing customers to new Panera locations that were being

opened at a rapid pace. Panera's same-store sales gains had declined in recent months, bottoming

out in the low single digits from a high of 10.2%. The Company' s revenue and earnings per

share were rising, but the return on capital was declining, resulting in a decline in shareholder

value.

4. In response to this news, the Company's shares declined over the next two days.

The shares declined $ 1.39 per share , or 2.24 percent, to close on July 17, 2006 at $60.71 per

share, on unusually heavy trading volume. The following day the Company' s shares declined an

additional $1.30, or 2.14 percent, to close on July 18, 2006 at $59.41, on unusually heavy trading

volume.

5. Then on July 26, 2006, the Company shocked investors when it announced its

second quarter financial results and stated that its projected results for the period were below

trend (approximately three percentage points below second quarter two-year comps). The

Company further indicated that sales for the second half of the year were uncertain and would be

influenced by a new pizza product the Company recently introduced. Moreover, the Company

indicated that it had incurred higher startup expenses than in previous quarters, partly due to the

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introduction of the new product.

6. Upon the release of this news, the Company's shares declined an additional $7.34

per share, or 12.38 percent, to close on July 26, 2006 at $51.93 per share, on unusually heavy

trading volume.

7. The Complaint alleges that, throughout the Class Period, defendants failed to

disclose material adverse facts about the Company's financial well-being, business relationships,

and prospects. Specifically, defendants failed to disclose or indicate the following: (1) that the

Company was experiencing fierce competition from similar dining establishments, such that the

Company would not be able to maintain growth and earnings trends and projections ; (2) that the

Company's strategy of rapidly expanding locations was causing a decline in sales per restaurant

and a lower return on capital because business was being drawn away from existing stores; (3)

that the Company's business was trending negatively because of both slow growth and rising

expenses ; and (4) that, as a result of the foregoing, the Company's statements about its financial

well-being and future business prospects were lacking in any reasonable basis when made.

8. As a result of defendants' wrongful acts and omissions , and the precipitous decline

in the market value of the Company's securities, Plaintiff and other Class Members have suffered

significant losses and damages.

JURISDICTION AND VENUE

9. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of

the Exchange Act, (15 U.S.C. §§ 78j(b) and 78t(a)), and Rule lOb-5 promulgated thereunder (17

C.F.R. § 240.1Ob-5).

10. This Court has jurisdiction over the subject matter of this action pursuant to

Section 27 of the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331.

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11. Venue is proper in this Judicial District pursuant to Section 27 of the Exchange

Act, 15 U.S.C. § 78aa and 28 U.S.C. § 1391(b). Many of the acts and transactions alleged

herein, including the preparation and dissemination of materially false and misleading

information, occurred in substantial part in this Judicial District . Additionally, Panera's principal

executive offices are located within this Judicial District.

12. In connection with the acts, conduct and other wrongs alleged in this Complaint,

defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,

including but not limited to, the United States mails, interstate telephone communications and

the facilities of the national securities exchange.

PARTIES

13. Plaintiff, Sue Trachet, as set forth in the accompanying certification, incorporated

by reference herein, purchased Panera's securities at artificially inflated prices during the Class

Period and has been damaged thereby.

14. Defendant Panera is a Delaware corporation with its principal executive offices

located at 6710 Clayton Road, Richmond Heights, Missouri.

15. Defendant Ronald M. Shaich ("Shaich") was, at all relevant times, the Company's

Chief Executive Officer ("CEO"), and Chairman of the Board of Directors.

16. Defendant Mark E. Hood ("Hood") was, at relevant times , the Company's Chief

Financial Officer ("CFO") until he resigned on or about May 5, 2006.

17. Defendant Jeffrey W. Kip ("Kip") was, at relevant times, the Company's Senior

Vice President and Chief Financial Officer since May 5, 2006. Prior to that, Kip was Vice

President of Finance and Planning.

18. Defendants Shaich, Hood and Kip are collectively referred to hereinafter as the

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"Individual Defendants." The Individual Defendants, because of their positions with the

Company, possessed the power and authority to control the contents of Panera's reports to the

SEC, press releases and presentations to securities analysts, money and portfolio managers and

institutional investors, i.e., the market. Each defendant was provided with copies of the

Company's reports and press releases alleged herein to be misleading prior to, or shortly after,

their issuance and had the ability and opportunity to prevent their issuance or cause them to be

corrected. Because of their positions and access to material non-public information available to

them, each of these defendants knew that the adverse facts specified herein had not been

disclosed to, and were being concealed from, the public, and that the positive representations

which were being made were then materially false and misleading. The Individual Defendants

are liable for the false statements pleaded herein, as those statements were each "group-

published" information, the result of the collective actions of the Individual Defendants.

SUBSTANTIVE ALLEGATIONS

Background

19. Panera Bread Company owns and franchises bakery-cafes under the Panera Bread

Co. and Saint Louis Bread Co. names. The Company operates as three business segments: the

Company-owned bakery-cafe operations segment, the franchise operations segment, and the

fresh dough operations segment . The Company's revenues consist of franchise royalties and

fees, fresh dough sales to franchisees , and sales at its bakery-caf .

Materially False and MisleadingStatements Issued During the Class Period

20. The Class Period begins on November 1, 2005. On this day, the Company issued

a press release entitled "Panera Bread Reports 36% Increase in Third Quarter Net Income and

Raises 2005 Target." Therein, the Company, in relevant part, stated:

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Case 4:08-cv-00271 Document 1

Business Outlook

Filed 02/26/2008 of 31

Fourth Quarter and Full Year 2005

The Company today raised its fourth quarter 2005 earnings perdiluted share target to be $0.48 to $0.49. If this target isaccomplished it would result in fiscal 2005 full year earnings perdiluted share of $1.62 to $1.63, an increase of 30% from 2004results. The fourth quarter target assumes fourth quarter system-wide comparable bakery-cafe sales growth of 5.25% to 5.75%which is significantly higher than the Company's prior fourthquarter 2005 comp target of 2.5% to 4.0%. The Company hasraised its fourth quarter comp target based on its presentexpectation that comparable bakery-cafe sales for the first fourweek period of quarter four (4 weeks ending November 1, 2005)will be in the range of 7.7% to 8.2%. The Company expects fourthquarter system-wide average weekly sales of $39,400 to $40,400and expects operating weeks in the range of 10,150 to 10,200. TheCompany expects new bakery-cafe openings in thefourth quarterwill be 54 (24 company and 30 franchise), a reduction from itsprior target. The Company adjusted its fourth quarter openingtarget as a result of delays in certain of its scheduled openings.

2006

The Company is today establishing its initial target for fiscal 2006earnings per diluted share at $1.97 to $2.01. This 2006 EPS targetis stated prior to implementation of SFAS No.123R, "Share BasedPayment," which requires the Company to begin expensing stockoptions in fiscal 2006. The Company anticipates the impact ofexpensing options in 2006 will lower EPS by $0.12 to $0.13 in2006, resulting in targeted EPS for 2006 in the range of $1.84 to$1.89 inclusive of option expense. The Company anticipates it willadopt SFAS 123R prospectively. The impact of option expense inprior years, as reported under SFAS 123 in the footnotes to theCompany's financial statements, is estimated to be $0.15 per sharein 2005, and was $0.10, $0.06, and $0.05 in 2004, 2003 and 2002,respectively.

The assumptions on key metrics underlying the 2006 target arenew bakery-cafe development of 150 to160 (70 to 75 companyand 80 to 85 franchise), comparable bakery-cafe sales growth of2.5% to 4.5% (equivalent to 2 year comps of approximately 10-12%), average weekly sales of $38,800 to $39,800 and operatingweeks of48,500 to 49,000. [Emphasis added.]

21. On December 7, 2005, the Company issued a press release entitled "Panera Bread

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Reports System-Wide Comparable Bakery-Cafe Sales Increased 7.7% For the Four Weeks

Ended November 29, 2005 and Raises Full Year 2005 Earnings Per Diluted Share Target to

$1.63 to $1.64." Therein, the Company, in relevant part, stated:

The 7.9% increase in system-wide comparable sales for the8 weeks ended November 29, 2005 exceeded the Company'stargeted growth range of 6.8% to 7.1% for thefirst eight weeks ofthe fourth quarter. As a result, the Company today raised its fullyear 2005 earnings per diluted share target to be $1.63 to $1.64,representing an increase of30% to 31% over 2004 results.

The Company reported its sales results earlier than in prior periodsas its internal systems have become more efficient. As a result, theCompany expects to report sales information on a more timelybasis in 2006 compared to 2005. The calendar for 2006 reportingdates will be released when the Company reports sales for the fourweeks ended December 27, 2005.

Included above are Company, franchised, and system-widecomparable bakery-cafe sales increases. System-wide sales are anon-GAAP financial measure that includes sales at all Companyand franchise bakery-cafes, as reported by franchisees.Management uses system-wide sales information internally inconnection with store development decisions, planning, andbudgeting analyses, and believes it is useful in assessing consumeracceptance of the Company's brand and facilitating anunderstanding of financial performance as the Company'sfranchisees pay royalties and contribute to advertising pools basedon a percentage of their sales. [Emphasis added.]

22. On January 5, 2006, the Company issued a press release entitled "Panera Bread

Reports Fourth Quarter Revenues Increased 33.1% and System-Wide Comparable Bakery-Cafe

Sales Increased 7.2% For the Four Weeks Ended December 27, 2005 and Raises Fiscal Year

2005 Earnings Per Share Target to $1.64 to $1.65 Per Diluted Share." Therein, the Company, in

relevant part, stated:

The 7.7% increase in system-wide comparable sales for the12 weeks ended December 27, 2005 exceeded the Company'stargeted growth range of 5.25% to 5.75% for the fourth quarter.The Company believes that comparable bakery-cafe sales growth

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in its final period of the year was artificially aided by the beneficialtiming of the Sunday Christmas holiday.

The Company now expects earnings per diluted share for thetwelve weeks ended December 27, 2005 of $0.50 to $0.51,resulting in fiscal year 2005 earnings per diluted share of $1.64to $1.65, representing an increase of31% to 32% overfiscal year2004 results.

During the fourth quarter of 2005, 53 new bakery-cafes wereopened (26 Company and 27 franchise), 1 bakery-cafe was closed,and 21 bakery-cafes were acquired by the Company from afranchisee . [Emphasis added.]

23. On February 1, 2006, the Company issued a press release entitled "Panera Bread

Reports System-Wide Comparable Bakery-Cafe Sales Increased 10.2% For the Four Weeks

Ended January 24, 2006 " Therein, the Company, in relevant part, stated:

Company-owned comparable bakery-cafe sales increases are basedon sales for bakery-cafes that have been in operation and companyowned for at least 18 months . Franchised comparable bakery-cafesales increases are based on sales for bakery-cafes that have beenin operation for at least 18 months . Both company-owned andfranchised comparable bakery-cafe sales exclude closed locations.

As previously reported, the Company has adopted a new quarterlycalendar beginning fiscal 2006 whereby each of its quarters willinclude 13 weeks (4 week, 5 week, and 4 week period progressionsin each quarter), rather than its previous quarterly calendar whichhad 16 weeks in the first quarter and 12 weeks in the second, thirdand fourth quarters (4 week period progressions in each quarter).

24. On February 9, 2006, the Company issued a press release entitled "Panera Bread

Reports Financial Results for the Fiscal Year and Fourth Quarter Ended December 27, 2005 and

Raises 2006 Earnings Per Share Target." Therein, the Company, in relevant part, stated:

Panera Bread Company (Nasdaq:PNRA) today reported thatearnings per diluted sharefor the fiscal year ended December 27,2005 increased 32% to $1.65 compared to $1.25per diluted sharefor the fiscal year ended December 25, 2004. Net income for thefiscal year ended December 27, 2005 increased 35% to$52.2 million compared to $38. 6 million for the fiscal year endedDecember 25, 2004.

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For the twelve weeks ended December 27, 2005, earnings perdiluted share increased 13% to $0.51 compared to $0.45 for thetwelve weeks ended December 25, 2004. Net income for thetwelve weeks ended December 27, 2005 increased 15% to$16.2 million compared to $14.0 million for the twelve weeksended December 25, 2004.

Fourth Quarter 2005 Business Review

The Company's key metrics showed continued strength in thefourth quarter . Revenues increased 33% from the same period inthe prior year. The increased revenues resulted from the 139 newbakery-cafes opened system-wide since the end of 2004 combinedwith the system-wide increase in comparable bakery-cafe sales of7.7% (7.4% company and 7.8% franchise ). Fourth quarter system-wide average weekly sales increased 6.4% to $40,594, and system-wide operating weeks totaled 10,201. During the quarter, theCompany opened 53 bakery-cafes (26 company and 27 franchise).The 26 company bakery-cafe openings compares to 15 opened inthe same period in the prior year.

As indicated in the Company ' s prior releases , the pre-openingcosts and inefficiencies associated with the increased openingscombined with higher market research costs were expected toresult in slower growth in earnings in the fourth quarter. Fourthquarter net income and earnings per diluted share of $16 .2 millionand $0.51 , respectively, exceeded the Company's expectations atthe start of the quarter ($0.48 to $0 .49) as a result of the strength ofcomparable bakery-cafe sales. However, the higher than expectedsales and earnings in the fourth quarter also led to increasedincentive compensation costs during the quarter.

2006 Business Outlook

The Company today raised its full year fiscal 2006 earnings perdiluted share target to $1.91 to $1. 95 (including $0.13 for optionexpense), an increase of26% to 28% from comparable proforma2005 results (including footnote option expense of $0.13). Thisincrease in targeted EPS is based on upward adjustments intargeted ranges on the company's key metrics. The Company todayhas raised its 2006 system-wide comparable sales growth target to4.0% to 6.0% (equivalent to 2 year comps of approximately 12%to 14%). Additional assumptions on 2006 key metrics include newbakery-cafe development of 150 to 160 bakery-cafes (70 to 75

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company and 80 to 85 franchise), average weekly sales of $39,200to $40,200, and operating weeks of 48,500 to 49,000.

The 2006 EPS target is stated consistent with the implementationof SFAS No.123R, "Share Based Payment," which requires theCompany to begin expensing stock options in fiscal 2006. TheCompany anticipates the impact of expensing options in 2006 willlower EPS by $0.13 in 2006 (reflected in target). The Companyanticipates it will adopt SFAS 123R prospectively effectiveDecember 28, 2005. The impact of option expense in prior years,as reported under SFAS 123 in the footnotes to the Company'sfinancial statements, was $0.13, $0.10, $0.06, and $0.05 per sharein 2005, 2004, 2003, and 2002, respectively.

As previously disclosed, the Company will adopt a new quarterlycalendar (4-5-4) in 2006 whereby each of its quarters will include13 weeks, rather than its current calendar which has 16 weeks inthe first quarter and 12 weeks in the second, third, and fourthquarters. Supplemental information presenting the Company'sunaudited pro forma consolidated statements of operations andmargin analysis for each of the quarters of fiscal 2005 conformedto the 2006 quarterly presentation is attached as Schedule II. TheCompany intends to show pro forma results for 2005, in addition tohistorical results, for quarterly comparisons in 2006.

The Company is today setting an earnings per diluted share targetfor the first quarter of 2006 (which include the 13 weeks endingMarch 28, 2006) of $0.45 to $0.46 (including $0.03 for optionexpense), an increase of 25% to 28% from pro forma comparableresults for the 13 weeks ended March 29, 2005. Pro forma resultsfor the 13 weeks ended March 29, 2005 were $0.36 per dilutedshare (including footnote option expense of $0.03). Actual firstquarter results for 2005 (which included 16 weeks and three days)were $0.44 per diluted share.

The first quarter target assumes system-wide comparable salesgrowth of 8.0% to 9.0%, system-wide average weekly sales of$38,800 to $39,300, and system-wide operating weeks of 11,475 to11,525. Bakery-cafe openings are expected to be 23 (9 companyand 14 franchise) compared to 24 (11 company and 13 franchised)in the comparable 13 week period in 2005.

Ron Shaich, chairman and chief executive officer commented, "In2005 our EPS increased 32% over 2004. Since 2001 our earningsper share has grown at a compounded rate of 39%. This halfdecade long record ofperformance is reflective of the strength ofour concept and demonstrates the vitality of our growing

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national brand We are excited by the quick start to 2006, and aremore confident than ever ofour ability to deliver a year of26% to28% EPS growth as we continue to develop, execute andfurtherinnovate the Panera Bread brand " [Emphasis added.]

25. On March 8, 2006, the Company issued a press release entitled "Panera Bread

Reports System-Wide Comparable Bakery-Cafe Sales Increased 7.9% For the Five Weeks Ended

February 28, 2006."

26. On April 5, 2006, the Company issued a press release entitled "Panera Bread

Reports First Quarter Revenues Increased 35% and System-Wide Comparable Bakery-Cafe

Sales Increased 9.3% For the Four Weeks Ended March 28, 2006." Therein, the Company, in


Panera Bread Company (Nasdaq:PNRA) today reported thatrevenue increased 35% to $194 million for thefirst quarter endedMarch 28, 2006 from $144 million in the comparable period of2005. Bakery-cafe sales accounted for $155 million ofconsolidated revenues while franchise royalties and fees and freshdough sales to franchisees accounted for $39 million ofconsolidated revenues for the first quarter of 2006. [Emphasisadded.]

27. On April 13, 2006, Panera filed its Form 8-K with the SEC, which included a

letter by Defendant Shaich to shareholders, sent with the Company's Annual Report. The letter,

in relevant part, stated:

2006 OUTLOOK

For 2006, we are targeting earnings per share of $1.91 to $1.95including the impact of expensing options , which we adoptedeffective December 28, 2005. If we attain these targets , we wouldgenerate EPS growth of 26% to 28% including the expensing ofoptions in both 2005 and 2006.

Our EPS target is based on our individual targets for key metrics.In 2006 we are targeting 150 to 160 new bakery-cafe openings(70-75 Company-owned and 80-85 franchise-operated), averageweekly sales of $39,200 to $40,200, and comparable bakery-cafesales of4% to 6%. I am pleased to say we are off to a great start

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in the first quarter of 2006, with system-wide same store salesgrowth of 9% (8.9% for Company-owned locations and 9.1 % forfranchise-operated locations). [Emphasis added.]

28. On April 25, 2006, the Company issued a press release entitled "Panera Bread

Reports First Quarter EPS of $0.47 and Raises 2006 EPS Target to $1.97 to $2.00." Therein, the

Company, in relevant part, stated:

Business Outlook - Fiscal 2006

The Company today established a second quarter earnings perdiluted share target of $0.44 to $0. 45, an increase of47% to 50%from comparable second quarter 2005 results ($0.30 inclusive offootnote stock option expense in 2005). The second quarter targetassumes an increase in comparable bakery-cafe sales of 3.0% to4.0%. The Company expects that comparable sales growth for thefour weeks ending April25, 2006 will be 2.6% to 3.0% and istargeting comparable sales growth for the remainder of thesecond quarter of 3.0% to 4.5%. It is important to note that thelater Easter holiday in 2006 compared to 2005 negatively impactedsales for the four weeks ended April 25, 2006 by an estimated1.5% to 2.0% as normal operating hours are reduced on Easter.The Company is targeting second quarter average weekly sales of$38,600 to $39,100 and expects operating weeks in the range of11,900 to 11,950. Bakery-cafe openings in the second quarter aretargeted at 40 (17 company and 23 franchise), compared to 25 (13company and 12 franchise) in the comparable 2005 quarter.

The Company today raised its fiscal 2006 full year earnings perdiluted share target to $1.97 to $2.00, which if achieved representsan increase of 30% to 32% from comparable 2005 results ($1.52inclusive of footnote stock option expense in 2005). The increasein the 2006 target is a result of the strength of year to date resultscombined with an increase in expected full year system-widecomparable sales growth to 4.5% to 6.5%. Average weekly salesfor full year 2006 are now expected to be in the range of $39,500to $40,500 and operating weeks in the range of 48,500 to 49,000.Bakery-cafe openings in 2006 are expected to be 150 to 160 (70 to75 company-owned and 80 to 85 franchise-operated).

Ron Shaich, chairman and chief executive officer commented,"We are pleased to be able to raise our 2006 EPS target for thesecond time. The strength of our first quarter 2006 comparablesales growth, confidence in our 2006 development plan and ouroutlook for the remainder of the year have allowed us to raise

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our full year earnings per diluted share target to $1.97 to $2.00,which would represent an increase of 30% to 32% fromcomparable 2005 results. " [Emphasis added.]

29. On June 7, 2006, the Company issued a press release entitled "Panera Bread

Reports System-Wide Comparable Bakery-Cafe Sales Increased 3.0% For the Five Weeks Ended

May 30, 2006." Therein, the Company, in relevant part, stated:

In 2006, Easter Sunday was on April 16, which occurred duringthe four week period ended April 25, 2006. In 2005, Easter Sundaywas on March 27, which occurred in our first quarter of 2005 (thefour week period ended March 29, 2005). This shiftin Eastertiming negatively impacted comparable bakery-cafe sales for thenine weeks ended May 30, 2006 by approximately 0.5% to 1.0%based on past holiday results, as normal bakery-cafe operatinghours are reduced on Easter. [Emphasis added.]

30. On July 6, 2006, the Company issued a press release entitled "Panera Bread

Reports Second Quarter Revenues Increased 30% and System-Wide Comparable Bakery-Cafe

Sales Increased 3.9% For the Four Weeks Ended June 27, 2006." Therein, the Company, in


Panera Bread Company (Nasdaq:PNRA) today reported thatrevenue increased 30% to $197 million for the second quarterended June 27, 2006from $152 million in the comparable periodof 2005. Bakery-cafe sales accounted for $157 million ofconsolidated revenues while franchise royalties and fees and freshdough sales to franchisees accounted for $40 million ofconsolidated revenues for the second quarter of 2006. [Emphasisadded.]

31. The statements contained in 1120-30 were materially false and misleading when

made because defendants failed to disclose or indicate the following: (1) that the Company was

experiencing fierce competition from similar dining establishments , such that the Company

would not be able to maintain growth and earnings trends and projections; (2) that the

Company's strategy of rapidly expanding locations was causing a decline in sales per restaurant

and a lower return on capital because business was being drawn away from existing stores; (3)

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that the Company's business was trending negatively because of both slow growth and rising

expenses ; and (4) that, as a result of the foregoing, the Company's statements about its financial

well-being and future business prospects were lacking in any reasonable basis when made.

The Truth Begins to Emerge

32. On July 17, 2006, investors were shocked by an article printed in Barron 's entitled

"Running Low on Yeast?" Therein, the article, in relevant part, stated:

Panera Bread, the fast-growing bakery-cafe chain, has seen thefuture and it's called Crispani. In May, at its first-ever meeting withWall Street analysts, the company announced the roll-out of aflatbread pizza that it plans to sell only after 4 p.m., in a bid todraw dinnertime diners. If all goes appetizingly, expect Crispani tobe on the menu in 75% of the company's 900-plus cafes by yearend.

Panera says the pizzas, which will cost around $8 or $9 apiece,depending on toppings, could give a 3%-to-5% lift to the annualsales of each of its outlets, which typically gross near $40,000 aweek and last year generated $1.5 billion systemwide.

"It is a very upscale product, and the first salvo in our effort toboost unit sales during the evening," says Ron Shaich, PaneraBread's co-founder and chief executive. "It's a natural extension ofour bread business."

Dough, in all its guises, seems to be a Panera specialty.Systemwide sales , encompassing those at 319 company-owned and578 franchised cafes, have more than tripled in the past five years,and are expected to approach $2 billion by the end of 2006. Profitshave more than quadrupled in the same span, to $52.2 million, or$1.52 a share, in 2005 (including stock-option expensing), and thecompany believes they could jump by 30% to 32%, to $1.97 to $2a share, this year. Analysts are lookingforprofits of$2.46 a sharein 2007.

Not surprisingly, Panera's shares also have been on a tear,rocketing more than 435% since 2001, to a recent split-adjusted61.25. That compares with a decline in the same period of 6% inthe Standard & Poor's 500 stock index and a 60% gain in the DowJones Restaurants & Bars Index.

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Yet signs are emerging that Panera's torrid growth has begun toslow. Same-store-sales gains, or sales increases at units open atleast 18 months, have cascaded in recent months to the lowsingle digits from a peak of 10.2% in January. Newer stores aredoing less business, on average, than those opened before 2005.And many institutional investors, worried about contraints on thecompany's - and the restaurant industry's -- growth, have beendumping the shares.

Panera (ticker: PNRA), which calls the St Louis suburb ofRichmond Heights, Mo., home, has lost nearly 20% of its valuesince hitting a high of 75.88 April 3. But the stock could fallfurther ifrecent trends persist. Short sellers are betting as much;their ranks swelled by 10.6% in the month ended June 15, to 3.6million of the company's 30 million publicly traded shares, or12% ofthefloat

Even after its recent selloff, Panera fetches a lofty 31 times '06estimated earnings, almost double that of the restaurant-industrygroup.

On the basis of enterprise value (market value plus net debt) toEbitdar (earnings before interest, taxes, depreciation, amortizationand rent), notes Ivan Feinseth, director of research with MatrixInvestment Research in New York, the stock trades for a multipleof 14.6, versus an industry multiple of 9.6. Feinseth, one of threeWall Street analysts with a Sell rating on Panera, sees about 30%downside for the shares and pegs the company's "intrinsic value" inthe low 40s per share.

"The primary reason for our Sell rating is Panera 's decliningreturn on capital, " he says. "The incremental investment intoeach new restaurant opened is yielding a lower and lower return.Revenue and earnings per share keep rising, driven by capitalinvestment, but return on capital is declining. As it falls, thecompany's ability to create shareholder value will decline."

Feinseth calculates return on capital peaked at 13.2% in the 12months ended March 2004, and since has deteriorated to about12.1 %. He expects it to fall to around 11% next year.

Panera is opening restaurants at a rate of about 150 a year, andexpects to reach 1,000 units by fall. At least one analyst, CIBCWorld Markets' John Glass, thinks the company can open 3,000 to3,500 cafes before saturating the market.

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"There's much more demand than we can keep up with," saysShaich, who co-founded the Au Bon Pain cafe chain in 1981 andran it until selling out to British investors in 1998. Shaich keptPanera, which Au Bon Pain had acquired in 1993.

Strong demand, alas, has not translated of late into the roughly7%-to-10% monthly samestore salesgrowth Panera used to see.

In early May, the company reported an increase ofjust 2.8%systemwide in comparablestore sales for the four weeks endedApril 25, a disappointing showing it blamed, in par4 on acalendar shift that placed Easter in April this year instead ofMarch, where itfell in 2005.

A month later, Panera announced a 3% pick-up in May sales atexisting units, missing Wall Street estimates of as much as 4.5%,not to mention year-ago same-store sales growth ofnearly 10%.

Things improved slightly in June, when same-store sales climbed3.9%, but that compared with a gain of 7.9% a year ago.

To be sure, Panera's management isn't entirely wrong to blameindustry trends for the slump in same-store sales . Restaurantearnings generally have been hurt by a slowing economy, highergasoline prices, greater competition, especially in the casual-diningsegment, and higher costs for food and energy.

Just last week, shares of P.F. Chang's China Bistro (PFCB) tanked,dragging down other restaurant shares with them, after thecompany issued a profit warning and posted lower same-storesales . (For more, see page 14.) P.F. Chang, too, was a richly pricedstock whose multiple left little room for disappointment.

Peter Siris, managing director of New York hedge fund GuerillaCapital Management, calls Panera "a great company [that] hasdone very well." But he notes that "it all comes down to supplyand demand, and there 's too much supply around Shareholdersof Panera and other restaurant stocks have been hit with adouble whammy -- increasing competition and chain expansion,along with weakening demand "

So, why didn't Siris sell his Panera shares when he unloaded therest of his retaurant-stock holdings? "If you hadn't called, I wouldbe short," he says, laughing, an allusion to the ethical guidelinesmany fund managers follow to avoid trading inadvertently oninsider knowledge -- such as a potential story in Barron's.

16


In addition to the falloff in Panera 's comparablestore sales,analysts also are disturbed about another trend: a decline in unitvolume, or sales per restaurant. CEO Shaich frequently spotlightsPanera's average unit volume, which he says is among "the highestin the industry -- two-and-a-half times what a Starbucks [SBUX]outlet does, 5% more than a McDonald's [MCD] and 50% [more]than a Wendy's [WEN]."

While that still may be true, the 139 company-run andfranchisedcafes Panera opened in 2005 rang up average weekly sales of$37,497per unit in the first quarter of '06 - below the $39,837 aweek enjoyed by restaurants opened prior to '05, according toBarry Stouffer, an analyst with BB&T Capital Markets.

"Keeping average unit volumes growing in the new stores isessential to maintaining the profitability of all stores, and theoverall success of the company's expansion program," says amoney manager based in Hawaii who trimmed his Panera holdingsby 80% earlier this year.

Declining unit volume is a common problem for fast-growingplayers in the restaurant business, and it is compounded by manycompanies' aggressive expansion plans.

That's true for Panera, too; it plans to open 150-to-160 newoutlets this year. It also explains the importance ofnewproducts,which help to rev sales and earnings.

Just don't look to Crispani to reverse a decline in Panera's high-priced shares in the event sales growth continues to ebb. Thatwould be asking a lot of pizza, even the $9 flatbread kind.[Emphasis added.]

33. On this news, the Company's shares fell $1.39 per share, or 2.24 percent, to close

on July 17, 2006 at $60.71 per share, on unusually heavy trading volume.

34. The repercussions from the news reported in the Baron's article were displayed the

following day as well, as the Company's shares continued to decline, falling $1.30 per share, or

2.14 percent, to close on July 18, 2006 at $59.41 per share, on unusually heavy trading volume.

35. Then on July 26, 2006, Panera issued a press release entitled "Panera Bread

Reports Second Quarter EPS of $0.44." Therein, the Company, in relevant part, revealed:

17


Panera Bread Company (Nasdaq:PNRA) today reported netincome of $14 million, or $0.44 per diluted share, for the secondquarter ended June 27, 2006. As described in the followingparagraphs, the prior year results are not comparable to the currentyear results as the Company adopted a new quarterly reportingcalendar in 2006 and began expensing stock options in 2006.Reported earnings per diluted share for the 12 weeks endedJuly 12, 2005 (second quarter 2005) was $0.33 per share.Comparable calendar earnings per diluted share inclusive offootnote option expense was $0.30 per share for the thirteen weeksended June 28, 2005. Therefore, the increase in earnings per shareinclusive of stock option expense for the second quarter of 2006versus the comparable period in 2005 was 47%.

Business Outlook - Fiscal 2006

Based on its strong operating results, the Company expects toachieve its previously established full year metrics targets. Theyare: full year system-wide comparable bakery-cafe sales growth of4.5% to 6.5%; average weekly sales for full year 2006 in the rangeof $39,500 to $40,500; operating weeks in the range of 48,500 to49,000; and bakery-cafe openings of 150 to 160 (70 to 75company-owned and 80 to 85 franchise-operated). The Companyis particularly pleased with the solid pace of new bakery-cafedevelopment in 2006 after an extremely strong second quarter (43new bakery-cafes in the second quarter of 2006 versus 25 newbakery-cafes in the comparable period of 2005).

Today, the Company is projecting comparable bakery-cafe salesgrowth for period 7 (the four-week period ending July 25, 2006)in the range of1.7% to 1.9%. Period 7projected results are belowrecent trend, and represent two-year comp sales of 9. 6% to 9.8%.This is approximately three percentage points below secondquarter two-year comps. Uncertainty also exists as comp sales forthe second half of the year are expected to be materiallyinfluenced by sales results of the new Crispani® produc4currently in operational rollout.

In addition, the gradual introduction of Crispani® is progressingmore rapidly than planned, bringing certain startup expenses, suchas training and initial marketing costs, forward from the fourthquarter to the third quarter. The earlier operational rollout willlead to somewhat reduced margins in the third quarter, owing toboth the cost shiftbetween quarters in the second half, and thelongerperiod oftime cafes with Crispani® will operate before fullmarketing support, which is planned to begin late in the thirdquarter, is initiated

18


In acknowledgement of this greater uncertainty relative to compsales and Crispani® impact, the Company today widened its fiscal2006 full year earnings per diluted share target to $1.93 to $2.00. Ifachieved, this EPS target would represent an increase of 27% to32% from comparable 2005 results ($1.52 inclusive of footnotestock option expense in 2005).

Finally, the Company today established a third quarter earningsper diluted share target of $0.34 to $0.37, an increase of 0% to9% from comparable third quarter 2005 results ($0.34 inclusiveof footnote stock option expense in 2005). This EPS targetreflects incremental costs of the earlier than planned operationalrollout of Crispani® of $0.02 to $0. 04 per share. In addition, thetarget includes costs of $0.06-$0. 08 per share for training,sampling, and local marketing expenses shiftedforwardfrom thefourth quarter to the third

The guidance for the third quarter target assumes system-widemetrics of comparable bakery-cafe sales growth of 3.0% to4.0%; average weekly sales for the quarter of$38,500 to $39,000;operating weeks in the range of 12,400 to 12,450; and 39 bakery-cafe openings (16 company and 23 franchise).

Ron Shaich, chairman and chief executive officer commented, "Weexpect to meet the targets for all of our 2006 key metrics. As aresult, 2006 is shaping up to be another strong year. We areextremely pleased to be in position to deliver 27% to 32% EPSgrowth while making investments in our business which will fuelour ability to deliver 25% EPS growth for the foreseeablefuture." [Emphasis added.]

36. On this news, the Company's shares fell an additional $7.34 per share, or 12.38

percent, to close on July 26, 2006 at $51.93 per share, on unusually heavy trading volume.

PLAINTIFF'S CLASS ACTION ALLEGATIONS

37. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased Panera's

securities between November 1, 2005 and July 26, 2006, inclusive (the "Class Period") and who

were damaged thereby. Excluded from the Class are defendants, the officers and directors of the

Company, at all relevant times, members of their immediate families and their legal

19


representatives, heirs, successors or assigns and any entity in which defendants have or had a

controlling interest.

38. The members of the Class are so numerous that joinder of all members is

impracticable. Throughout the Class Period, Panera's securities were actively traded on the

National Association of Securities Dealers Automated Quotation ("NASDAQ"). While the exact

number of Class members is unknown to Plaintiff at this time and can only be ascertained

through appropriate discovery, Plaintiff believes that there are hundreds or thousands of

members in the proposed Class. Record owners and other members of the Class may be

identified from records maintained by Panera or, its transfer agent and may be notified of the

pendency of this action by mail, using the form of notice similar to that customarily used in

securities class actions.

39. Plaintiffs claims are typical of the claims of the members of the Class as all

members of the Class are similarly affected by defendants' wrongful conduct in violation of

federal law that is complained of herein.

40. Plaintiff will fairly and adequately protect the interests of the members of the

Class and has retained counsel competent and experienced in class and securities litigation.

41. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the

questions of law and fact common to the Class are:

(a) whether the federal securities laws were violated by defendants' acts as

alleged herein;

(b) whether statements made by defendants to the investing public during the

Class Period misrepresented material facts about the business, operations

20


and management of Panera; and

(c) to what extent the members of the Class have sustained damages and the

proper measure of damages.

42. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as

the damages suffered by individual Class members may be relatively small, the expense and

burden of individual litigation make it impossible for members of the Class to individually

redress the wrongs done to them. There will be no difficulty in the management of this action as

a class action.

UNDISCLOSED ADVERSE FACTS

43. The market for Panera's securities was open, well-developed and efficient at all

relevant times. As a result of these materially false and misleading statements, and failures to

disclose, Panera's securities traded at artificially inflated prices during the Class Period. Plaintiff

and other members of the Class purchased or otherwise acquired Panera's securities relying upon

the integrity of the market price of Panera's securities and market information relating to Panera,

and have been damaged thereby.

44. During the Class Period, defendants materially misled the investing public,

thereby inflating the price of Panera's securities , by publicly issuing false and misleading

statements and omitting to disclose material facts necessary to make defendants' statements, as

set forth herein, not false and misleading. Said statements and omissions were materially false

and misleading in that they failed to disclose material adverse information and misrepresented

the truth about the Company, its business and operations , as alleged herein.

45. At all relevant times , the material misrepresentations and omissions particularized

21


in this Complaint directly or proximately caused or were a substantial contributing cause of the

damages sustained by Plaintiff and other members of the Class. As described herein, during the

Class Period, defendants made or caused to be made a series of materially false or misleading

statements about Panera's financial well-being and prospects. These material misstatements and

omissions had the cause and effect of creating in the market an unrealistically positive

assessment of Panera and its financial well-being and prospects, thus causing the Company's

securities to be overvalued and artificially inflated at all relevant times. Defendants' materially

false and misleading statements during the Class Period resulted in Plaintiff and other members

of the Class purchasing the Company's securities at artificially inflated prices, thus causing the

damages complained of herein.

LOSS CAUSATION

46. Defendants' wrongful conduct, as alleged herein, directly and proximately caused

the economic loss suffered by Plaintiff and the Class.

47. During the Class Period, Plaintiff and the Class purchased Panera's securities at

artificially inflated prices and were damaged thereby. The price of Panera's securities

significantly declined when the misrepresentations made to the market, and/or the information

alleged herein to have been concealed from the market, and/or the effects thereof, were revealed,

causing investors' losses.

SCIENTER ALLEGATIONS

48. As alleged herein, defendants acted with scienter in that defendants knew that the

public documents and statements issued or disseminated in the name of the Company were

materially false and misleading; knew that such statements or documents would be issued or

disseminated to the investing public; and knowingly and substantially participated or acquiesced

22


in the issuance or dissemination of such statements or documents as primary violations of the

federal securities laws. As set forth elsewhere herein in detail, defendants, by virtue of their

receipt of information reflecting the true facts regarding Panera, their control over, and/or receipt

and/or modification of Panera's allegedly materially misleading misstatements and/or their

associations with the Company which made them privy to confidential proprietary information

concerning Panera, participated in the fraudulent scheme alleged herein.

49. Additionally, during the Class Period, and with the Company's securities trading

at artificially inflated prices, Company insiders sold 172,475 shares of the Company's stock for

gross proceeds of $11,416,589, including $8,642, 828 in gross proceeds received by the

Individual Defendants. This trading by Company insiders is evidenced by the following chart:

Date of Trade Inside Trader Number of

Shares

Price per

Share

Gross Proceeds

my 3, 2006 Kish, Thomas C. 850 $67.38 $57,273

June 2, 2006 Kish, Thomas C. 850 $66 $56,100

May 1, 2006 Kish, Thomas C. 850 $73.80 $62,730

May 1, 2006 Maguire, John M. 7,500 $74.09 $555,675

pril 28, 2006 Davis, Scott G. 5,000 $73.45 $367,250

April 28, 2006 Davis, Scott G. 1,250 $73.45 $91,813

February 15, 2006 Shaich, Ronald M. 675 $72.19 $48,728

January 19, 2006 Shaich, Ronald M. 10,000 $64.03 $640,300

January 11, 2006 Shaich, Ronald M. 10,000 $64.03 $640,300

January 4, 2006 Shaich, Ronald M. 10,000 $68.54 $685.400

December 29. 2005 Shaich, Ronald M. 10,000 $66.53 $665,300

December 21, 2005 Shaich, Ronald M. 10,000 $69.51 $695,100



November 29, 2005 Kish, Thomas C. 2,000 $67.22 $134,440

23


November 28, 2005 Shaich, Ronald M. 10,000 $67.86 $678,600

November 21, 2005 Hood, Mark E. 10,000 $67.89 $678,900


November 17, 2005 Franklin, Larry J. 10.000 $62.39 $623,900

November 17, 2005 Shaich, Ronald M. 10,000 $64 $640,000

November 14, 2005 Hood, Mark E. 10,000 $62 $620,000

November 14, 2005 Kish, Thomas C. 1,000 $62.08 $62,080


November 10, 2005 Borland, Mark 12,500 $61 $762,500


TOTAL: 172,475 $11,416,589

Applicability of Presumption of Reliance:Fraud On The Market Doctrine

50. At all relevant times, the market for Panera's securities was an efficient market for

the following reasons, among others:

(a) Panera's securities met the requirements for listing, and were listed and

actively traded on the NASDAQ, a highly efficient and automated market;

(b) As a regulated issuer , Panera filed periodic public reports with the SEC

and the NASDAQ;

(c) Panera regularly communicated with public investors via established

market communication mechanisms, including through regular

disseminations of press releases on the national circuits of major newswire

services and through other wide-ranging public disclosures, such as

communications with the financial press and other similar reporting

services; and

(d) Panera was followed by several securities analysts employed by major

24


brokerage firms who wrote reports which were distributed to the sales

force and certain customers of their respective brokerage firms. Each of

these reports was publicly available and entered the public marketplace.

51. As a result of the foregoing, the market for Panera's securities promptly digested

current information regarding Panera from all publicly-available sources and reflected such

information in the price of Panera's securities. Under these circumstances, all purchasers of

Panera's securities during the Class Period suffered similar injury through their purchase of

Panera's securities at artificially inflated prices and a presumption of reliance applies.

NO SAFE HARBOR

52. The statutory safe harbor provided for forward-looking statements under certain

circumstances does not apply to any of the allegedly false statements pleaded in this Complaint.

Many of the specific statements pleaded herein were not identified as "forward-looking

statements" when made. To the extent there were any forward-looking statements, there were no

meaningful cautionary statements identifying important factors that could cause actual results to

differ materially from those in the purportedly forward-looking statements . Alternatively, to the

extent that the statutory safe harbor does apply to any forward-looking statements pleaded

herein, defendants are liable for those false forward-looking statements because at the time each

of those forward-looking statements was made, the particular speaker knew that the particular

forward-looking statement was false , and/or the forward-looking statement was authorized

and/or approved by an executive officer of Panera who knew that those statements were false

when made.

FIRST CLAIMViolation of Section 10(b) of

The Exchange Act and Rule 10b-5Promulgated Thereunder Against All Defendants

25


53. Plaintiff repeats and realleges each and every allegation contained above as if

fully set forth herein.

54. During the Class Period, defendants carried out a plan, scheme and course of

conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing

public, including Plaintiff and other Class members, as alleged herein ; and (ii) cause Plaintiff and

other members of the Class to purchase Panera's securities at artificially inflated prices. In

furtherance of this unlawful scheme, plan and course of conduct, defendants, and each of them,

took the actions set forth herein.

55. Defendants (i) employed devices, schemes, and artifices to defraud; (ii) made

untrue statements of material fact and/or omitted to state material facts necessary to make the

statements not misleading; and (iii) engaged in acts, practices, and a course of business which

operated as a fraud and deceit upon the purchasers of the Company's securities in an effort to

maintain artificially high market prices for Panera's securities in violation of Section 10(b) of the

Exchange Act and Rule lOb-5. All defendants are sued either as primary participants in the

wrongful and illegal conduct charged herein or as controlling persons as alleged below.

56. Defendants, individually and in concert, directly and indirectly, by the use, means

or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a

continuous course of conduct to conceal adverse material information about Panera's financial

well-being and prospects, as specified herein.

57. These defendants employed devices, schemes and artifices to defraud, while in

possession of material adverse non-public information and engaged in acts, practices, and a

course of conduct as alleged herein in an effort to assure investors of Panera's value and

performance and continued substantial growth, which included the making of, or the

26


participation in the making of, untrue statements of material facts and omitting to state material

facts necessary in order to make the statements made about Panera and its future prospects in

light of the circumstances under which they were made, not misleading, as set forth more

particularly herein, and engaged in transactions, practices and a course of business which

operated as a fraud and deceit upon the purchasers of Panera's securities during the Class Period.

58. Each of the Individual Defendants' primary liability, and controlling person

liability, arises from the following facts: (i) the Individual Defendants were high-level executives

and/or directors at the Company during the Class Period and members of the Company's

management team or had control thereof; (ii) each of these defendants, by virtue of their

responsibilities and activities as a senior officer and/or director of the Company, was privy to and

participated in the creation, development and reporting of the Company' s internal budgets, plans,

projections and/or reports; (iii) each of these defendants enjoyed significant personal contact and

familiarity with the other defendants and was advised of, and had access to , other members of the

Company's management team, internal reports and other data and information about the

Company's finances, operations, and sales at all relevant times; and (iv) each of these defendants

was aware of the Company's dissemination of information to the investing public which they

knew or recklessly disregarded was materially false and misleading.

59. The defendants had actual knowledge of the misrepresentations and omissions of

material facts set forth herein, or acted with reckless disregard for the truth in that they failed to

ascertain and to disclose such facts, even though such facts were available to them. Such

defendants' material misrepresentations and/or omissions were done knowingly or recklessly and

for the purpose and effect of concealing Panera's financial well-being and prospects from the

investing public and supporting the artificially inflated price of its securities. As demonstrated

27


by defendants' overstatements and misstatements of the Company's financial well-being and

prospects throughout the Class Period, defendants, if they did not have actual knowledge of the

misrepresentations and omissions alleged, were reckless in failing to obtain such knowledge by

deliberately refraining from taking those steps necessary to discover whether those statements

were false or misleading.

60. As a result of the dissemination of the materially false and misleading information

and failure to disclose material facts, as set forth above, the market price of Panera's securities

was artificially inflated during the Class Period. In ignorance of the fact that market prices of

Panera's securities were artificially inflated, and relying directly or indirectly on the false and

misleading statements made by defendants, or upon the integrity of the market in which the

securities trades, and/or in the absence of material adverse information that was known to or

recklessly disregarded by defendants, but not disclosed in public statements by defendants during

the Class Period, Plaintiff and the other members of the Class acquired Panera's securities during

the Class Period at artificially high prices and were damaged thereby.

61. At the time of said misrepresentations and omissions, Plaintiff and other members

of the Class were ignorant of their falsity, and believed them to be true. Had Plaintiff and the

other members of the Class and the marketplace known the truth regarding the problems that

Panera was experiencing , which were not disclosed by defendants, Plaintiff and other members

of the Class would not have purchased or otherwise acquired their Panera securities, or, if they

had acquired such securities during the Class Period, they would not have done so at the

artificially inflated prices which they paid.

62. By virtue of the foregoing, defendants have violated Section 10(b) of the

Exchange Act and Rule I Ob-5 promulgated thereunder.

28


63. As a direct and proximate result of defendants' wrongful conduct, Plaintiff and the

other members of the Class suffered damages in connection with their respective purchases and

sales of the Company's securities during the Class Period.

SECOND CLAIMViolation of Section 20(a) of

The Exchange Act Against the Individual Defendants

64. Plaintiff repeats and realleges each and every allegation contained above as if

fully set forth herein.

65. The Individual Defendants acted as controlling persons of Panera within the

meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level

positions, and their ownership and contractual rights, participation in and/or awareness of the

Company's operations and/or intimate knowledge of the false financial statements filed by the

Company with the SEC and disseminated to the investing public, the Individual Defendants had

the power to influence and control and did influence and control, directly or indirectly, the

decision-making of the Company, including the content and dissemination of the various

statements which Plaintiff contends are false and misleading. The Individual Defendants were

provided with or had unlimited access to copies of the Company's reports, press releases , public

filings and other statements alleged by Plaintiff to be misleading prior to and/or shortly after

these statements were issued and had the ability to prevent the issuance of the statements or

cause the statements to be corrected.

66. In particular, each of these defendants had direct and supervisory involvement in

the day-to-day operations of the Company and, therefore, is presumed to have had the power to

control or influence the particular transactions giving rise to the securities violations as alleged

herein, and exercised the same.

29


67. As set forth above, Panera and the Individual Defendants each violated Section

10(b) and Rule 1 Ob-5 by their acts and omissions as alleged in this Complaint. By virtue of their

positions as controlling persons, the Individual Defendants are liable pursuant to Section 20(a) of

the Exchange Act. As a direct and proximate result of defendants' wrongful conduct, Plaintiff

and other members of the Class suffered damages in connection with their purchases of the

Company's securities during the Class Period.

WHEREFORE, Plaintiff prays for relief and judgment, as follows:

(a) Determining that this action is a proper class action under Rule 23 of the

Federal Rules of Civil Procedure;

(b) Awarding compensatory damages in favor of Plaintiff and the other Class

members against all defendants, jointly and severally, for all damages

sustained as a result of defendants' wrongdoing, in an amount to be proven

at trial, including interest thereon;

(c) Awarding Plaintiff and the Class their reasonable costs and expenses

incurred in this action, including counsel fees and expert fees; and

(d) Such other and further relief as the Court may deem just and proper.

30


JURY TRIAL DEMANDED

Plaintiff hereby demands a trial by jury.

Dated:

By:

Respectfully submitted,

DYSART TAYLOR LAY COTTER &MCMONIGLE, P.C.

DON R. LOLLI #562634420 MadisonKansas City, MO 64111Telephone No.: 816-931-2700Fax No.: 816-931-7377Local/Liaison Counsel

SCHIFFRIN BARROWAYTOPAZ & KESSLER, LLPRichard A. ManiskasD. Seamus KaskelaDavid M. Promisloff280 King of Prussia RoadRadnor, PA 19087(610) 667-7706(610) 667-7056 (fax)

Attorneys for Plaintiff

31

Case 4 : 08-cv-00271 Document 1-2 Filed 02/26/2008 Page 1 of 2%JS 44 ( Rev. t 1/04 ) CIVIL COVER SHEETThe JS 44 civil cover sheet and the information contained herein neither re p lace nor supplement the filing and service ofpleadings or other papers as required bylaw, except as providedby local rules ofcourt, This form, approved by the Judicial Conference of the United States in September 1974, is required for the use of the Clerk of Court for the purpose of initiatingthe civil docket sheet , (SEE INSTRUCTIONS ON THE REVERSE OF THE FORM.)

I. (a) PLAINTIFFSSUE TRACHET, Individually and On Behalf of All OthersSimilarly situated,

(b) County of Residence of First Listed Plaintiff Washtenaw Co. , MI

(EXCEPT IN U.S, PLAINTIFF CASES)

(C) Attorney's ( Firm Name , Address, and Telephone Number)

Don R, Lollj - See Attached

DEFENDANTS

PANERA BREAD CO., RONALD M. SHAICH, MARK E. HOODand JEFFREY W. KIP,

County of Residence of First Listed Defendant(IN U.S. PLAINTIFF CASES ONLY)

NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF THE

LAND INVOLVED.

Attorneys Of Known)

11. BASIS OF JURISDICTION (PIace an'x' in One Box Only)

01 U.S. Government 1 3 Federal QuestionPlaintiff (U.S. Government Not a Party)

III. CITIZENSHIP OF PRINCIPAL PARTI ES(Place an'°X" in One Box for Plaintiff(For Diversity Cases Only) and One Box for Defendant)

PTF DEF PTF DEFCitizen of This State q 1 q I Incorporated or Principal Place 0 4 ) 4

of Business In This State

q 2 US. Government q 4 Diversity Citizen of Another State q 2 q 2 Incorporated and Principal Place U 5 O 5Defendant

(Indicate Citizenship of Panics in Isem 111)of Business In Another State

Citizen or Subject of a q 3 Q 3 Foreign Nation q 6 0 6

Forei gn Country

TV_ NATIJR1F OF q1 ITT (pi-, - -y-;. n- P_

CONTRACT TORTS FORFEITURE/PENALTY BANKRUPTCY OTHER STATUTES

0 110 Insurance PERSONAL INJURY PERSONAL INJURY O 610 Agriculture O 422 Appeal 28 USC 158 0 400 State ReapportionmentO 120 Marine q 310 Airplane 0 362 Personal Injury - O 620 Other Food & Drag q 423 Withdrawal q 410 Antitrust

q 130 Miller Act Q 315 Airplane Product Med. Malpractice q 625 Drug Related Seizure 28 USC 157 q 430 Banks and Banking

q 140 Negotiable Instrument Liability q 365 Personal Injury - ofProperty 21 USC 881 q 450 Commerce

q 150 Recovery of Overpayment q 320 Assault, Libel & Product Liability 0 630 Liquor Laws PROPERTY RIGHTS q 460 Deportation

& Enforcement of Judgment Slander q 368 Asbestos Personal q 640 R.R. & Truck q 820 Copyrights O 470 Racketeer influenced and

q 151 Medicare Act q 330 Federal Employers' Injury Product q 650 Airline Reps. q 830 Patent Corrupt Organizations

q 152 Recovery of Defaulted Liability Liability q 660 Occupational q 840 Trademark q 480 Consumer Credit

Student Loans O 340 Marine PERSONAL PROPERTY Safety/Health 0 490 Cable/Sat TV(Excl. Veterans) O 345 Marine Prodnet O 370 Other Fraud O 690 Other 0 810 Selective Service

O 153 Recovery ofOvetpayment Liability © 371 Truth in Lending LABOR SOCIAL SECURITY 0 850 Securities/Commodities/

of Veteran's Benefits O 350 Motor Vehicle Cl 380 Other Personal q 710 Fair Labor Standards q 861 HIA (1395f1) Exchange

q 160 Stockholders' Suits O 355 Motor Vehicle Property Damage Act q 862 Black Lung (923) O 875 Customer Challenge

q 190 Other Contract Product Liability O 385 Property Damage O 720 Labor/Mgmt. Relations q 863 DIWC/DIWW (405(g)) 12 USC 3410

q 195 Contract Product Liability 0 360 Other Personal Product Liability O 730 Labor/Mgmt.Reporting q 864 SSID Title XVI O 890 Other Statutory Actions

q 196 Franchise Injury & Disclosure Act 0 865 RSI (405(g) ) 0 891 Agricultural Acts

REAL PROPERTY CIVIL RIGHTS PRISONER PETITIONS q 740 Railway Labor Act FEDERAL TAX SUITS q 892 Economic Stabilization Act

q 2 10 Land Condemnation 0 441 Voting q 510 Motions to Vacate U 790 Other Labor Litigation 0 870 Taxes (U.S. Plaintiff q 893 Environmental Matters

0 220 Foreclosure q 442 Employment Sentence q 791 Empi. Rel. Inc, or Defendant) q 894 Energy Allocation Act

Ci 230 Rent Lease & Ejectment q 443 Housing/ Habeas Corpus: Security Act q 871 IRS-Third Party q 895 Freedom of Information

D 240 Torts to Land Accommodations q 530 General 26 USC 7609 Act

71 245 Tort Product Liability q 444 Welfare q 535 Death Penalty O 900Appeal of Fee Determination

D 290 All Other Real Property q 445 Amer. w/Disabilities - q 540 Mandamus & Other Under Equal Access

Employment O 550 Civil Rights to Justice

q 446 Amer. w/Disabilities - q 555 Prison Condition q 950 Constitutionality of

Other Stale StatutesO 440 Other Civil Rights

V. ORIGIN ( Place an "X" in One Box Only) Appeal to District

tYivl 02 0 3 04 0 5 Transferred from06

0 7 Judge fromOriginal Removed from Remanded from Reinstated or another district Multidislricl Magistrate

VI. CAUSE OF ACTIONof cause:- Securities Violation

VII. REQUESTED IN CHECK IF THIS IS A CLASS ACTION DEMAND S CHECK YES only if demanded in complaint:

COMPLAINT : UNDER F,R.C.P. 23 To be deto rm i n e d JURY DEMAND : l Yes L7 No

VIII. RELATED CASE (S) Western Washington Labors-Employers PenTr v. Panera, et al.

IF ANY(See instruct to

JUDGE Honorable Audrey G. Fl essig DOCKETNUMBER 04:08-cv-1204 4

DATE SIGNATURE OF ATTORNEY OF RECORD

02/26/2008 I / // Don R. Lolii/Local/ Liaison Counsel

RECEIPT 9 AMOUNT APPLYING IFP JUDGE

Cite the U S Civil Statute under which you are filing (Do not cite j urisdictional statutes unless diversity):Section 10(b) of the Exchange Act, Rule 10b-h, Section 20 (a) of the Exchanqe Act.

MAG. JUDGE

Case 4:08-cv-00271 Document 1-2 Filed 02/26/2008 Page 2 of 2

ATTACHMENT TO CIVIL COVERSHEET

Don R. Lolli, Esq.Dysart Taylor Lay Cotter & McMonigle, P.C.4420 Madison AvenueKansas City, MO 64111Telephone: 816-931-2700Fax: 816-931-7377Local/Liaison Counsel

Richard A. ManiskasD. Seamus KaskelaDavid M. PromisloffSchiffrin Barroway Topaz & Kessler, LLP280 King of Prussia RoadRadnor, PA 19087Telephone: 610-667-7706Fax: 610-667-7056Attorneys for Plaintiff

02/26/2008 14:47 q 644 P003Case 4 : 08-cv-00271 Document 1-3 Filed 02/26/2008 Page 1 of i '

CERTIFICATION

t, Suc Trachet, (" Plaintiff") declare, as to the claims asserted under the federal securities laws, that

1. Plaintiff has reviewed the Complaint, and authorizes it's fling,

2. Piuialiff did not purchase the security that is the subject of this action at the direction of Plaintiffs

counscl or in order to participate in any private action.

3. Plaintiff- is willing to Servo as a representative party on behalf 0f the class, either individually or as part of

a group, including providing testimony at deposition and trial, ifnecessary.

4. Plaintiff's purchase and sale transaction(s) in the Panera Bread Co. (Nasdaq: PNRA) security that isthe subject of this action during the Class Period is/arc as follows:

Type of Security

(common stock,

preferred, option, or

bond)

Number of Shares Bought(H)

Sold(S)

Date price per share

Canmari Stock 1.4981 {8) 1/27/06 $64.08

Common stock 1.3390 (B) 2/28/06 $73,_65

Common Stock 1.3092 (B) 3/28/06 $73.33

Common Stock 1.3086 (8) 4/25/06 $73.36

Common stock 1.4021 (B) 5/23/06 $67.60

Common Struck 3.4163 0 6/27/06 $67.79

Commnn Stiock 1.6151 (B} 7125/06 $59.44

(Please list additional purchase and sale information on a separate sheet of paper, if necessary)

5. Plaintiff has complete authority to bring a suit to recover for investment. losses on behalf ofpurchasers of

the subject securities described herein (including plaintiff, any co-owners, any corporations or other entities, and/or any

beneficial owners).

6. During the, three years prior to the date of this Certification , Plaintiff has not sought to serve or served as

a representative party for a class in an action filed under the federal securities laws except as described

below:

Plaintiff will not accept any payment for serving as a represen tative party on behalf ofthe class beyond

the Plaintiffs pro rats share of any recovery, eXcept spc4 reasonable costs and expenses (including lost wages) directly relating

to the representation of the class as ordered or approved by the Court,

I declare under penalty o['perju that the foregoing is true and correot.

Executedthis day of 2008

SUETRACHE

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