Document:

pbpb-ex105e_542.htm

Exhibit 10.5E

 

AMENDMENT NO. 5

TO 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

 

THIS AMENDMENT NO. 5 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) is entered into as of February 26, 2021 among POTBELLY SANDWICH WORKS, LLC, an Illinois limited liability company (“Borrower”), the other Loan Parties (as such term is defined in the Credit Agreement), the financial institutions listed on the signature pages hereto as lenders (the “Lenders”), and JPMORGAN CHASE BANK, N.A., as administrative agent for the Lenders (in such capacity, the “Administrative Agent”). 

W I T N E S S E T H:

WHEREAS, the Loan Parties, the Lenders and the Administrative Agent have entered into that certain Second Amended and Restated Credit Agreement dated as of August 7, 2019 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”, and as amended hereby, the “Amended Credit Agreement”); 

WHEREAS, the Loan Parties have informed the Administrative Agent and the Lenders that Events of Default exist under clause (d) of Article VII of the Credit Agreement resulting from breaches of Section 6.12(a) of the Credit Agreement occurring as of December 31, 2020 and January 31, 2021 as a result of EBITDA for the Specified Computation Periods ending on such dates being less than required by such section for such Specified Computation Periods (collectively, the “Existing Events of Default”);

WHEREAS, the Loan Parties have requested that the Administrative Agent and the Lenders waive the Existing Events of Default, and the Administrative Agent and the Lenders are willing to do so on the terms and subject to the conditions set forth herein; and

WHEREAS, the Loan Parties desire to amend the Credit Agreement as set forth herein, and the Administrative Agent and the Lenders are willing to do so on the terms and subject to the conditions set forth herein;

NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.Definitions.  Terms defined in the Amended Credit Agreement that are used herein shall have the same meanings as are set forth in the Amended Credit Agreement for such terms unless otherwise defined herein.

2.Amendments to Credit Agreement.  Subject to the satisfaction of the conditions set forth in Section 4 of this Amendment:

(a)The following defined terms are added to Section 1.01 of the Credit Agreement in their proper alphabetic locations:

 

 

“Amendment No. 5 Effective Date” means the “Effective Date” as defined in that certain Amendment No. 5 to Second Amended and Restated Credit Agreement dated as of February 26, 2021 among the Borrower, the other Loan Parties party thereto, the Lenders and the Administrative Agent.

“Competitor” means any Person that is an operating company (or a holding company for or subsidiary of such an operating company) directly and primarily engaged in substantially similar business operations as the Borrower; provided that in no event shall any of the following be deemed to be a Competitor: (a) any Person that is a passive investor in or is a lender to any entity that would otherwise constitute a Competitor, or (b) in any event, any bank, trust company, savings and loan association, finance company or other financial institution, any pension plan, any investment company, any bona-fide debt investment fund, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form. The determination that any Person is a Competitor shall not apply retroactively to disqualify any Person that has previously acquired an assignment in the Loans and/or Commitments as permitted herein.

“Disqualified Institution” means any Person that: (a) is designated as a Disqualified Institution by the Borrower solely by a written notice delivered by email to the Administrative Agent and the Lenders on the Amendment No. 5 Effective Date and acknowledged and agreed to by the Administrative Agent and the Lenders on the Amendment No. 5 Effective Date, or (b) is clearly identifiable, solely on the basis of the similarity of such Person’s name, as an Affiliate of any Person described in the foregoing clause (a) of this definition of “Disqualified Institution”.

(b)The following defined terms set forth in Section 1.01 of the Credit Agreement are amended and restated in their entirety as follows:

“Applicable Rate” means (a) 2.75% with respect to any CBFR Loan, and (b) 5.00% with respect to any Eurodollar Loan.

“Maturity Date” means January 31, 2023 or any earlier date on which the Commitments are reduced to zero or otherwise terminated pursuant to the terms hereof.

“Revolving Commitment” means, with respect to each Lender, the commitment, if any, of such Lender to make Revolving Loans and to acquire participations in Letters of Credit hereunder, expressed as an amount representing the maximum possible aggregate amount of such Lender’s Revolving Exposure hereunder, as such commitment may be reduced from time to time pursuant to (a) Section 2.09 and (b) assignments by or to such Lender pursuant to Section 9.04.  The initial amount of each Lender’s Revolving Commitment is set forth on the Commitment Schedule, or in the Assignment and Assumption (or other documentation incorporating the Assignment and Assumption by reference as provided in accordance with Section 9.04(b)(ii)(C)), pursuant to which such Lender shall have assumed its Revolving Commitment, as applicable.  The initial aggregate amount of the Lenders’ Revolving Commitments on the Amendment No. 5 Effective Date is $25,000,000.

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(c)The definition of “EBITDA” set forth in Section 1.01 of the Credit Agreement is amended by deleting the word “and” from the end of clause (b)(viii) thereof and by adding the following thereto immediately prior to the period at the end of clause (b)(ix) thereof:

, and (x) non-cash charges in connection with any Equity Interests of Holdings constituting warrants, options or other rights entitling the holder thereof to purchase or acquire Equity Interests of Holdings, minus (c) to the extent included in determining the net income (or loss) of the Loan Parties and their Subsidiaries on a consolidated basis for such period, the sum of (i) non-cash income or gains in connection with any Equity Interests of Holdings constituting warrants, options or other rights entitling the holder thereof to purchase or acquire Equity Interests of Holdings, and (ii) any cash payments made during such period in respect of non-cash charges described in clause (b)(x) taken in a prior period

(d)Section 4.02 of the Credit Agreement is amended by adding the following thereto as new clauses (d) and (e) thereof:

(d)The Borrower has delivered to the Administrative Agent a report setting forth the Consolidated Cash Balance on and as of the date of such Borrowing or the date of the issuance, increase, or extension of such Letter of Credit, such report to be in form and substance satisfactory to the Administrative Agent.

(e)The Consolidated Cash Balance on and as of the date of such Borrowing or the date of the issuance, increase, or extension of such Letter of Credit does not exceed $10,000,000, before and after giving effect to such Borrowing or to the issuance, increase, or extension of such Letter of Credit.

(e)The phrase “specified in paragraphs (a), (b) and (c) of this Section” set forth in the penultimate paragraph of Section 4.02 of the Credit Agreement is deleted and replaced with the phrase “specified in paragraphs (a), (b), (c), (d) and (e) of this Section”.

(f)Clause (vii) of Section 6.08(a) of the Credit Agreement is amended and restated in its entirety as follows:

(vii) at any time after June 30, 2021, each Loan Party may purchase, redeem or otherwise acquire its common or preferred Equity Interests with the proceeds received from the substantially concurrent issuance of new common or preferred Equity Interests or where the consideration is the cancellation of Indebtedness owed to any Loan Party, and

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(g)Section 6.12 of the Credit Agreement is amended and restated in its entirety as follows:

SECTION 6.12.Financial Covenants. 

(a)EBITDA.  The Loan Parties shall not permit EBITDA for any Specified Computation Period set forth below to be less than the applicable amount set forth below for such Specified Computation Period:

 

	
Specified Computation Periods ending on or about

(all dates are inclusive):

 
	
Minimum EBITDA:

	
February 28, 2021
	
$-26,700,000

	
March 31, 2021
	
  -29,000,000

	
April 30, 2021
	
  -30,000,000

	
May 31, 2021
	
  -30,700,000

	
June 30, 2021
	
  -31,500,000

	
July 31, 2021
	
   -28,600,000

	
August 31, 2021 
	
   -26,100,000

	
September 30, 2021
	
   -22,700,000

	
October 31, 2021
	
   -20,200,000

	
November 30, 2021
	
   -15,800,000

	
December 31, 2021
	
     -9,900,000

	
January 31, 2022
	
     -5,700,000

	
February 28, 2022
	
     -2,100,000

	
March 31, 2022
	
      2,300,000

	
April 30, 2022
	
      6,000,000

	
May 31, 2022
	
      9,200,000

	
June 30, 2022
	
    12,400,000

	
July 31, 2022
	
    15,500,000

	
August 31, 2022
	
    18,000,000

	
September 30, 2022
	
    20,200,000

	
October 31, 2022
	
    22,000,000

	
November 30, 2022
	
    23,200,000

	
December 31, 2022 and thereafter
	
    23,800,000

 

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(b)Liquidity.  The Loan Parties shall not permit Liquidity on the last day of any month set forth below to be less than the applicable amount set forth below for such month: 

 

	
Months (all dates are inclusive):

 
	
Minimum Liquidity:

	
February 2021
	
$25,300,000

	
March 2021
	
  21,500,000

	
April 2021
	
  17,500,000

	
May 2021
	
  15,600,000

	
June  2021
	
  17,200,000

	
July 2021
	
  13,400,000

	
August 2021
	
  12,000,000

	
September 2021
	
  10,800,000

	
October 2021
	
  10,400,000

	
November 2021
	
  11,800,000

	
December 2021
	
  13,100,000

	
January 2022
	
  13,500,000

	
February 2022
	
  14,800,000

	
March 2022
	
  11,700,000

	
April 2022
	
  13,900,000

	
May 2022
	
  16,000,000

	
June 2022
	
  18,700,000

	
July 2022
	
  21,100,000

	
August 2022
	
  23,400,000

	
September 2022
	
  26,300,000

	
October 2022
	
  27,700,000

	
November 2022
	
  29,200,000

	
December 2022 and thereafter
	
  31,100,000

 

As used herein, the term “Liquidity” means, at any time, the sum of (i) the Available Revolving Commitment at such time, plus (ii) the Consolidated Cash Balance maintained with Chase at such time (excluding the aggregate amount of the Consolidated Cash Balance of non-wholly owned Subsidiaries and Permitted J/Vs in excess of $2,500,000).

(h)Section 9.04(b)(i) of the Credit Agreement is amended and restated in its entirety as follows:

(i)Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more Persons all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment, participations in Letters of Credit and the Loans at the time owing to it) without the Borrower’s or any other Loan Party’s prior written consent; provided, however, that (A) the prior written consent (such consent not to be unreasonably withheld) of the Administrative Agent and the Issuing Bank shall be required for any such assignment, and (B) so long as no Event of Default has occurred and is continuing, no Lender shall assign any of its rights and obligations under this Agreement to a Disqualified Institution or to a Competitor, in each case without the prior 

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written consent of the Borrower, provided that no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender or an Approved Fund.

(i)The Commitment Schedule to the Credit Agreement is amended and restated in its entirety in the form of the Commitment Schedule attached hereto.

3.Waiver.  Subject to the satisfaction of the conditions set forth in Section 4 of this Amendment, the Administrative Agent and the Lenders hereby waive the Existing Events of Default.  The foregoing waiver is specifically limited in time and scope to the events expressly described in the definition of “Existing Events of Default” set forth herein and shall not be deemed to extend or apply to any other event or occurrence in existence as of the date hereof or arising hereafter.  In addition, the foregoing waiver shall not be deemed to constitute a custom or a practice on the part of any one or more of the Administrative Agent and the Lenders and shall not establish or be deemed to have established a course of dealing among any one or more of the Administrative Agent, the Lenders and the Loan Parties under the Credit Agreement or any other Loan Document.

4.Conditions.  When each of the following conditions has been completely satisfied as determined by the Administrative Agent in its reasonable discretion on the date of this Amendment (the “Effective Date”), the amendments to the Credit Agreement and the waivers described in Sections 2 and 3 of this Amendment shall be deemed to have become effective as of February 26, 2021:

(a)Documents.  The Administrative Agent shall have received each of the following agreements, instruments and other documents, in each case in form and substance reasonably satisfactory to the Administrative Agent:

(i)this Amendment duly executed and delivered by the Loan Parties, the Lenders and the Administrative Agent; and

(ii)such other documents, agreements, instruments, certificates, opinions and other items as the Administrative Agent may reasonably request in connection with this Amendment, including the documents, agreements, instruments, certificates, opinions and other items listed on the document checklist attached hereto as Exhibit A.

(b)Equity Investment.  The Borrower has received cash equity contributions in aggregate amount of not less than $10,000,000 funded with the net proceeds of the issuance, after February 1, 2021 and on or before the Effective Date, by Holdings of Equity Interests having terms acceptable to the Administrative Agent and the Lenders.  

(c)Representations and Warranties; No Default.  As of the date hereof (and, if different, also as of the Effective Date): (i) the representations and warranties contained herein, in the Amended Credit Agreement (other than with respect to the second sentence of Section 3.05(a) therein) and in each other Loan Document shall be true and correct in all material respects (both immediately before and after giving effect to consummation of the amendments and other transactions contemplated hereby), except to the extent any such representation and warranty expressly refers to an earlier date, in which case such representation and warranty shall be true and correct in all material respects as of such earlier date; provided, however, that, solely for the purposes of the representation and warranty set forth in Section 3.04(b) of the Credit Agreement, 

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the term “Material Adverse Effect” will exclude the known and reasonably foreseeable effects, as reflected in financial statements and projections delivered to the Administrative Agent prior to the Effective Date on the Loan Parties and their Subsidiaries (including, without limitation, on the business, assets, operations or condition, financial or otherwise, thereof) of the COVID-19 epidemic, pandemic and disease; and (ii) no Default or Event of Default shall exist (after giving effect hereto and consummation of the transactions contemplated hereby).

(d)Proceedings.  All resolutions, consents and other corporate or limited liability company proceedings taken or to be taken in connection with the transactions contemplated hereby, and all agreements, instruments, certificates and other documents relating thereto, shall be in form and substance satisfactory to the Administrative Agent, as determined in its sole and absolute discretion, and shall be in full force and effect.

(e)Fees.  The Borrower shall have paid to the Administrative Agent, for the account of Lenders in accordance with their respective Applicable Percentages, a non-refundable amendment fee in the aggregate amount of $125,000 and all reasonable, out-of-pocket expenses required to be paid to the Administrative Agent’s special counsel on or prior to the Effective Date pursuant to Section 9.03 of the Amended Credit Agreement shall have been paid in full.

5.Release.  The Borrower and each other Loan Party hereby release, discharge, and agree to hold harmless the Administrative Agent, each Lender and their respective representatives, agents, employees, attorneys, directors, officers, parents, affiliates, assigns, insurers, subsidiaries, and their successors and assigns (collectively, the “Released Parties”) from any and all claims, defenses, affirmative defenses, setoffs, counterclaims, actions, causes of action, suits, controversies, agreements, provisions, liabilities and demands in law or in equity or under statute, whether known or unknown (collectively, the “Claims”) which any one or more of the Borrower and the other Loan Parties ever had, now has, or may hereafter have against or related to the Released Parties through the date of this Amendment relating to or arising out of (i) this Amendment, the Credit Agreement, the Amended Credit Agreement, the other Loan Documents or the transactions described herein or therein, (ii) any proposal letter, commitment letter or term sheet, (iii) the Secured Obligations, (iv) the Administrative Agent’s or any Lender’s administration of this Amendment, the Credit Agreement, the Amended Credit Agreement or the other Loan Documents, or (v) the banking relationship of any one or more of the Borrower and the other Loan Parties with the Administrative Agent or any Lender.

6.Representations and Warranties of the Loan Parties.  Each Loan Party represents and warrants that: (a) the execution and delivery by such Loan Party of this Amendment, each other document, instrument and agreement to be executed and delivered by such Loan Party in connection herewith (this Amendment and such other documents, instruments and agreements are referred to herein, collectively, as the “Amendment Documents”) and the performance of such Loan Party’s obligations hereunder, thereunder and under the Amended Credit Agreement: (i) are within the corporate or limited liability company powers of such Loan Party, (ii) are duly authorized by the board of directors or managers of such Loan Party, and, if necessary, the shareholders or members of such Loan Party, (iii) are not in contravention of the terms of such Loan Party’s articles or certificate of incorporation or formation, by-laws, operating, management or partnership agreement or other organizational documents, (iv) are not in (x) contravention of the terms of the provisions of any indenture, instrument or agreement to which such Loan Party is 

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a party or is subject, or by which it, or its property, is bound, or (y) conflict therewith, nor will constitute a default thereunder, or result in, or require, the creation or imposition of any Lien in, of or on the property of such Loan Party pursuant to the terms of any such indenture, instrument or agreement (other than Liens in favor of the Administrative Agent, for the benefit of itself and the Lenders, under the Security Agreement and any other Permitted Encumbrances), (v) will not violate any Requirement of Law applicable to any Loan Party or any of its Subsidiaries, which individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect; and (vi) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except (i) such as have been obtained or made and are in full force and effect, (ii) for filings necessary to perfect Liens created pursuant to the Loan Documents or (iii) those that individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect; (b) each of this Amendment and the other Amendment Documents has been duly executed and delivered by such Loan Party and constitutes the legal, valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law; (c) the Amended Credit Agreement, and each other Loan Document, after giving effect hereto, constitutes the legal, valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law; (d) as of the date hereof, and (after giving effect hereto and consummation of the transactions contemplated hereby) as of the Effective Date, there exists no Default or Event of Default (other than the Existing Events of Default); (e) no Domestic Subsidiaries have been formed or acquired after August 7, 2019 (except for Permitted J/Vs, if any); and (f) all conditions set forth in Section 4 of this Amendment have been satisfied in full (provided that no representation or warranty is made as to the Administrative Agent’s or any Lender’s acceptance or satisfaction with any matter).  All representations and warranties contained in this Amendment shall survive the execution and delivery of this Amendment.

7.Consent of Loan Guarantor.  Each Loan Party (other than Borrower), in its capacity as a Loan Guarantor under Article X of the Credit Agreement, hereby consents to this Amendment and the amendments contained herein and confirms and agrees that, notwithstanding this Amendment and the effectiveness of the amendments contained herein, the Loan Guaranty is, and shall continue to be, in full force and effect and is hereby confirmed and ratified in all respects notwithstanding the terms of this Amendment or any other amendment to the Credit Agreement.  Nothing herein is intended or shall be deemed to limit the Administrative Agent’s or any Lender’s rights under the Loan Guaranty to take actions without the consent of any Loan Guarantor.

8.Reference to/Effect on the Credit Agreement, Etc.

(a)On and after the Effective Date: (i) each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” “herein,” or words of like import shall mean and be a reference to the Amended Credit Agreement, and (ii) each reference to the Credit Agreement in all other Loan Documents shall mean and be a reference to the Amended Credit Agreement.

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(b)Except as otherwise provided herein, the Credit Agreement, all other Loan Documents, all covenants, representations and warranties made therein, and all other documents, instruments and agreements executed and/or delivered in connection therewith, shall remain in full force and effect, and are hereby reaffirmed, ratified and confirmed.

(c)The execution, delivery and effectiveness of this Amendment and the other Amendment Documents shall not (i) except as specifically stated herein, amend the Credit Agreement or any other Loan Document, (ii) operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender, or (iii) except as specifically stated herein, constitute a waiver of, or consent to any departure from, any provision of the Credit Agreement or any other Loan Document or any other documents, instruments and agreements executed or delivered in connection therewith.

(d)Each Loan Party acknowledges and agrees that: (i) as of the date hereof (and, if different, also as of the Effective Date), such Loan Party has no defenses, claims or set-offs to the payment of the Secured Obligations or to the enforcement of the Secured Obligations, the Amended Credit Agreement or any of the other Loan Documents; and (ii) the Liens granted to the Administrative Agent, for the benefit of itself and the Lenders, by such Loan Party are and remain valid perfected Liens in the assets of such Loan Party securing the payment and performance of the Secured Obligations.

(e)This Amendment and the other Amendment Documents shall each be deemed a Loan Document for the purposes of the Amended Credit Agreement.

9.Miscellaneous.

(a)Choice of Law.  This Amendment shall be governed by and construed in accordance with the internal laws of the State of Illinois, but giving effect to federal laws applicable to national banks.

(b)Severability. Any provision of any Amendment Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions thereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. 

(c)WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AMENDMENT, ANY OTHER AMENDMENT DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE OR OTHER AGENT (INCLUDING ANY ATTORNEY) OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN 

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INDUCED TO ENTER INTO THIS AMENDMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

(d)Headings.  Section headings used herein are for convenience of reference only, are not part of this Amendment and shall not affect the construction of, or be taken into consideration in interpreting, this Amendment.

(e)Counterparts.  This Amendment may be executed and accepted in any number of counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  Delivery of an executed counterpart of a signature page of this Amendment and any Amendment Document that is an Electronic Signature transmitted by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page shall be effective as delivery of a manually executed counterpart of this Agreement and such Amendment Document.  The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to this Amendment and any Amendment Document shall be deemed to include Electronic Signatures, deliveries or the keeping of records in any electronic form (including deliveries by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page), each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be; provided that nothing herein shall require the Administrative Agent or any Lender to accept Electronic Signatures in any form or format without its prior written consent and pursuant to procedures approved by it.  If the Administrative Agent or any Lender agrees to accept any Electronic Signature, it shall be entitled to rely on such Electronic Signature purportedly given by or on behalf of the signers without further verification thereof and without any obligation to review the appearance or form of any such Electronic Signature and any Electronic Signature shall be promptly followed by a manually executed counterpart.  Without limiting the generality of the foregoing, the signers hereby (a) agree that, for all purposes, including without limitation, in connection with any workout, restructuring, enforcement of remedies, bankruptcy proceedings or litigation among any one or more of the Administrative Agent, the Lenders and signers of the Credit Agreement, this Amendment or any Amendment Document, Electronic Signatures transmitted by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page and/or any electronic images of the Credit Agreement, any Loan Document, this Amendment and any Amendment Document shall have the same legal effect, validity and enforceability as any paper original, (b) agree that the Administrative Agent and each Lender may, at its option, create one or more copies of the Credit Agreement, any Loan Document, this Amendment and any Amendment Document in the form of an imaged electronic record in any format, which shall be deemed created in the ordinary course of such Person’s business, and destroy the original paper document (and all such electronic records shall be considered an original for all purposes and shall have the same legal effect, validity and enforceability as a paper record), (c) waives any argument, defense or right to contest the legal effect, validity or enforceability of the Credit Agreement, any Loan Document, this Amendment and any Amendment Document based solely on the lack of paper original copies of the Credit Agreement, any Loan Document, this Amendment and any Amendment Document, respectively, including with respect to any signature pages thereto and (d) waives any claim against the Administrative Agent and each Lender for any liabilities arising solely from the Administrative Agent’s or such Lender’s reliance on or use of Electronic 

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Signatures and/or transmissions by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page, including any liabilities arising as a result of the failure of the signers hereto to use any available security measures in connection with the execution, delivery or transmission of any Electronic Signature. 

 

[signature page(s) follow]

 

 

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IN WITNESS WHEREOF, this Amendment No. 5 to Second Amended and Restated Credit Agreement has been duly executed as of the day and year first above written.

 

LOAN PARTIES:

POTBELLY SANDWICH WORKS, LLC

By:  /s/ Steven Cirulis  

Name: Steven Cirulis

Title: Chief Financial Officer

 

POTBELLY CORPORATION

By:  /s/ Steven Cirulis

Name: Steven Cirulis

Title: Chief Financial Officer

 

POTBELLY ILLINOIS, INC.

By:  /s/ Steven Cirulis

Name: Steven Cirulis

Title: Chief Financial Officer

 

POTBELLY FRANCHISING, LLC

POTBELY SANDWICH WORKS DC-1, LLC

PSW WEST JACKSON, LLC

PSW 555 TWELFTH STREET, LLC

PSW ROCKVILLE CENTER, LLC

PSW DC ACQUISITION LLC

PSW PBD ACQUISITION LLC

 

By:  Potbelly Illinois, Inc. as Manager

By:  /s/ Steven Cirulis

Name: Steven Cirulis

Title: Chief Financial Officer

 

 

 

JPMORGAN CHASE BANK, N.A., individually as a Lender, and as

 Administrative Agent and Issuing Bank

 

By:  /s/ Jonathan M. Deck

Name: Jonathan M. Deck

Title: Authorized Officer

 

 

 

COMMITMENT SCHEDULE

 

	
 
	
Lender
	
Revolving Commitment 
	
 

	
 
	
 

JPMorgan Chase Bank, N.A.
	
 

$25,000,000
	
 

	
 
	
 

Total
	
 

$25,000,000
	
 

 

 

 

 

 

 

EXHIBIT A

Document Checklist

See Attached

 

 

 

AMENDMENT NO. 5 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

among

POTBELLY SANDWICH WORKS, LLC, 

as Borrower and as a Loan Party

THE OTHER LOAN PARTIES PARTY THERETO,

THE LENDERS PARTY THERETO

and

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

February 26, 2021

 

Definitions

 

	
Borrower
	
Potbelly Sandwich Works, LLC, an Illinois limited liability company 

	
 
	
 

	
Loan Parties
	
Borrower

	
 
	
Potbelly Corporation, a Delaware corporation 

	
 
	
Potbelly Illinois, Inc., an Illinois corporation 

	
 
	
Potbelly Franchising, LLC, an Illinois limited liability company 

	
 
	
Potbelly Sandwich Works DC-1, LLC, an Illinois limited liability company

	
 
	
PSW West Jackson, LLC, an Illinois limited liability company

	
 
	
PSW 555 Twelfth Street, LLC, an Illinois limited liability company

	
 
	
PSW Rockville Center, LLC, an Illinois limited liability company

	
 
	
PSW DC Acquisition LLC, an Illinois limited liability company

	
 
	
PSW PBD Acquisition LLC, an Illinois limited liability company

	
 
	
 

	
Administrative Agent
	
JPMorgan Chase Bank, N.A.

	
 
	
 

	
Lender
	
JPMorgan Chase Bank, N.A. (“Chase”)

	
 
	
 

	
SH
	
Schiff Hardin LLP

	
 
	
 

	
SA
	
Sidley Austin LLP

 

 

Facility Information

Potbelly Sandwich Works, LLC

UCN: 790278964000

Facility ID: 198731685

 

 

Contact Information for Counsel for Administrative Agent

 

	
Schiff Hardin LLP

	
233 S. Wacker Drive - Suite 7100

	
Chicago, Illinois 60606

	
Attention:
	
Scott E. Pickens

	
Electronic Mail:
	
spickens@schiffhardin.com

	
Telephone:
	
312.258.5515

 

 

	
Signed by:
	
 
	
 

	
 
	
 
	
Scott E. Pickens
	
 

 

 

 

 

				
	
 
	
Document Checklist
	
Responsible Party

	
1.
	
Amendment No. 5 to Second Amended and Restated Credit Agreement by and among the Loan Parties, the Lenders and the Administrative Agent 

Commitment Schedule

Exhibit A                    Document Checklist

 
	
SH

	
2.
	
Secretary’s Certificate of each Loan Party certifying as to (a) no change to the certificate or articles of formation or incorporation, as applicable, of such Loan Party since August 7, 2019, (b) no change to the by-laws or limited liability company agreement, as applicable, of such Loan Party since August 7, 2019, (c) the names and true signatures of the officers of such Loan Party authorized to execute, deliver and perform the Amendment, and (d) the resolutions of the applicable governing body of such Loan Party authorizing the execution, delivery and performance of the Amendment 
	
SA

	
3.
	
Certificate of good standing of each Loan Party from the applicable office set forth below for such Loan Party
	
SA

	
 
	
Loan Party

Potbelly Sandwich Works, LLC

Potbelly Corporation

Potbelly Illinois, Inc.

Potbelly Franchising, LLC

Potbelly Sandwich

  Works DC-1, LLC

PSW West Jackson, LLC

PSW 555 Twelfth Street, LLC

PSW Rockville Center, LLC

PSW DC Acquisition LLC

PSW PBD Acquisition LLC
	
Office

Secretary of State of Illinois

Secretary of State of Delaware

Secretary of State of Illinois

Secretary of State of Illinois

 

Secretary of State of Illinois

Secretary of State of Illinois

Secretary of State of Illinois

Secretary of State of Illinois

Secretary of State of Illinois

Secretary of State of Illinoispbpb-ex1020_774.htm

Exhibit 10.20

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into on September 3, 2019 and effective as of September 30, 2019 (the "Effective Date") by and between Potbelly Corporation, a Delaware corporation (hereinafter referred to as "Company"), and Jeffrey Douglas, an individual (hereinafter referred to as "Executive").

 

Statement of Purpose

 

WHEREAS, Company wishes to employ Executive as its Senior Vice President, Chief Information 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, Chief Information 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.Without limiting the generality of the foregoing, Executive will lead the information technology activities of the Company and achieve the expectations as outlined to him by the Chief Executive Officer of the Company ("CEO").

 

(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 CEO. Without the prior approval of the CEO, 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 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, or a change in reporting to anyone other than the Chief Executive Officer of the 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 

 

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headquarters at the Effective Date; provided, however, that any such occurrence under clauses (i) -(v) about: 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 $300,000.00 (the "Base Salary"), payable in accordance with the Company's normal payroll practices. The Base Salary will be reviewed annually based on the Company's normal review cycle.

 

(b)Annual Bonus. Beginning with calendar year 2020 for pro-rated service in 2019, 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 established by the Compensation Committee consistent with other members of the Senior Leadership Team, 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.

 

(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. Generally, your eligibility date for Company-provided benefits will be November 1, 2019.

 

(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.

 

(I)Equity Awards. Executive shall be entitled to annual equity grants, if any, as determined by the Compensation Committee of the Board (the "Compensation Committee"). 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 $350,000, which equity award grant shall be comprised of restricted stock units or performance 

 

3

 

stock units (or a mix of equity forms) as determined by the Compensation Committee, 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 2020 and thereafter, Executive shall be eligible to participate in the Equity Plan at a level consistent with other members of the Senior Leadership Team, 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 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.

 

	
 
	
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 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 

 

4

 

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(£) 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).

 

(I)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.

 

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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 nut 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: Chief Legal Officer

 

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

 

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 

 

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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 hy 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 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 

 

7

 

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.

 

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 (I5t) 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]

 

8

 

IN WITNESS WHEREOF, intending to be legally bound, Company and Executive have executed this agreement on the date set forth below, effective as of December 3, 2018.

Date: September 3, 2019

 

POTBELLY CORPORATION:

 

	
 
	
/s/ Alan Johnson

	
By:
	
Alan Johnson

	
Its:
	
President and Chief Executive Officer

 

 

EXECUTIVE:

 

	
 
	
/s/ Jeffrey Douglas

	
By:
	
Jeffrey Douglas

 

 

9

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