| Item 1.01. | Entry into a Material Definitive Agreement |
On April 10, 2020, Potbelly Sandwich Works, LLC (the “Borrower”), an indirect subsidiary of Potbelly Corporation (the “Company”), was granted a loan (the “Loan”) from JPMorgan Chase Bank, N.A. in the aggregate amount of $10,000,000, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020.
The Loan, which was in the form of a Note dated April 6, 2020 issued by the Borrower, matures on April 6, 2022 and bears interest at a rate of 0.98% per annum, payable monthly commencing on November 6, 2020. The Note may be prepaid by the Borrower at any time prior to maturity with no prepayment penalties. Funds from the Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020. The Company intends to use the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.
| Item 2.03. | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
Reference is made to the disclosure under Item 1.01 above which is hereby incorporated in this Item 2.03 by reference.
| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
The Company appointed Steven W. Cirulis, age 49, as Senior Vice President, Chief Financial Officer and Chief Strategy Officer, effective as of April 6, 2020 (the “Effective Date”).
Mr. Cirulis previously served in a strategic planning, finance and analytical consulting role for the Company since December 2019. Prior to that, Mr. Cirulis served as Senior Vice President, Strategic Projects at Panera Bread from 2017 to 2018. Prior to his role at Panera Bread, Mr. Cirulis was the Global Vice President, Corporate Strategy, at McDonald’s Corporation from 2011 to 2016. Prior to joining McDonald’s, Mr. Cirulis was the Senior Director of Strategy, Business Development and Insights, for Gap Brand at Gap, Inc. from 2006 to 2011. Mr. Cirulis is an MBA graduate of the Kellogg Graduate School of Management at Northwestern University, and holds an undergraduate degree in economics and political science from Northwestern University.
Mr. Cirulis takes over from Alan Johnson, Chief Executive Officer of the Company, who temporarily assumed the responsibilities of the principal financial officer and William Atkins, the Company’s Vice President, Controller, who temporarily assumed the responsibilities of the principal accounting officer.
Pursuant to the terms of his employment agreement (the “Executive Employment Agreement”), made and entered into and effective as of April 6, 2020, Mr. Cirulis will be paid an annual base salary of $425,000, although as is the case with all senior management, his base salary has been temporarily reduced by 25%. Mr. Cirulis’s Executive Employment Agreement also provides, among other things, that: (i) he is eligible to receive a discretionary bonus at a target rate of 60% of his base salary based on the attainment of mutually agreed upon performance goals; (ii) he is eligible for annual equity grants as determined by the Compensation Committee of the Company’s Board of Directors; (iii) the Company shall reimburse all reasonable business expenses incurred by Mr. Cirulis in performing services to the Company; and (iv) severance and change of control benefits contingent upon Mr. Cirulis agreeing to a general release of claims in favor of the Company following termination of employment shall be available. Mr. Cirulis will also be eligible to participate in all customary employee benefit plans or programs of the Company generally made available to the Company’s senior executive officers. Mr. Cirulis has agreed to observe the Company’s standard confidentialityand non-compete agreement. Mr. Cirulis’s employmentis at-will and may be terminated at any time for any reason.
The foregoing description of the Executive Employment Agreement is not complete and is qualified in its entirety by reference to the Executive Employment Agreement which is filed as Exhibit 10.1 to this Current Report onForm 8-K and is incorporated in this Item 5.02 in its entirety by reference.
In connection with the commencement of his Executive Employment Agreement, Mr. Cirulis was granted aone-time cash sign on bonus of $100,000. Mr. Cirulis also received equity consisting of 30,000 restricted stock units to be granted on the Effective Date, 30,000 restricted stock units to be granted on the six month anniversary of the Effective Date, and 30,000 restricted stock units to be granted on the twelve month anniversary of the Effective Date, provided Mr. Cirulis remains continuously employed by the Company through the applicable grant date. The equity awards will be granted under the Potbelly Corporation 2019 Long-Term Incentive Plan, which is filed as Exhibit 10.1 to the Company’s Current Report onForm 8-K, filed with the Securities and Exchange Commission on May 21, 2019.
There are no family relationships between Mr. Cirulis and any director or executive officer of the Company (or person nominated or chosen to become a director or executive officer of the Company), and Mr. Cirulis has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) ofRegulation S-K.
| Item 7.01. | Regulation FD Disclosure. |
On April 13, 2020, the Company issued a press release announcing the appointment of Steven W. Cirulis as Senior Vice President, Chief Financial Officer and Chief Strategy Officer of the Company, as noted in Item 5.02 above. A copy of this press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The information in this Item 7.01 and Exhibit 99.1 attached hereto is intended to be furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference to such filing.
