Exhibit 10.3

EMPLOYEE AND CONSULTANT
NON-QUALIFIED STOCK OPTION AGREEMENT

PANERA BREAD COMPANY

     AGREEMENT made as of the 5th day of June, 2003, between Panera Bread
Company (the “Company”), a Delaware corporation having a principal place of
business in Richmond Heights, Missouri, and Paul Twohig (the “Participant”).

     WHEREAS, the Company desires to grant to the Participant an Option to
purchase shares of its Class A Common Stock, $.0001 par value per share (the
“Shares”), under and for the purposes set forth in the Company’s 2001 Employee,
Director and Consultant Stock Option Plan (the “Plan”);

     WHEREAS, the Company and the Participant understand and agree that any
terms used and not defined herein have the same meanings as in the Plan; and

     WHEREAS, the Company and the Participant each intend that the Option
granted herein shall be a Non-Qualified Option.

     NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto agree as
follows:

     1.     GRANT OF OPTION.

     The Company hereby grants to the Participant the right and option to
purchase all or any part of an aggregate of fifty thousand (50,000) Shares,
subject to adjustment, as provided in the Plan, in the event of a stock split,
reverse stock split or other events affecting the holders of Shares, and on the
terms and conditions and subject to all the limitations set forth herein and in
the Plan, which is incorporated herein by reference.

     2.     PURCHASE PRICE.

     The purchase price of the Shares covered by the Option shall be Thirty-six
dollars and fifteen cents ($36.15) per Share, subject to adjustment, as provided
in the Plan, in the event of a stock split, reverse stock split or other events
affecting the holders of Shares. Payment shall be made in accordance with
Paragraph 7 of the Plan.

     3.     EXERCISABILITY OF OPTION.

     Subject to the terms and conditions set forth in this Agreement and the
Plan, the Option granted hereby shall become exercisable as follows:

      On the second anniversary of the date of this Agreement   25% of the
Shares       On the third anniversary of the date of this Agreement   an
additional 25% of the Shares       On the fourth anniversary of the date of this
Agreement   an additional 25% of the Shares       On the fifth anniversary of
the date of this Agreement   an additional 25% of the Shares

 

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     The foregoing rights are cumulative and are subject to the other terms and
conditions of this Agreement and the Plan. In the event of a Change in Control
(as defined below) of the Company, the Options then outstanding shall become
immediately and fully exercisable, notwithstanding any provision above for the
exercise in installments.

     A Change in Control means the first to occur of (i) the closing of the sale
of all or substantially all of the assets of the Company and its subsidiaries on
a consolidated basis to a person or entity other than one or more of the
subsidiaries of the Company, (ii) the closing of the sale, transfer or other
disposition of the voting equity interests of the Company (“Voting Stock”) the
result of which is that the owners of such Voting Stock prior to such
transaction cease to own 50% or more of the Voting Stock after such transaction,
and (iii) the closing of a merger or consolidation of the Company with or into
any other person or entity, the result of which is that the owners of the Voting
Stock prior to such transaction do not own 50% or more of the voting equity
interests of the surviving or resulting company after such transaction; provided
that the following events shall not be deemed to be a Change in Control: (A) the
acquisition of Voting Stock by the Company or any of its subsidiaries, (B) the
acquisition of Voting Stock by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its subsidiaries, or (C) the
acquisition of Voting Stock by any underwriter temporarily holding securities
pursuant to an offering of such securities.

     4.     TERM OF OPTION.

     The Option shall terminate seven years after the date of this Agreement,
but shall be subject to earlier termination as provided herein or in the Plan.

     If the Participant ceases to be an employee, director or consultant of the
Company or of an Affiliate (for any reason other than the death or Disability of
the Participant or termination of the Participant for “cause” (as defined in the
Plan), the Option may be exercised, if it has not previously terminated, within
three (3) months after the date the Participant ceases to be an employee,
director or consultant of the Company or an Affiliate, or within the originally
prescribed term of the Option, whichever is earlier, but may not be exercised
thereafter. In such event, the Option shall be exercisable only to the extent
that the Option has become exercisable and is in effect at the date of such
cessation of employment, directorship or consultancy.

     Notwithstanding the foregoing, in the event of the Participant’s Disability
or death within three (3) months after the termination of employment,
directorship or consultancy, the Participant or the Participant’s Survivors may
exercise the Option within one (1) year after the date of the Participant’s
termination of employment, directorship or consultancy, but in no event after
the date of expiration of the term of the Option.

     In the event the Participant’s employment, directorship or consultancy is
terminated by the Company or an Affiliate for “cause” (as defined in the Plan),
the Participant’s right to exercise any unexercised portion of this Option shall
cease as of such termination, and this Option shall thereupon terminate.
Notwithstanding anything herein to the contrary, if subsequent to the
Participant’s termination, but prior to the exercise of the Option, the Board of
Directors of the Company determines that, either prior or subsequent to the
Participant’s termination, the Participant engaged in conduct which would
constitute “cause,” then the Participant shall immediately cease to have any
right to exercise the Option and this Option shall thereupon terminate.

     In the event of the Disability of the Participant, as determined in
accordance with the Plan, the Option shall be exercisable within one (1) year
after the Participant’s termination of service or, if earlier, within the term
originally prescribed by the Option. In such event, the Option shall be
exercisable:

  (a)   to the extent exercisable but not exercised as of the date of
Disability; and     (b)   in the event rights to exercise the Option accrue
periodically, to the extent of a pro rata portion of any additional rights to
exercise the Option as would have accrued had the Participant not become
Disabled prior to the end of the accrual period which next ends following the
date of Disability. The proration shall be based upon the number of days during
the accrual period prior to the date of Disability.

 

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     In the event of the death of the Participant while an employee, director or
consultant of the Company or of an Affiliate, the Option shall be exercisable by
the Participant’s Survivors within one (1) year after the date of death of the
Participant or, if earlier, within the originally prescribed term of the Option.
In such event, the Option shall be exercisable:

  (x)   to the extent exercisable but not exercised as of the date of death; and
    (y)   in the event rights to exercise the Option accrue periodically, to the
extent of a pro rata portion of any additional rights to exercise the Option as
would have accrued had the Participant not died prior to the end of the accrual
period which next ends following the date of death. The proration shall be based
upon the number of days during the accrual period prior to the Participant’s
death.

     5.     METHOD OF EXERCISING OPTION.

     The Option (or any part or installment) may be exercised by written notice
to the Company at its principal executive office, in substantially the form of
Exhibit A attached to this Agreement. The notice must include provision for
payment of the full purchase price for the Shares as to which the Option is
being exercised, and the exercise must comply with any other condition(s) set
forth in this Agreement. The notice must be signed by the Participant, shall
state the number of Shares with respect to which the Option is being exercised
and shall contain any representation required by the Plan or this Agreement.
Payment of the purchase price for the Shares as to which the Option is being
exercised shall be made (a) in United States dollars in cash or by check, or
(b) at the discretion of the Company, through delivery of shares of Shares
having a fair market value equal as of the date of the exercise to the cash
exercise price of the Option, or (c) at the discretion of the Company, by having
the Company retain from the shares otherwise issuable upon exercise of the
Option, a number of shares having a fair market value equal as of the date of
exercise to the exercise price of the Option, or (d) at the discretion of the
Company, by delivery of the Participant’s personal recourse note bearing
interest payable not less than annually at no less than 100% of the applicable
Federal rate, or (e) at the discretion of the Company, in accordance with a
cashless exercise program established with a securities brokerage firm, and
approved by the Company, or (f) at the discretion of the Company, by any
combination of (a), (b), (c), (d) and (e) above.

     The Company shall deliver a certificate or certificates representing such
Shares as soon as practicable after the notice shall be received, provided,
however, that the Company may delay issuance of such Shares until completion of
any action or obtaining of any consent, which the Company deems necessary under
any applicable law (including, without limitation, state securities or “blue
sky” laws). The certificate or certificates for the Shares as to which the
Option shall have been so exercised shall be registered in the name of the
person or persons so exercising the Option (or, if the Option shall be exercised
by the Participant and if the Participant shall so request in the notice
exercising the Option, shall be registered in the name of the Participant and
another person jointly, with right of survivorship) and shall be delivered as
provided above to or upon the written order of the person or persons exercising
the Option. In the event the Option shall be exercised, pursuant to Section 4
hereof, by any person or persons other than the Participant, such notice shall
be accompanied by appropriate proof of the right of such person or persons to
exercise the Option. All Shares that shall be purchased upon the exercise of the
Option as provided herein shall be fully paid and nonassessable.

     6.     PARTIAL EXERCISE.

     Exercise of this Option to the extent above stated may be made in part at
any time and from time to time within the above limits, except that no
fractional share shall be issued pursuant to this Option.

     7.     NON-ASSIGNABILITY.

     The Option shall not be transferable by the Participant otherwise than by
will or by the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act or the rules thereunder. Except as provided in
the previous sentence, the Option shall be exercisable, during the Participant’s
lifetime, only by the Participant (or, in the event of legal incapacity or
incompetency, by the Participant’s guardian or representative) and shall not be
assigned, pledged or hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar

 

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process. Any attempted transfer, assignment, pledge, hypothecation or other
disposition of the Option or of any rights granted hereunder contrary to the
provisions of this Section 7, or the levy of any attachment or similar process
upon the Option shall be null and void.

     8.     NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE.

     The Participant shall have no rights as a stockholder with respect to
Shares subject to this Agreement until registration of the Shares in the
Company’s share register in the name of the Participant. Except as is expressly
provided in the Plan with respect to certain changes in the capitalization of
the Company, no adjustment shall be made for dividends or similar rights for
which the record date is prior to the date of such registration.

     9.     CAPITAL CHANGES AND BUSINESS SUCCESSIONS.

     The Plan contains provisions covering the treatment of Options in a number
of contingencies such as stock splits and mergers. Provisions in the Plan for
adjustment with respect to stock subject to Options and the related provisions
with respect to successors to the business of the Company are hereby made
applicable hereunder and are incorporated herein by reference.

     10.     TAXES.

     The Participant acknowledges that upon exercise of the Option the
Participant will be deemed to have taxable income measured by the difference
between the then fair market value of the Shares received upon exercise and the
price paid for such Shares pursuant to this Agreement. The Participant
acknowledges that any income or other taxes due from him or her with respect to
this Option or the Shares issuable pursuant to this Option shall be the
Participant’s responsibility.

     The Participant agrees that the Company may withhold from the Participant’s
remuneration, if any, the minimum statutory amount of federal, state and local
withholding taxes attributable to such amount that is considered compensation
includable in such person’s gross income. At the Company’s discretion, the
amount required to be withheld may be withheld in cash from such remuneration,
or in kind from the Shares otherwise deliverable to the Participant on exercise
of the Option. The Participant further agrees that, if the Company does not
withhold an amount from the Participant’s remuneration sufficient to satisfy the
Company’s income tax withholding obligation, the Participant will reimburse the
Company on demand, in cash, for the amount under-withheld.

     11.     PURCHASE FOR INVESTMENT.

     Unless the offering and sale of the Shares to be issued upon the particular
exercise of the Option shall have been effectively registered under the
Securities Act of 1933, as now in force or hereafter amended (the “1933 Act”),
the Company shall be under no obligation to issue the Shares covered by such
exercise unless and until the following conditions have been fulfilled:

  (a)   The person(s) who exercise the Option shall warrant to the Company, at
the time of such exercise, that such person(s) are acquiring such Shares for
their own respective accounts, for investment, and not with a view to, or for
sale in connection with, the distribution of any such Shares, in which event the
person(s) acquiring such Shares shall be bound by the provisions of the
following legend which shall be endorsed upon the certificate(s) evidencing the
Shares issued pursuant to such exercise:

      “The shares represented by this certificate have been taken for investment
and they may not be sold or otherwise transferred by any person, including a
pledgee, unless (1) either (a) a Registration Statement with respect to such
shares shall be effective under the Securities Act of 1933, as amended, or
(b) the Company shall have received an opinion of counsel satisfactory to it
that an exemption from registration under such Act is then available, and
(2) there shall have been compliance with all applicable state securities laws;”
and

 

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  (b)   If the Company so requires, the Company shall have received an opinion
of its counsel that the Shares may be issued upon such particular exercise in
compliance with the 1933 Act without registration thereunder. Without limiting
the generality of the foregoing, the Company may delay issuance of the Shares
until completion of any action or obtaining of any consent, which the Company
deems necessary under any applicable law (including without limitation state
securities or “blue sky” laws).

     12.     RESTRICTIONS ON TRANSFER OF SHARES.

     12.1 If, in connection with a registration statement filed by the Company
pursuant to the Securities Act, the Company or its underwriter so requests, the
Participant will agree not to sell any Shares for a period not to exceed 180
days following the effectiveness of such registration.

     12.2 The Participant acknowledges and agrees that neither the Company, its
shareholders nor its directors and officers, has any duty or obligation to
disclose to the Participant any material information regarding the business of
the Company or affecting the value of the Shares before, at the time of, or
following a termination of the employment of the Participant by the Company,
including, without limitation, any information concerning plans for the Company
to make a public offering of its securities or to be acquired by or merged with
or into another firm or entity.

     13.     NO OBLIGATION TO MAINTAIN RELATIONSHIP.

The Company is not by the Plan or this Option obligated to continue the
Participant as an employee, director or consultant of the Company. The
Participant agrees, however, that in the event of a Change in Control, if
requested by the Company or its successor, he will remain in the employ of the
Company or its successor until the end of the two-month period following the
Change in Control.

     14.     NOTICES.

     Any notices required or permitted by the terms of this Agreement or the
Plan shall be given by recognized courier service, facsimile, registered or
certified mail, return receipt requested, addressed as follows:

      If to the Company:         Panera Bread Company    

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    6710 Clayton Road    

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    Richmond Heights, MO 63117    

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    ATTN: General Counsel     ATTN: Personnel — Benefits Manager          

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    With copies to:           Panera Bread Company
3 Charles River Place
63 Kendrick Street
Needham, MA 02494
ATTN: General Counsel
ATTN: Personnel — Benefits Manager
   

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 If to the Participant:         Paul Twohig    

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    54 Suffolk Road    

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    Wellesley, MA 02481    

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or to such other address or addresses of which notice in the same manner has
previously been given. Any such notice shall be deemed to have been given upon
the earlier of receipt, one business day following delivery to a recognized
courier service or three business days following mailing by registered or
certified mail.

     15.     GOVERNING LAW.

     This Agreement shall be construed and enforced in accordance with the law
of the State of Delaware, without giving effect to the conflict of law
principles thereof.

     16.     BENEFIT OF AGREEMENT.

     Subject to the provisions of the Plan and the other provisions hereof, this
Agreement shall be for the benefit of and shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.

     17.     ENTIRE AGREEMENT.

     This Agreement, together with the Plan, embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior oral or written agreements and understandings
relating to the subject matter hereof. No statement, representation, warranty,
covenant or agreement not expressly set forth in this Agreement shall affect or
be used to interpret, change or restrict, the express terms and provisions of
this Agreement, provided, however, in any event, this Agreement shall be subject
to and governed by the Plan.

     18.     MODIFICATIONS AND AMENDMENTS.

     The terms and provisions of this Agreement may be modified or amended as
provided in the Plan.

     19.     WAIVERS AND CONSENTS.

     Except as provided in the Plan, the terms and provisions of this Agreement
may be waived, or consent for the departure therefrom granted, only by written
document executed by the party entitled to the benefits of such terms or
provisions. No such waiver or consent shall be deemed to be or shall constitute
a waiver or consent with respect to any other terms or provisions of this
Agreement, whether or not similar. Each such waiver or consent shall be
effective only in the specific instance and for the purpose for which it was
given, and shall not constitute a continuing waiver or consent.

 

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     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer, and the Participant has hereunto set his or her
hand, all as of the day and year first above written.

              PANERA BREAD COMPANY               By:            

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        Name         Title              

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    Participant

 

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Exhibit A

NOTICE OF EXERCISE OF NON-QUALIFIED STOCK OPTION

    TO: Panera Bread Company
6710 Clayton Road
Richmond Heights, MO 63117
Attn:                                        

Ladies and Gentlemen:

     I hereby exercise my Non-Qualified Stock Option to purchase           
shares (the “Shares”) of the Class A Common Stock, $.0001 par value, of Panera
Bread Company (the “Company”), at the exercise price of $                per
share, pursuant to and subject to the terms of that certain Non-Qualified Stock
Option Agreement between the undersigned and the Company dated           , 200_.

     I understand the nature of the investment I am making and the financial
risks thereof. I am aware that it is my responsibility to have consulted with
competent tax and legal advisors about the relevant national, state and local
income tax and securities laws affecting the exercise of the Option and the
purchase and subsequent sale of the Shares.

     I am paying the option exercise price for the Shares as follows:

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     Please issue the stock certificate for the Shares (check one):

     o to me; or

     o to me and
                                                                       , as
joint tenants with right of survivorship,

     and mail the certificate to me at the following address:

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     My mailing address for shareholder communications, if different from the
address listed above, is:

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          Very truly yours,          

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    Participant (signature)          

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    Print Name

 

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    Date          

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    Social Security Number