Document:

Exhibit

EXHIBIT 4.2

DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934

As of December 31, 2019, LHC Group, Inc. (the “Company,” “us,” “we,” or “our”) had one class of securities, our common stock, par value $0.01 per share, registered under Section 12 of the Securities Exchange Act of 1934, as amended.

Description of Common Stock

The following description of our Common Stock is a summary and does not purport to be complete. It is subject to and qualified in its entirety by reference to our amended and restated certificate of incorporation and our amended and restated bylaws, which are filed as exhibits to our Annual Report on Form 10-K and are incorporated by reference herein, as well as the applicable provisions of the Delaware General Corporation Law (the “DGCL”). We encourage you to carefully review our amended and restated certificate of incorporation, our amended and restated bylaws and the applicable provisions of the DGCL, for additional information.

General

Our authorized capital stock will consist of 60,000,000 shares of common stock, par value $0.01 per share, and 5,000,000 shares of preferred stock, par value $0.01 per share.  As of December 31, 2019, we had 36,129,280 shares of our common stock issued, 30,922,390 shares of our common stock outstanding, no shares of LHC preferred stock outstanding, and an additional 2,141,893 shares of our common stock reserved for issuance under our employee benefit plans.

Voting Rights of Common Stock

Each holder of our common stock will be entitled to one vote per share of record on all matters to be voted upon by our stockholders, including the election of directors, and do not have cumulative voting rights. Generally, all matters other than the election of directors submitted to our stockholders at any properly-convened meeting of our stockholders shall be decided by the affirmative vote of the holders of a majority of the voting power of our outstanding voting stock present in person or represented by proxy at a meeting and entitled to vote thereon. Election of directors at all properly-convened meetings of our stockholders at which directors are to be elected are decided by a plurality of the votes cast.

Dividends

Subject to the preferential rights of the holders of any preferred stock that may at the time be outstanding, each share of common stock will entitle the holder of that share to an equal and ratable right to receive dividends or other distributions if declared from time to time by our board of directors and if there are sufficient funds to legally pay a dividend.

Rights Upon Liquidation

In the event of the Company’s liquidation, dissolution, or winding up, whether voluntary or involuntary, the holders of our common stock will be entitled to share ratably in all assets remaining after payments to creditors and after satisfaction of the liquidation preference, if any, of the holders of any preferred stock that may at the time be outstanding. 

Other Rights

Holders of our common stock have no preemptive or conversion rights or other subscription rights and there are no redemption or sinking funds provisions applicable to our common stock. 

Preferred Stock

The authorized preferred stock will be available for issuance from time to time at the discretion of our board of directors without stockholder approval. Our board of directors has the authority to prescribe for each series of preferred stock it establishes the number of shares in that series, the number of votes, if any, to which the shares in that series are entitled, the consideration for the shares in that series, the powers, designations, preferences, the relative, participating, optional, or other special rights, and the qualifications, limitations, or restrictions thereof, of the shares in that series. Depending upon the rights prescribed for a series of preferred stock, the issuance of preferred stock could have an adverse effect on the voting power of the holders of our common stock and could adversely affect holders of our common stock by delaying or preventing a change in control of the Company, making removal of the Company’s management more difficult or imposing restrictions upon the payment of dividends and other distributions to the holders of our common stock.  Additionally, the issuance of preferred stock may decrease the market price of our common stock.

Authorized But Unissued Shares

The DGCL does not require stockholder approval for any issuance of authorized shares. Authorized but unissued shares may be used for a variety of corporate purposes, including future public or private offerings to raise additional capital or to facilitate corporate acquisitions. One of the effects of the existence of authorized but unissued shares may be to enable our board of directors to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of the Company by means of a merger, tender offer, proxy contest, or otherwise and thereby protect the continuity of current management and possibly restrict our stockholders of opportunities to sell their shares of our common stock at prices higher than prevailing market prices.

Certain Provisions That May Have an Anti-Takeover Effect

Certain other provisions of our amended and restated certificate of incorporation and amended and restated bylaws may delay or make more difficult unsolicited acquisitions or changes of control of the Company. These provisions could have the effect of discouraging third parties from making proposals involving an unsolicited acquisition or change in control of the Company. These provisions may also have the effect of making it more difficult for third parties to cause the replacement of the current management without the concurrence of our board of directors. These provisions include:

		
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	Undesignated Preferred Stock. Our board of directors has the ability to authorize undesignated preferred stock, which allows the board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any unsolicited attempt to change control of the Company. This ability may have the effect of deferring hostile takeovers or delaying changes in control or management of the Company.

		
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	Election and Removal of Directors. Our board of directors is classified into three classes serving staggered terms of office of three years. With a classified board of directors, it would generally take a majority stockholder two annual meetings of stockholders to elect a majority of the board of directors. As a result, a classified board may discourage proxy contests for the election of directors or purchases of a substantial block of stock because it could operate to prevent obtaining control of the board in a relatively short period of time. Additionally, our directors may be removed from office at any time by a vote of the holders of a majority of the outstanding shares of stock entitled to vote in an election of directors, other than in connection with a properly-convened election of directors, but only for cause.

		
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	Elimination of Stockholder Action by Written Consent. Stockholder action by written consent of our stockholders is prohibited. Action by written consent may, in some circumstances, permit the taking of stockholders’ action opposed by the board of directors more rapidly than would be possible if a meeting of stockholders were required. The prohibition contained in the amended and restated certificate of incorporation will restrict the ability of controlling stockholders to take action at any time other than at an annual meeting and will generally force a takeover bidder to negotiate directly with the board of directors.

		
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	Stockholder Meetings. Only the Company’s board of directors, a duly authorized committee of the board of directors, the chairman or the vice chairman of our board of directors, or the chief executive officer is permitted to call a special meeting of the Company’s stockholders. This provision could prevent a stockholder from, among other things, calling a special meeting of stockholders to consider the stockholder’s proposed slate of directors or a transaction that might result in a change of control of the corporation.

		
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	Requirements for Advance Notification of Stockholder Nominations and Proposals. Compliance with an advance notice procedure is required for stockholder nomination of candidates for election as directors and other proposals to be brought before an annual meeting of our stockholders. Although our amended and restated bylaws will not give our board of directors any power to approve or disapprove stockholder nominations for the election of directors or other proposals for action, these advance notice procedures may have the effect of precluding a contest for the election of directors or the consideration of other stockholder proposals if the established procedures are not followed and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors or to approve another proposal without regard to whether consideration of those nominees or proposals might be harmful or beneficial to the Company and our stockholders.

		
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	Elimination of Company Directors’ Personal Liability.  No Company director shall be personally liable to the Company or our stockholders for monetary damages for breach of fiduciary duties by such director as a director, subject to the exceptions set forth in the DGCL and described herein. Our amended and restated certificate of incorporation eliminates or limits the personal liability of a director except for (i) any breach of the director’s duty of loyalty to the Company or our stockholders, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) unlawful corporate distributions, or (iv) any transaction from which such director derives an improper personal benefit. This provision of our amended and restated certificate of incorporation will limit the remedies available to a stockholder who is dissatisfied with a decision of the board of directors protected by this provision, and such stockholder’s only remedy in that circumstance may be to bring a suit to prevent the action of the board. In many situations, this remedy may not be effective, as for example when stockholders are not aware of a transaction or an event prior to board action in respect of such transaction or event. In these cases, the stockholders and the corporation could be injured by the board’s decision and have no effective remedy.

		
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	Permitting the board of directors, in evaluating any takeover offer, to consider all relevant factors, including the potential economic and social impact of the offer on our stockholders, employees, customers, creditors, the communities in which the Company operates and any other factors the directors consider pertinent. Once the board, in exercising its business judgment, has determined that a proposed action is not in the best interests of the Company, it has no duty to remove any barriers to the success of the action, including a shareholder rights plan.

Section 203 of the DGCL

The Company is subject to Section 203 (“Section 203”) of the DGCL, which, subject to certain exceptions, prohibits a Delaware corporation from engaging in any business combinations with any interested stockholder for a period of three years following the date that such stockholder became an interested stockholder, unless (i) before such date the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder, (ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned (x) by persons who are directors and also officers and (y) by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer, or (iii) on or after such date the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder.

Section 203 defines business combination to include (i) any merger or consolidation involving the corporation and the interested stockholder, (ii) any sale, lease, exchange, mortgage, transfer, pledge or other disposition involving the interested stockholder of 10% or more of assets of the corporation, (iii) subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder, (iv) any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder, or (v) the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by such an entity or person.

A Delaware corporation may “opt out” of Section 203, but we have not elected to do so, and we will therefore will be subject to the anti-takeover provisions of Section 203. The application of the provisions of Section 203 may therefore delay, prevent or make more difficult certain unsolicited acquisitions, tender offers or changes of control of the Company and also may have the effect of preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions which our stockholders may otherwise deem to be in their best interest.pbpb-ex1011_301.htm

 

EXHIBIT 10.11

Executive Employment Agreement

 

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into on May 11, 2018 and effective as of June 4, 2018 (the “Effective Date”) by and between Potbelly Corporation, a Delaware corporation (hereinafter referred to as “Company”), and Brandon Rhoten, an individual (hereinafter referred to as “Executive”).

Statement of Purpose

WHEREAS, Company wishes to employ Executive as its Senior Vice President and Chief Marketing Officer; and

WHEREAS, Executive desires to accept such employment on the terms and conditions set forth below; and

WHEREAS, Company and Executive desire to definitively set forth their agreement with respect to Executive’s employment; and

WHEREAS, Potbelly Illinois, Inc. and Potbelly Sandwich Works, LLC are direct or indirect subsidiaries of Company;

NOW, THEREFORE, in consideration of the Statement of Purpose, the terms and provisions of this Agreement and other good and valuable consideration, the parties hereto mutually consent, covenant, represent, warrant, and agree as follows:

1.Term, Employment and Duties.

(a)Term.  The term of employment of Executive pursuant to this Agreement (the “Term”) shall commence on the Effective Date and shall terminate on the date Executive’s employment with Company and its affiliates terminates for any reason (“Termination Date”).  Executive shall at all times be an at-will employee and nothing in this Agreement shall constitute or be evidence of any agreement or understanding, express or implied, that Executive has a right to continue to be employed by Company for any period of time or any specific rate of compensation.  Notwithstanding the foregoing, in the event that Executive does not commence active employment under this Agreement on the Effective Date, this Agreement shall be of no force and effect and neither party will have any obligations hereunder.

(b)Title and Duties.  Effective as of the Effective Date, Company hereby agrees to employ Executive, and Executive agrees to accept employment, as Company’s Senior Vice President and Chief Marketing Officer.  Executive shall also have the commensurate titles and positions with such subsidiaries or affiliates of Company as determined by Company and shall serve in such positions without additional compensation.  Executive shall have the duties, responsibilities and authority customary for his positions and shall perform such other duties consistent with such positions as may be assigned to Executive, from time to time, by Company.

 

		
	
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(c)Performance of Duties.  Executive shall devote Executive’s full business time, energy, loyalty, and ability exclusively to the business, affairs, and interests of Company and its affiliates, and shall use Executive’s best efforts and abilities to promote the interests of Company and its affiliates and to perform the services contemplated by this Agreement and agrees that he will perform his duties faithfully and efficiently subject to the directions of the Chief Executive Officer of Company (“CEO”) or such other executive designated by the CEO.  Without the prior approval of the CEO or the executive to whom Executive reports, Executive shall not, during the Term, directly or indirectly, render any other employment or consulting activities or services, including as a director, to any other person, firm, corporation, or other entity; provided, however, that, to the extent that the following activities do not conflict with or detract from the performance by Executive of Executive’s duties, Executive may act as a director of, and may also engage in activities involving, charitable, educational, religious, and similar types of organizations, and similar types of activities.

(d)Confidentiality, Non-Competition, Non-Interference and Intellectual Property.  The Company’s offer of employment set forth in this Agreement is made upon the express condition that Executive executes and delivers that certain Executive Confidentiality and Business Preservation Agreement provided to Executive simultaneously herewith and dated as of the Effective Date.  In addition, Company is entering into this Agreement with Executive and will employ Executive on the express condition that Executive does not use or disclose to Company any confidential or proprietary information or trade secrets belonging to anyone with whom Executive previously worked, and with the understanding that Executive’s employment with Company will not violate or be restricted by any non-competition or other agreement with anyone else.

2.Termination of Employment.

(a)Termination Date.  Executive’s Termination Date shall occur upon termination by Company for any reason or no reason or by Executive for any reason or no reason, including any of the following: (i) Executive’s death; (ii) Executive being disabled by reason of physical and mental infirmity or both, thereby rendering Executive unable to satisfactorily perform Executive’s duties under this Agreement (a “Disability”), said Disability to be determined in good faith by the CEO in consultation with no fewer than two (2) accredited physicians selected by the CEO and reasonably approved by Executive in the event that Disability is disputed; (iii) termination of Executive’s employment by Company with or without Cause (as defined below) or (iv) Executive’s resignation with or without Good Reason (as defined below).  Executive’s Termination Date shall be considered to be on account of a “Qualifying Termination” if the Termination Date occurs due to (1) termination by Company without Cause, or (2) termination by Executive with Good Reason.

(b)Cause.  The term “Cause” as used in this Agreement shall mean an act, action, or series of acts or actions, or omission or series of omissions, by Executive which constitute or result in: (i) intentional misrepresentation of material information by Executive in Executive’s relations with Company; (ii) Executive’s indictment (or its equivalent) for the commission of a crime by Executive that constitutes a felony; (iii) commission of an act involving moral turpitude; (iv) the material breach or material default by Executive of any of Executive’s written agreements with Company or obligations under any material provision of 

 

		
	
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this Agreement or any written policy of Company (that remains unremedied within thirty (30) days after notice to Executive); (v) the commission of fraud or embezzlement on the part of Executive; (vi) failure to comply with any lawful written direction of Company’s Board of Directors (the “Board”) (that, if capable of cure without damage to Company, remains unremedied within thirty (30) days after notice to Executive); or (vii) willful action taken for the purpose of harming Company or any of its affiliates.  For purposes of clause (vii) of this Paragraph 2(b), no act or failure to act, on the part of Executive, shall be considered “willful” unless it is done or omitted to be done, by Executive in bad faith and without reasonable belief that Executive’s action or omission was in the best interest of Company.  An act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interest of Company.

(c)Good Reason.  The term “Good Reason” as used in this Agreement means the occurrence, without Executive’s consent, of (i) a material reduction in either Executive’s rate of Base Salary (as defined in Paragraph 3(a)) or Executive’s target or maximum bonus percentage (other than a reduction which does not exceed the percentage reduction of an across the board salary or bonus reductions (target, actual or maximum) for management employees); (ii) any material reduction in the position, authority, or office of Executive with respect to Company, or in Executive’s responsibilities or duties for Company; (iii) any action or inaction by Company that constitutes a material breach of the terms of this Agreement; or (iv) any relocation of Executive’s principal place of work with Company to a place more than fifty (50) miles from Company’s headquarters at the Effective Date; provided, however, that any such occurrence under clauses (i) – (v) above shall constitute Good Reason only if (1) Executive provides notice to Company within thirty (30) days after the occurrence, (2) Company fails to cure such occurrence within thirty (30) days after receipt of notice from Executive, and (3) Executive terminates employment within thirty (30) days following expiration of the cure period.

3.Compensation and Benefits During Employment.

(a)Base Salary.  During the term of Executive’s employment hereunder, Company shall pay to Executive a base salary at an annual rate of $425,000.00 (the “Base Salary”).  The Base Salary may be increased from time to time at the recommendation of the CEO and approved by the Compensation Committee of the Board (the “Compensation Committee”).

(b)Annual Bonus.  Executive shall be eligible for a discretionary “Annual Bonus” in accordance with Company’s Named Executive Officers Incentive Plan as in effect from time to time (or a successor thereof) (the “NEO Incentive Plan”) at a target rate of 60% of his Base Salary and a maximum rate of 80% of his Base Salary, subject to satisfaction of applicable performance ratings and other conditions as determined by the Company from time to time.  Executive’s bonus shall be paid in a single lump sum cash payment not later than June 15 following the conclusion of the calendar year in which such bonus is earned; provided, however, that if the annual audit for such calendar year has not been issued by Company’s outside auditors by said June 15, then payment shall be made within thirty (30) days following the issuance of such audit, but in no event shall payment be made later than the end of the calendar year following the calendar year in which such bonus is earned.  The Annual Bonus for any year shall be pro rated for partial years and shall be subject to the terms and conditions of the NEO Incentive Plan.

 

		
	
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(c)Time Off.  During the Term, Executive shall be entitled to paid time off consistent with Company practice and policy for executive-level employees, but not less than 20 vacation days and 2 personal days per year, subject to pro ration for partial years.  In addition, Executive shall be entitled to those paid holidays granted to Company employees while Executive is employed.

(d)Executive Benefits/Perquisites.  Executive shall be entitled to such other benefits, including health insurance, dental, 401(k), and other benefits and perquisites in such form and in such manner and at such times as Company shall from time to time adopt and establish for its executive-level employees generally.  Executive shall be subject to eligibility and other requirements of applicable benefit plans.

(e)Expenses and Reimbursements.  

(i)Company shall pay or reimburse Executive for all reasonable business expenses actually incurred or paid by Executive during the Term in the performance of Executive’s duties and responsibilities under this Agreement, subject to and in accordance with applicable expense reimbursement policies as in effect from time to time and the terms and conditions of this Agreement.  

(ii)Company shall reimburse Executive for costs incurred by Executive in connection with moving Executive’s household goods, to the greater Chicago, Illinois area, up to a maximum of $20,000, in accordance with Company’s applicable relocation reimbursement policy and the terms and conditions of this Agreement.  

(iii)In the event that, prior to the first anniversary of the Effective Date and as a result of his termination of employment from his immediately prior employer (Papa John’s, the “Prior Employer”), Executive is required to repay to the Prior Employer amounts received by Executive in connection with his employment for the Prior Employer, Company shall pay such amounts, up to a maximum amount of $25,000, directly to the Prior Employer on behalf of Executive, provided, in any case, that Executive is employed by Company on the date that such repayment to the Prior Employer is due.  

(f)Equity Awards.  Executive shall be entitled to annual equity grants, if any, as determined by the Compensation Committee.  Notwithstanding the foregoing, Executive shall receive an initial grant under the Amended and Restated Potbelly Corporation 2013 Long-Term Incentive Plan, as further amended and restated (the “Equity Plan”) (and not to be considered representative of any future grants either as to amount or form), with an aggregate value of $500,000, which equity award grant shall be comprised of approximately fifty percent (50%) restricted stock units and fifty percent (50%) stock options, which equity grant shall be made in the first open trading window that begins after the Effective Date and, in any event, as soon as practicable following the Effective Date.  For years beginning in 2019 and thereafter, Executive shall be eligible to participate in the Equity Plan with an annual target award value of between 110 and 120 percent of Base Salary, which equity award may be in the form of stock options, restricted stock units (including performance-based restricted stock units) and/or other forms of 

 

		
	
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awards permitted under the Equity Plan, as determined in the sole discretion of the Compensation Committee; provided, however, that the actual value of the equity award for any year shall be determined by the Compensation Committee in its sole discretion taking into account Executive’s performance and performance of the Company for the applicable period to which the award relates.  All awards under the Equity Plan shall be evidenced by an award agreement setting forth the terms and conditions of the applicable award.  For purposes of determining the value of any equity award made under the Equity Plan in accordance with this Paragraph 3(f), the value of stock options granted shall be determined based on the Black-Scholes valuation method.  

4.Payments and Benefits on Termination of Employment.

(a)Termination for any Reason.  If Executive’s Termination Date occurs for any reason, Company shall pay or provide to Executive (i) Executive’s Base Salary for the period ending on the Termination Date; (ii) Executive’s earned but unpaid Annual Bonus for any bonus year ending prior to the bonus year during which the Termination Date occurs; (iii) reimbursement of Executive’s incurred but unreimbursed business expenses for periods prior to Executive’s Termination Date; and (iv) any other payments or benefits to be provided to Executive by Company pursuant to any employee benefit plans or arrangements of Company or required by applicable law, to the extent such amounts are due from Company.  Executive will be entitled to any other benefits in accordance with the terms of the applicable benefit plan or program.  Generally, all vested stock options outstanding on Executive’s Termination Date shall remain exercisable for ninety (90) days following the Termination Date or for such longer or shorter period specified under the stock option agreement evidencing such stock option but in no event after the expiration of the stock option term.

(b)Qualifying Termination—Non-Change in Control.  If Executive’s Termination Date occurs by reason of a Qualifying Termination and if the Release Requirements (as defined Paragraph 4(e)) are satisfied as of the sixtieth (60th) day following the Termination Date (which sixtieth (60th) day shall be referred to as the “Payment Date”), then, in addition to the payments and benefits to which Executive is entitled under Paragraph 4(a), Executive will be entitled to the following payments and benefits:

(i)Company shall pay Executive a cash severance payment in a gross amount equal to twelve (12) months of Executive’s Base Salary (determined as of the Termination Date without regard to any reduction thereof under circumstances which constitute Good Reason) (the “Severance Payment”).  Any Severance Payment to which Executive is entitled under this Paragraph 4(b)(i) will commence on the first regular payroll date after the Payment Date and shall continue to be paid in substantially equal payroll by payroll period installments for a period of twelve (12) months thereafter.

(ii)If Executive is entitled to and elects continuation coverage under Company’s group health plans pursuant to “COBRA” (“COBRA Coverage”), Company shall continue to pay on behalf of Executive and his eligible dependents the same level of employer contribution that is provided by Company for corresponding coverage for similarly-situated active employees for the lesser of (1) twelve (12) months following Executive’s Termination Date or (2) the date on which COBRA Coverage terminates by 

 

		
	
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its terms (the “Post-Termination Coverage Benefit”).  Company shall have no obligations under this Paragraph 4(b)(ii) if the Post-Termination Coverage Benefit would subject Company or any of its affiliates to tax penalties or materially increase the cost to Company and its affiliates of providing group medical coverage to employees generally.  For the period commencing on Executive’s Termination Date and ending on the Payment Date, the COBRA Coverage shall be provided at Executive’s expense and, if the Release Requirements are satisfied on the Payment Date, Executive shall be entitled to a lump sum payment in an amount equal to the Post-Termination Coverage Benefit that would have been provided to Executive for the period beginning on the Termination Date and ending on the Payment Date, which lump sum payment shall be made on the Payment Date or the next scheduled payroll date.

If the Release Requirements are not satisfied on the Payment Date, Executive shall not be entitled to any payments or benefits under this Paragraph 4(b).

(c)Qualifying Termination—Change in Control.  If Executive’s Termination Date occurs by reason of a Qualifying Termination on or within two (2) years following a Change in Control (as defined below), then, in addition to the payments and benefits to which Executive is entitled under Paragraph 4(a), Executive will be entitled to the following payments and benefits (which shall not be subject to satisfaction of the Release Requirements):

(i)Company shall pay Executive the Severance Benefit in accordance with the provisions of Paragraph 4(b)(i).

(ii)If Executive is entitled to and elects COBRA Coverage, Company shall provide Executive with the Post-Termination Coverage Benefit in accordance with the provisions of Paragraph 4(b)(ii).

(iii)Company shall pay Executive a cash payment equal to the amount of the Annual Bonus that Executive would have received for the bonus year in which the Termination Date occurs had his Termination Date not occurred, based on actual Company performance and pro rated for the portion of the bonus year completed prior to the Termination Date, payable at the same time as the annual bonus is paid to similarly-situated active executive employees in accordance with the terms of the applicable bonus plan of Company.

For purposes of this Agreement, the term “Change in Control” shall mean, a “Change in Control” as defined in the Incentive Plan.

(d)Company Property.  Upon Executive’s Termination Date, Executive will promptly return to Company all the documents and/or property of or relating to Company or any of its affiliates within Executive’s possession or control.

(e)Release Requirements.  For purposes of this Agreement, the “Release Requirements” shall be satisfied as of any date if, as of such date, Executive (or, for purposes of Paragraph 4(f) in the event of death, the legal representative of Executive’s estate) has signed a form of general release and waiver satisfactory to Company and Executive (the “Release”) and the Release has become effective in accordance with applicable law (including that the Release has not revoked and the revocation period applicable under applicable law has expired).

 

		
	
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(f)Termination by Reason of Death or Disability.  If Executive’s Termination Date occurs by reason of death or Disability and the Release Requirements are satisfied (which, in the case of death shall be satisfied by the legal representative of Executive’s estate), then, in addition to the payments and benefits to which Executive is entitled under Paragraph 4(a), Company shall pay to Executive or the legal representative of his estate, as applicable, a cash payment equal to the amount of the Annual Bonus that Executive would have received for the bonus year in which the Termination Date occurs had his Termination Date not occurred, based on actual Company performance and pro-rated for the portion of the bonus year completed prior to the Termination Date, payable at the same time as the annual bonus is paid to similarly-situated active executive employees in accordance with the terms of the applicable bonus plan of Company.

5.Mitigation and Set-Off.  Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise.  Company shall not be entitled to set off against the amounts payable to Executive under this Agreement any amounts earned by Executive in other employment after termination of his employment with Company or any amounts which might have been earned by Executive in other employment had he sought such other employment; provided, however that Company shall be entitled to set off against the amounts payable to Executive under this Agreement any amounts owed to Company by Executive.

6.Reimbursements.  To the extent that any reimbursements under this Agreement are taxable to Executive, such reimbursements shall be paid to Executive only if (a) to the extent not specified herein, the expenses are incurred and reimbursable pursuant to a reimbursement plan that provides an objectively determinable nondiscretionary definition of the expenses that are eligible for reimbursement and (b) the expenses are incurred during the Term.  With respect to any expenses that are reimbursable pursuant to the preceding sentence, the amount of the expenses that are eligible for reimbursement during one calendar year may not affect the amount of reimbursements to be provided in any subsequent calendar year, the reimbursement of an eligible expense shall be made no later than the last day of the calendar year following the calendar year in which the expense was incurred, and the right to reimbursement of the expenses shall not be subject to liquidation or exchange for any other benefit.

7.Notices.  Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid, or sent by facsimile or prepaid overnight courier to the parties at the addresses set forth below (or such other addresses as shall be specified by the parties by like notice).  Communications that are to be delivered by the U.S. mail or by overnight service are to be delivered to the addresses set forth below:

to Company:

Potbelly Corporation

111 N. Canal Street, Suite 850

Chicago, IL 60606

Attention:  General Counsel

or to Executive, to Executive’s home address as reflected in Company’s records.

 

		
	
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Each party, by notice furnished to the other party, may modify the applicable delivery address, except that notice of change of address shall be effective only upon receipt.

8.Non-Waiver.  No waiver by either party or any breach by the other party of any provision hereof shall be deemed to be a waiver of any later or other breach thereof or as a waiver of any such or other provision of this Agreement.

9.Governing Law and Choice of Forum.  The construction, validity, and enforceability of this Agreement shall be governed by the laws of the State of Illinois, as that law applies to contracts made, and to be wholly performed, in the State of Illinois.

10.Binding Effect.  This Agreement shall be binding upon and inure to the benefit of Company, Executive, and Executive’s personal representatives, beneficiaries, heirs, and successors.  Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Company would be required to perform it if no such succession has taken place.

11.Severability.  If any provision of this Agreement or any part thereof be held invalid or unenforceable, the same shall not affect or impair any other provision of this Agreement or any part thereof, and the invalidity or unenforceability of any provision of this Agreement shall not have any effect on or otherwise impair or limit the other obligations of Company or Executive.

12.Counterparts.  This Agreement may be executed in duplicate counterparts, each of which shall be deemed an original hereof.

13.Disputes.  Except as set forth in this Paragraph 13, any dispute, claim or difference arising between Company and Executive (each a “Party,” and jointly, the “Parties”), including any dispute, claim or difference arising out of this Agreement, will be settled exclusively by binding arbitration in accordance with the rules of the Judicial Arbitration and Mediation Services, Inc. (“JAMS”).  The arbitration will be held Chicago, Illinois unless the Parties mutually agree otherwise.  Nothing contained in this Paragraph 13 will be construed to limit or preclude a Party from bringing any action in any court of competent jurisdiction for injunctive or other provisional relief to compel another party to comply with its obligations under this Agreement or any other agreement between or among the Parties during the pendency of the arbitration proceedings.  Each Party shall bear its own costs and fees of the arbitration, and the fees and expenses of the arbitrator will be borne equally by the Parties, provided, however, if the arbitrator determines that any Party has acted in bad faith, the arbitrator shall have the discretion to require any one or more of the Parties to bear all or any portion of fees and expenses of the Parties and/or the fees and expenses of the arbitrator; provided, further that, with respect to claims that, but for this mandatory arbitration clause, could be brought against Company under any applicable federal or state labor or employment law (“Employment Law”), the arbitrator shall be granted and shall be required to exercise all discretion belonging to a court of competent jurisdiction under such Employment Law to decide the dispute, whether such discretion relates to the provision of discovery, the award of any remedies or penalties, or otherwise and provided 

 

		
	
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further that Company may be required to pay filing or administrative fees in the event that requiring Executive to pay such fees would render this Paragraph 13 unenforceable under applicable law.  As to claims not relating to Employment Laws, the arbitrator shall have the authority to award any remedy or relief that a Court of the State of Illinois could order or grant.  The decision and award of the arbitrator shall be in writing and copies thereof shall be delivered to each Party.  The decision and award of the arbitrator shall be binding on all Parties.  In rendering such decision and award, the arbitrator shall not add to, subtract from or otherwise modify the provisions of this Agreement.  Either Party to the arbitration may seek to have the award of the arbitrator entered in any court having jurisdiction thereof.  All aspects of the arbitration shall be considered confidential and shall not be disseminated by any Party with the exception of the ability and opportunity to prosecute its claim or assert its defense to any such claim.  The arbitrator shall, upon request of either Party, issue all prescriptive orders as may be required to enforce and maintain this covenant of confidentiality during the course of the arbitration and after the conclusion of same so that the result and underlying data, information, materials and other evidence are forever withheld from public dissemination with the exception of its subpoena by a court of competent jurisdiction in an unrelated proceeding brought by a third party.

14.Assignment and Survival.  This Agreement is personal to Executive and shall not be assignable by Executive.  This Agreement may be assigned by Company only to a successor-in interest to all or substantially all of the business operations of Company or any of its affiliates.  The rights and obligations of the parties to this Agreement shall survive its termination or expiration of this Agreement to the extent that any performance is required under this Agreement after the termination or expiration of the Agreement.

15.No Strict Construction.  The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be used against any person.

16.Indemnification.  If Executive (or his heirs, executors or administrators) is made a party or is threatened to be made a party to, or is involved in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that Executive is or was a director or officer of Company or is or was serving at the request of Company as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, Executive (and his heirs, executors or administrators) shall be indemnified and held harmless by Company to the fullest extent permitted by Delaware Law.  To the fullest extent authorized by Delaware Law, the right to indemnification conferred in this Paragraph 16 shall also include the right to be paid by Company the expenses incurred in connection with any such proceeding in advance of its final disposition upon delivery to Company of an undertaking by or on behalf of Executive to repay such amount if it shall ultimately be determined that Executive is not entitled to be indemnified.  Company’s obligations under this Paragraph 16 shall survive the termination or expiration of this Agreement for any reason.

17.Withholding.  All payments and benefits under this Agreement are subject to withholding of all applicable taxes.

 

		
	
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18.Special Section 409A Rules.  It is intended that this Agreement will comply with section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), to the extent applicable, and this Agreement shall be interpreted and construed on a basis consistent with such intent.  Notwithstanding any other provision of this Agreement to the contrary, if any payment or benefit hereunder is subject to section 409A of the Code, and if such payment or benefit is to be paid or provided on account of Executive’s Termination Date (or other separation from service or termination of employment):

(a)and if Executive is a specified employee (within the meaning of section 409A(a)(2)(B) of the Code) and if any such payment or benefit is required to be made or provided prior to the earlier of (i) the first (1st) day of the seventh (7th) month following Executive’s separation from service or (ii) the date of Executive’s death (the “Section 409A Payment Date”), such payment or benefit shall be delayed until the Section 409A Payment Date; and

(b)the determination as to whether Executive has had a termination of employment (or separation from service) shall be made in accordance with the provisions of section 409A of the Code and the guidance issued thereunder without application of any alternative levels of reductions of bona fide services permitted thereunder.

For purposes of section 409A of the Code, any installment payment or benefit under this Agreement shall be treated as a separate payment.  If this Paragraph 18 applies to any payment or benefit hereunder, any such payments or benefits that would otherwise have been paid or provided to Executive between Executive’s Termination Date and the Section 409A Payment Date, shall be paid in a lump sum on the Section 409A Payment Date.

19.Entire Agreement.  This Agreement, together with the Executive Confidentiality and Business Preservation Agreement in effect on the Effective Date, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes and cancels all prior or contemporaneous oral or written agreements and understandings between them with respect to the subject matter hereof, including the offer letter dated May 8, 2018.  This Agreement may not be changed or modified orally but only by an instrument in writing signed by the parties hereto, which instrument states that it is an amendment to this Agreement.

[signature page follows]

 

		
	
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IN WITNESS WHEREOF, intending to be legally bound, Company and Executive have executed this agreement on the date set forth below, effective as of June 4, 2018.

 

	
Date: May 11, 2018
	
 
	
POTBELLY CORPORATION

	
 
	
 
	
 
	
 

	
 
	
 
	
/s/ Alan Johnson

	
 
	
 
	
 
	
 

	
 
	
 
	
By:
	
Alan Johnson

	
 
	
 
	
 
	
 

	
 
	
 
	
Its:
	
President and Chief Executive Officer

	
 
	
 
	
 
	
 

	
 
	
 
	
EXECUTIVE:

	
 
	
 
	
 
	
 

	
 
	
 
	
/s/ Brandon Rhoten

	
 
	
 
	
 
	
 

	
 
	
 
	
Brandon Rhoten

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

		
	
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