-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AiI805mUbIHCJ5K4CA7lfFdz3EJ/9aQCm7jriHdydL/8LIBhDwHNlHVz4iZOVfot CjY0UyGCBFFbCi39Wxhl3Q== 0001047469-99-016375.txt : 19990427 0001047469-99-016375.hdr.sgml : 19990427 ACCESSION NUMBER: 0001047469-99-016375 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19981226 FILED AS OF DATE: 19990426 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AU BON PAIN CO INC CENTRAL INDEX KEY: 0000724606 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 042723701 STATE OF INCORPORATION: DE FISCAL YEAR END: 1226 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-19253 FILM NUMBER: 99601197 BUSINESS ADDRESS: STREET 1: 19 FID KENNEDY AVE CITY: BOSTON STATE: MA ZIP: 02210 BUSINESS PHONE: 6174232100 MAIL ADDRESS: STREET 1: 19 FID KENNEDY AVE CITY: BOSTON STATE: MA ZIP: 02210 10-K/A 1 FORM 10-K/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 -------------------- FORM 10-K/A -------------------- AMENDMENT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 26, 1998 COMMISSION FILE NUMBER 0-19253 -------------------- AU BON PAIN CO., INC. -------------------- (Exact name of registrant as specified in its charter) DELAWARE 04-2723701 ----------------- ------------ (State or other jurisdiction (I.R.S. employer of incorporation or identification No.) organization) 19 FID KENNEDY AVENUE, BOSTON, MASSACHUSETTS 02210 - ------------------------------------------- ------- (Address of principal executive offices) (Zip Code) (617) 423-2100 ---------------- (Registrant's telephone number, including area code) AMENDMENT NO. 1 The undersigned registrant hereby amends the following items, financial statements, exhibits or other portions of its Annual Report for the fiscal year ended December 26, 1998 on Form 10-K as set forth in the pages attached hereto: 1. Part III: Item 10 - Directors and Executive Officers of the Registrant. 2. Part III: Item 11 - Executive Compensation. 3. Part III: Item 12 - Security Ownership of Certain Beneficial Owners and Management. 4. Part III: Item 13 - Certain Relationships and Related Transactions. 5. Part IV: Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8 K; Section 3. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. BACKGROUND INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS The following table and biographical descriptions set forth information regarding the principal occupation, other affiliations, committee memberships and age, for each Director in office and the executive officers of the Company who are not Directors, based on information furnished to the Company by each director and officer. The following information is as of April 1, 1999 unless otherwise noted.
Term as a Name Age Position With Company Director Ends ---- --- --------------------- ------------- Henry J. Nasella(1)(2)........ 52 Director 2001 George E. Kane(3)............. 94 Director 2001 Louis I. Kane.................. 68 Co-Chairman, Director 2000 James R. McManus(1)(2)........ 65 Director 2000 Ronald M. Shaich............... 45 Co-Chairman, Director, 1999 Chief Executive Officer Francis W. Hatch(1)(2)(3)..... 73 Director 1999
- ---------- (1) Member of the Compensation and Stock Option Committee. (2) Member of the Committee on Nominations. (3) Member of the Audit Committee. GEORGE E. KANE, Director since November 1988. Mr. Kane was a Director of the Company from March 1981 to December 1985 and a Director Emeritus from December 1985 to November 1988. Mr. Kane retired in 1970 as President of Garden City Trust Company (now University Trust Company). Mr. Kane is an Honorary Director of USTrust. Mr. Kane is the father of Louis I. Kane. HENRY J. NASELLA, Director since June 1995. Mr. Nasella has been the President, Chief Executive Officer and Chairman of Star Markets Company, Inc. from September 1994. From January 1994 to September 1994, he was a principal of Phillips-Smith Specialty Venture Capital. From 1988 to July 1993, Mr. Nasella served as the President and Chief Operating Officer of Staples, Inc. Mr. Nasella served as President and Chief Executive Officer of Staples USA (Domestic) from 1992 to July 1993. Mr. Nasella currently is a member of the Board of Visitors of Northeastern University School of Business and a member of the Board of Trustees of Northeastern University Corporation. FRANCIS W. HATCH, Director since February 1983. Mr. Hatch is a trustee of certain private trusts, and also serves as a director of various corporations. -2- LOUIS I. KANE, Director since 1981, co-founder of the Company and Co-Chairman of the Board since January 1988. From January 1988 to May 1994, Mr. Kane served as Co-Chief Executive Officer of the Company. From March 1981 to January 1988, Mr. Kane served as Chairman and Chief Executive Officer of the Company. Beginning in August 1978, Mr. Kane was Chief Executive Officer of Au Bon Pain Corporation, an operator of French bakeries and a predecessor of the Company. JAMES R. MCMANUS, Director since October 1987. Since 1971, Mr. McManus has been Chairman, Chief Executive Officer and founder of Marketing Corporation of America, Westport, Connecticut, a marketing consulting and marketing services firm. On February 1, 1994, Mr. McManus resigned as President and Chief Executive Officer of Business Express, Inc., a regional airline operating in the northeastern United States. On January 22, 1996, a petition for Chapter XI Bankruptcy Protection was filed against Business Express, Inc. in federal Bankruptcy Court in Manchester, New Hampshire by Saab Aircraft of America and two of its operating subsidiaries. RONALD M. SHAICH, Director since 1981, co-founder of the Company, Co-Chairman of the Board since January 1988 and Chief Executive Officer since May 1994. From January 1988 to May 25, 1994, Mr. Shaich served as Co-Chief Executive Officer of the Company. Mr. Shaich is Chairman of the Board of Trustees of Clark University. EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS MAXWELL T. ABBOTT, 52, Senior Vice President Technical Services since June 1995. Prior to that time since 1991, Mr. Abbott was Senior Vice President - Research and Development of Long John Silver's, Inc. MARK A. BORLAND, 46, Executive Vice President since January 1993 and Chief Operating Officer of the Au Bon Pain Business Unit since June 1998. President, Manufacturing Services Division from January 1995 until June 1998. Prior to January 1995 and from May 1992, Mr. Borland served as Executive Vice President of Au Bon Pain Retail Operations and Manufacturing Operations. Prior to May 1992, Mr. Borland served as Vice President Manufacturing Operations of the Company. ANTHONY J. CARROLL, 47, Senior Vice President and Chief Financial Officer since November 1988. Mr. Carroll has also served as Treasurer of the Company since 1992. MARIEL CLARK, 42, Senior Vice President Corporate Human Resources since July 1994. Prior to that and since January 1993, Ms. Clark served as Vice President Human Resources. THOMAS R. HOWLEY, 48, Vice President, General Counsel and Assistant Secretary since January 1993. Prior to that time and for the five years preceding December 28, 1996, Mr. Howley was an attorney with the law firm of Rackemann, Sawyer & Brewster. WILLIAM N. MORETON, 39, Executive Vice President, and Chief Financial Officer of the Saint Louis Bread Business Unit since November 1998. Prior to that time since April 1997, Mr. Moreton served as Executive Vice President and Chief Financial Officer of Quality Dining, Inc. Prior to that time and since October 1992, Mr. Moreton served as Executive Vice President and Chief Financial Officer of Houlihan's Restaurants Inc. -3- RICHARD C. POSTLE, 50, Executive Vice President and President, Saint Louis Bread Company, Inc. since August 1995. From August 1994 through August 1995, Mr. Postle was President and Chief Operating Officer of Checkers Drive-In Restaurants, Inc. From January 1992 through August 1994, Mr. Postle was Senior Vice President, Operations of KFC-USA. From 1988 through December 1991, Mr. Postle was Chief Operating Executive of Brice Foods Inc. SAMUEL H. YONG, 49, Executive Vice President and President Au Bon Pain Business Unit since June 1998. Mr. Yong was Executive Vice President and President, International and Trade Channels Business Unit between January 1994 and June 1998. From April 1989 to December 1993, Mr. Yong served as Managing Director for Burger King Asia Pacific Private, Ltd. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and Directors, and persons who own more than 10% of the Company's outstanding shares of Common Stock to file reports of ownership and changes in ownership with the Securities and Exchange Commission (the "SEC") and Nasdaq. Officers, Directors and greater than 10% stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. In accordance with the provisions of Item 405 of Regulation S-K, to the Company's knowledge, based solely on review of the copies of such reports furnished to the Company and written representations that no other reports were required during the fiscal year ended December 26, 1998, all Section 16(a) filing requirements applicable to its executive officers, Directors and greater than 10% beneficial owners were satisfied, except that Anthony J. Carroll filed a late Form 4 in respect of his exercise of options to purchase 12,500 shares of Class B Common Stock and will file a late Form 5 in respect of the grant to him of options to purchase 22,500 shares of Class A Common Stock. ITEM 11. EXECUTIVE COMPENSATION. COMPENSATION TABLES The following tables set forth information concerning the compensation paid or accrued by the Company during the fiscal years ended December 28, 1996, December 27, 1997 and December 26, 1998, to or for the Company's Chief Executive Officer and its four other most highly compensated executive officers whose salary and bonus combined exceeded $100,000 for fiscal year 1998 (hereinafter referred to as the "named executive officers"). -4- SUMMARY COMPENSATION TABLE
Long-term Annual Compensation Compensation Options/sars All Other Name and ------------ Salary Bonus Other Annual ------------ Compensation Principal Position Year ($) ($) Comp.($) (#) ($) ------------------ ---- --- --- --------- --- --- Ronald M. Shaich 1998 254,807 -- 1,428 -- -- Co-Chairman and Chief 1997 250,000 -- 1,428 400,000 (a) -- Executive Officer 1996 249,519 -- 1,428 -- -- Louis I. Kane 1998 254,807 -- 17,640 -- -- Co-Chairman 1997 250,000 -- 17,640 400,000 (a) -- 1996 249,519 -- 17,640 -- -- Richard C. Postle 1998 316,067 -- 5,096 100,000 -- President, Saint 1997 295,192 75,000 8,846 10,000 -- Louis/Panera 1996 250,000 75,000 7,436 35,000 (b) -- Bread Business Unit Mark A. Borland 1998 214,275 150,000 6,759 25,000 -- Chief Operating Officer, 1997 194,205 -- 5,516 15,000 -- Au Bon Pain Business 1996 188,370 -- 5,939 -- -- Unit Anthony J. Carroll 1998 167,450 125,000 6,487 42,500 -- Senior Vice President, 1997 144,816 -- 5,528 10,000 -- Treasurer and Chief 1996 139,819 18,200 6,392 2,212 -- Financial Officer
(a) Consists of a ten-year option, vesting equally over a five year period beginning June 12, 1997 subject to continued employment. (b) Includes an option for 5,000 shares granted in fiscal 1997 in order to reflect compensation earned for performance in fiscal 1996. -5- AGGREGATED OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants --------------------------- Percent of Potential Realizable Number of Total Annual Rates of Stock Securities Options/ Valued At Assumed Price Underlying Sars Appreciation Options/ Granted to Prices for Option Term Sars Employees Exercise or ($)* Granted in Fiscal Base Price Expiration ------------------------- Name (#) Year (%) ($/Sh) Date 5% 10% ---- --- -------- ------ ---- -- --- Ronald M. Shaich -0- N/A N/A N/A N/A N/A Louis I. Kane -0- N/A N/A N/A N/A N/A Richard C. Postle 100,000 11.9 6.38 6/25/08 401,235 1,016,808 Mark A. Borland 25,000 3.0 10.94 6/25/08 172,003 435,889 Anthony J. Carroll 22,500 2.7 6.38 11/19/08 90,278 228,782 20,000 2.4 10.94 6/25/08 137,602 348,711
* The dollar amounts in this table are the result of calculations at stock appreciation rates specified by the Securities and Exchange Commission and are not intended to forecast actual future appreciation rates of the Company's stock price. AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
Shares Number of Securities Value of Unexercised Acquired Underlying Unexercised In-the-Money Options/SARs on Value Options / Sars At Fy-end (#) At Fiscal Year End ($) Exercise Realized ---------------------------- --------------------------- Name (#) ($) Exercisable / Unexercisable Exercisable / Unexercisable ---- -------- -------- ---------------------------- --------------------------- Ronald M. Shaich....... -- -- 357,330/320,000 0/0 Louis I. Kane.......... -- -- 357,330/320,000 0/0 Richard C. Postle...... -- -- 30,912/160,910 1,875/5,625 Mark A. Borland........ -- -- 36,757/40,661 6,560/0 Anthony J. Carroll..... 12,500 2,562 20,431/59,270 1,235/0
-6- TEN YEAR OPTION/SAR REPRICINGS As discussed in the Report of the Compensation and Stock Option Committee on Executive Compensation, in November 1998 the Company cancelled and reissued options issued in June 1998 to certain individuals including Richard C. Postle a named executive officer. The repricing was based on the market price of the Class A Common Stock on November 19, 1998. The new options were for the same number of shares and retained the original vesting and expiration dates of the old stock options; the new options did not accelerate or extend the time for exercise of any old options. The table below sets forth information with respect to Mr. Postle's options and with respect to all former or current executive officers of the Company concerning their participation in other option repricing programs implemented by the Company during the last ten fiscal years. -7- TEN-YEAR OPTION/SAR REPRICINGS
Number of Securities Length of Original Underlying Option Term Options/sars Market Price of Exercise Price New Remaining At Repriced or Stock At Time At Time of Exercise Date Amended of Repricing or Repricing or Price of Repricing or Name Date (1) (1)(#) Amendment($) Amendments($) ($) Amendment ---- -------- ------ ------------ ------------- --- --------- Ronald M. Shaich..........October 9, 1995 2,448 $7.25 $20.00 $7.25 6.5 October 9, 1995 45,536 $7.25 $23.75 $7.25 7.3 October 9, 1995 1,961 $7.25 $23.75 $7.25 7.5 October 9, 1995 55,092 $7.25 $24.00 $7.25 8.3 October 9, 1995 72,293 $7.25 $15.50 $7.25 9.3 Louis I. Kane.............October 9, 1995 2,448 $7.25 $20.00 $7.25 6.5 October 9, 1995 45,536 $7.25 $23.75 $7.25 7.3 October 9, 1995 1,961 $7.25 $23.75 $7.25 7.5 October 9, 1995 55,092 $7.25 $24.00 $7.25 8.3 October 9, 1995 72,293 $7.25 $15.50 $7.25 9.3 Samuel H. Yong............October 9, 1995 5,808 $7.25 $25.00 $7.25 8.3 October 9, 1995 717 $7.25 $20.25 $7.25 8.5 October 9, 1995 744 $7.25 $20.00 $7.25 8.7 October 9, 1995 1,024 $7.25 $16.69 $7.25 9.0 October 9, 1995 1,105 $7.25 $16.00 $7.25 9.2 October 9, 1995 1,433 $7.25 $13.63 $7.25 9.5 October 9, 1995 12,698 $7.25 $11.88 $7.25 9.6 October 9, 1995 1,717 $7.25 $12.13 $7.25 9.7 October 9, 1995 3,156 $7.25 $7.75 $7.25 10.0 Mark A. Borland...........October 9, 1995 12,837 $7.25 $12.50 $7.25 6.0 October 9, 1995 4,937 $7.25 $19.78 $7.25 7.4 October 9, 1995 2,644 $7.25 $20.00 $7.25 8.6 John P. Billingsley.......October 9, 1995 3,154 $7.25 $19.78 $7.25 7.4 October 9, 1995 5,067 $7.25 $20.00 $7.25 8.6 October 9, 1995 2,638 $7.25 $16.63 $7.25 8.8 October 9, 1995 4,056 $7.25 $11.88 $7.25 9.6 Mariel Clark..............October 9, 1995 6,732 $7.25 $17.00 $7.25 6.6 October 9, 1995 3,154 $7.25 $19.78 $7.25 7.4 October 9, 1995 4,223 $7.25 $20.00 $7.25 8.6 October 9, 1995 5,297 $7.25 $15.38 $7.25 8.9 October 9, 1995 8,112 $7.25 $11.88 $7.25 9.6 David J. Peterman.........October 9, 1995 16,510 $7.25 $15.50 $7.25 9.0 Maxwell T. Abbott.........October 9, 1995 15,741 $7.25 $12.13 $7.25 9.6 Richard C. Postle.........Nov. 19, 1998 100,000 $6.38 $10.94 $6.38 9.6 October 9, 1995 46,822 $7.25 $9.25 $7.25 9.9 Peter E. McNally..........October 9, 1995 16,504 $7.25 $15.50 $7.25 8.9 Anthony J. Carroll........October 9, 1995 3,154 $7.25 $19.78 $7.25 7.4 October 9, 1995 4,223 $7.25 $20.00 $7.25 8.6 October 9, 1995 8,112 $7.25 $11.88 $7.25 9.6 Thomas R. Howley..........October 9, 1995 5,284 $7.25 $19.75 $7.25 7.0 October 9, 1995 3,154 $7.25 $19.78 $7.25 7.4 October 9, 1995 3,378 $7.25 $20.00 $7.25 8.6 October 9, 1995 4,056 $7.25 $11.88 $7.25 9.6
-8- In connection with the 1995 repricing program, the number of options held was also reduced. The following chart shows the number of options outstanding prior to the 1995 repricing, and the number outstanding after such repricing:
Number of Number of Securities Securities Underlying Underlying Options/sars Options/sars Outstanding Prior to Outstanding Name Repricing After Repricing ---- --------- --------------- Ronald M. Shaich.............................................. 5,000 2,448 100,000 45,536 4,211 1,961 110,000 55,092 100,000 72,293 Louis I. Kane................................................. 5,000 2,448 100,000 45,536 4,211 1,961 110,000 55,092 100,000 72,293 Samuel H. Yong................................................ 12,000 5,808 1,234 717 1,250 744 1,498 1,024 1,563 1,105 1,835 1,433 15,152 12,698 2,062 1,717 3,226 3,156 Mark A. Borland............................................... 18,000 12,837 9,100 4,937 4,500 2,644 John P. Billingsley........................................... 5,814 3,154 8,625 5,067 3,909 2,638 4,840 4,056 Mariel Clark.................................................. 11,765 6,732 5,814 3,154 7,188 4,223 7,421 5,297 9,680 8,112 David J. Peterman............................................. 23,226 16,510 Maxwell T. Abbott............................................. 18,961 15,741 Richard C. Postle............................................. 50,000 46,822 Peter E. McNally.............................................. 23,226 16,504 Anthony J. Carroll............................................ 5,814 3,154 7,188 4,223 9,680 8,112 Thomas R. Howley.............................................. 10,127 5,284 5,814 3,154 5,750 3,378 4,840 4,056
-9- THE BOARD OF DIRECTORS AND ITS COMMITTEES The Company's Board of Directors held 13 meetings, including 7 actions by written consent, during fiscal year 1998. The Board of Directors has established an Audit Committee, a Compensation and Stock Option Committee and a Committee on Nominations. The Audit Committee, which held one meeting in fiscal year 1998, meets with the Company's auditors and principal financial personnel to review the results of the annual audit. The Audit Committee also reviews the scope of, and establishes fees for, audit and non-audit services performed by the independent accountants, reviews the independence of the independent accountants and the adequacy and effectiveness of the Company's internal accounting controls. The Audit Committee consists of two members, currently Messrs. George E. Kane and Francis W. Hatch, and is reconstituted annually. The Compensation and Stock Option Committee ("Compensation Committee"), which held 3 meetings in fiscal year 1998, establishes the compensation, including stock options and other incentive arrangements, of the Company's Co-Chairmen and Chief Executive Officer. It also administers the Company's 1992 Equity Incentive Plan and 1992 Employee Stock Purchase Plan. The Compensation Committee consists of three members, currently Messrs. Francis W. Hatch, James R. McManus and Henry J. Nasella, and is reconstituted annually. The Committee on Nominations was established in November 1995 and held one meeting in 1998. The Committee on Nominations consists of three members, currently Messrs. Francis W. Hatch, James R. McManus and Henry J. Nasella, and is reconstituted annually. The Committee on Nominations selects nominees for election as Directors and will consider written recommendations from any stockholder of record with respect to nominees for Directors of the Company. All Directors attended at least 75% of the meetings of the Board and of the committees of which they are members in fiscal 1998. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION None of the members of the Compensation Committee has interlocking or other relationships with other boards or with the Company that would call into question his independence as a Committee member. COMPENSATION OF DIRECTORS Directors who are not employees of the Company receive a quarterly fee ranging from $3,000 to $3,500 for serving on the Board, plus reimbursement of out-of-pocket expenses for attendance at each Board or committee meeting. Under a formula-based stock option plan for independent directors (the "Directors' Plan"), as amended by the stockholders at the 1995 Annual Meeting of Stockholders, each current Director who is not an employee or principal stockholder of the Company ("Independent Director") first elected after the effective date of the Directors' Plan will receive, upon his or her election to the board, a one-time grant of an option to purchase 5,000 shares of Class A Common stock. All Independent Directors who serve as such at the end of each of the Company's fiscal years will receive an option to purchase 5,000 shares of Class A Common Stock. All such options will have an exercise price per share equal to the fair -10- market value of a share of Class A Common Stock as of the close of the market the trading day immediately preceding the grant date, will be fully vested when granted, and will be exercisable for a period of 10 years. REPORT OF THE COMPENSATION COMMITTEE This report is made by the Compensation and Stock Option Committee (the "Compensation Committee") of the Board of Directors, the committee which is responsible for establishing the compensation, including base salary and incentive compensation, for the Company's Co-Chairman of the Board, Louis I. Kane and its Co-Chairman and Chief Executive Officer, Ronald M. Shaich. PHILOSOPHY The Compensation Committee seeks to set the compensation of the Company's Chief Executive Officer and Co-Chairmen at levels which are competitive with companies of similar size in the Company's industry. Messrs. Kane and Shaich share the overall responsibilities of Chairman of the Board of Directors. Mr. Shaich also has the overall responsibilities of Chief Executive and Chief Operating Officer. In addition to his responsibilities as Co-Chairman, Mr. Kane is actively involved in a number of areas of the Company, including real estate development, finance and international franchise development. The Compensation Committee examined compensation structures for the chief executive and chief operating officers of companies in the restaurant industry using generally available source material from business periodicals and other sources, and sought to structure the Chief Executive Officer's and Co-Chairmen's compensation at a competitive level appropriate to the comparable companies' group. The companies examined for purposes of evaluating and setting compensation of the Chief Executive Officer and Co-Chairmen are not necessarily included in the "Standard & Poor's 400 - MidCap Restaurant Index" used in the Stock Performance Graph set forth under "Stock Performance" below. COMPENSATION STRUCTURE The compensation of the Chief Executive Officer and Co-Chairmen is structured to be competitive within the Company's industry and is based upon the general performance of the Company, and is reviewed annually by the Committee. COMPONENTS OF COMPENSATION SALARY. The salary shown in the Summary Compensation Table represents the fixed portion of compensation for the Chief Executive Officer and Co-Chairmen for the year. Changes in salary depend upon overall Company performance as well as levels of base salary paid by companies of similar size in the Company's industry. BONUS. The cash bonus is the principal incentive-based compensation paid annually to the Chief Executive Officer and Co-Chairmen. The Chief Executive Officer and Co-Chairmen will receive a bonus in a predetermined amount if the Company achieves its net income objective for the fiscal year. A higher bonus is paid if the Company exceeds the net income objective by a predetermined percentage. In determining the bonus amount, the Compensation Committee seeks to create an overall compensation package for the Chief Executive Officer and Co-Chairmen which is at the mid-point for comparable companies in the restaurant industry. For 1998, the Company did not achieve the net income objective and, therefore, no cash bonuses were paid to the Chief Executive Officer and Co-Chairmen. -11- The Chief Executive Officer and Co-Chairmen may elect to take their respective bonuses in the form of 10-year, fully vested stock options for that number of shares of the Company's Class A Common Stock that could be purchased with an amount equal to two times the cash value of his bonus. The exercise price of the option equals the fair market value of the Company's Class A Common Stock on the date of grant. STOCK OPTIONS. Neither Mr. Kane nor Mr. Shaich participates in either the Performance-Based Option Program under the Company's 1992 Equity Incentive Plan or the 1992 Employee Stock Purchase Plan. In order to provide what the Compensation Committee believes to be appropriate and continuing long-term incentives to its Chief Executive Officer and Co-Chairmen, and in order to align more fully the interests of the stockholders and the Chief Executive Officer and Co-Chairmen, the Compensation Committee on June 12, 1997 granted, to each of Messrs. Kane and Shaich a 10-year option, vesting equally over a five-year period (subject to continued employment), to purchase 400,000 shares of the Company's Class A Common Stock at an exercise price equal to the fair market value of a share of the Class A Common Stock calculated immediately preceding the date of grant. These grants were made in order to retain the services of Messrs. Kane and Shaich over the next five years, at a minimum. As these options have exercise prices equal to the market value of the Company's Class A Common Stock on the grant date, they provide incentive for the creation of stockholder value over the long term since their full benefit cannot be realized unless there occurs over time an appreciation in the price of the Company's Class A Common Stock. The Compensation Committee considers the number of shares to be an appropriate incentive for the Chief Executive officer and Co-Chairmen to continue to focus on building stockholder value. The Compensation Committee has not determined whether any ongoing program of long-term incentive compensation should or will be adopted with respect to its Chief Executive Officer and Co-Chairmen. In November 1998 the Compensation Committee determined that it was desirable to provide an additional incentive to certain employees who had been granted options in June 1998. The options granted in June 1998 had an exercise price of $10.94, the market price for the shares of Class A Common Stock on the grant date. Following the option issuances, the stock price declined, such that by November 1998 the price was in the $6.25 to $7.00 range (per reported closing prices). The Compensation Committee determined that the services of Richard Postle were of great importance to the success of the Saint Louis/Panera Bread Business Unit. Therefore, taking into account the significant change in stock price closely following the June grant, the Committee determined that it was appropriate, and in the Company's best interests, to cancel the June option grant to Mr. Postle for 100,000 shares and to reissue the option at the market price of $6.38 as of the date of grant (November 19, 1998). -12- DEDUCTIBILITY OF EXECUTIVE COMPENSATION The Compensation Committee has reviewed the potential consequences for the Company of Section 162(m) of the Code which imposes a limit on tax deductions for annual compensation in excess of one million dollars paid to any of the five most highly compensated executive officers. Based on such review, the Compensation Committee believes that the limitation will have no effect on the Company in 1999. Respectfully submitted, JAMES R. MCMANUS Chairman, FRANCIS W. HATCH, HENRY J. NASELLA REPORT OF THE CHIEF EXECUTIVE OFFICER This report is made by the Company's Chief Executive Officer, who is responsible for establishing the compensation, including salary, bonus and incentive compensation, for all of the Company's executive officers other than the Chief Executive Officer and Co-Chairmen of the Board. PHILOSOPHY In compensating its executive officers, the Chief Executive Officer seeks to structure a salary, bonus and incentive compensation package that will help attract and retain talented individuals and align the interests of the executive officers with the interests of the Company's stockholders. COMPONENTS OF COMPENSATION There are two components to the compensation of the Company's executive officers: annual cash compensation (consisting of salary and bonus incentives) and long-term incentives. CASH COMPENSATION. The Company participates annually in an industry-specific survey of executive officers, which serves as the basis for determining total target cash compensation packages, which are crafted individually for each executive officer. The individual's compensation consists of a base salary and contingent compensation based on actual performance against agreed-to expectations of performance. The individual compensation packages are structured so that, if the executive officer attains the expected level of achievement of each performance goal, the cash compensation of the executive officer will be approximately at the 75th percentile of the compensation of individuals occupying similar positions in the industry, using generally available surveys of executive compensation within the retail industry for companies with comparable revenues. At the beginning of each fiscal year, the Chief Executive Officer and each executive officer establish a series of individual performance goals which are specific to the executive's responsibilities. These goals seek to measure performance of each executive officer's job responsibilities: for executive officers whose responsibilities are operational in nature, attainment of operating group goals and objectives is stressed, and for corporate staff officers, overall Company performance measured by earnings-per share growth is utilized. Currently, the maximum potential cash bonus for the Company's executive officers, as a percentage of base salary, ranges from 20% to 60%. -13- Thus, the Company's cash compensation practices seek to motivate executives by requiring excellent performance measured against both internal goals and competitive performance. LONG-TERM INCENTIVE COMPENSATION. The second element of executive compensation, long-term incentive compensation, currently takes the form of stock options granted under the Company's 1992 Equity Incentive Plan. Currently, stock options are granted under the Performance-Based Option program, which consists of a series of guidelines which provide for the periodic granting of specific amounts of stock options, denominated in dollars rather than in numbers of shares, depending upon the executive's position within the Company. Existing holdings of stock or stock options are not a factor in determining the dollar value of an individual executive officer's award. As is the case with short-term incentive compensation, at the beginning of each fiscal year, the Chief Executive Officer and each executive officer establish a series of individual performance goals specifically related to the executive's responsibilities and designed to measure execution of these responsibilities. In addition, a Company-wide performance goal measured in earnings-per-share growth is established. Further consideration is given to each executive officer's accountability and/or level of responsibility for managing one or more aspects of the Company's overall business. These factors are weighted for each executive officer, with greater emphasis and value being placed on those factors which could have a greater impact on the Company's long-term profitability. An individual executive officer's performance against each of these criteria is then graded at one of five levels: significantly less than expected, less than expected, as expected, exceeds expectation, and significantly exceeds expectation. Awards of options are then made based upon a dollar value, which increases as the executive officer achieves higher grades for overall performance. As often as seems appropriate, but at least annually, the Chief Executive Officer reviews the Company's executive compensation program to judge its consistency with the Company's compensation philosophy, whether it supports the Company's strategic and financial objectives, and whether it is competitive within the Company's industry. DEDUCTIBILITY OF EXECUTIVE COMPENSATION The Chief Executive Officer has reviewed the potential consequences for the Company of Section 162(m) of the Code which imposes a limit on tax deductions for annual compensation in excess of one million dollars paid to any of the five most highly compensated executive officers. Based on such review, the Chief Executive Officer believes that the limitation will have no effect on the Company in 1998. Respectfully submitted, RONALD M. SHAICH Chief Executive Officer EMPLOYMENT RELATED AGREEMENTS The Company and Anthony J. Carroll are party to an Executive Employment Agreement dated July 9, 1998 pursuant to which Mr. Carroll currently earns a base salary of $200,000. The Agreement is for a two year term and automatically renews unless either party gives notice of his or its intent not to renew the Agreement 30 days prior to its expiration. In the event the Company gives notice of its intent not to renew the Agreement or terminates Mr. Carroll without cause during the term of the Agreement, Mr. Carroll -14- will be entitled to his base salary, car allowance (if any) and other benefits for one year, such payments to be reduced dollar for dollar by any compensation and benefits received by Mr. Carroll from other sources. The Company and Mark A. Borland are party to an Executive Employment Agreement dated August 27, 1997 pursuant to which Mr. Borland currently earns a base salary of $238,370, $18,370 of which is deferred per the terms of a Deferred Compensation Agreement. The Agreement is for a two year term and automatically renews unless either party gives notice of his or its intent not to renew the Agreement 30 days prior to its expiration. In the event that the Company gives notice of its intent not to renew the Agreement or terminates Mr. Borland without cause during the term of the Agreement, Mr. Borland will be entitled to his base salary, car allowance (if any) and other benefits for one year and a lump sum payment of $18,370, such payments to be reduced dollar for dollar by any compensation and benefits received by Mr. Borland from other sources. The Company and Richard C. Postle are party to an Executive Employment Agreement dated September 1, 1995, which provides Mr. Postle with a base salary of $300,000 for a two year period. The Agreement automatically renews unless either party gives notice of his or its intent not to renew the Agreement at least twenty-six weeks prior to its expiration. In the event that the Company gives notice of its intent not to renew the Agreement or terminates Mr. Postle without cause during the term of the Agreement, Mr. Postle will be entitled to his base salary, car allowance (if any) and other benefits for twenty-six weeks, such payments to be reduced dollar for dollar by any compensation and benefits received by Mr. Borland from other sources. -15- TOTAL RETURN TO STOCKHOLDERS (ASSUMES $100 INVESTMENT ON DECEMBER 31, 1992) The following graph and chart compare the cumulative annual stockholder return on the Company's Class A Common Stock over the period commencing December 31, 1993 through December 31, 1998 to that of the total return index for the NASDAQ Stock Market (U.S. Companies) and the Standard & Poor's 400 - MidCap Restaurant Index, assuming the investment of $100 on December 31, 1993. In calculating total annual stockholder return, reinvestment of dividends is assumed. The stock performance graph and chart below are not necessarily indicative of future price performance. [PERFORMANCE GRAPH]
- ---------------------------------------------------------------------------------------------------------------------- TOTAL RETURN ANALYSIS 12/31/93 12/31/94 12/29/95 12/30/96 12/31/97 12/31/98 - ---------------------------------------------------------------------------------------------------------------------- Au Bon Pain $100.00 $70.33 $ 36.26 $ 28.57 $ 33.24 $ 26.67 - ---------------------------------------------------------------------------------------------------------------------- S&P MidCap $100.00 $68.74 $ 67.92 $ 65.15 $ 71.42 $ 87.40 Restaurants - ---------------------------------------------------------------------------------------------------------------------- Nasdaq Composite $100.00 $96.79 $136.45 $167.88 $205.06 $297.02 - ----------------------------------------------------------------------------------------------------------------------
-16- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. OWNERSHIP OF AU BON PAIN COMMON STOCK The following table sets forth certain information as of March 31, 1999, with respect to the Company's Class A and Class B Common Stock owned by (1) each director of the Company, (2) the executive officers named in the Summary Compensation Table, (3) all directors and executive officers of the Company as a group, and (4) each person who is known by the Company to beneficially own more than five percent of the Company's capital stock. Unless otherwise indicated in the footnotes to the table, all stock is owned of record and beneficially by the persons listed in the table. +
Class A Common Class B Common Name and, with respect to owner ------------------------ ------------------------- Combined Voting of More Than 5%, Address Number Percent (1) Number Percent (2) Percentage (3) - ------------------------------ ------ ----------- ------ ----------- -------------- Ronald M. Shaich............................ 420,865(4) 3.9% 1,272,540 80.7% 27.2% Co-Chairman, Director and Chief Executive Officer c/o Au Bon Pain Co., Inc. 19 Fid Kennedy Avenue Boston, MA 02210 Louis I. Kane............................... 373,580(5) 3.4 53,406 3.4 3.4 Co-Chairman and Director c/o Au Bon Pain Co., Inc. 19 Fid Kennedy Avenue Boston, MA 02210 Francis W. Hatch............................ 28,542(6) * 64,351(7) 4.1% 1.5% Director George E. Kane.............................. 28,942(6) * 20,000 1.3% * Director James R. McManus............................ 28,542(6) * -- -- * Director Henry J. Nasella............................ 20,080(8) * -- -- * Director Richard C. Postle........................... 69,576(9) * -- -- * President, Saint Louis/Panera Bread Business Unit Mark A. Borland............................. 37,727(10) * -- -- * Chief Operating Officer, Au Bon Pain Business Unit Anthony J. Carroll.......................... 23,170(11) * 19,911 1.3% * Senior Vice President, Treasurer and Chief Financial Officer
-17-
Class A Common Class B Common Name and, with respect to owner ------------------------ ------------------------- Combined Voting of More Than 5%, Address Number Percent (1) Number Percent (2) Percentage (3) - ------------------------------ ------ ----------- ------ ----------- -------------- All Directors and officers as a group (14 persons)...................... 1,160,025(12) 10.1% 1,310,070 83.0% 33.4% Morgan Stanley Group Inc. .................. 1,332,385(13) 12.6% -- -- 8.7% PG Investors, Inc. Princes Gate Investors, L.P. 1251 Avenue of the Americas New York, NY 10020 Brown Capital Management.................... 1,319,450(14) 12.5% -- -- 8.7% 809 Cathedral Street Baltimore, MD 21201 Princeton Services, Inc. Fund Asset Management, L.P.................. 1,166,800(15) 11.1% -- -- 7.7% Merrill Lynch Special Value Fund, Inc. 800 Scudders Mill Road Plainsboro, NJ 08536 Dimensional Fund Advisors Inc. 1299 Ocean Avenue, 11th Floor Santa Monica, CA 90401 ................... 755,900(16) 7.2% - - 5.0%
- ---------- * Less than one percent. (1) Percentage ownership of Class A Common Stock is based on 10,560,051 shares issued and outstanding plus shares subject to options exercisable within sixty days of March 31, 1999 held by the stockholder or group. (2) Percentage ownership of Class B Common Stock is based on 1,557,658 shares issued and outstanding plus shares subject to options exercisable within sixty days of March 31, 1999 held by the stockholder or group. (3) This column represents voting power rather than percentage of equity interest as each share of Class A Common Stock is entitled to one vote while each share of Class B Common Stock is entitled to three votes. (4) Includes options exercisable within 60 days for 357,330 shares. (5) Consists of (a) 1,200 shares owned by Mr. Kane's spouse and as to which Mr. Kane disclaims beneficial ownership; (b) 15,050 shares owned by Mr. Kane and (c) options exercisable within 60 days for 357,330 shares. (6) Includes options for 28,542 shares exercisable within sixty days of March 31, 1999 pursuant to the Directors' Plan for independent directors. -18- (7) Includes 22,338 shares owned by Mr. Hatch's spouse and as to which Mr. Hatch disclaims beneficial ownership. (8) Consists of 1,000 shares jointly owned by Mr. Nasella and his spouse and options for 24,080 shares exercisable within sixty days of March 31, 1999 pursuant to the Directors' Plan for independent directors. (9) Includes options for 30,912 shares exercisable within 60 days of March 31, 1999. (10) Includes options for 36,757 shares exercisable within 60 days of March 31, 1999. (11) Includes options for 20,984 shares exercisable within sixty days of March 31, 1999. (12) Includes options for 860,867 shares exercisable within sixty days of March 31, 1999. (13) Information included is based solely upon a Schedule 13D filed with the Commission, jointly on behalf of Morgan Stanley Group Inc. ("MS Group"), PG Investors, Inc. ("PGI") and Princes Gate Investors, L.P. ("Princes Gate L.P."). PGI Investors, Inc. is a wholly-owned subsidiary of Morgan Stanley Group Inc., and is the general partner of Princes Gate L.P. On December 22, 1993, the Company issued to several purchasers, including Princes Gate L.P., $30,000,000 in aggregate principal amount of 4.75% Convertible Subordinated Notes due 2001 (the "Notes"). The Notes are convertible into fully paid and non-assessable shares of Class A Common Stock at a conversion price (subject to adjustment) equal to $25.50 principal amount for each share of Class A Common Stock, or currently 1,176,468 shares of Class A Common Stock in the aggregate. The amount of shares disclosed includes (a) 317 shares of Class A Common Stock owned by MS Group's wholly-owned subsidiary, Morgan Stanley & Co. Incorporated ("MS & Co.") in its capacity as a market-maker in the Company's Class A Common Stock, (b) 5,600 shares of Class A Common Stock over which MS & Co. exercises discretionary authority on behalf of customers, and (c) since PGI exercises investment management, voting and/or disposition control over all of the Notes and the underlying shares of Class A Common Stock obtainable upon conversion of the Notes, 1,176,468 shares of Class A Common Stock obtainable upon conversion of the Notes. In connection with a financing transaction consummated in July 1996, the number of shares also includes a Class A Common Stock purchase warrant issued for 150,000 shares, exercisable at $5.62 per share through July 24, 2001. (With respect to Princes Gate, L.P., the total of 1,332,385 shares includes 881,504 shares of Class A Common Stock obtainable upon conversion of the Notes, and, in connection with the financing transaction consummated in July 1996, includes a Class A Common Stock purchase warrant issued for 112,392 shares, exercisable at $5.62 per share through July 24, 2001). (14) Information included is based solely upon a Schedule 13G dated January 8, 1999. (15) Princeton Services, Inc. ("PSI") is a parent holding company in accordance with the Securities and Exchange Act of 1934 and is the corporate managing general partner of Fund Asset Management, L.P. Fund Asset Management, L.P. d/b/a Fund Asset Management ("FAM") is an investment adviser registered under section 203 of the Investment Advisers Act of 1940 (the "Advisers Act"). Merrill Lynch Special Value Fund, Inc. (the "Fund") is an investment company registered under Section 8 of the Investment Company Act of 1940 (the "Investment Company Act"). FAM acts as an investment adviser to investment companies registered under Section 8 of the Investment Company Act and private accounts. With respect to securities held by those investment companies and private accounts, several persons have the right to receive, or the power to direct the receipt of dividends from or the proceeds from the sale of such securities. The Fund, a reporting person for which FAM serves as investment adviser, has an interest that relates to more than 5% of the class of the class of securities reported herein. No other person has an interest that relates to more than 5% of the class of securities reported herein. PSI is deemed to be the beneficial owner of, and has shared voting and dispositive power with respect to 1,166,800 shares, and FAM and the Fund are deemed to be the beneficial owners of, and have shared voting and dispositive power with respect to 1,140,200 shares. Information regarding beneficial -19- ownership of the shares has been obtained solely from the joint Schedule 13G of PSI, FAM and the Fund filed with the Commission on February 3, 1998. (16) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment advisor, is deemed to have beneficial ownership of 755,900 shares, all of which shares are held in portfolios of DFA Investment Dimensions Group Inc., a registered open-end investment company, or in series of the DFA Investment Trust Company, a Delaware business trust, or the DFA Group Trust and DFA Participation Group Trust, investment vehicles for qualified employee benefit plans, all of which Dimensional serves as investment manager. Dimensional disclaims beneficial ownership of all such shares. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS There are no Certain Relationships or Related Transactions during the fiscal year ended December 26, 1998 to report. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. 3. EXHIBITS. The following exhibits are added to the list:
Exhibit Number Description - ------ ----------- 10.6.5 Executive Employment Agreement between the Registrant and Mark A. Borland dated August 27, 1997 and Deferred Compensation Agreement between Mr. Borland and the Registrant.+ 10.6.6 Executive Employment Agreement between the Registrant and Anthony J. Carroll dated July 9, 1998.+ 10.6.7 Executive Employment Agreement between the Registrant and Richard C. Postle dated September 1, 1995.+
- ---------- + Management contract or compensatory plan required to be filed as an exhibit to this Form 10-K pursuant to Item 14(c). -20- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. AU BON PAIN CO., INC. By:/s/ Louis I. Kane --------------------------------------- Louis I. Kane, Co-Chairman of the Board Date: April 26, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this amendment has been duly signed by the following persons on behalf of the registrant and in the capacities and on the date indicated: /s/ Louis I. Kane /s/ Ronald M. Shaich - ----------------------------- ------------------------------------- Louis I. Kane, Co-Chairman of Ronald M. Shaich, Co-Chairman of the Board and Director the Board and Chief Executive Officer /s/ Anthony J. Carroll /s/ Francis W. Hatch - ----------------------------- ------------------------------------- Anthony J. Carroll, Chief Francis W. Hatch, Director Financial Officer /s/ George E. Kane /s/ Henry J. Nasella - ----------------------------- ------------------------------------- George E. Kane, Director Henry J. Nasella, Director /s/ James R. McManus - ----------------------------- James R. McManus, Director All dated: April 26, 1999 -21- EX-10.6(5) 2 EXHIBIT 10.6.5 EXHIBIT 10.6.5 MARK BORLAND - ABP DEFERRED COMPENSATION AGREEMENT THIS AGREEMENT is made this day of January, 1996 by and between Au Bon Pain Co., Inc., a corporation organized under the laws of the State of Delaware (the "Corporation"), and MARK BORLAND, an individual residing at 284 Center Street, Pembroke, Massachusetts 02359 (the "Employee"). WITNESSETH THAT: WHEREAS, the Corporation currently employs the Employee; and WHEREAS, the Corporation and the Employee wish to defer immediate payment of some compensation as it otherwise would accrue and be payable to the Employee; and WHEREAS, the Corporation will retain such accrued but unpaid amounts for the benefit of the Employee, subject to the claims of the Corporation's creditors in the event of the Corporation's insolvency; and WHEREAS, it is the intention of the parties that this Agreement shall constitute an unfunded arrangement maintained for the purpose of providing deferred compensation to the Employee as a member of the management of the Corporation for purposes of Title I of the Employee Retirement Income Security Act of 1974. NOW, THEREFORE, in consideration of the agreements hereinafter contained, the parties hereby agree as follows: 1. WITHHOLDING. During the term of the Corporation's employment of the Employee after the date hereof, the Corporation shall withhold from compensation otherwise accrued and payable to the Employee the sum of $18,370.00 per annum, to be accrued and retained ratably on a weekly basis. In addition, during the term of the Corporation's employment of the Employee for one year after the date hereof, the Corporation shall accrue and withhold an additional amount of $25,000.00, to be accrued and retained ratably on a weekly basis during such one year term. 2. DEFERRED COMPENSATION ACCOUNT. (a) The Corporation shall credit the amounts described in the preceding paragraph to a book reserve (the "Deferred Compensation Account") established for this purpose. (b) All funds credited to the Deferred Compensation Account may be kept in cash or invested and reinvested in mutual funds, stocks, bonds, securities or any other assets as may be selected by the Corporation in its discretion until the Employee provides to the Corporation written direction of investment. The Employee may provide such written direction no more frequently than quarter-annually; provided, however, that the Employee may not direct the Corporation to invest Deferred Compensation Account amounts in the debt or equity of the Corporation or in any assets in which the Corporation, in the opinion of counsel, reasonably may not invest. In the exercise of the foregoing discretionary investment powers, the Corporation may engage investment counsel and, if it so desires, may delegate to such counsel full or limited authority to select the assets in which the Deferred Compensation Account funds are to be invested. (c) All appreciation, depreciation, income, loss and expenses on the Deferred Compensation Account shall increase or decrease, as appropriate, such Deferred Compensation Account. The Corporation shall account at least annually to the Employee to reflect all activity in the Deferred Compensation Account for the preceding period. (d) The Employee assumes all risk in connection with any investment of the Deferred Compensation Account. (e) Title to and beneficial ownership of all assets held in the Deferred Compensation Account shall at all times remain in the Corporation and the Employee shall not have any property interest whatsoever in the Deferred Compensation Account. 3. PAYMENT OF DEFERRED AMOUNTS. The Corporation shall pay the following benefits as deferred compensation to the Employee (unless they are forfeited by the occurrence of any of the events of forfeiture specified in paragraph 3(b) below) as follows: (a) If the Employee's employment with the Corporation is terminated for any reason on or after the Employee shall have reached the age of sixty (60), the Corporation shall pay to him in a lump sum or in ten (10) annual installments an amount equal to the fair market value of the assets in the Deferred Compensation Account as of such date. The method of payment shall be determined by the Employee by written direction to the Corporation at the time of such termination and, absent such written direction, the Corporation shall pay such amount in a lump sum. If the Employee directs the Corporation to pay such amount over ten (10) annual installments, the total amount payable to the Employee shall be appropriately increased or decreased, as the case may be, to reflect the appreciation or depreciation in value and the net income or loss and expenses on the funds which remain invested in the Deferred Compensation Account. The above notwithstanding, if the Employee should die on or after his sixtieth (60) birthday and before all payments are made hereunder, the unpaid balance will continue to be paid in -2- installments for the unexpired portion of such ten year period to his designated beneficiary (as described below) in the same manner as set forth above. (b) If the Employee's employment with the Corporation is terminated for any reason other than death and disability but before the Employee shall have reached the age of sixty (60), the Corporation shall pay the fair market value of the assets in the Deferred Compensation Account as of such date or dates as provided in paragraph (a) above or at such earlier date or dates as shall be selected by the Corporation in its sole discretion, unless the Employee terminates his employment with the Corporation without providing at least six months prior notice of such termination, in which event all rights of the Employee and his successors and assigns (including his personal representatives) to receive payments hereunder shall be forfeited. (c) If the Employee's employment with the Corporation is terminated because of death or disability before he has reached the age of sixty (60), the Corporation shall make payments to the Employee (in the event of his disability) or his designated beneficiary (in the event of his death) in the same manner and to the same extent as provided in paragraph 3(a), above. (d) The designated beneficiary may be designated or changed by the Employee (without the consent of any prior beneficiary) by written direction delivered to the Corporation at any time before the death of the Employee. (e) If both the Employee and his designated beneficiary should die before all payments due under this Agreement are made by the Corporation, then the remaining value of the Deferred Compensation Account shall be determined and shall be paid as promptly as possible in a lump sum to the estate of such designated beneficiary if such designated beneficiary had survived the Employee. If no such beneficiary shall have been designated upon the death of the Employee, or if the designated beneficiary does not survive the Employee, then the remaining value of the Deferred Compensation Account shall be determined and shall be paid as promptly as possible in a lump sum to the estate of the Employee. (f) For the purpose of this Agreement, the term "Cause" shall mean the conviction of the Employee of a crime involving fraud or moral turpitude involving the Corporation. For purposes of this Agreement, the term "disability" shall mean that, as a result of the Employee's incapacity due to physical or mental illness, the Employee is unable substantially to perform his employment duties on a full-time basis for one hundred eighty (180) consecutive days or one hundred eighty (180) days in the aggregate in any consecutive two hundred seventy (270) day period. -3- (g) Installment payments to be made to the Employee under paragraphs 3(a) and 3(c) above shall commence on the first day of the month next following the date of the termination of his employment, and the installment payments to be made to the Employee under paragraph 3(b) above shall commence on the first day of the month next following the date on which the Employee shall have reached the age of sixty (60) unless the Corporation selects an earlier date or dates in its sole discretion. The installment payments to be made to the designated beneficiary under the provisions of this paragraph 3 shall commence on a date to be selected by the Corporation but within six months from the date of death of the Employee. 4. NO TRUST CREATED. Nothing contained in this Agreement and no action taken pursuant to the provisions of this Agreement shall create or be construed to create a trust of any kind or a fiduciary relationship between the Corporation and the Employee, his designated beneficiary or any other person. Any funds which may be invested under the provisions of this Agreement shall continue for all purposes to be a part of the general funds of the Corporation and no person other than the Corporation shall, by virtue of the provisions of this Agreement, have any interest in such funds. To the extent that any person acquires a right to receive payments from the Corporation under this Agreement, such rights shall be no greater than the right of any unsecured general creditor of the Corporation. 5. NO ASSIGNMENT. The right of the Employee or any other person to the payment of deferred compensation or other benefits under this Agreement may not be assigned, transferred, pledged or encumbered except by the Employee's designation of a designated beneficiary, by will or by the laws of descent and distribution. 6. NO EMPLOYMENT ASSURANCE. Nothing contained herein shall be construed as conferring upon the Employee the right to continue in the employment of the Corporation as an executive or in any other capacity. 7. PAYMENT IN KIND: WITHHOLDING. The Corporation may pay amounts due hereunder in cash or in kind as it may choose in its sole discretion. The Corporation will withhold all necessary taxes from such amounts. 8. SEVERABILITY. If any provision of this Agreement is declared or found to be illegal, unenforceable or void, in whole or in part, then both parties will be relieved of all obligations arising under such provision, but only to the extent it is illegal, unenforceable or void. The intent and agreement of the parties to this Agreement is that this Agreement will be deemed amended by modifying any such illegal, unenforceable or void provision to the extent -4- necessary to make it legal and enforceable while preserving its intent, or if such is not possible, by substituting therefor another provision that is legal and enforceable and achieves the same objectives. The foregoing notwithstanding, if the remainder of this Agreement will not be affected by such declaration or finding and is capable of substantial performance, then each provision not so affected will be enforced to the extent permitted by law. 9. WAIVER. Any delay or omission by either party to this Agreement in exercising any right or power under the Agreement will not impair such right or power or be construed as a waiver thereof. A waiver by either party to this Agreement of any of the covenants to be performed by the other or any breach thereof will not be construed to be a waiver of any succeeding breach thereof or of any other covenant contained in this Agreement. All remedies provided for in this Agreement will be cumulative and in addition to and not in lieu of any other remedies available to either party at law, in equity, or otherwise. 10. GOVERNING LAW. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the Commonwealth of Massachusetts applicable to contracts made and to be performed therein and without giving effect to any principle of conflict-of-laws that would require the application of the law of any other jurisdiction. 11. NOTICES. Any notice to a party hereto shall be in writing, and such notice shall be given by delivery in hand; by telecopy (if available) with original posted first class mail, postage prepaid, within two (2) business days thereafter; by certified mail, postage prepaid, return receipt requested; or by private courier requesting evidence of receipt as a part of its service, addressed as follows: If to the Company: 19 Fid Kennedy Avenue Boston, MA 02210 Attn: Chief Executive Officer with a copy to: Robert J. Foley, Esq. Gadsby & Hannah LLP 125 Summer Street Boston, MA 02110 If to the Employee: 284 Center Street Pembroke, MA 02359 -5- or to such other address as may be designated in writing by either party from time to time in accordance herewith, and shall be deemed delivered upon the earliest to occur of delivery by hand, when so telecopied, when so placed in the mails or when so delivered to such delivery service as aforesaid. 12. ARBITRATION. Any controversy or claim arising out of or relating to this Agreement; or the breach thereof, shall be settled by arbitration in Boston, Massachusetts in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. 13. ENTIRE AGREEMENT: AMENDMENT. This Agreement constitutes the entire agreement between the parties to this Agreement with respect to the subject matter of this Agreement and there are no understandings or agreements relative to this Agreement which are not fully expressed in this Agreement. All prior agreements with respect to the subject matter of this Agreement are expressly superseded by this Agreement. No amendment to, or waiver or discharge of, this Agreement will be valid unless in writing and signed by the party to be charged. 14. DESCRIPTIVE HEADINGS. All descriptive headings of this Agreement are inserted for convenience only, and shall not affect the construction or interpretation hereof. 15. POWER TO INTERPRET. The Corporation shall have full power and authority to interpret, construe, and administer this Agreement and the Corporation's reasonable interpretations and construction thereof, and actions thereunder, including any valuation of the Deferred Compensation Account, or the amount or recipient of the payments to be made therefrom, shall be binding and conclusive on all persons for all purposes. Neither the Corporation nor any director, officer, employee or agent of the Corporation shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Agreement unless attributable to willful misconduct or lack of good faith. 16. BINDING AGREEMENT. This Agreement shall be binding upon and inure to the benefit of the Corporation, its successors and assigns, and the Employee and his designated beneficiaries, heirs, executors, administrators, and legal representatives. -6- IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed by its duly authorized employee and Employee has hereunto set his hand and seal as of the date first above written. AU BON PAIN CO., INC. By: /s/ Mariel Clark ---------------------------- Mariel Clark, Vice President /s/ Mark Borland ---------------------------- MARK BORLAND -7- EXECUTIVE EMPLOYMENT AGREEMENT This EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made this 27th day of August, 1997, by and between Mark Borland ("Employee") and Au Bon Pain, Co., Inc., a Delaware corporation with a principal place of business in Boston, Massachusetts (the "Company"). WHEREAS, the Company wishes to employ and engage the services of the Employee in an executive capacity for the Company, upon the terms, conditions and provisions of this Agreement; and WHEREAS, the Employee desires to provide services to the Company in accordance with the terms, conditions and provisions of this Agreement; NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and other good and valuable consideration, the receipt of which is hereby acknowledged, the Company and Employee hereby agree as follows: 1. DEFINITIONS For all purposes of this Agreement, the following terms shall have the meanings specified in this Section I unless the context clearly requires otherwise: (a) "BASE SALARY" means the Employee's annualized base salary set forth in Section 3 of this Agreement, and such increases thereto as may be established by the Company from time to time. In no event, however, shall Employee's Base Salary be less than the amount set forth in Section 3 of this Agreement. "Base Salary" shall not include any bonus, incentive compensation or employee benefits; (b) "BENEFITS" means all employee benefits provided to the Employee by the Company, including medical, dental, long-term disability, life insurance, and such other benefits as may be provided from time- to time by the Company generally to its employees; (c) "INCENTIVE COMPENSATION" means additional compensation provided to the Employee by the Company during the term of this Agreement, if any, other than Base Salary and Benefits; (d) "SEVERANCE" means payments made by the Company to the Employee after termination of employment, pursuant to this Agreement, at the rate of the Employee's annualized Base Salary (and car allowance, if any) as of the date of Employee's termination and an additional lump sum payment of $18,370.00. Severance is payable, commencing after the last day of active employment with the Company, on a weekly basis in substantially equal installments following Employee's termination, in such increments and for such period(s) of time designated in this Agreement ("Severance Period"). Severance shall not include any bonuses or other Incentive Compensation. Except as set forth in the immediately preceding sentence, Severance shall also include the continuation of Employee's Benefits existing at the time of Employee's termination for the Severance Period. Employee shall be responsible for making all required contributions to continue Benefits during the Severance Period on the same basis as existed at the time of the Employee's termination. Severance shall be reduced (dollar for dollar) by any compensation and benefits Employee receives or earns during the Severance Period from any source other than the Company including, without limitation, salary, employee benefits, consulting fees, income from self-employment or otherwise; 2. EMPLOYMENT The Company agrees to employ the Employee to render services to the Company in an executive capacity, consistent with the typical duties and responsibilities of an Executive Vice President with the Company, and to maintain the Employee's title as Executive Vice President. Employee understands and agrees that Employee's duties and responsibilities may change from time to time, in the sole discretion of the Company. Effective as of the date hereof, Employee hereby accepts such employment subject to the terms and conditions set forth herein. Employee agrees to devote his full attention, best talents and abilities to the job and to perform faithfully his duties and responsibilities hereunder. 3. COMPENSATION The Company shall pay Employee a Base Salary at the rate of $175,950.00 annualized, Incentive Compensation, and Benefits, subject to federal and state withholdings and customary payroll deductions. 4. TERM Unless terminated as provided in Section 5, or as otherwise provided in this Agreement, this Agreement shall continue for a two-year period from the commencement of Employee's employment with the Company or the effective date of this Agreement, whichever is later; thereafter, this Agreement shall automatically renew for additional one-year periods, unless either party notifies the other in writing of its intent not to renew this Agreement at least thirty (30) days prior to its expiration. In the event the Employee gives notice of intent not to renew this Agreement, the Employee shall not be entitled to Severance. In the event the Company gives notice of intent not to renew this Agreement, at the expiration of the Agreement the Employee shall be entitled to fifty-two (52) weeks' Severance. 5. TERMINATION (a) TERMINATION FOR CAUSE The Company may terminate Employee's employment at any time for cause, upon written notice specifying the reasons. As used herein, the term "cause" shall mean: (i) The commission by Employee of any act of embezzlement, fraud, larceny, theft, or other willful misconduct or gross negligence in connection with the performance of Employee's duties which adversely, affects the affairs of the Company; (ii) Employee's conviction of a felony, or conviction of a misdemeanor involving moral turpitude; (iii) A material breach of the terms of this Agreement which continues for fifteen (15) days after the Company has given written notice to the Employee specifying in reasonable detail the material breach. (b) TERMINATION WITHOUT CAUSE 2 Notwithstanding any other provision of this Agreement, the Company may terminate Employee's employment, without cause, at any time, for any reason, effective upon thirty (30) days' written notice to the Employee. In the event of a termination without cause, the Employee shall be entitled to fifty-two (52) weeks' Severance. (c) RESIGNATION The Employee may at any time during the term of this Agreement resign employment, effective upon ninety (90) days' written notice to the Company, or upon such shorter period of notice as the parties may agree in writing. Upon such resignation, the Employee shall not be entitled to any Severance, and, except as otherwise specifically set forth herein, the obligations of the Company to the Employee under this Agreement shall terminate upon the effective date of such resignation. Employee agrees to continue to perform his duties hereunder, and otherwise assist the Company in an orderly transition, during such ninety-day period. (d) DISABILITY The Company may terminate Employee's employment if, at any time during the term of this Agreement, the Employee shall become disabled so that he is unable to perform the Employee's regular duties of employment, with reasonable accommodation, for a period of ninety (90) days in the aggregate during any 180-day period. The determination of the Employee's disability for purposes of this Section 5(d) shall be made by a qualified physician acceptable to both parties. In the event that the Company and the Employee are unable to agree upon a qualified physician, each party shall select a qualified physician, and in the event those two physicians are unable to agree upon a determination as to the Employee's disability, a third neutral physician ("Neutral Physician") acceptable to the parties shall be selected. The determination of disability by the Neutral Physician shall be final and binding for purposes of this Agreement. In the event this Agreement is terminated pursuant to this Section 5(d), the Employee shall be entitled to fifty-two (52) weeks' Severance. Such Severance shall be offset dollar for dollar by any payments made in the aggregate to the Employee under the Company's existing Salary Continuation and Long-Term Disability Plan(s). (e) DEATH This Agreement and all obligations of the Company hereunder shall terminate upon the death of the Employee. In the event of a termination upon the death of the Employee, monies or compensation owed by the Company to the Employee up to the date of termination shall be paid to the Employee's estate or designee. (f) ACCRUED VACATION All accrued vacation owed by the Company to the Employee upon termination of employment shall be included in the Employee's last paycheck following active employment. 6. CONFIDENTIAL NATURE OF THIS AGREEMENT Employee agrees to keep confidential the terms of this Agreement. A violation of this provision shall entitle the Company to terminate this Agreement immediately, for cause, as set forth in Section 5(a)(iii). Notwithstanding the above, the Employee may disclose the terms of this Agreement to his/her immediate family, bankers, accountants, attorneys, and 3 other financial advisers, the Internal Revenue Service, the Massachusetts Department of Revenue, in the event such disclosure is necessary to prospective employers or others to review the restrictive covenants contained herein, in the event of litigation or arbitration involving this Agreement, or in the event that such disclosures shall be compelled by law. 7. CONFIDENTIAL AND PROPRIETARY INFORMATION (a) The Employee understands and acknowledges that in the course of employment with the Company, Employee will have access to confidential and proprietary information of the Company and its Affiliates (which shall mean entities controlling, controlled by or under common control with the Company, including without limitation, Saint Louis Bread Company, Inc. and its Affiliates) which constitute valuable, special and unique assets of the Company and its Affiliates. For purposes of this Agreement, such confidential and proprietary information shall include, without limitation, the following: trade secrets; operating techniques; procedures and methods; product specifications; customer lists; account information; price lists; discount schedules; correspondence with customers, vendors, employees, partners or others; drawings; software; leads from suppliers; marketing techniques; procedures and methods; employee lists; internal financial reports of the Company and its Affiliates; sourcing lists; and recruiting lists (collectively, "Confidential Information"), but shall not include any information which is commonly known or in the public domain. (b) The Employee agrees that during the term of this Agreement and at any time thereafter, Employee will not, without the authorization of the Company: (i) disclose any Confidential Information to any person or entity for any purpose whatsoever; or (ii) make use of any Confidential Information for Employee's own purposes or for the benefit of any other person or entity, other than the Company and its Affiliates. (c) The Employee agrees that upon the request of the Company or upon termination of employment, Employee shall return to the Company all documents or other materials, including electronic or computerized data, containing or relating to Confidential Information, along with all other Company property. 8. RESTRICTIVE COVENANT During the term of this Agreement, and, for (i) six (6) months after its termination with respect to Section 8(a), and (ii) one (1) year after its termination with respect to Section 8(b), for whatever reason, the Employee shall not, directly or indirectly, either as an individual, employee, partner, officer, owner, director, shareholder, advisor or consultant, or in any other capacity whatsoever, on behalf of any person, firm, corporation, partnership or entity: (a) during the term of this Agreement, and for six (6) months after its termination, for whatever reason, be employed by or retained as a consultant or advisor to a competitive entity in the bakery/coffee/deli business. For purposes of this Agreement, "competitive entity" includes, without limitation, the following companies doing business as: PARADISE BAKERY, INC.; STARBUCKS; BRUEGGER'S BAGEL BAKERY; FINAGLE-A-BAGEL; LE BOULANGERIE, GREAT HARVEST, EINSTEIN'S/NOAH'S; CORNER BAKERY; BIG SKY; AFC ENTERPRISES, INC. and their respective parents, subsidiaries, franchisees, affiliates, successors or assigns. Additionally, "competitive entity" shall include, without limitation, any company which generates in the aggregate more than 50% of its revenues from the retail sales of baked 4 goods and coffee, and their respective parents, subsidiaries, franchisees, affiliates, successors or assigns. Notwithstanding the above, the direct or indirect ownership of one percent (1%) or less of the stock of a competitive entity whose shares are listed on a national securities exchange or are quoted on the National Association of Securities Dealers Automated Quotation System or so-called Bulletin Board shall not, in and of itself, be deemed to be a violation of this Section 8(a); (b) recruit, solicit, hire, or assist any other person or party in recruiting, soliciting, or hiring any employee of the Company or any of its Affiliates or any of their respective franchises. The Company may, in its sole discretion, waive enforcement of any of the provisions of this Section 8, which waiver shall be evidenced solely by the execution and delivery to the Employee of a written document setting forth the terms of such waiver, executed by an authorized representative of the Company. 9. ENFORCEMENT Employee agrees and acknowledges that a violation of Sections 7 or 8 of this Agreement shall entitle the Company to terminate this Agreement immediately, which termination shall be conclusively deemed to be a termination for cause, as set forth in Section 5(a) hereunder. In the event of a violation of Sections 7 or 8 of this Agreement, any further Severance, salary continuation, Benefits or other future compensation otherwise owed pursuant hereto shall be forfeited. The Employee acknowledges and agrees that the Company's remedies at law for a breach of Sections 7 or 8 of this Agreement are inadequate and that the harm caused thereby is irreparable. The Employee expressly agrees that in the event of a violation of Sections 7 or 8 of this Agreement, the Company shall be entitled to equitable relief enforcing the terms of this Agreement, including without limitation, specific performance, a temporary restraining order, preliminary injunction or permanent injunction to prevent any breach or attempted broach thereof. The provisions of Sections 7, 8 and 9 shall survive the termination of this Agreement, in addition to any others which may survive pursuant to the terms of this Agreement. 10. SEVERABILITY If any provision of this Agreement including, without limitation, Sections 7, 8 or 9 hereof, is declared or found to be illegal, unenforceable, void, overbroad, or unreasonable in scope, territory, or duration, in whole or in part, then both parties will be relieved of all obligations arising under such provisions, but only to the extent it is illegal, unenforceable, void, overbroad, or unreasonable in scope, territory or duration. The intent and agreement of the parties to this Agreement is that this Agreement will be deemed amended by modifying any such illegal, unenforceable, void, overbroad or unreasonable provision to the extent necessary to make it legal and enforceable while preserving its intent, or if such is not possible, by substituting therefor another provision that is legal and enforceable and achieves the same objectives. The foregoing notwithstanding, if the remainder of this Agreement will not be affected by such declaration or finding and is capable of substantial performance, then each provision not so affected will be enforced to the extent permitted by law. 11. ARBITRATION Any controversy or claim arising out of or relating to this Agreement or Employee's employment with the Company, except for claims of violation by the Employee of Sections 5 7 and 8 hereof which may be enforced by the Company in a court of competent jurisdiction pursuant to Section 9 hereof, shall be settled exclusively by binding arbitration before a single arbitrator in the City of Boston, in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The provisions hereof shall be a complete bar and defense to any suit, action or proceeding instituted by the Employee in any federal, state or local court or before any administrative tribunal with respect to any matter which is arbitrable as herein set forth. This Section shall survive the termination or expiration of this Agreement. Nothing herein contained shall be deemed to give any arbitrator any authority, power, or right to alter, change, amend, modify, add to, or subtract from any provisions of this Agreement. The arbitrator shall have no authority to award punitive damages or attorney's fees to any party. The decision of the arbitrator shall be final and conclusive. Judgment on an award rendered by the arbitrator may be entered in any court of competent jurisdiction. 12. NO CONFLICTING AGREEMENTS Employee hereby represents and warrants that neither the entry into this Agreement nor its performance by Employee will conflict with or result in a breach of the terms, conditions or provisions of any other agreement or other obligation of any nature to which Employee is a party, or by which he is otherwise bound, including, without limitation, any other employment agreement, non-competition agreement, or confidentiality agreement. 13. GOVERNING LAW The- terms hereof shall be governed by, and construed and interpreted in accordance with, the laws of the Commonwealth of Massachusetts, without giving effect to its conflict of laws rules which may otherwise require the application of the law of another jurisdiction. 14. SUCCESSORS AND ASSIGNS This Agreement shall be binding upon and inure to the benefit of the Company and the Employee and their respective successors, assigns, heirs, legal representatives, executors and administrators. 15. NOTICES (i) All notices to the Employee shall be addressed to Employee at: or to such other place(s) as may be designated by written notice to the Company.: (ii) All notices to the Company shall be addressed to the Company at: 19 Fid Kennedy Avenue Boston, MA 02210 Attention: C. E. 0. With copies to: Walter D. Wekstein, Esq. Gadsby & Hannah LLP 225 Franklin Street Boston, MA 02110 6 or to such other place(s) as may be designated by written notice to Employee. (iii) Notice shall be sufficient if given by hand or by certified mail, postage prepaid, return receipt requested, addressed to the party at its address described above. Unless otherwise notified in writing, each party shall direct all sums payable to the other party at its address for notice purposes. 16. HEADINGS The captions and headings in this Agreement are for convenience and reference only, and they shall in no way be held or deemed to define, modify or add to the meaning, scope or intent of any provision of this Agreement. 17. ENTIRE AGREEMENT This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, written or oral on the subject matter hereof including, but not limited to, offer letters, employment letters, and agreements concerning severance pay, with the exception of the Deferred Compensation Agreement between the parties dated January, 1996, a copy of which is attached hereto as Exhibit "A", which shall remain in force until terminated pursuant to its terms. 18. AMENDMENTS This Agreement may be modified only by written agreement signed by both the Employee and the Company. 19. WAIVER The failure of any party at any time to require the performance of any provision(s) hereof shall in no manner affect the right(s) of such party at a later time to require the performance of said provision(s), and shall not be deemed a waiver of any obligations hereunder. 7 IN WITNESS WHEREOF, the parties to this Agreement have executed this Agreement under seal, as of the date first above written. AU BON PAIN CO., INC. By: /s/ Ronald M. Shaich Date: 8/27/97 ------------------------- ------------- Ronald M. Shaich, Chief Executive Officer Witness: /s/ Mariel Clark Date: 8/27/97 ------------------------- ------------- MARK BORLAND /s/ Mark C. Borland Date: 9/16/97 - ------------------------- ------------- Witness: Date: ------------------------- ------------- 8 EX-10.6(6) 3 EXHIBIT 10.6.6 EXHIBIT 10.6.6 EXECUTIVE EMPLOYMENT AGREEMENT This EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made this 9th day of July, 1998, by and between Anthony J. Carroll ("Employee") and Au Bon Pain, Co., Inc., a Delaware corporation with a principal place of business in Boston, Massachusetts (the "Company"). WHEREAS, the Company wishes to employ and engage the services of the Employee in an executive capacity for the Company, upon the terms, conditions and provisions of this Agreement; and WHEREAS, the Employee desires to provide services to the Company in accordance with the terms, conditions and provisions of this Agreement; NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and other good and valuable consideration, the receipt of which is hereby acknowledged, the Company and Employee hereby agree as follows: 1. DEFINITIONS For all purposes of this Agreement, the following terms shall have the meanings specified in this Section 1 unless the context clearly requires otherwise: (a) "BASE SALARY" means the Employee's annualized base salary set forth in Section 3 of this Agreement, and such increases thereto as may be established by the Company from time to time. In no event, however, shall Employee's Base Salary be less than the amount set forth in Section 3 of this Agreement, "Base Salary" shall not include any bonus, incentive compensation or employee benefits; (b) "BENEFITS" means all employee benefits provided to the Employee by the Company, including medical, dental, long-term disability, life insurance, and such other benefits as may be provided from time to time by the Company generally to its employees; (c) "INCENTIVE COMPENSATION" means additional compensation provided to the Employee by the Company during the term of this Agreement, if any, other than Base Salary and Benefits; (d) "SEVERANCE" means payments made by the Company to the Employee after termination of employment, pursuant to this Agreement, at the rate of the Employee's annualized Base Salary (and car allowance, if any) as of the date of Employee's termination. Severance is payable, commencing after the last day of active employment with the Company, on a weekly basis in substantially equal installments following Employee's termination, in such increments and for such period(s) of time designated in this Agreement ("Severance Period'). Severance shall not include any bonuses or other Incentive Compensation. Except as set forth in the immediately preceding sentence, Severance shall also include the continuation of Employee's Benefits existing at the time of Employee's termination for the Severance Period. Employee shall be responsible for making all required contributions to continue Benefits during the Severance Period on the same basis as existed at the time of the Employee's termination. Severance shall be reduced (dollar for dollar) by any compensation and benefits Employee receives or earns during the Severance Period from any source other than the Company including, without limitation, salary, employee benefits, consulting fees, income from self-employment or otherwise; 2. EMPLOYMENT The Company agrees to employ the Employee to render services to the Company in an executive capacity, consistent with the typical duties and responsibilities of a Senior Vice President with the Company. Employee understands and agrees that Employee's duties and responsibilities may change from time to time, in the sole discretion of the Company. Effective as of the date hereof, Employee hereby accepts such employment subject to the terms and conditions set forth herein. Employee agrees to devote his full attention, best talents and abilities to the job and to perform faithfully his duties and responsibilities hereunder. 3. COMPENSATION The Company shall pay Employee a Base Salary at the rare of $185,000.00 annualized, Incentive Compensation, and Benefits, subject to federal and state withholdings and customary payroll deductions. 4. TERM Unless terminated as provided in Section 5, or as otherwise provided in this Agreement, this Agreement shall continue for a two-year period from the effective date of this Agreement; thereafter, this Agreement shall automatically renew for additional one-year periods, unless either party notifies the other in writing of its intent not to renew this Agreement at least thirty (30) days prior to its expiration. In the event the Employee gives notice of intent not to renew this Agreement, the Employee shall not be entitled to Severance. In the event the Company gives notice of intent not to renew this Agreement, at the expiration of the Agreement the Employee shall be entitled to fifty-two (52) weeks' Severance. 5. TERMINATION (a) TERMINATION FOR CAUSE The Company may terminate Employee's employment at any time for cause, upon written notice specifying the reasons. As used herein, the term "cause" shall mean: 2 (i) The commission by Employee of (A) any act of embezzlement, fraud, larceny, theft, or (B) other willful misconduct or gross negligence in connection with the performance of Employee's duties which adversely affects the affairs of the Company; (ii) Employee's conviction of a felony, or conviction of a misdemeanor involving moral turpitude; (iii) A material breach of the terms of this Agreement which continues uncured for fifteen (15) days after the Company has given written notice to the Employee specifying in reasonable detail the material breach. (b) TERMINATION WITHOUT CAUSE Notwithstanding any other provision of this Agreement, the Company may terminate Employee's employment, without cause, at any time, for any reason, effective upon thirty (30) days' written notice to the Employee. In the event of a termination without cause, the Employee shall be entitled to fifty-two (52) weeks' Severance. (c) RESIGNATION The Employee may at any time during the term of this Agreement resign employment, effective upon ninety (90) days' written notice to the Company, or upon such shorter period of notice as the parties may agree in writing. Upon such resignation, the Employee shall not be entitled to any Severance, and, except as otherwise specifically set forth herein, the obligations of the Company to the Employee under this Agreement shall terminate upon the effective date of such resignation. Employee agrees to continue to perform his duties hereunder, and otherwise assist the Company in an orderly transition, during such ninety-day period. (d) DISABILITY The Company may terminate Employee's employment if, at any time during the term of this Agreement, the Employee shall become disabled so that he is unable to perform the Employee's regular duties of employment, with reasonable accommodation, for a period of ninety (90) days in the aggregate during any 180-day period. The determination of the Employee's disability for purposes of this Section 5(d) shall be made by a qualified physician acceptable to both parties. In the event that the Company and the Employee are unable to agree upon a qualified physician, each party shall select a qualified physician, and in the event those two physicians are unable to agree upon a determination as to the Employee's disability, a third neutral physician ("Neutral Physician") acceptable to the parties shall be selected. The determination of disability by the Neutral Physician shall be final and binding for purposes of this Agreement. In the event this Agreement is terminated pursuant to this Section 5(d), the Employee shall be entitled to fifty-two (52) weeks' Severance. Such Severance shall be offset dollar for dollar by any payments made in the 3 aggregate to the Employee under the Company's existing Salary Continuation and Long-Term Disability Plan(s). (e) DEATH This Agreement and all obligations of the Company hereunder shall terminate upon the death of the Employee. In the event of a termination upon the death of the Employee, monies or compensation owed by the Company to the Employee up to the date of termination shall be paid to the Employee's estate or designee. (f) ACCRUED VACATION All accrued vacation owed by the Company to the Employee upon termination of employment shall be included in the Employee's last paycheck following active employment. 6. CONFIDENTIAL NATURE OF THIS AGREEMENT Employee agrees to keep confidential the terms of this Agreement. A violation of this provision shall entitle the Company to terminate this Agreement immediately, for cause, as set forth in Section 5(a)(iii). Notwithstanding the above, the Employee may disclose the terms of this Agreement to his/her immediate family, bankers, accountants, attorneys, and other financial advisers, the Internal Revenue Service, the Massachusetts Department of Revenue, in the event such disclosure is required by prospective employers or others to review the restrictive covenants contained herein, in the event of litigation or arbitration involving this Agreement, or in the event that such disclosures shall be compelled by law. 7. CONFIDENTIAL AND PROPRIETARY INFORMATION (a) The Employee understands and acknowledges that in the course of employment with the Company, Employee will have access to confidential and proprietary information of the Company and its Affiliates (which shall mean entities controlling, controlled by or under common control with the Company, including without limitation, Saint Louis Bread Company, Inc. and its Affiliates) which constitute valuable, special and unique assets of the Company and its Affiliates. For purposes of this Agreement, such confidential and proprietary information shall include, without limitation, the following: trade secrets; operating techniques; procedures and methods; product specifications; customer lists; account information; price lists; discount schedules; budgets; strategic plans; financial and other projections; correspondence with customers, vendors, lenders, employees, partners or others; drawings; software, leads from suppliers; marketing techniques; procedures and methods; employee lists; internal financial reports of the Company and its Affiliates; sourcing lists; and recruiting lists (collectively, "Confidential Information"), but shall not include any information which is commonly known or in the public domain. 4 (b) The Employee agrees that during the term of this Agreement and at any time thereafter, Employee will not, without the authorization of the Company: (i) disclose any Confidential Information to any person or entity for any purpose whatsoever; or (ii) make use of any Confidential Information for Employee's own purposes or for the benefit of any other person or entity, other than the Company and its Affiliates. (c) The Employee agrees that upon the request of the Company or upon termination of employment, Employee shall return to the Company all documents or other materials, including electronic or computerized data, containing or relating to Confidential Information, along with all other Company property. 8. RESTRICTIVE COVENANT The Employee shall not, other than in the course of employment with the Company, directly or indirectly, either as an individual, employee, partner, officer, owner, director, shareholder, advisor or consultant, or in any other capacity whatsoever, on behalf of any person, firm, corporation, partnership or entity: (a) during the term of this Agreement, and for one (1) year after its termination, for whatever reason, be employed by or retained as a consultant or advisor to a competitive entity in the bakery/coffee/deli business. For purposes of this Agreement, "competitive entity" includes, without limitation, the following companies doing business as: PARADISE BAKERY, INC.; STARBUCKS; BRUEGGER'S BAGEL BAKERY; FINAGLE-A-BAGEL; LE BOULANGERIE; GREAT HARVEST; EINSTEIN'S/NOAH'S; CORNER BAKERY; BIG SKY, AFC ENTERPRISES, INC. and their respective parents, subsidiaries, franchisees, affiliates, successors or assigns. Additionally, "competitive entity" shall include, without limitation, any company which generates in the aggregate more than 50% of its revenues from the retail sales of baked goods and coffee, and their respective parents, subsidiaries, franchisees, affiliates, successors or assigns. Notwithstanding the above, the direct or indirect ownership of one percent (1%) or less of the stock of a competitive entity whose shares are listed an a national securities exchange or are quoted an the National Association of Securities Dealers Automated Quotation System or so-called Bulletin Board shall not, in and of itself, be deemed to be a violation of this Section 8(a); (b) during the terms of this Agreement and for one (1) year after its termination, for whatever reason, recruit, solicit, hire, or assist any other person or party in recruiting, soliciting, or hiring any employee of the Company or any of its Affiliates or any of their respective franchisee- The Company may, in its sole discretion, waive enforcement of any of the provisions of this Section 8, which waiver shall be evidenced solely by the execution and delivery to the Employee of a written document setting forth the terms of such waiver, executed by an authorized representative of the Company. 5 9. ENFORCEMENT Employee agrees and acknowledges that a violation of Sections 7 or 8 of this Agreement shall entitle the Company to terminate this Agreement immediately, which termination shall be conclusively deemed to be a termination for cause, as set forth in Section 5(a) hereunder. In the event of a violation of Sections 7 or 8 of this Agreement, any further Severance, salary continuation, Benefits or other future compensation otherwise owed to the Employee pursuant hereto shall be forfeited. The Employee acknowledges and agrees that the Company's remedies at law for a breach of Sections 7 or 8 of this Agreement are inadequate and that the harm caused thereby is irreparable. The Employee expressly agrees that in the event of a violation of Sections 7 or 8 of this Agreement, the Company shall be entitled to equitable relief enforcing the terms of this Agreement, including without limitation, specific performance, a temporary restraining order, preliminary injunction or permanent injunction to prevent any breach or attempted breach thereof. The provisions of Sections 7, 8 and 9 shall survive the termination of this Agreement, in addition to any others which may survive pursuant to the terms of this Agreement. 10. SEVERABILITY If any provision of this Agreement including, without limitation, Sections 7, 8 or 9 hereof, is declared or found to be illegal, unenforceable, void, overbroad, or unreasonable in scope, territory, or duration, in whole or in part, then both parties will be relieved of all obligations arising under such provision, but only to the extent it is illegal, unenforceable, void, overbroad, or unreasonable in scope, territory or duration. The intent and agreement of the parties to this Agreement is that this Agreement will be deemed amended by modifying any such illegal, unenforceable, void, overbroad or unreasonable provision to the extent necessary to make it legal and enforceable while preserving its intent, or if such is not possible, by substituting therefor another provision that is legal, enforceable and achieves the same objectives. The foregoing notwithstanding, if the remainder of this Agreement will not be affected by such declaration or finding and is capable of substantial performance, then each provision not so affected will be enforced to the extent permitted by law. 11. ARBITRATION Any controversy or claim arising out of or relating to this Agreement or Employee's employment with the Company, except for claims of violation by the Employee of Sections 7 and 8 hereof which may be enforced by the Company in a court of competent jurisdiction pursuant to Section 9 hereof, shall be settled exclusively by binding arbitration before a single arbitrator in the City of Boston, in accordance with the Commercial Arbitration Rules of thc American Arbitration Association. The provisions hereof shall be a complete bar and defense to any suit, action or proceeding instituted by the Employee in any federal, state or local court or before any administrative tribunal with respect to any matter which is arbitrable as herein set forth. This Section shall survive the termination or expiration of this 6 Agreement. Nothing herein contained shall be deemed to give any arbitrator any authority, power, or right to alter, change, amend, modify, add to, or subtract from any provisions of this Agreement. The arbitrator shall have no authority to award punitive damages or attorney's fees to any party. The decision of the arbitrator shall be final and conclusive. Judgment on an award rendered by the arbitrator may be entered in any court of competent jurisdiction. 14. NO CONFLICTING AGREEMENTS Employee hereby represents and warrants that neither the entry into this Agreement nor its performance by Employee will conflict with or result in a breach of the terms, conditions or provisions of any other agreement or other obligation of any nature to which Employee is a party, or by which he is otherwise bound, including, without limitation, any other employment agreement, non-competition agreement, or confidentiality agreement. 13. GOVERNING LAW The terms hereof shall be governed by, and construed and interpreted in accordance with, the laws of the Commonwealth of Massachusetts, without giving effect to its conflict of laws rules which may otherwise require the application of the law of another jurisdiction. 14. SUCCESSORS AND ASSIGNS This Agreement shall be binding upon and inure to the benefit of the Company and the Employee and their respective successors, assigns, heirs, legal representatives, executors and administrators. 15. NOTICES (i) All notices to the Employee shall be addressed to Employee at: Anthony J. Carroll 88 Fearing Road Hingham, MA 02043 or to such other place(s) as may be designated by written notice to the Company. (ii) All notices to the Company shall be addressed to the Company at: 19 Fid Kennedy Avenue Boston, MA 02210 Attention: C.F.O. 7 With copies to: Walter D. Wekstein, Esq. Gadsby & Hannah LLP 225 Franklin Street Boston, MA 02110 or to such other place(s) as may be designated by written notice to Employee. (iii) Notice shall be sufficient if given by hand or by certified mail, postage prepaid, return receipt requested, addressed to the party at its address described above. Unless otherwise notified in writing, each party shall direct all sums payable to the other party at its address for notice purposes. 16. HEADINGS The captions and headings in this Agreement are for convenience and reference only, and they shall in no way be held or deemed to define, modify or add to the meaning, scope or intent of any provision of this Agreement. 17. ENTIRE AGREEMENT This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, written or oral on the subject matter hereof including, but not limited to, offer letters, employment letters, and agreements concerning severance pay. 18. AMENDMENTS This Agreement may be modified only by written agreement signed by both the Employee and the Company. 19. WAIVER The failure of any party at any time to require the performance of any provision(s) hereof shall in no manner affect the right(s) of such party at a later time to require the performance of said provision(s), and shall not be deemed a waiver of any obligation hereunder. 8 IN WITNESS WHEREOF, the parties to this Agreement have executed this Agreement under seal, as of the date first above written. AU BON PAIN CO., INC. By: /s/ Ronald M. Shaich Date: 7/9/98 ----------------------------- -------------- Ronald M. Shaich, Co-Chairman Witness: /s/ Deborah L. Emery Date: 7/9/98 ------------------------- -------------- ANTHONY J. CARROLL /s/ Anthony J. Carroll Date: 8/5/98 - ----------------------------- -------------- Anthony J. Carroll Witness: /s/ Stephanie Shaw Date: 8/5/98 ------------------------- -------------- 9 EX-10.6(7) 4 EXHIBIT 10.6.7 EXHIBIT 10.6.7 EXECUTIVE EMPLOYMENT AGREEMENT This EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made this 1st day of September, 1995, by and between Richard Postle ("Employee") and Au Bon Pain, Co., Inc., a Delaware corporation with a principal place of business in Boston, Massachusetts (the "Company"). WHEREAS, the Company wishes to employ and engage the services of the Employee in an executive capacity for the Company, upon the terms, conditions and provisions of this Agreement; and WHEREAS, the Employee desires to provide services to the Company in accordance with the terms, conditions and provisions of this Agreement; NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and other good and valuable consideration, the receipt of which is hereby acknowledged, the Company and Employee hereby agree as follows: 1. DEFINITIONS For all purposes of this Agreement, the following terms shall have the meanings specified in this Section 1 unless the context clearly requires otherwise: (a) "BASE SALARY" means the Employee's annualized base salary set forth in Section 3 of this Agreement, and such increases thereto as may be established by the Company from time to time. In no event, however, shall Employee's Base Salary be less than the amount set forth in Section 3 of this Agreement. "Base Salary" shall not include any bonus, incentive compensation or employee benefits; (b) "BENEFITS" means all employee benefits provided to the Employee by the Company, including medical, dental, long-term disability, life insurance, and such other benefits as may be provided from time to time by the Company generally to its employees; (c) "INCENTIVE COMPENSATION" means additional compensation provided to the Employee by the Company during the term of this Agreement, if any, other than Base Salary and Benefits; (d) "SEVERANCE" means payments made by the Company to the Employee after termination of employment, pursuant to this Agreement, at the rate of the Employee's annualized Base Salary (and car allowance, if any) as of the date of Employee's termination. Severance is payable on a weekly basis in substantially equal installments following Employee's termination, in such increments and for such period(s) of time designated in this Agreement ("Severance Period"). Severance shall not include any bonuses or other Incentive Compensation. Except as set forth in the immediately preceding sentence, Severance shall also include the continuation of Employee's Benefits existing at the time of Employee's termination for the Severance Period. Employee shall be responsible for making all required contributions to continue Benefits during the Severance Period on the same basis as existed at the time of the Employee's termination. Severance shall be reduced (dollar for dollar) by any compensation and benefits Employee receives or earns during the Severance Period from any source other than the Company including, without limitation, salary, employee benefits, consulting fees, income from self-employment or otherwise. 2. EMPLOYMENT The Company agrees to employ the Employee to render services to the Company in an executive capacity. Effective as of the date hereof, Employee hereby accepts such employment subject to the terms and conditions set forth herein. Employee agrees to devote his full attention, best talents and abilities to the job and to perform faithfully his duties and responsibilities hereunder. 3. COMPENSATION The Company shall pay Employee a Base Salary at the rate of $300,000 annualized, Incentive Compensation, and Benefits, subject to federal and state withholdings and customary payroll deductions. 4. TERM Unless terminated as provided in Section 5, or as otherwise provided in this Agreement, this Agreement shall continue for a two-year period from the commencement of Employee's employment with the Company or the effective date of this Agreement, whichever is later; thereafter, this Agreement shall automatically renew for additional one-year periods, unless either party notifies the other in writing of its intent not to renew this Agreement at least twenty-six (26) weeks prior to its expiration. In the event the Employee gives notice of intent not to renew this Agreement, the Employee shall not be entitled to Severance. In the event the Company gives notice of intent not to renew this Agreement, at the expiration of the Agreement the Employee shall be entitled to twenty-six (26) weeks' Severance. 5. TERMINATION (a) TERMINATION FOR CAUSE The Company may terminate Employee's employment at any time for cause, upon written notice specifying the reasons. As used herein, the term "cause" shall mean: - 2 - (i) The commission by Employee of any act of embezzlement, fraud, larceny, theft, or other willful misconduct or gross negligence in connection with the performance of Employee's duties which adversely affects the affairs of the Company; (ii) Employee's conviction of a felony, or conviction of a misdemeanor involving moral turpitude; (iii) A material breach of the terms of this Agreement which continues for fifteen (15) days after the Company has given written notice to the Employee specifying in reasonable detail the material breach. (b) TERMINATION WITHOUT CAUSE Notwithstanding any other provision of this Agreement, the Company may terminate Employee's employment, without cause, at any time, for any reason, effective upon thirty (30) days' written notice to the Employee. In the event of a termination without cause, the Employee shall be entitled to fifty-two (52) weeks' Severance. (c) RESIGNATION The Employee may at any time during the term of this Agreement resign employment, effective upon ninety (90) days' written notice to the Company. Upon such resignation, the Employee shall not be entitled to any Severance, and, except as otherwise specifically set forth herein, the obligations of the Company to the Employee under this Agreement shall terminate upon the effective date of such resignation. Employee agrees to continue to perform his duties hereunder, and otherwise assist the Company in an orderly transition, during such ninety-day period. (d) DISABILITY The Company may terminate Employee's employment if, at any time during the term of this Agreement, the Employee shall become disabled so that he is unable to perform the Employee's regular duties of employment, with reasonable accommodation, for a period of ninety (90) days in the aggregate during any 180-day period. The determination of the Employee's disability for purposes of this Section 5(d) shall be made by a qualified physician acceptable to both parties. In the event that the Company and the Employee are unable to agree upon a qualified physician, each party shall select a qualified physician, and in the event those two physicians are unable to agree upon a determination as to the Employee's disability, a third neutral physician ("Neutral Physician") acceptable to the parties shall be selected. The determination of disability by the Neutral Physician shall be final and binding for purposes of this Agreement. In the event this Agreement is terminated pursuant to this Section 5(d), the Employee shall be - 3 - entitled to fifty-two (52) weeks' Severance. Such Severance shall be offset dollar for dollar by any payments made in the aggregate to the Employee under the Company's existing Salary Continuation and Long-Term Disability Plan(s). (e) DEATH This Agreement and all obligations of the Company hereunder shall terminate upon the death of the Employee. In the event of a termination upon the death of the Employee, monies or compensation owed by the Company to the Employee up to the date of termination shall be paid to the Employee's estate or designee. 6. CONFIDENTIAL NATURE OF THIS AGREEMENT Employee agrees to keep confidential the terms of this Agreement. A violation of this provision shall entitle the Company to terminate this Agreement immediately, for cause, as set forth in Section 5(a)(iii). Notwithstanding the above, the Employee may disclose the terms of this Agreement to his/her immediate family, bankers, accountants, attorneys, and other financial advisers, the Internal Revenue Service, the Massachusetts Department of Revenue, in the event that disclosure is necessary in litigation or arbitration involving this Agreement, or in the event that such disclosures shall be compelled by law. 7. CONFIDENTIAL AND PROPRIETARY INFORMATION (a) The Employee understands and acknowledges that in the course of employment with the Company, Employee will have access to confidential and proprietary information of the Company and its Affiliates (which shall mean entities controlling, controlled by or under common control with the Company, including without limitation, Saint Louis Bread Company, Inc. and its Affiliates) which constitute valuable, special and unique assets of the Company and its Affiliates. For purposes of this Agreement, such confidential and proprietary information shall include, without limitation, the following: trade secrets; operating techniques; procedures and methods; product specifications; customer lists; account information; price lists; discount schedules; correspondence with customers, vendors, employees, partners or others; drawings; software; leads from suppliers; marketing techniques; procedures and methods; employee lists; internal financial reports of the Company and its Affiliates; sourcing lists; and recruiting lists (collectively, "Confidential Information"). (b) The Employee agrees that during the term of this Agreement and at any time thereafter, Employee will not, without the authorization of the Company: (i) disclose any Confidential Information to any person or entity for any purpose whatsoever; or (ii) make use of any Confidential Information for Employee's own purposes or for the benefit of any other person or entity, other than the Company and its Affiliates. - 4 - (c) The Employee agrees that upon the request of the Company or upon termination of employment, Employee shall return to the Company all documents or other materials, including electronic or computerized data, containing or relating to Confidential Information, along with all other Company property. 8. RESTRICTIVE COVENANT During the term of this Agreement, and for one year after its termination, for whatever reason, the Employee shall not, directly or indirectly, either as an individual, employee, partner, officer, owner, director, shareholder, advisor or consultant, or in any other capacity whatsoever, on behalf of any person, firm, corporation, partnership or entity: (a) be employed by or retained as a consultant or advisor to a competitive entity in the bakery/coffee/deli business. For purposes of this Agreement, "competitive entity" includes, without limitation, the following companies doing business as: WALL STREET DELI; PARADISE BAKERY, INC.; STARBUCKS; VIE DE FRANCE; JAVA CITY; BRUEGGER'S BAGEL BAKERY; FINAGLE-A-BAGEL; LE BOULANGERIE; GREAT HARVEST; EINSTEIN'S/NOAH'S; PEET'S; CORNER BAKERY; BIG SKY, and their respective parents, subsidiaries, franchisees, affiliates, successors or assigns. Additionally, "competitive entity" shall include, without limitation, any company which generates in the aggregate more than 25% of its revenues from the sale of baked goods and coffee, and their respective parents, subsidiaries, franchisees, affiliates, successors or assigns. Notwithstanding the above, the direct or indirect ownership of one percent (1%) or less of the stock of a competitive entity whose shares are listed on a national securities exchange or are quoted on the National Association of Securities Dealers Automated Quotation System or so-called Bulletin Board shall not, in and of itself, be deemed to be a violation of this Section 8(a); (b) recruit, solicit, hire, or assist any other person or party in recruiting, soliciting, or hiring any employee of the Company or any of its Affiliates or any of their respective franchises. The Company may, in its sole discretion, waive enforcement of the provisions of this Section 8, which waiver shall be evidenced solely by the execution and delivery to the Employee of a written document setting forth the terms of such waiver, executed by an authorized representative of the Company. - 5 - 9. ENFORCEMENT Employee agrees and acknowledges that a violation of Sections 7 or 8 of this Agreement shall entitle the Company to terminate this Agreement immediately, which termination shall be conclusively deemed to be a termination for cause, as set forth in Section 5(a) hereunder. In the event of a violation of Sections 7 or 8 of this Agreement, any further Severance, salary continuation, Benefits or other future compensation otherwise owed pursuant hereto shall be forfeited, and any Severance already paid or provided to the Employee shall likewise be forfeited and shall be immediately returned to the Company. The Employee acknowledges and agrees that the Company's remedies at law for a breach of Sections 7 or 8 of this Agreement are inadequate and that the harm caused thereby is irreparable. The Employee expressly agrees that in the event of a violation of Sections 7 or 8 of this Agreement, the Company shall be entitled to equitable relief enforcing the terms of this Agreement, including without limitation, specific performance, a temporary restraining order, preliminary injunction or permanent injunction to prevent any breach or attempted breach thereof. The provisions of Sections 7, 8 and 9 shall survive the termination of this Agreement, in addition to any others which may survive pursuant to the terms of this Agreement. 10. SEVERABILITY If any provision of this Agreement including, without limitation, Sections 7, 8 or 9 hereof, is declared or found to be illegal, unenforceable, void, overbroad, or unreasonable in scope, territory, or duration, in whole or in part, then both parties will be relieved of all obligations arising under such provision, but only to the extent it is illegal, unenforceable, void, overbroad, or unreasonable in scope, territory or duration. The intent and agreement of the parties to this Agreement is that this Agreement will be deemed amended by modifying any such illegal, unenforceable, void, overbroad or unreasonable provision to the extent necessary to make it legal and enforceable while preserving its intent, or if such is not possible, by substituting therefor another provision that is legal and enforceable and achieves the same objectives. The foregoing notwithstanding, if the remainder of this Agreement will not be affected by such declaration or finding and is capable of substantial performance, then each provision not so affected will be enforced to the extent permitted by law. 11. ARBITRATION Any controversy or claim arising out of or relating to this Agreement or Employee's employment with the Company, except for claims of violation by the Employee of Sections 7 and 8 hereof which may be enforced by the Company in a court of competent jurisdiction pursuant to Section 9 hereof, shall be settled exclusively by - 6 - binding arbitration before a single arbitrator in the City of Boston, in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The provisions hereof shall be a complete bar and defense to any suit, action or proceeding instituted by the Employee in any federal, state or local court or before any administrative tribunal with respect to any matter which is arbitrable as herein set forth. This Section shall survive the termination or expiration of this Agreement. Nothing herein contained shall be deemed to give any arbitrator any authority, power, or right to alter, change, amend, modify, add to, or subtract from any provisions of this Agreement. The arbitrator shall have no authority to award punitive damages or attorney's fees to any party. The decision of the arbitrator shall be final and conclusive. Judgment on an award rendered by the arbitrator may be entered in any court of competent jurisdiction. 12. NO CONFLICTING AGREEMENTS Employee hereby represents and warrants that neither the entry into this Agreement nor its performance by Employee will conflict with or result in a breach of the terms, conditions or provisions of any other agreement or other obligation of any nature to which Employee is a party, or by which he is otherwise bound, including, without limitation, any other employment agreement, non-competition agreement, or confidentiality agreement. 13. GOVERNING LAW The terms hereof shall be governed by, and construed and interpreted in accordance with, the laws of the Commonwealth of Massachusetts, without giving effect to its conflict of laws rules which may otherwise require the application of the law of another jurisdiction. 14. SUCCESSORS AND ASSIGNS This Agreement shall be binding upon and inure to the benefit of the Company and the Employee and their respective successors, assigns, heirs, legal representatives, executors and administrators. 15. NOTICES (i) All notices to the Employee shall be addressed to Employee at: or to such other place(s) as may be designated by written notice to the Company. - 7 - (ii) All notices to the Company shall be addressed to the Company at: 19 Fid Kennedy Avenue Boston, MA 02210 Attention: C.E.O. With copies to: Walter D. Wekstein, Esq. Gadsby & Hannah LLP 125 Summer Street Boston, MA 02110 or to such other place(s) as may be designated by written notice to Employee. (iii) Notice shall be sufficient if given by hand or by certified mail, postage prepaid, return receipt requested, addressed to the party at its address described above. Unless otherwise notified in writing, each party shall direct all sums payable to the other party at its address for notice purposes. 16. HEADINGS The captions and headings in this Agreement are for convenience and reference only, and they shall in no way be held or deemed to define, modify or add to the meaning, scope or intent of any provision of this Agreement. 17. ENTIRE AGREEMENT This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, written or oral on the subject matter hereof including, but not limited to, offer letters, employment letters, and agreements concerning severance pay. 18. AMENDMENTS This Agreement may be modified only by written agreement signed by both the Employee and the Company. 19. WAIVER The failure of any party at any time to require the performance of any provision(s) hereof shall in no manner affect the right(s) of such party at a later time to require the - 8 - performance of said provision(s), and shall not be deemed a waiver of any obligations hereunder. IN WITNESS WHEREOF, the parties to this Agreement have executed this Agreement under seal, as of the date first above written. AU BON PAIN CO., INC. By: /s/ Ronald M. Shaich Date: 12/13/96 ------------------------------- ---------------- Ronald M. Shaich, Co-Chairman Witness: /s/ Deborah L. Emery Date: 12/13/96 --------------------------- ---------------- Richard Postle /s/ Richard C. Postle Date: 3/28/97 - ----------------------------------- ---------------- Richard C. Postle Witness: /s/ Iris K. Grote Date: 3/28/97 --------------------------- ---------------- - 9 - -----END PRIVACY-ENHANCED MESSAGE-----