WASHINGTON, DC
(Rule 14a-101)
INFORMATION REQUIRED IN
PROXY STATEMENT
SCHEDULE 14A INFORMATION
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| ☒ | Definitive Proxy Statement | |
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| ☐ | Soliciting Material Pursuant to §240.14a-12 |
Potbelly Corporation
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May 20, 2020April 5, 2023
Dear Fellow Shareholder:Stockholder:
You are cordially invited to virtually attend virtually our Annual Meeting of ShareholdersStockholders (including any adjournments or postponements thereof, the “Annual Meeting”“Annual Meeting”) on June 24, 2020. Due to the emerging public health impact of the coronavirus outbreak(COVID-19), and to support the health and well-being of the Company’s employees and shareholders, the meetingMay 18, 2023, which will be held in a virtual meeting format only via live audio webcast. Included with this letter are the notice of annual meeting of shareholders,stockholders, a proxy statement detailing the business to be conducted at the Annual Meeting, and a proxy card. You may also find electronic copies of these documents online at www.proxyvote.com.www.proxyvote.com.
Regardless of whether you plan to attend our virtual Annual Meeting, it is important that your voice be heard. We encourage you to vote in advance of the meeting by telephone, by Internet or by signing, dating and returning your proxy card by mail. You may also vote by attending the virtual annual meeting athttp://www.virtualshareholdermeeting.com/PBPB2020PBPB2023 and voting online. Full instructions are contained in the accompanying proxy statement or the enclosedand proxy card.
Sincerely,
Chairman of the Board |
President and Chief Executive Officer |
111 North Canal Street, Suite 850325
Chicago, Illinois 60606
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERSSTOCKHOLDERS
TO BE HELD ON JUNE 24, 2020
To our Shareholders:MAY 18, 2023
The 20202023 Annual Meeting of ShareholdersStockholders (including any adjournments or postponements thereof, the “Annual Meeting”“Annual Meeting”) of Potbelly Corporation (the “Company”“Company”) will be held on June 24, 2020,May 18, 2023, at 8:00 a.m. local timeCentral Time (with login beginning at 7:45 a.m., Central Time) exclusively via live audio webcast athttp://www.virtualshareholdermeeting.com/PBPB2020PBPB2023, for the following purposes:
| 1. | to elect |
| 2. | to ratify the appointment of Deloitte & Touche LLP to serve as our independent registered public accounting firm for the fiscal year ending December |
| 3. | to vote, on anon-binding, advisory basis, on a resolution to approve the |
| 4. | to approve the amendment |
| 5. | to transact any other business properly brought before the Annual Meeting. |
These items of business are more fully described in the Proxy Statement accompanying this Notice.
The Board of Directors (the “Board”) has set the close of business on June 11, 2020March 22, 2023 as the record date for determining shareholdersstockholders of the Company entitled to notice of and to vote at the Annual Meeting. You may examine our shareholderThe list duringof stockholders entitled to vote at the Annual Meeting by followingwill be available for examination during normal business hours for ten days prior to the instructions provided onAnnual Meeting for any purpose germane to the meeting website during the Annual Meeting.at our corporate headquarters at 111 North Canal Street, Suite 325, Chicago, Illinois 60606.
All shareholdersstockholders are cordially invited to attend the virtual Annual Meeting. To participate in the virtual Annual Meeting, you will need the16-digit control number that appears on your proxy card or the instructions that accompanied your proxy materials. Beneficial owners will need to register in order to attend the virtual Annual Meeting. For detailed instructions on attending the Annual Meeting, please refer to page 4 under “Annual Meeting Procedures.”
EVEN IF YOU CANNOT ATTEND THE VIRTUAL ANNUAL MEETING, PLEASE TAKE THE TIME TO PROMPTLY VOTE YOUR PROXY BY CAREFULLY FOLLOWING THE INSTRUCTIONS ON THETHE PROXY CARD. IF YOU WISH TO VOTE USING A PAPER PROXY CARD, PLEASE SIGN, DATE AND RETURN THE PROXY CARD IN THE RETURN ENVELOPE PROVIDED AS PROMPTLY AS POSSIBLE.
Important Notice of Internet Availability of Proxy Materials for the Annual Meeting to be Held on June 24, 2020:May 18, 2023: The Proxy Statement for the Annual Meeting and the Annual Report on Form10-K for the fiscal year ended December 29, 201925, 2022 are available atwww.proxyvote.com.
By order of the Board of Directors,
Matthew RevordAdiya Dixon
Senior Vice President, Chief Legal Officer, Chief PeopleCompliance Officer and Secretary
May 20, 2020April 5, 2023
IMPORTANT
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE VIRTUAL ANNUAL MEETING, WE URGE YOU TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE POSTAGEPRE-PAID ENVELOPE PROVIDED, OR VOTE BY TELEPHONE OR THE INTERNET AS INSTRUCTED ON THE PROXY CARD, WHETHER OR NOT YOU PLAN TO ATTEND THE VIRTUAL ANNUAL MEETING. YOU CAN REVOKE YOUR PROXY AT ANY TIME BEFORE THE PROXIES YOU APPOINTED CAST YOUR VOTES.VOTES AT THE VIRTUAL ANNUAL MEETING.
PROXY STATEMENT
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PROXYSTATEMENT
The Board of Directors (the “Board“Board of Directors”Directors” or “Board”“Board”) of Potbelly Corporation, a Delaware corporation (the “Company”“Company”), is using this Proxy Statement to solicit your proxy for use at our 20202023 Annual Meeting of ShareholdersStockholders (including any postponements or adjournments thereof, the “Annual Meeting”“Annual Meeting”). References in this Proxy Statement to “Potbelly,” the “Company,” “we,” “us,” “our” and similar terms refer to Potbelly Corporation.
We are sending this Proxy Statement, the enclosed proxy card and our Annual Report on Form10-K for the fiscal year ended December 29, 2019 (collectively, the “Proxy Materials”) to our shareholders of record as of the close of business on June 11, 2020, the record date. ShareholdersStockholders of record at the close of business on the record dateMarch 22, 2023 (the “Record Date”) will be entitled to vote at the Annual Meeting. As of May 19, 2020, the latest practicable date prior to the publication of this Proxy Statement, 23,812,999Record Date, 29,423,495 shares of our common stock, $0.01 par value per share, were outstanding. ShareholdersStockholders are entitled to one vote for each share of common stock held. A majority of these shares present virtually or represented by proxy at the Annual Meeting will constitute a quorum for the transaction of business.
TheThis Proxy MaterialsStatement, the enclosed proxy card and our Annual Report on Form 10-K for the fiscal year ended December 25, 2022 (collectively, the “Proxy Materials”) are first being mailed to our shareholdersstockholders of record on or about May 20, 2020.April 5, 2023.
This summary highlights information contained elsewhere in this Proxy Statement. It does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting.
Date and Time | Location | Record Date | ||
Thursday, May 18, 2023 (login beginning at 7:45 a.m., Central Time) | Exclusively via live audio webcast at http://www.virtualshareholdermeeting.com/ |
Matters to be Voted on at the Annual Meeting and Board Recommendations
Proposal | Board Voting Recommendation | Page Reference (for more detail) | ||
| 1:Election of | FOR EACH
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| 2:Ratification of | FOR | |||
| 3:Advisory vote on compensation of our named executive | FOR | |||
| 4: | FOR | |||
The following tables provide summary information about our current Board of Directors, including their ages as of December 31, 2019.25, 2022.
Name | Age | Director Since | Audit Committee | Compensation Committee | Nominating & Corporate Governance Committee | |||||
Joe Boehm Independent | 33 | 2017 | ✓ | ✓ | ||||||
Adrian Butler Independent | 49 | 2019 | ✓ | |||||||
Susan Chapman-Hughes Independent | 51 | 2014 | Chair | ✓ | ||||||
Dan Ginsberg Independent Chairman of the Board | 67 | 2014 | Chair | |||||||
Marla Gottschalk Independent | 59 | 2009 | Chair | ✓ | ||||||
David Head Independent | 63 | 2019 | ✓ | |||||||
Alan Johnson President and Chief Executive Officer | 60 | 2017 | ||||||||
David Near Independent | 50 | 2020 | ✓ | |||||||
Ben Rosenzweig Independent | 34 | 2018 | ✓ | |||||||
Todd Smith Independent | 42 | 2020 | ✓ | |||||||
Name | Age | Director Since | Audit Committee | Compensation Committee | Nominating & Corporate Governance Committee | |||||
Vann Avedisian Independent | 58 | 2021 | ✓ | |||||||
Joseph Boehm Independent Chairman of the Board | 36 | 2017 | Chair | |||||||
Adrian Butler Independent | 52 | 2019 | ✓ | |||||||
David Head Independent | 66 | 2019 | ✓ | |||||||
David Near Independent | 53 | 2020 | Chair | |||||||
Dave Pearson Independent | 57 | 2022 | Chair | |||||||
Todd Smith Independent | 45 | 2020 | ✓ | |||||||
Jill Sutton Independent | 51 | 2022 | ✓ | ✓ | ||||||
Robert D. Wright President and Chief Executive Officer | 55 | 2020 | ||||||||
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| Board Diversity Matrix (As of April 5, 2023) | ||||||||
Total Number of Directors: 9 |
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| Part I: Gender Identity | Male | Female | ||||||
Directors | 8 | 1 | ||||||
Part II: Demographic Background | ||||||||
African American or Black | 1 | |||||||
White | 7 | 1 | ||||||
Corporate Governance Highlights
Eight of nine director nominees are independent. Our Chief Executive Officer is the only management director. Independent Chairman of the Board who is elected by the independent directors. The independent directors regularly meet in executive session without management present. All Board committees are comprised only of independent directors. |
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Why am I receiving these materials?
Our Board of Directors is soliciting proxies in connection with the Annual Meeting. The Company will bear the cost of preparing, printing and mailing the materials in connection with this solicitation of proxies. The Company has retained DF King for certain advisory and solicitation services at a fee of approximately $10,000. Proxies also may be solicited on the Company’s behalf by officers and other employees. The Company will reimburse banks and brokers for their reasonableout-of-pocket expenses related to forwarding proxy materials to beneficial owners of stock or otherwise in connection with this solicitation. We are mailing these proxy materials to shareholders of record as of the close of business on June 11, 2020, the record date.
You are receiving this Proxy Statement as a shareholder of the Company. We request that you promptly use the enclosed proxy card to vote, by telephone, Internet, or mail, in the event you desire to express your support of or opposition to the proposals.
THE BOARD UNANIMOUSLY RECOMMENDS VOTING “FOR” THE ELECTION OF EACH OF THE TEN DIRECTOR NOMINEES NAMED IN PROPOSAL 1 AND “FOR” PROPOSALS 2, 3 AND 4.
Where and when is the Annual Meeting?
We will hold the Annual Meeting on June 24, 2020, at 8:00 am, Central Time, exclusively via live webcast. Please go towww.virtualshareholdermeeting.com/PBPB2020 for instructions on how to participate in the Annual Meeting.
Was the Annual Meeting previously announced for another date?
The Company previously disclosed in a Current Report filed on 8K on May 12, 2020 that the Annual Meeting would be held on June 9, 2020. Due to reasons relating to the COVID-19 pandemic, the Board decided to postpone the Annual Meeting to June 24, 2020.
What am I being asked to vote on at the Annual Meeting?
We are asking our shareholders to consider the following proposals at the Annual Meeting:
Proposal 1: the election of ten director nominees to serve on the Board of Directors for a term of one year or until their successors are duly elected or appointed and qualified.
Proposal 2:the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 27, 2020.
Proposal 3:anon-binding advisory vote on a resolution to approve the 2019 compensation of our named executive officers.
Proposal 4:amendment and restatement of the Potbelly Corporation 2019 Long-Term Incentive Plan, to, among other things, increase the number of shares of common stock authorized for issuance thereunder by 900,000 shares.
Proposal 5:any other business properly brought before the Annual Meeting.
Shareholders of record at the close of business on June 11, 2020, the record date, may vote at the Annual Meeting.
As of May 19, 2020, the latest practicable date prior to the publication of this Proxy Statement, there were 23,812,999 shares of our common stock outstanding.
You have one vote for each share of our common stock that you owned as of the record date. These shares include shares held by you as a “shareholder of record” and as a “beneficial owner.”
What is the difference between holding shares as a “shareholder of record” and as a “beneficial owner”?
If your shares are registered directly in your name with our transfer agent, you are considered the “shareholder of record” with respect to those shares. We have sent these proxy materials directly to you.
If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the “beneficial owner” of the shares held in street name. Your broker, bank or other nominee who is considered the shareholder of record with respect to those shares has forwarded these proxy materials to you. You should direct your broker, bank or other nominee on how to vote your shares by using the voting instruction form included in the mailing or by following their instructions for voting by telephone or the Internet.
If you legally designate another person to vote the shares you own at a meeting of shareholders according to your instruction, that person is your proxy. If you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card. We have designated two of our officers to serve as proxies for the Annual Meeting. These officers are Alan Johnson and Matthew Revord.
Shareholders of Record.Shareholders of record may vote their shares or submit a proxy to have their shares voted by one of the following methods:
By Internet
Before the Meeting – You may submit your proxy online via the Internet by following the instructions provided on the enclosed proxy card. Internet voting facilities will be available 24 hours a day and will close at 11:59 p.m., Eastern Time, on June 23, 2020.
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By Telephone – You may vote your shares by touch-tone telephone by calling the toll-free number on the enclosed proxy card. Telephone voting facilities will be available 24 hours a dayRobust director and will close at 11:59 p.m., Eastern Time, on June 23, 2020.executive stock ownership guidelines.
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Annual Board and Committee evaluations.
By Mail – You may submit your proxy by completing, signing and dating your proxy card and returning it in the reply envelope included with these proxy materials.
Beneficial Owners.If you are the beneficial owner of your shares (that is, you hold your shares in “street name” through an intermediary such as a broker, bank or other nominee), you will receive a voting instruction form from your bank, broker or other nominee.
Your bank, broker or other nominee will not vote your shares on Proposals 1, 3 or 4 unless you provide them instructions on how to vote your shares. You should instruct your bank, broker or other nominee how to vote your shares by following the directions provided by your bank, broker or other nominee.
General.If you submit your proxy using anyActive Board oversight of the methods above, Alan Johnson or Matthew Revord will vote your shares in the manner you indicate. You may specify whether your shares should be voted for all, some, or none of the nominees for director, for, against or abstain from voting for Proposals 2, 3, 4Company’s strategy and any other proposals properly introduced at the Annual Meeting. If you vote by telephone or Internet and choose to vote with the recommendation of our Board of Directors, or if you vote by mail, sign your proxy card, and do not indicate specific choices, your shares will be votedFOR the election of each of the ten director nominees (Proposal 1);FOR ratification of the appointment of Deloitte & Touche LLP to serve as our independent public accounting firm (Proposal 2);FOR thenon-binding resolution to approve our 2019 named executive officer compensation (Proposal 3); andFOR the amendment and restatement of the Potbelly Corporation 2019 Long-Term Incentive Plan (Proposal 4).
If a matter to be considered at the Annual Meeting is timely submitted pursuant toRule 14a-4(c)(1) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), your proxy will authorize Alan Johnson or Matthew Revord to vote your shares in their discretion with respect to any such matter subsequently raised at the Annual Meeting. At the time this Proxy Statement was filed, we knew of no matters to be considered at the Annual Meeting other than those referenced in this Proxy Statement.
You may revoke a proxy in any one of the following three ways:
submit a valid, later-dated proxy, or vote again by Internet or by phone after your original vote;risk management.
notify our corporate secretary in writing before the Annual Meeting that you have revoked your proxy; orExecutive compensation program strongly links pay and performance.
vote online atCompensation Committee reviews the Annual Meeting.goal-setting processes to ensure targets are rigorous, yet attainable, thereby incentivizing strong performance.
If I have already voted by proxy on one or more proposals, can I change my vote?
Yes. To change your vote by proxy, simply sign, date and return the enclosed proxy card or voting instruction form in the accompanyingpostage pre-paid envelope, or vote by proxy via telephone or the Internet in accordance with the instructions on the proxy card or voting instruction form. We strongly urge you to vote by proxy “FOR” the election of each of the ten director nominees named in Proposal 1, and “FOR” Proposals 2, 3 and 4. Only your latest dated proxy will count at the Annual Meeting.
What “quorum” is required for the Annual Meeting?
In order to have a valid shareholder vote, a quorum must exist at the Annual Meeting. At the Annual Meeting a quorum exists when shareholders holding a majority of the issued and outstanding shares entitled to vote are present in person or represented by proxy at the meeting.
Votes withheld, abstentions andbroker-non votes (discussed below under “– What is the effect of abstentions andbroker non-votes?”) will be counted as present or represented for purposes of determining whether a quorum exists. In the absence of a quorum, the Annual Meeting may be adjourned by a majority of the votes entitled to be cast either present in person or represented by proxy or by any officer entitled to preside at the Annual Meeting.
What vote is required to approve each proposal?
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How are the voting results determined?
For the election of directors, your vote may be cast “for” each of the nominees or your vote may be “withheld” with respect to one or more of the nominees. The nominees receiving the largest number of “for” votes will be elected as directors, up to the maximum number of directors to be chosen for election. Each of Proposals 2, 3 and 4 will pass if the total votes cast “for” such proposal exceed the total number of votes cast “against” such proposal and “abstain” for such proposal.
What is the effect of abstentions and brokernon-votes?
Because the election of directors is determined on the basis of a plurality of the votes cast, abstentions have no effect on the outcome of the election of ten nominees to the Board of Directors (Proposal 1), although abstentions will result in directors receiving fewer votes.
Because the approval of a majority of shares present and entitled to vote is required to ratify the appointment of Deloitte & Touche LLP as our independent public accountants for the fiscal year ending December 27, 2020 (Proposal 2), to approve on an advisory basis,the non-binding resolution to approve our 2019 named executive officer compensation (Proposal 3), and to adopt an amendment and restatement to the Potbelly Corporation 2019 Long-Term Incentive Plan (Proposal 4), abstentions have the effect of a vote against those proposals.
Broker non-votes occur when brokers do not have discretionary voting authority to vote certain shares held in “street name” onparticular “non-routine” proposals, including the election of directors, and the “beneficial owner�� of those shares has not instructed the broker to vote on those proposals. Shares registered in the name of a broker, bank or other nominee, for which proxies are voted on some, but not all matters, will be considered to be represented at the Annual Meeting and voted only as to those matters for which the broker, bank or other nominee has authority to vote.Broker non-votes will have no direct effect on the outcome of the election of directors, the advisory resolution on executive compensation or the approval of amendments to the Potbelly Corporation 2019 Long-Term Incentive Plan.
Will my shares be voted if I do nothing?
If your shares are registered in your name, you must sign and return a proxy card in order for your shares to be voted, unless you vote via telephone or the Internet or vote online at the Annual Meeting. If you submit (including by telephone or Internet) your proxy card with no instructions on how to vote, your shares will be voted in accordance with the recommendations of the Board.
If your shares of our common stock are held in “street name,” your bank, broker or other nominee has enclosed a proxy card or voting instruction form with this Proxy Statement. We strongly encourage you to authorize your bank, broker or other nominee to vote your shares by following the instructions provided on the proxy card or voting instruction form. If you sign (including electronic confirmation in the case of Internet or telephone voting) your broker voting instruction form with no instructions on how to vote, your stock will be voted in the broker’s discretion only with respect to “routine” matters but will not be voted with respectto “non-routine” matters. The only routine matter on the ballot for the Annual Meeting is the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 27, 2020 (Proposal 2).
Please return your proxy card or voting instruction form to your bank, broker or other nominee by proxy by signing, dating and returning the enclosed proxy card or voting instruction form in the accompanying postagepre-paid envelope or vote by proxy via telephone or the Internet in accordance with the instructions in the proxy card or voting instruction form. Please contact the person responsible for your account to ensure that a proxy card or voting instruction form is voted on your behalf.
We strongly urge you to vote by proxy “FOR” the election of each of the ten director nominees named in Proposal 1, and “FOR” Proposals 2, 3 and 4 by signing, dating and returning the enclosed proxy card in the envelope provided. You may also vote by proxy by telephone using the toll-free number on the proxy card or by Internet using the website address on the proxy card. If your shares are held in “street name,” you should follow the instructions on the voting instruction form provided by your bank, broker or other nominee, and provide specific instructions to your bank, broker or other nominee to vote as described above.
Has the Company received notice from one or more shareholders that they are intending to nominate director candidates at the Annual Meeting?
Intrinsic Investment Holdings, LLC, the Vann A. Avedisian Trust U/A 8/29/85, Vann A. Avedisian, KGT Investments, LLC, The Khimji Foundation, Mahmood Khimji, Bryant L. Keil and Neil Luthra (the foregoing, collectively with each of their respective affiliates, the “Vann Group”) had notified the Company of its intention to nominate a slate of nominees for election as directors at the Annual Meeting. However, the Vann Group withdrew its nomination notice as part of a settlement with the Company. Please see “Corporate Governance—Resolution of Shareholder Nominations” on page 11 for further details.
What are the fiscal year end dates?
This Proxy Statement provides information about the matters to be voted on at the Annual Meeting and additional information about Potbelly and its executive officers and directors. Some of the information is provided as of the end of our 2017, 2018 or 2019 fiscal years as well as some information being provided as of a more current date. Our fiscal year 2017 ended on December 31, 2017; our fiscal year 2018 ended on December 30, 2018 and our fiscal year 2019 ended on December 29, 2019.
Where can I find the voting results?
We intend to announce preliminary voting results at the Annual Meeting. We will disclose the preliminary results in a Current Report on Form8-K, which we expect to file on or before June 30, 2020. You can obtain a copy of the Form8-K by logging on to our website athttp://investors.potbelly.com/financial-information/sec-filings, or through the EDGAR system atwww.sec.gov. Information on our website does not constitute part of this Proxy Statement.
Admission to the Annual Meeting
Only shareholdersstockholders of the Company or their duly authorized proxies may attend the Annual Meeting. ShareholdersStockholders may attend the virtual annual meeting athttp://www.virtualshareholdermeeting.com/PBPB2020PBPB2023. The meeting will only be conducted via live audio webcast; there will be no physical meeting location. To participate in the virtual annual meeting, shareholdersstockholders will need the16-digit control number that appears on your proxy card or the voting instructions that accompanied the proxy materials.Proxy Materials. If you would like to attend the virtual meeting and you have your control number, please go tohttp://www.virtualshareholdermeeting.com/PBPB2020PBPB2023 prior to the start of the meeting to log in. Online access to the webcast will open approximately 15 minutes prior to the start of the Annual Meeting to allow time for our shareholdersstockholders to log in and test their devices’ audio system.
Participation during the Annual Meeting
ShareholdersStockholders will have the ability to submit questions during the Annual Meeting via the Annual Meeting website athttp://www.virtualshareholdermeeting.com/PBPB2020PBPB2023. As part of the Annual Meeting, we will hold a question and answer session, during which we intend to answer questions submitted during the meeting that are pertinent to the Company and the meeting matters, as time permits.
ShareholdersStockholders do not have appraisal rights under Delaware law in connection with the matters to be voted on at the Annual Meeting.
You may examine our shareholderThe list duringof stockholders entitled to vote at the Annual Meeting by followingwill be available for examination during normal business hours for ten days prior to the instructions provided onAnnual Meeting for any purpose germane to the meeting website during the Annual Meeting.at our corporate headquarters at 111 North Canal Street, Suite 325, Chicago, Illinois 60606.
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All of our corporate governance materials, including our corporate governance guidelines, our ethics code of conduct and Board committee charters, are published under the Governance section of our Investor website athttp:https://investors.potbelly.com/corporate-governance/governance/governance-documents. Information on our website does not constitute part of this Proxy Statement. These materials are also available in print to any shareholderstockholder without charge upon request made by telephone at (312)951-0600 or by mail to our principal executive offices at Potbelly Corporation, 111 North Canal Street, Suite 850,325, Chicago, Illinois 60606, Attention: Corporate Secretary. The Board of Directors regularly reviews these materials, Delaware law, the rules and listing standards of the Nasdaq Global Select Market (“NASDAQ”NASDAQ”) and SEC rules and regulations, as well as best practices suggested by recognized governance authorities, and modifies theits governance materials as it believes is warranted.
Corporate Governance | • • Independent Chairman with clearly defined and robust responsibilities • 100% • Executive Sessions of independent directors at • Active Board oversight of the Company’s strategy and risk management • All directors attended at least 75% of meetings held • Ethics Code of Conduct • No hedging of Company stock by any director, officer or employee • Annual Board and Committee evaluations | |
Board Refreshment | • Comprehensive, ongoing Board succession planning process • Focus on diversity • Regular Board refreshment and mix of tenure of directors | |
Rights | • Annual election of all directors • Proxy access right for • Active • | |
| Compensation | • Independent Compensation Committee which oversees the Company’s compensation policies and strategic direction • • Independent • Direct link between Company share price performance and pay outcomes • Periodic review of
• Double trigger vesting of equity awards upon a change in control | |
Our Board of Directors reviews the independence of the current and potential members of the Board of Directors in accordance with independence requirements set forth in the NASDAQ rules and applicable provisions of the Exchange Act.Act based on director responses to director and officer questionnaires and other information available to the Board of Directors. During its review, the Board of Directors considers transactions and relationships
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between each
director and potential director, as well as any member of his or her immediate family, and the Company and its affiliates, including those related-party transactions contemplated by Item 404(a) ofRegulation S-K under the Exchange Act. The Board of Directors must affirmatively determine that the director has no material relationship with the Company, either directly or as a partner, shareholderstockholder or officer of an organization that has a relationship with the Company, that, in the opinion of the Board of Directors, would interfere with the exercise of the director’s independent judgment in carrying out the responsibilities of a director. The purpose of this review is to determine whether any such relationships or transactions exist that are inconsistent with a determination that the director is independent. Our Board of Directors has determined that all nominees except Alan Johnson,Robert D. Wright, our President and Chief Executive Officer,CEO, are “independent” as such term is defined by NASDAQ rules, our corporate governance standards and the federal securities laws.
Corporate Environmental and Social Responsibility
We are committed to improving the world by improving the communities we serve.serve, respecting our planet’s resources, and working together as a vibrant, diverse team. That means bringbeing a responsible community member in each of our neighborhoods andwhile always looking for ways to reduce our footprint and improve our relationships with people. We believe it is important to conduct our business in an ethical, legal and socially responsible manner andmanner. We have undertaken a number of initiatives to reduce our environmental impact and to ensure a healthy and safe workplace. Examplesworkplace, including our use of recycled and upcycled materials in construction and our green initiatives can be found in the “Corporate Responsibility” section of the “About Us” page of our website atwww.potbelly.com.efforts to minimize food waste. We also expect our suppliers and business partners to adhere to these ideals and to promote these values, and have adopted aby adherence to our Supplier Code of Conduct specifying the standards and principles we expect all of our suppliers to adhere to.require. A copy of the Supplier Code of Conduct and related information can be found in the “Corporate Responsibility” section of the “About Us”“Our Story” page of our website atwww.potbelly.com.
We have a written ethics code of conduct that applies to our directors, officers and employees. A copy of this code is available athttp:https://investors.potbelly.com/corporate-governance/governance/governance-documents. We will disclose information regarding any amendment to or waiver from the provision of this code by posting itat this location on the same portion of our website.
Pursuant to our ethics code of conduct and our related party transaction policy, each director and executive officer has an obligation not to engage in any transaction that could be deemed a conflict of interest. Our directors may not engage in any transaction that could impact their independence on the Board of Directors. See “Related Party Transactions,” on page 6154 of this Proxy Statement.
Resolution of Shareholder Nominations
On May 10, 2020, we entered into a Settlement Agreement (the “Settlement Agreement”) with the Vann Group.
Effective upon the execution of the Settlement Agreement, our Board (i) increased the size of the Board from eight to ten members, (ii) appointed David Near and Todd Smith to the Board (together, the “Designees”), and (iii) appointed David Near to the Compensation Committee of the Board and Todd Smith to the Nominating and Corporate Governance Committee of the Board. Our Board also agreed to include David Near and Todd Smith in the Company’s slate of nominees for election to the Board at the Annual Meeting. Also effective upon execution of the Settlement Agreement, the Vann Group withdrew its notice of intent to nominate director candidates for election to the Board at the Annual Meeting.
The Settlement Agreement further provides, among other things, that:
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During the term of the Settlement Agreement, the Vann Group will vote all of their shares of the Company’s common stock at any and all shareholder meetings in accordance with the Board’s recommendations, subject to certain exceptions relating to extraordinary transactions and recommendations of Institutional Shareholder Services, Inc. and Glass Lewis & Co., LLC.
During the term of the Settlement Agreement, the Vann Group will be subject to customary standstill restrictions, including with respect to acquiring beneficial ownership of more than 15% of the Company’s outstanding common stock, nominating or recommending for nomination any persons for election to the Board, submitting any proposal for consideration at any shareholder meeting, soliciting any proxy in respect of any proposal for consideration at any shareholder meeting and participating in any “withhold” or similar campaign with respect to any shareholder meeting.
Each party agrees not to make public statements about the other party, subject to certain exceptions.
Each party agrees not to sue the other party, subject to certain exceptions.
The Designees will be subject to customary confidentiality obligations applicable to all directors of the Company and no Designee will be asked to share any material non-public information concerning the Company with the Vann Group.
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Structure of the Board of Directors
Our certificate of incorporation provides that our Board of Directors shall consist of not more than twelve directors, with the exact number as determined from time to time by resolution of the Board. Our Board of Directors currently consists of tennine members, comprised of Vann Avedisian, Joseph Boehm, Adrian Butler, Susan Chapman-Hughes, David Head, Dan Ginsberg, Marla Gottschalk, Alan Johnson, David Near, Benjamin RosenzweigDave Pearson, Todd Smith, Jill Sutton and Todd Smith.Robert D. Wright. All current directors are nominees for election for a term expiring at our 20212024 Annual Meeting. Our certificate of incorporation provides that if a director is removed or if a vacancy occurs, the vacancy may be filled by a majority of the directors then in office, even if less than a quorum.
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Board Leadership Structure
Mr. GinsbergBoehm currently serves as our independent Chairman of the Board. The Board appointed Mr. GinsbergBoehm to the role of Chairman in May of 2019.on March 19, 2021. Prior to that, appointment, Mr. GinsbergBoehm had been a member of our Board of Directors since 2014.2017. Our Board of Directors has carefully considered its leadership structure and believes at this time that the Company and its shareholdersstockholders are best served by having the offices of Chairman of the Board and CEO held by different individuals. As part of our corporate governance principles, and as required in our Bylaws, in the event the Chairman of the Board and CEO positions are ever recombined, or the Chairman of the Board is not otherwise independent, the Board of Directors shall appoint an independent director to serve as lead independent
director. The Bylaws also provide that the chairperson of each of our committees will rotate at least once every three years. Our Board of Directors believes that these and other features of our Board structure provide for substantial independent oversight of the Company’s management.
Our Board of Directors recognizes that depending on future circumstances, other leadership models may become more appropriate. Accordingly, our Board of Directors will continue to periodically review its leadership structure.
The following is a list of our current directors and candidates for director, their ages as of December 31, 2019,26, 2021, their occupation during the last five years and certain other biographical information:
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Age: Director Since: Committees: Audit
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Experience
Vann Avedisian, 58, has served as our director since March 2021. Mr. Avedisian is the founder and Managing Director of Intrinsic Investment Holdings, a real estate and private equity vehicle (“Intrinsic”). From 2010 through 2021, Intrinsic partnered programmatically with Highgate Holdings, a fully integrated real estate investment firm that has acquired in excess of $10 billion of real estate assets and manages over 150+ hotels comprising approximately 40,000 rooms. Prior to founding Intrinsic, Mr. Avedisian co-founded Oxford Capital Partners (“Oxford”) and directed its real estate principal investments with an aggregate value in excess of $1 billion. Prior to founding Oxford, Mr. Avedisian was a Vice President at LaSalle Partners and a Director and Shareholder of Citizens National Bank of Lake Geneva. Mr. Avedisian is currently on the Board of Trustees of the William Blair Mutual Funds where he is Chairman of the Nominating and Governance Committee and also serves on the Audit and Compliance Committees. Mr. Avedisian previously served on the Company’s Board of Directors from 2001 to 2015 and was Chairman of the Compensation and Organization Committee.
Skills and Qualifications
Our Board of Directors believes Mr. Avedisian’s qualifications to serve as a member of our Board include his financial expertise, his knowledge of our business and his extensive experience in managing capital intensive operations, corporate finance and strategic advisory services.
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 | JOSEPH BOEHM Chairman of the Board Age: 36 Director Since: 2017 Committees: Nominating & Corporate Governance (Chair) | |||
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Experience
Joseph Boehm,33,Boehm, 36, has served as our director since October 2017. Since January 2021, Mr. Boehm has beenserves as Managing Partner of Provider Real Estate Partners, a real estate fund management company. Prior to Provider Real Estate Partners, Mr. Boehm served as a Director and Portfolio Manager at Ancora Advisors, LLC, a registered investment advisor, since April 2014. Prior to his current role,Ancora, Mr. Boehm was an Investment Analyst at Sigma Capital Management, a hedge fund, from February 2013 through March 2014. From 2010 to 2013, Mr. Boehm was an investment banking associate at Deutsche Bank an investment bank.Securities. Mr. Boehm also currently serves as a director for the First Tee of Cleveland.
Skills and Qualifications
Our Board of Directors believes Mr. Boehm’s qualifications to serve as a member of our Board include his financial industries experience.
  | ADRIAN BUTLER
Age: Director Since: 2019 Committees: Audit
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Experience
Adrian Butler,, 49, 52, has served as our director since May 2019. Since AugustHe currently serves as Chief Technology Officer for Foot Locker, Inc., a retailer of athletic footwear and sportwear. Mr. Butler served from 2020 to 2023 as Chief Information Officer for Casey’s General Stores, a convenience store operator. From 2015 to 2020, he has served asheld the positions of Senior Vice President and Chief Information Officer for Dine Brands Global, Inc., a full-service dining company and franchisor of Applebee’s Grill + Bar and IHOP. From 2011 to 2015, Mr. Butler was Vice President in the Technology Services division of Target Corporation.
Skills and Qualifications
Our Board of Directors believes Mr. Butler’s qualifications to serve as a member of our Board includes his expertise in information technology, digital, data and analytics, cyber security and experience in the food industry.
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Age: Director Since: Committees:
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| A Wreck | |||
Experience
Susan Chapman-Hughes, 51, has served as our director since May 2014. Since February 2018, Ms. Chapman-Hughes has been Global Head of Digital Capabilities, Transformation and Operations, Global Commercial Services for American Express Company, a financial services corporation. Prior to assuming her current role, Ms. Chapman-Hughes was Senior Vice President, US Large Market, Global Corporate Payments from for American Express from December 2014 through February 2018; she was Senior Vice President, US Account Development, Global Corporate Payments from November 2013 through December 2014; and she was the Senior Vice President, Global Real Estate & Workplace Enablement for American Express from July 2010 through November 2013. Before joining American Express Company, Ms. Chapman-Hughes was the Global CAO/Global Head of Operations and Strategy, Citi Realty Services for Citigroup, Inc. Ms. Chapman-Hughes serves on the board of trustees of the National Trust for Historic Preservation and the board of directors of A Better Chance, each of which is a national nonprofit organization.
Skills and Qualifications
Our Board of Directors believes Ms. Chapman-Hughes’s qualifications to serve as a member of our Board include her real estate knowledge and her general management, innovation, financial and digital experience.
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Experience
Dan Ginsberg, 67, has served as our director since February 2014. Mr. Ginsberg was Chief Executive Officer of Dermalogica, a U.S.-based skincare brand, from January 2011 through his retirement in August 2014 and has a comprehensive background in branding strategy, marketing and advertising. Mr. Ginsberg’s previous roles include Chief Executive Officer of Red Bull, NA until 2007. Before his Red Bull service, Mr. Ginsberg had been an advertising and marketing executive who held executive positions at agencies such as NW Ayer and Cunningham & Walsh, and Chief Marketing Officer at Hardee’s.
Skills and Qualifications
Our Board of Directors believes Mr. Ginsberg’s qualifications to serve as a member of our Board includes his extensive executive officer experience as well as his marketing and branding expertise.
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Experience
Marla Gottschalk, 59, has served as our director since November 2009. Ms. Gottschalk was Chief Executive Officer of The Pampered Chef Ltd., a marketer of kitchen tools, food products and cookbooks for preparing food in the home, from May 2006 until December 2013 and its President and Chief Operating Officer from December 2003 until May 2006. Ms. Gottschalk joined Pampered Chef from Kraft Foods, Inc., where she worked for 14 years in various management positions, including Senior Vice President of Financial Planning and Investor Relations for Kraft, Executive Vice President and General Manager of Post Cereal Division and Vice President of Marketing and Strategy of Kraft Cheese Division. Ms. Gottschalk is currently a member of the board of trustees of Underwriters Laboratories, a world leader in safety testing and certification, a strategic board advisor for Ocean Spray Cranberries, Inc., and sits on the board of directors for Big Lots, Inc. and Reynolds Consumer Products. She has previously served as a director of GATX Corp. and as a director of Visteon Corp.
Skills and Qualifications
Our Board of Directors believes Ms. Gottschalk’s qualifications to serve as a member of our Board include her extensive experience with global companies, her expertise in the food industry and her years of experience in operations and strategic management.
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Experience
David Head, 63,66, has served as our director since August 2019. Mr. Head hascurrently serves as a Senior Advisor and Board Director for Authentic Restaurant Brands, which owns a portfolio of regional casual dining restaurants, and Senior Advisor and Operating Partner to Garnett Station Partners an investment firm specializing in the food and beverage, health and wellness, automotive and business services sectors. From January 2012 to December 2022, Mr. Head served as Chairman and CEOChief Executive Officer of Primanti Brothers, since 2013.which owns and operates a chain of casual dining restaurants. Mr. Head’s previous roles include CEOChief Executive Officer of O’Charley’s, which owns and operates a chain of casual dining restaurants, from 2010 to 2012 and CEOChief Executive Officer of Captain D’s LLC, which owns and operates a chain of quick service seafood restaurants, from 2006 to 2010. Prior to O’Charley’s,joining Captain D’s LLC, Mr. Head also served as the CEOChief Executive Officer of Romacorp, which operates and franchises Tony Romas’ restaurants around the world and as the Chief Executive Officer of Houlihan’s Restaurant Group.Group, which operates casual restaurant and bar locations throughout the United States. Mr. Head previously served as a director of Bob Evans Farms, O’ Charley’s, Inc.,O’Charley’s, Captain D’s, / Sagittarius Brands and Imvescor.
Skills and Qualifications
Our Board of Directors believes Mr. Head’s qualifications to serve as a member of our Board include his extensive knowledge and proven restaurant industry experience in restaurant operations, food service and production.
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Experience
Alan Johnson, 60, has served as our President and Chief Executive Officer and a director since November 2017. Mr. Johnson was previously the founder of AJ Consulting, a consulting services firm, from September 2015 through November 2017. Prior to that, he was the Chief Executive Officer of BevMo!, a specialty retailer of alcoholic beverages and related products, from April 2007 through September 2015. From 2005 to 2007, Mr. Johnson served as Chief Operating Officer and Chief Financial Officer of Forth & Towne, a division of Gap Inc. Prior to his service with Gap Inc., Mr. Johnson held various executive leadership positions, including at Walt Disney Parks & Resorts, Regal Theaters, PepsiCo and Pizza Hut International. Mr. Johnson is on the Board of Directors of Saucey, a wine, beer and spirits on-demand delivery start-up. Mr. Johnson has over 30 years of executive leadership experience across a variety of blue chip organizations.
Skills and Qualifications
Our Board of Directors believes Mr. Johnson’s qualifications to serve as a member of our Board include his role as Chief Executive Officer and President, his leadership experience as an executive at publicly-traded companies in the restaurant and retail sectors and his extensive experience in the retail industry.
 | DAVID NEAR
Age: Director Since: 2020 Committees: Compensation
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Experience
David Near,50,Near, 53, has served as our director since May 2020. Mr. Near has been the managing partner of Ramen Tatsuya Holdings LLC, which manages Tatsuya Brands, since 2014, as well as the owner and co-president of Pisces Foods, L.P., a restaurant operating company, since 1995. In addition, Mr. Near previously operated The Wendy’s Company restaurants as a franchisee from 1995 to 2012. From 2006-2009,2006 to 2009, Mr. Near served as the Chief Operations Officer at The Wendy’s Company, which owns and operates a chain of quick service restaurants, where he was responsible for global operations, franchising, new store development, and served as a board member of Wendy’s National Advertising Program.
Skills and Qualifications
Our Board of Directors believes Mr. Near’s qualifications to serve as a member of our Board include his experience and expertise in operations and franchising in the restaurant industry.
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Age: Director Since: Committees:
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Experience
Benjamin Rosenzweig, 34,Dave Pearson, 57, has served as our director since April 2018.2022. Mr. RosenzweigPearson is currently serving as a Partner at Privet Fund Management, LLC.board member for Lee Enterprises and Magnite, both of which operate within the media industry. From May 2013 to August 2020, Mr. Rosenzweig joined Privet Fund Management LLC in September 2008. He has been an Independent DirectorPearson was the Chief Financial Officer of Cicero Inc., a provider of desktop activity intelligence, since February 23, 2017; Hardinge Inc., a designer, manufacturerVonage, where he was responsible for managing the Finance, Corporate Development, and distributor of machine tools, since October 14, 2015; and PFSweb, Inc., a global commerce service provider, sinceInvestor Relations departments. From May 2013.2013 to August 2020, Mr. Rosenzweig served on the Board of Directors of StarTek, Inc., a customer engagement business process outsourcer, from May 2011 to December 2018. During his time on the Board for StartTek, Mr. Rosenzweig was Chairman of the Audit Committee. HePearson served as athe Managing Director of RELM Wireless Corporation, a manufacturer of wireless communications equipment, from September 2013 to September 2015.and Global Media & Telecom Group Head within Deutsche Bank’s investment banking services. Prior to joining Privet in September 2008,Deutsche Bank, Mr. Rosenzweig served as anPearson held three different positions within the Technology, Media & Telecom investment banking analystpractice at Goldman Sachs, most recently as Managing Director. Mr. Pearson received his M.B.A. from Harvard Business School and an A.B. in the Corporate Finance group of AlvarezPolitical Science and Marsal, where he completed multiple distressed mergers and acquisitions, restructurings, capital formation transactions and similar financial advisory engagements across several industries.Organizational Behavior from Brown University.
Skills and Qualifications
Our Board of Directors believes Mr. Rosenzweig’sPearson’s qualifications to serve as a member of our Board include his corporate finance and financial advisory experience across multiple industries.industries experience.
  | TODD SMITH
Age: Director Since: 2020 Committees: Nominating & Corporate Governance
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Experience
Todd Smith, 42,45, has served as our director since May 2020. Since 2017, Mr. Smith has been the Chief Concept Officer of Cafe Rio Mexican Grill, which owns and operates a chain of casual dining restaurants and a partner in CoreLife Eatery, since 2017.which owns and operates restaurants focused on healthy, active lifestyles. Mr. Smith worked at Sonic Drive-in, which owns and operates a chain of quick service restaurants, from 2012 to 2017, ultimately serving as its President and Chief Marketing Officer. Prior to Sonic Drive-in, Mr. Smith also worked in the marketing divisions for Yum! Brands and Wendy’s International.
Skills and Qualifications
Our Board of Directors believes Mr. Smith’s qualifications to serve as a member of our Board includes his leadership and marketing experience in the restaurant industry.
 | JILL SUTTON Age: 51 Director Since: 2022 Committees: Compensation; Nominating & Corporate Governance | |||
| Italian with lots of hot peppers | |||
Experience
Jill Sutton, 51, has served as our director since March 2022. Ms. Sutton currently serves on the board of Miller Industries, Inc., a tow truck and towing equipment manufacturer. Ms. Sutton was the Chief Legal Officer, General Counsel and Corporate Secretary of United Natural Foods, Inc., the largest publicly traded grocery distributor in America, from May 2018 to December 2021. From July 2015 to January 2018, Ms. Sutton served as Deputy General Counsel, and was Corporate Secretary, of General Motors Company, a multinational automotive manufacturing company. From May 2006 to January 2015, Ms. Sutton served in various roles of increasing accountability at Tim Hortons, Inc., then a publicly traded company, which owns and operates quick service restaurants, including serving as Executive Vice President, General Counsel, and Corporate Secretary. Prior to joining Tim Hortons, Inc., Ms. Sutton served as Corporate Counsel for The Wendy’s Company, which owns and operates a chain of quick service restaurants.
Skills and Qualifications
Our Board of Directors believes Ms. Sutton’s qualifications to serve as a member of our Board include her experience in the food and restaurant industries, her legal and regulatory experience and her knowledge of public companies.
 | ROBERT D. WRIGHT Age: 55 Director Since: 2020 Committees: None | |||
| Italian on white with peppers, mustard, lettuce and pickles | |||
Experience
Robert D. Wright, 55, has served as our President and CEO and a director since July 2020. Prior to joining Potbelly, Mr. Wright served as Executive Vice President and Chief Operations Officer, International of The Wendy’s Company, which owns and operates a chain of quick service restaurants, from May 2016 to May 2019 and Senior Vice President and Chief Operations Officer from December 2013 to May 2016. Prior to that, Mr. Wright served in leadership roles with other restaurant brands, including Charley’s Philly Steaks, Checker’s Drive-In Restaurants, Inc. and Domino’s Pizza, Inc.
Skills and Qualifications
Our Board of Directors believes Mr. Wright’s qualifications to serve as a member of our Board includes his role as CEO and President, his leadership experience as an executive at publicly-traded companies in the restaurant sector and his extensive experience in the restaurant industry.
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Our Board of Directors held thirteensix meetings during our fiscal 2019.year ended December 25, 2022. In 2019,2022, each of our directors attended at least 75% of the aggregate number of meetings held by the Board of Directors, and the committees on which the director served, when such director was a member of the Board of Directors or such committee. Under our corporate governance guidelines, each director is expected to make every effort to attend each Board meeting and each meeting of any committee on which he or she sits.
The Company’s directors are encouraged to attend our annual meeting of shareholders,Annual Meeting, but we do not currently have a policy relating to directors’ attendance at these meetings. All of our directors serving at the time virtually attended our 20192022 Annual Meeting of Shareholders.Stockholders.
Our Board of Directors has established three standing committees to assist it with its responsibilities. The composition and responsibilities of each committee are described below. The membership and responsibilities of each committee comply with the listing requirements of NASDAQ. Members serve on these committees until their resignation or until otherwise determined by our Board of Directors. A new chairperson of each committee is appointed at least once every three years. In the future, the Board may establish other committees, as it deems appropriate, to assist it with its responsibilities.
Audit Committee
The purpose of the Audit Committee is set forth in the Audit Committee charter and is primarily to assist the Board in overseeing:
the selection, management and compensation of our independent auditor;
the integrity of our financial statements, our financial reporting process and our systems of internal accounting and financial controls;
our compliance with legal and regulatory requirements;
the independent auditor’s qualifications, independence and independence;performance;
the evaluation of enterprise risk issues;
the performance of our internal audit function and independent auditor;
the preparation of an audit committee report as required by the SEC to be included in our annual proxy statement; and
Potbelly’sour systems of disclosure controls and procedures and ethical standards.
The Audit Committee currently consists of Mr. Boehm,Avedisian, Mr. Butler and Ms. Gottschalk,Mr. Pearson, and the chairperson is Ms. Gottschalk.Mr. Pearson. Our Board of Directors has affirmatively determined that each of these Audit Committee members meets the independence criteria applicable to directors serving on the Audit Committee under NASDAQ and SEC rules. Our Board of Directors has also determined that each of these Audit Committee members meet the requirements for financial literacy under the applicable NASDAQ rules and that each is an “audit committee financial expert” under SEC rules. Our Board of Directors has adopted a written charter under which the Audit Committee operates. A copy of the charter, which satisfies the applicable standards of the SEC and NASDAQ, is available on our website athttp:https://investors.potbelly.com/corporate-governance/governance/governance-documents.
The Audit Committee held fourfive meetings during the fiscal year 2019.ended December 25, 2022.
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Nominating and Corporate Governance Committee
The purpose of the Nominating and Corporate Governance Committee is set forth in the Nominating and Corporate Governance Committee charter and is primarily to:
identify individuals qualified to become members of our Board of Directors, and to recommend to our Board of Directors the director nominees for each annual meeting of shareholdersstockholders or to otherwise fill vacancies on the Board;
review and recommend to our Board of Directors committee structure, membership and operations;
recommend to our Board of Directors the persons to serve on each committee and a chairmanchairperson for such committee;
develop and recommend to our Board of Directors a set of corporate governance guidelines applicable to us; and
lead our Board of Directors in its annual review of its performance.
The Nominating and Corporate Governance Committee consists of Mr. Boehm, Ms. Chapman-Hughes, Mr. Ginsberg and Mr. Smith and Ms. Sutton, and the chairperson is Mr. Ginsberg.Boehm. Our Board of Directors has affirmatively determined that each of these Nominating and Corporate Governance Committee members meets the independence criteria applicable to directors serving on the Nominating and Corporate Governance Committee under NASDAQ and SEC rules. Our Board of Directors has adopted a written charter under which the Nominating and Corporate Governance Committee operates. A copy of the charter, which satisfies the applicable standards of the SEC and NASDAQ, is available on our website athttp:https://investors.potbelly.com/corporate-governance/governance/governance-documents.
Included in the incumbent directors nominated for re-election are Mr. Adrian Butler and Mr. David Head, who were each appointed by the Board as a director effective May and August, 2019, respectively. Mr. Butler was identified by JPMorgan Chase & Co’s director advisory services group, and Mr. Head was recommended by a member of the Board.
The Nominating and Corporate Governance Committee held eleventhree meetings during the fiscal year 2019.ended December 25, 2022.
Compensation Committee
The purpose of the Compensation Committee is set forth in the Compensation Committee charter and is primarily to:
oversee our executive compensation policies and practices;
discharge the responsibilities of our Board of Directors relating to executive compensation by determining and approving the compensation of our Chief Executive OfficerCEO and our other executive officers and reviewing and approving any compensation and employee benefit plans, policies, and programs, and exercising discretion in the administration of such programs; and
produce, approve and recommend to our Board of Directors for its approval reports on compensation matters required to be included in our annual proxy statement or annual report, in accordance with all applicable rules and regulations.
For more information regarding the process and procedures regarding the determination of director compensation, see “Director Compensation” and such information regarding named executive officer compensation, see “Compensation Discussion and Analysis.”
The Compensation Committee consists of Ms. Chapman-Hughes, Ms. Gottschalk, Mr. Head, Mr. Near and Mr. Rosenzweig,Ms. Sutton, and the chairperson is Ms. Chapman-Hughes.Mr. Near. Our Board of Directors has affirmatively
determined that each of these Compensation Committee members meets the independence criteria applicable to directors serving on the Compensation Committee under NASDAQ and SEC rules. Our Board of Directors has adopted a written charter under which the Compensation Committee operates. A copy of the charter, which satisfies the applicable standards of the SEC and NASDAQ, is available on our website athttp:https://investors.potbelly.com/corporate-governance/governance/governance-documents.
The Compensation Committee held eight meetingsduringthree meetings during the fiscal year 2019.ended December 25, 2022.
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Compensation Committee Interlocks and Insider Participation
None of the members of our Compensation Committee is, or has at any time been, an officer or employee of the Company. None of our executive officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee of any other entity that has or has had one or more executive officers who served as a member of our Board or our Compensation Committee during the fiscal 2019.year ended December 25, 2022. No directors served on our Compensation Committee in 20192022 other than Ms. Chapman-Hughes, Ms. Gottschalk, Mr. Head, and Mr. Rosenzweig, the directors currently serving on such committee,Near and Ms. CampbellSutton except for Marla Gottschalk and Mr. Kanter, who decided not to stand forre-election inBenjamin Rosenzweig served on the 2019Compensation Committee until the 2022 Annual Meeting of Shareholders.Stockholders when they did not stand for re-election to the Board of Directors.
Board’s Role in Risk Oversight
The entire Board of Directors is engaged inultimately responsible for risk management oversight. Atoversight and is supported by a healthy infrastructure of committees, management, employees and outside advisors in the present time,performance of this duty.
The Board’s standing committees support the Board by addressing various risks within their respective areas of Directors has not established a separate committee to facilitate its risk oversight responsibilities. The Board of Directors expects to continue to monitor and assess whether such a committee would be appropriate.responsibility. The Audit Committee assists the Board of Directors in its oversight of our risk management and the processprocesses established to identify, measure, monitor, and manage risks, in particular major financial risks.risks, cybersecurity and information technology. The Compensation Committee assesses risks arising from our compensation policies and practices. The Nominating and Corporate Governance Committee reviews risks related to our corporate governance structure and processes, including director qualifications and independence, succession planning relating to the Chief Executive Officer and the effectiveness of our Corporate Governance Guidelines. Each of the committees reports to the Board at quarterly meetings during which risks are discussed and assessed.
The Audit Committee also oversees enterprise risk management (“ERM”) for the Company. ERM is supported by senior management and other personnel from applicable functions of Directorsthe Company. The Enterprise Risk Management Committee identifies current and potential risks facing the Company and ensures that actions are taken as and when appropriate to manage and mitigate those risks. The Audit Committee receives regulara comprehensive ERM report on a quarterly basis and discusses the results with the full Board, which is ultimately responsible for oversight of the Company’s ERM process, on an annual basis.
Management of the Company plays an important role in identifying and mitigating risks and presenting them to the Board and its committees. The Audit Committee receives reports from management, as well as fromincluding the Chief Information Officer with respect to cybersecurity and information security issues, and the Chief Financial Officer with respect to financial risks, each of whom reports to the Audit Committee at least quarterly. In addition, in 2023, the Company appointed Ms. Dixon to serve as Chief Compliance Officer. Reporting to the Chief Executive Officer, the Chief Compliance Officer is responsible for oversight and management of legal, human resources and operational risks.
Each of the committees utilizes various outside advisors in assessing risk. Our Audit Committee receives guidance from our external auditors and our compensation consultant, Aon, supports the Compensation Committee, regarding relevantand our Nominating and Corporate Governance Committee receives guidance from our external legal advisor, among others. The committees leverage these advisors to respond to existing risks and to identify significant emerging risks on an ongoing basis.
The Board believes that its current leadership structure supports the actions takenrisk oversight function of the Board. Having the roles of Chief Executive Officer and Chairman filled by separate individuals allows the Chief Executive Officer to lead senior management in its supervision of the Company’s day-to-day business operations, including the identification, assessment and mitigation of material risks, and allows the Chairman to address those risks.lead the Board in its oversight of the Company’s risk assessment and risk management activities.
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Policy for Director Recommendations
Our Nominating and Corporate Governance Committee is responsible for reviewing and making recommendations to our Board of Directors regarding nominations of candidates for election as a director of the Company. The Nominating and Corporate Governance Committee identifies new director candidates through a variety of sources. The committee will consider director candidates recommended by shareholdersstockholders in the same manner it considers other candidates, but it has no obligation to recommend such candidates. A shareholderstockholder that wants to recommend a candidate for election to the Board of Directors should send a recommendation in writing to Potbelly Corporation, 111 North Canal Street, Suite 850,325, Chicago, Illinois 60606, Attention: Corporate Secretary. Such recommendation should describe the candidate’s qualifications and other relevant biographical information and provide confirmation of the candidate’s consent to serve as director.
ShareholdersStockholders may also nominate directors at the annual meeting by adhering to the advance notice procedure described under “Shareholder“Stockholder Proposals for the 20212024 Annual Meeting” on page 6564 of this Proxy Statement.
The Nominating and Corporate Governance Committee works with the Board on an annual basis to determine the appropriate characteristics, skills and experience for the Board as a whole and its individual members. In evaluating the suitability of individual Board members, the Board and the Nominating and Corporate Governance Committee will take into account factors such as the individual’s general understanding of disciplines relevant to the success of a publicly traded company; understanding of Potbelly’s business; education and professional background, including current employment and other board memberships; reputation for integrity; and any other factors they consider to be relevant. Pursuant to the provisions of our Corporate Governance Guidelines, the
Board will endeavor to reflect the diversity of Potbelly’s shareholders,stockholders, employees and customers and the communities it serves.we serve. Additionally, in determining whether to recommend a director forre-election, the Nominating and Corporate Governance Committee also considers the director’s past attendance at meetings and participation in and contributions to the activities of the Board.
If the Nominating and Corporate Governance Committee determines that an additional or replacement director is required, the committee may take such measures that it considers appropriate in connection with its evaluation of a director candidate, including candidate interviews, inquiry of the person or persons making the recommendation and engagement of an outside search firm to gather additional information. From time to time for a fee, Potbelly has used the executive search firm, Spencer Stuart,firms, to identify and evaluate or assist in identifying and evaluating potential candidates for election as directors.
ShareholdersStockholders and other parties interested in communicating directly with one or more individual directors or with thenon-management directors as a group, may do so by writing to the individual director or group, c/o Potbelly Corporation, 111 North Canal Street, Suite 850,325, Chicago, Illinois 60606, Attention: Corporate Secretary. The Board has directed our corporate secretary to forward shareholderstockholder communications to our chairman and any other director to whom the communications are directed. In order to facilitate an efficient and reliable means for directors to receive all legitimate communications directed to them regarding our governance or operations, our corporate secretary will use hisher discretion to refrain from forwarding the following: sales literature; defamatory material regarding us and/or our directors; incoherent or inflammatory correspondence, particularly when such correspondence is repetitive and was addressed previously in some manner; and otherany correspondence unrelated to the Board of Director’s corporate governance and oversight responsibilities.
Our Board of Directors approved a director compensation plan pursuant to the Potbelly Corporation 2013 Long-Term Incentive Plan.2019 LTIP. Under the director compensation plan in effect for 2019,2022, each non-employee Director director who was a member of the Board of Directors as of the 20192022 Annual Meeting of ShareholdersStockholders was eligible to receive $135,000 in annual compensation.Each non-employee Director will receive (1) director received (i) $60,000 payable in cash or restricted stock units (“RSUs”) at the option of the director (half of which will bewas paid after the end ofduring the second fiscal quarter and half of which will bewas paid after the end ofduring the fourth fiscal quarter); plus (2) restricted stock units (“(ii) RSUs”) having a grant date Fair Market Value of $75,000 (with a grant date immediately after the 20192022 Annual Meeting)Meeting of Stockholders).
Pursuant to the director compensation plan,the non-executive Chairman of the Board receives an additional $80,000 retainer, the Audit Committee Chair receives an additional $15,000 retainer, the Compensation Committee Chair receives an additional $10,000 retainer, and the Nominating and Corporate Governance Chair receives an additional $7,500 retainer.The non-executive Chairman of the Board, the Lead Director (if applicable), the Audit Committee Chair, the Compensation Committee Chair and the Nominating and Corporate Governance Committee Chair will receive the following form of payment for such additional retainer: (1)(i) cash in an amount equalto one-half of such additional retainer amount (half of which will bewas paid after the end ofduring the second fiscal quarter and half of which will bewas paid after the end ofduring the fourth fiscal quarter); plus (2)(ii) RSUs having a grant date Fair Market Value of half of such additional retainer amount (with a grant date immediately after the 20192022 Annual Meeting)Meeting of Stockholders).
RSUs granted in 2022 shall vest as follows: fiftyone hundred percent (50%(100%) on the first anniversary of the grant date, and fifty percent (50%) on the second anniversary of the grant date.
20192022 Director Compensation
The following table summarizes the amounts earned and paid to ournon-employee members of our Board of Directors for 2019. Mr. Johnson, our President and Chief Executive Officer, receives no additional compensation for his service on our Board of Directors:2022:
Name(1)(2) | Fees Earned or Paid in Cash | Stock Awards (3) | Total | |||||||||
Joe Boehm | $ | 60,000 | $ | 75,000 | $ | 135,000 | ||||||
Adrian Butler | $ | 60,000 | $ | 75,000 | $ | 135,000 | ||||||
Susan Chapman-Hughes | $ | 65,000 | $ | 80,000 | $ | 145,000 | ||||||
Dan Ginsberg | $ | 103,750 | $ | 118,750 | $ | 222,500 | ||||||
Marla Gottschalk | $ | 67,500 | $ | 82,500 | $ | 150,000 | ||||||
David Head | $ | 47,248 | $ | 59,060 | $ | 106,308 | ||||||
Ben Rosenzweig | $ | 60,000 | $ | 75,000 | $ | 135,000 | ||||||
Name (1)(2) | Fees Earned or Paid in Cash(2) | Stock Awards (3) | Total | |||||||||
Vann Avedisian | $ | — | $ | 135,000 | $ | 135,000 | ||||||
Joseph Boehm | $ | — | $ | 222,500 | $ | 222,500 | ||||||
Adrian Butler | $ | 60,000 | $ | 75,000 | $ | 135,000 | ||||||
Marla Gottschalk | $ | — | $ | — | $ | — | ||||||
David Head | $ | — | $ | 135,000 | $ | 135,000 | ||||||
David Near | $ | — | $ | 145,000 | $ | 145,000 | ||||||
David Pearson | $ | 75,884 | $ | 92,979 | $ | 168,863 | ||||||
Benjamin Rosenzweig | $ | — | $ | — | $ | — | ||||||
Todd Smith | $ | — | $ | 135,000 | $ | 135,000 | ||||||
Jill Sutton | $ | 8,384 | $ | 145,479 | $ | 153,863 | ||||||
| (1) | Pursuant to our director compensation program in effect for |
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Messrs. Avedisian, Boehm, Head, Near and Smith and Ms. Sutton chose to take all of their annual cash retainers in the form of RSUs. Ms. Sutton received a small cash payment as compensation for the period of her service on the Board prior to the 2022 term. |
| (3) | The following directors have unvested stock awards at December |
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Director Stock Ownership Guidelines
The Board believes that all directors should hold a significant equity interest in Potbelly. Toward this end, the Board expects that all directors own, or acquire within five years of first becoming a director, shares of Potbelly common stock (including restricted shares, but not options, under Potbelly’s equity-linked incentive plans) having a market value of at least four times the annual cash compensationretainer for directors (excluding any additional retainer received for service as Chairman of the Board or Lead Director, or as Chair of any Board committee) offered to directors (regardless of whether the director elects to receive such compensation in cash)cash or equity). As of December 31, 2022, all directors met or exceeded the applicable stock ownership guidelines.
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TenNine candidates will be elected at the Annual Meeting to serve fora one-year term that will expire at the 20212024 Annual Meeting and until their successors shall have been elected and qualified. The election of directors requires the affirmative vote of a plurality of our shares of common stock present in person or by proxy at the Annual Meeting.
Our Board of Directors has nominated Vann Avedisian, Joseph Boehm, Adrian Butler, Susan Chapman-Hughes, Dan Ginsberg, Marla Gottschalk, David Head, Alan Johnson, David Near, Benjamin RosenzweigDave Pearson, Todd Smith, Jill Sutton and Todd SmithRobert D. Wright for election as directors. The Board of Directors is not aware that any nominee will be unwilling or unable to serve as a director. All nominees have consented to be named in this Proxy Statement and to serve as a director of the Company if elected. Proxies may not be voted for a greater number of persons than the number of nominees named in this Proxy Statement.
TheIn the Board’s view, the Board’s nominees possess the requisite experience and skills to successfully oversee the Company’s strategy and business, in the Board’s view.business. The Board, and its nominees, are dedicated to analyzing objectively the Company’s strategy, business operations, capital allocation and configuration, overseeing the CEO and CEO succession planning, risk and compliance and acting to maximize shareholderstockholder value.
For more information on the structure of our Board of Directors and our Board members and nominees, see “Corporate Governance.” The qualifications and experience of each nominee that led our Board and the Nominating and Corporate Governance Committee to conclude that such nominee should serve or continue to serve as director are discussed at the end of each of the nominees’ biographies.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THESE NOMINEES.
Ratification of Appointment of Independent Registered Public Accounting Firm
The Audit Committee of our Board of Directors is responsible for recommending, for shareholderstockholder approval, our independent registered public accounting firm. The Audit Committee has selected the accounting firm of Deloitte & Touche LLP to serve as our independent registered public accounting firm for the fiscal year ending December 27, 2020.31, 2023. Deloitte & Touche LLP has served as our independent registered public accounting firm since before our Initial Public Offering and has also providednon-audit services from time to time.
Although ratification is not required by our Bylaws or otherwise, our Board of Directors is submitting the selection of Deloitte & Touche LLP to our shareholdersstockholders for ratification because we value our shareholders’stockholders’ views on our independent registered public accounting firm and as a matter of good corporate practice. The Audit Committee will consider the outcome of this vote in its decision to appoint an independent registered public accounting firm but is not bound by our shareholders’stockholders’ vote. Even if the selection of Deloitte & Touche LLP is ratified, the Audit Committee may change the appointment at any time during the year if it determines a change would be in the best interests of the Company and our shareholders.stockholders.
The following table sets forth the fees pertaining to audit services for the fiscal years ended December 29, 201925, 2022 and December 30, 201826, 2021 and for other services during those fiscal years:
| 2019 | 2018 | |||||||
Audit fees(1) | $ | 709,445 | $ | 683,666 | ||||
Audit-related fees(2) | 10,000 | 10,000 | ||||||
Tax fees(3) | 316,159 | 392,645 | ||||||
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All other fees | 0 | 0 | ||||||
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|
| |||||
Total fees | $ | 1,035,604 | $ | 1,086,311 | ||||
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| 2022 | 2021 | |||||||
Audit fees (1) | $ | 975,500 | $ | 842,403 | ||||
Audit-related fees (2) | — | 165,000 | ||||||
Tax fees (3) | 300,305 | 333,085 | ||||||
All other fees (4) | 1,895 | 1,895 | ||||||
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|
| |||||
Total fees | $ | 1,277,700 | $ | 1,342,383 | ||||
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Audit fees include fees for audits of our annual financial statements and internal controls, reviews of the related quarterly financial statements, and services that are normally provided by the independent accountants in connection with statutory and regulatory filings or engagements, including reviews of documents filed with the SEC. |
Audit-related fees in 2021 were comprised of fees for services performed in connection with other audit-related services and our filing of |
Tax fees relate to professional services rendered for tax compliance, tax return review and preparation, cost segregation study, and related tax advice. |
| (4) | All other fees relate to a subscription to an accounting research software. |
Policy on Audit Committee Approval of Audit andNon-Audit Services
The Audit Committee’s policy is to approve all audit and permissiblenon-audit services prior to the engagement of our independent registered public accounting firm to provide such services. The Audit Committee annually approves, pursuant to detailed approval procedures, certain specific categories of permissiblenon-audit services. Such procedures include the review of (i) a detailed description by our independent registered public accounting firm of the particular services to be provided and the estimated fees for such services and (ii) a regular report to the committee regarding the services provided and the fees paid for such services. The Audit Committee must approve on aproject-by-project basis any permissiblenon-audit services that do not fall within apre-approved category and any fees forpre-approved permissiblenon-audit services that exceed the previously approved amounts. In making the determinations aboutnon-audit services, the Audit Committee considers whether the provision ofnon-audit services is compatible with maintaining the auditor’s independence.
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All services provided to the Company by Deloitte & Touche LLP in the fiscal 2019years ended December 25, 2022 and fiscal 2018December 26, 2021 and related fees werepre-approved by the Audit Committee.
Representatives of Deloitte & Touche LLP are expected to be present at the Annual Meeting and to be available to respond to your questions.
They have advised us that they do not presently intend to make a statement at the Annual Meeting, although they will have the opportunity to do so.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
With regard to the fiscal year ended December 29, 2019,25, 2022, the Audit Committee has (i) reviewed and discussed with management our audited consolidated financial statements as of December 29, 201925, 2022 and for the year then ended; (ii) discussed with Deloitte & Touche LLP, the independent auditors, the matters required by the Public Company Accounting Oversight Board (“PCAOB”PCAOB”) Auditing Standard No. 1301, Communications with Audit Committees; (iii) received the written disclosures and the letter from Deloitte & Touche LLP required by applicable requirements of the PCAOB regarding Deloitte & Touche LLP’s communications with the Audit Committee regarding independence; and (iv) discussed with Deloitte & Touche LLP their independence.
Based on the review and discussions described above, the Audit Committee recommended to our Board of Directors of the Company that our audited consolidated financial statements be included in our Annual Report on Form10-K for the fiscal year ended December 29, 201925, 2022 for filing with the SEC.
Marla Gottschalk,ChairmanDave Pearson, Chairperson
Joseph BoehmVann Avedisian
Adrian Butler
Advisory Vote on a Resolution To Approve Our 20192022 Named Executive Officer Compensation
We are asking shareholdersstockholders to approve, on an advisory basis,a non-binding resolution (commonly referred to asa “say-on-pay”“say-on-pay” resolution) to approve the Company’s 20192022 named executive officer compensation as reported in this Proxy Statement.
We urge shareholdersstockholders to read the “Compensation Discussion and Analysis” section of this Proxy Statement, which describes how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and other related compensation tables and narrative, which provide detailed information on the compensation of our named executive officers. The Compensation Committee and our Board of Directors believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in aligning the interests of our officer team with those of shareholders.stockholders.
We have committed toholding say-on-pay votes at each year’s annual meeting. In accordance with Section 14A of the Exchange Act and as a matter of good corporate governance, we are asking shareholdersstockholders to approve the following advisory resolution at the Annual Meeting:
“RESOLVED, that the shareholdersstockholders of the Company approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed under the “Compensation Discussion and Analysis” and “2019 Compensation Tables”“Executive Compensation” headings of this proxy statement.”
This resolutionis non-binding on the Board of Directors.Although non-binding, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding executive compensation.
THE BOARD OF DIRECTORS RECOMMENDS AN ADVISORY VOTE “FOR” THE RESOLUTION TO APPROVE OUR 20192022 NAMED EXECUTIVE OFFICER COMPENSATIONCOMPENSATION.
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ApprovalSummary of the Amendment and Restatement of the Potbelly Corporation 2019 Long-Term Incentive PlanProposal
The Board recommends approval of the amendment and restatement of the Potbelly Corporation 2019 Long-Term Incentive Plan (the “Plan”),LTIP solely to increase the number of shares available for grant under the 2019 LTIP, which, if approved by our shareholders,stockholders, will be effective as of June 24, 2020.May 18, 2023. The Plan, prior to the amendment and restatement,2019 LTIP was initiallyoriginally approved by shareholdersour stockholders on May 16, 2019 (the “Prior Approval Date”).and amended and restated on June 24, 2020, following approval by our stockholders. We are submitting the Plan, as amended and restated,amendment of the 2019 LTIP to shareholdersour stockholders for approval in order to increase the current share reserve under the Plan2019 LTIP by 900,000 shares and make certain other technical changes.1,100,000 shares. This is the only change we are proposing to the previously approved 2019 LTIP.
As of May 19, 2020,April 5, 2023, the latest practicable date prior to the publication of this Proxy Statement, there were 1,218,239approximately 1.3 million shares available for issuance under the existing long-term incentive plan.2019 LTIP. Of these available shares, approximately 400,000 shares are committed for distribution to directors, officers and employees on April 7, 2023 in accordance with the 2019 LTIP. The Board believes approval of the amended and restated Planamendment of the 2019 LTIP is necessary to make available an adequate number of shares to enable us to continue to attract, retain and motivate our officers, employees and employees.directors in a competitive market for talent.
We believe that equity awards are critical incentives to attracting, retaining and motivating our directors, officers and employees.employees, and are an important way of ensuring the interests of our talent are aligned with Company goals and stockholder interests. The increase in the share reserve will enable us to continue to be able to grant equity awards authorized by the Plan2019 LTIP to deserving individuals and remain competitive with our industry peers. We believe the granting of equity awards in this way is a common compensation practice. If this proposal is not approved, we believe we would be at a significant disadvantage against our competitors for attracting, retainingwho use this practice to attract, retain and motivating those individuals whomotivate key employees. If we are criticalunable to our success, andgrant equity awards, we could be forced instead to increase cash compensation at a time when we are seeking to be careful in our uses of cash, reducing resources available to meet our other business needs.
A summary of the principal features of the amended and restated Plan2019 LTIP is provided below, but it is qualified in its entirety by referencebelow. A copy of the amendment to the full text of the amended and restated Plan that2019 LTIP is attachedincluded as Annex A to this Proxy Statement asAppendix A.Statement.
The purpose of the Plan2019 LTIP is to (a) align the interests of our shareholdersstockholders and the recipients of awards under the plan2019 LTIP by increasing the proprietary interest of such recipients in our growth and success; (b) advance our interests by attracting and retaining qualified employees, outside directors and other persons providing services to us and/or our related companies; and (c) motivate such persons to act in the long-term best interests of our shareholdersstockholders and our Company.
The Board approved an amendment and restatement of the Plan on May 15, 2020. The following are the most significant changesonly change to the Plan2019 LTIP included in the amendment and restatement, subjectof the 2019 LTIP is to approvalauthorize an increase in the overall limit on the number of our shareholders, as more fully describedshares that may be issued under the heading “Summary of Plan” below:
We have increased the shares reserved for issuance under the Planplan by 900,000 shares; as described in greater detail below;
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We have eliminated the maximum share limit available to be delivered pursuant to the Plan to any one participant in any one calendar-year period (which was previously 400,000 shares).
On May 19, 2020, the latest practicable date prior to the publication of this Proxy Statement, the closing price of a share of our common stock on NASDAQ was $2.10.an additional 1,100,000 shares.
If the amendment and restatement of the Plan2019 LTIP is not approved by the Company’s shareholders, the Companyour stockholders, we will continue to operate the Plan2019 LTIP in accordance with its existing terms.
As of December 31, 2019,25, 2022, six executive officers, seveneight non-employee members of the Board of Directors and approximately 3532 other employees and consultants were eligible to participate in the Plan.
Factors Considered in Setting Size of Requested Share Reserve
Equity is Essential to Talent Acquisition and Retention
The restaurant industry is intensely competitive with many well-established companies that compete directly and indirectly with us with respect to talent. The additional shares, if approved, would be used for grants not only to our executive officers, but also to recruit and retain employees in our corporate headquarters. We firmly believe that employees with a stake in the future success of our business are highly motivated to achieve long-term growth and are well-aligned with the interests of our other equity-holders to increase shareholderstockholder value. It is essential that we continue the use of equity compensation to better position us in the market and allow us to retain our skilled employees while attracting talented new employees to help us achieve our objectives, which include increasing shareholderstockholder value by growing the business. The use of shares would enable us to reduce cash compensation costs while leveraging equity to retain employees critical to the long-term success of the Company. Without the approval of an addition to our share reserve, we will be very challenged to continue to compete in this highly competitive market. This wouldcould ultimately result in the loss of critical talent and inhibit our ability to meet our future growth objectives.
The Size of Our Share Reserve Request is Reasonable
The Compensation Committee thoughtfully evaluated the appropriate number of shares for which to seek shareholderstockholder approval. The Compensation Committee conducted this evaluation at a time of significant volatility in the stockconsidered historical grant and forfeiture levels, recent market and a material decline in our stock price due to unprecedented business disruption resulting from the COVID-19 pandemic and related macroeconomic factors. Becauseprices of the lowerCompany’s shares and the anticipated use of stock price at the time of the Compensation Committee’s decisionawards as an incentive and continuing uncertainty in relation to the timing of the market’s recovery, the Compensation Committee determined that 900,000 additional shares should be requested to allow the Company flexibility to retain and incentivize personnel that are critical to our success.retention tool. The Compensation Committee is committed to being careful stewards of shareholderstockholder capital.
If our request to amend and restateapprove the Plan and increase its share reserveamendment of the 2019 LTIP is approved, we will have approximately 2.12 million shares available for grant after June 24, 2020. WeMay 18, 2023. Based on our historical usage and forfeiture and forecasts of annual usage, we currently anticipate that this reserve will be a sufficient amount of equity for attracting, motivating and retaining employees, directors and consultants for approximately one year. In addition to the number of shares we plan to reserve for issuance under the Plan, we also note that the Plan, as amended and restated, does not contain a “fungible ratio,” which was included previously in the Plan. Under this “fungible ratio,” full-value awards, such as PSUs and RSUs, are charged against the plan limit on a higher basis than 1:1 as a means of equating full value awards and options. Absent a fungible ratio, if the Compensation Committee grants full-value awards in the future, they will be charged against the Plan limit on aone-for-one basis. When an outstanding award under the Plan, prior to the amendment and restatement, or under the Amended and Restated Potbelly Corporation 2013 Long-Term Incentive Plan (the “Prior Plan”) expires or is canceled, forfeited, settled in cash or otherwise terminated without a delivery to the participant of the shares to which the award related, such undelivered shares would return to the Plan at the same rate at which they were originally charged against the plan limit, notwithstanding that the ratio for new awards would beone-to-one.three years.
We Have Responsibly Managed Our Annual Burn Rate
Our three-year averageCompensation Committee takes a thoughtful approach to managing our dilution and annual burn rate from 2017 to 2019 was 2.2%usage levels, taking into account business needs, competitive market practices, and our broader human capital management strategy. Our annual burn rates in 2020, 2021, and 2022 were 12.9%, 2.8%, and 2.7%, respectively, calculated for each year as the number of shares issuable pursuant to equity awards granted in such year divided by the respective weighted-average common shares outstanding during 2017, 20182020, 2021 and 2019.2022. During 2020, the social and regulatory pressures of the COVID-19 pandemic reduced the availability of cash to recruit, retain and motivate our employees, including our named executive officers. As a result, the compensation we offered to recruit and retain certain of our NEO during 2020 was comprised more heavily of equity awards than cash to help us secure talent while protecting limited cash reserves. In particular, as noted below under “CEO Employment Agreement,” Mr. Wright was paid an initial base salary of $1.00 in cash for the period commencing on July 20, 2020 through June 30, 2021, and received equity awards of $2,206,000. We believe the equity awards we granted to our three-year averageNEOs in 2020 helped recruit a management team that has contributed to improved sales and shop margin expansion, as well as increased total shareholder return. Going forward, we expect our annual burn rate is reasonable for a companyto remain at the more normalized usage rates of our sizethe last two years, absent any other extraordinary circumstances, such as we faced in our industry, given our broad-based use of equity awards to compensate our employees. We will continue to monitor our equity use in future years to ensure our burn rate is within competitive market norms.
Our CurrentEquity-Pay Mix Aligns Executive Incentives with ShareholderStockholder Gains
Our executive compensation consists of base salary payable in cash, annual cash bonuses based on the performance of each executive as well as that of the Company, and long-term incentives payable in the form of equity awards. Beginning with grants in 2019, ourOur long-term performance based equity incentive award mix for executive officers changed from 50% stock options and 50% restricted stock units tois currently 50% performance stock units and 50% restricted stock units. The change from stock options to performance stock units, while requiring the issuance of more shares, served to further align the interests of our shareholders and our executive officers by increasing the proprietary interest of our executive officers in the Company’s growth and success, advance the Company’s interests by attracting and retaining qualified employees over time, and motivate our executives to act in the long-term best interests of our shareholders. We believe these equity awards provide effective incentives to motivate our executives to take actions designed to increase our stock price. If we are unable to offer equity awards to new and existing executives, we may need to increase the cash component of our compensation.
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Promotion of Good Corporate Governance Practices
The Plan2019 LTIP includes a number of responsible corporate governance provisions which will remain in place in this Proposal Four.provisions. These include, but are not limited to, the following:
Element | Description | |
| No “Evergreen” | The | |
| No Liberal Share Recycling | Shares delivered to or withheld by the Company to pay the exercise price of an option or stock appreciation right or to pay the withholding taxes with respect to an award may not be made available again under the | |
| Minimum1-Year Vesting Requirement | Except for (a) awards granted under the | |
| Clawback | In the event that the Company is required to restate its financial results due to material noncompliance with any financial reporting requirement as a result of any gross negligence, intentional misconduct, theft, embezzlement, fraud or other serious misconduct by an executive officer, the result of which is that any performance-based compensation received by such executive officer during the three-year period preceding the publication of the restated financial statement would have been lower had it been calculated based on such restated results, the Compensation Committee may seek to recover the excess of the incentive compensation paid to the executive based on the erroneous data. | |
| Limitation on Awards toNon-Employee Directors | The aggregate value of all awards granted under the | |
| No | Other than in connection with certain corporate events where a reduction in exercise price is necessary to preserve the benefits or prevent the enlargement of benefits of | |
|
| |
| awards under the |
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Element | Description | |
| option or stock appreciation right for a new award with a lower exercise price or a full value award. | ||
| No Transferability | Awards may not be transferred, except by will or the laws of descent and distribution, or, unless otherwise provided by the Compensation Committee, pursuant to a qualified domestic relations order or to or for the benefit of the participant’s family. | |
| No Single-Trigger Vesting | The 2019 LTIP does not provide for automatic vesting of awards upon a change in control. | |
| No 280G Excise Tax Gross Ups | The 2019 LTIP does not provide for 280G tax gross-ups to officers, non-employee directors or other plan participants. | |
Administration.The Plan2019 LTIP generally is administered by the Compensation Committee of our Board. The Compensation Committee selects award recipients under the Plan2019 LTIP who will thereby become participants, the types of awards to be granted and the applicable terms, conditions, performance criteria, restrictions and other provisions of such awards, not inconsistent with the plan.2019 LTIP. The Compensation Committee also has the authority to conclusively interpret the Plan.2019 LTIP. Subject to the applicable securities exchange rules and applicable law, the Compensation Committee may delegate all or any portion of its responsibilities or powers under the Plan2019 LTIP to persons selected by it.
Authorized Shares.If shareholderstockholder approval of the Plan2019 LTIP is obtained, the total number of shares that will be available for issuance under the Plan2019 LTIP will be equal to 900,000 shares plus the number of shares that were available under the Prior Plan immediately prior to Prior Approval Date.approximately 2 million shares. Shares of stock covered by an award will only be counted to the extent that they are actually used. Shares subject to substitute awards (i.e., awards or shares granted in assumption of, or in substitution or exchange for, an award previously granted, or the right or obligation to make a future award, in all cases by a company acquired by us or any of our affiliates) will not be counted against the shares reserved for issuance under the Plan.2019 LTIP. Any shares of our common stock that (1) are subject to an award under the Plan2019 LTIP or (2) are subject to awards that were granted under the Prior Planprior plan and that are outstanding on the approval date, in any case that terminate by reason of expiration, forfeiture, cancellation, or otherwise, without the issuance of such shares, or that are settled in cash (collectively referred to as “Recycled Shares”“Recycled Shares”) will be again available for grant under the Plan.2019 LTIP. Recycled Shares shall be added back to the number of shares of common stock reserved for issuance under the Plan2019 LTIP on the same basis that they were charged to the number of shares reserved for issuance under the Plan2019 LTIP or the Prior Plan,prior plan, as applicable, at the time the award relating thereto was granted. The following shares of common stock may not again be made available for issuance under the Plan:2019 LTIP: (i) shares of common stock not issued or delivered as a result of the net settlement of an outstanding award; (ii) shares delivered to or withheld to pay the exercise price of an option or Stock Appreciation Right (“SAR”SAR”) or to pay the withholding taxes with respect to an award; (iii) shares of common stock repurchased on the open market with the proceeds of the exercise price of an option; or (iv) shares subject to substitute awards.
Additional Limits.No more than 1,200,000 shares of common stock may be subject to incentive stock options (“ISOs”ISOs”) granted under the Plan.2019 LTIP. The aggregate value of all awards granted under the Plan2019 LTIP to any outside director for any calendar year shall not exceed (y) $300,000 in total value or (z) in the event such outside director is first appointed or elected to the Board in such calendar year, $400,000 in total value.
Adjustments.In the event of a corporate transaction, including a stock dividend, stock split, reverse stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation,split-up,spin-off, exchange
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of shares, sale of assets or subsidiaries, combination or other corporate transaction, that affects our common stock such that the Compensation Committee determines that an adjustment is warranted in order to preserve the benefits or prevent the enlargement of benefits of awards under the Plan,2019 LTIP, the Compensation Committee will make adjustments to awards in a manner that it determines to be equitable in its discretion. Actions that the
Compensation Committee may take are: (i) adjustment of the number and kind of shares which may be delivered under the Plan2019 LTIP (including adjustments to the individual limitations described above); (ii) adjustment of the number and kind of shares subject to outstanding awards; (iii) adjustment of the exercise price of outstanding options and SARs; and (iv) any other adjustments that the Compensation Committee determines to be equitable, which may include, without limitation, (A) replacement of awards with other awards which the Compensation Committee determines have comparable value and which are based on stock of a company resulting from the transaction, and (B) cancellation of the award in return for cash payment of the current value of the award, determined as though the award is fully vested at the time of payment, provided that in the case of an option or SAR, the amount of such payment may be the excess of the value of the shares of common stock subject to the option or SAR at the time of the transaction over the exercise price.
Eligibility.The Compensation Committee may grant awards under the Plan2019 LTIP to any officer, director, employee, consultant, independent contractor or agent of the Company and/or a related company, and persons who are expected to become an officer, director, employee, consultant, independent contractor or agent of the Company or a related company. Awards to a person who is expected to become a service provider to the Company or a related company cannot be effective prior to the date on which such person’s service begins. ISOs may only be granted to employees of the Company and its corporate related companies which satisfy certain requirements of the Internal Revenue Code of 1986, as amended (the “Code”“Code”). As of May 19, 2020,April 5, 2023, we had approximately 5,30038 employees and teneight directors, all of whom would be eligible to participate in the Plan2019 LTIP if selected by the Compensation Committee.
Types of Awards.The Plan2019 LTIP will provide for grants of options (including nonqualified stock options (“NQOs”NQOs”) and ISOs), SARs, and Full Value Awards.
| 1. | Options and SARs.The Compensation Committee may grant options to purchase shares of common stock, which options may be either ISOs or NQOs. ISOs may only be granted to employees of us and our permitted corporate subsidiaries and must satisfy other requirements of section 422 of the Code. An option that does not satisfy the requirements for an ISO will be treated as a NQO and an option will be deemed to be an NQO unless it is specifically designed as an ISO. An SAR entitles the participant to receive (in shares of common stock or cash) an amount that is equal to the excess of the fair market value of a specified number of shares of common stock on the exercise date over the exercise price of the SAR. The exercise price of an option or SAR must be no less than the fair market value of a share of common stock on the date the option or SAR is granted. Except for reductions approved by our |
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| 2. | Full Value Awards.A Full Value Award is a grant of one or more shares of common stock or a right to receive one or more shares of common stock in the future (including restricted stock, restricted stock units, performance stock and performance stock units) which is contingent on continuing service, the achievement of performance objectives during a specified period performance, or other restrictions as determined by the Compensation Committee or in consideration of a participant’s previously performed services or surrender |
or other compensation that may be due. The grant of Full Value Awards may also be subject to such other conditions, restrictions and contingencies, as determined by the Compensation Committee, including provisions relating to dividend or dividend equivalent rights and deferred payment or settlement. Notwithstanding the foregoing, no dividends or dividend equivalent rights will be paid or settled on Full Value Awards that have not been earned or |
Special Vesting Rules.Except for (a) awards granted under the Plan2019 LTIP with respect to shares of common stock which do not exceed, in the aggregate, fivepercentfive percent of the total number of shares of common stock reserved for issuance pursuant to the Plan,2019 LTIP, (b) awards granted in lieu of other compensation, and (c) awards that are a form of payment of earned performance awards or other incentive compensation provided that the performance period relating to such performance or incentive awards was at least one year, if a participant’s right to become vested in an award is conditioned on the completion of a specified period of service with the us or our affiliates being required, then the required period of service shall be at least one (1) year, except if accelerated in the event of the participant’s death or disability, or involuntary termination.
Transferability.Awards under the plan2019 LTIP generally may not be transferred except through will or by the laws of descent and distribution; provided, however, that unless otherwise provided by the Compensation Committee, awards (other than an ISO) may be transferred to or for the benefit of the participant’s family (including, without limitation, to a trust or partnership for the benefit of a participant’s family) in accordance with rules established by the Compensation Committee.
Change in Control.In the event that (i) a participant is employed or in service on the date of a Change in Control (as defined in the Plan)2019 LTIP) and the participant’s employment or service, as applicable, is terminated by us, our successor or a related company that is the participant’s employer for reasons other than cause (as defined in the Plan)2019 LTIP) within 24 months following the Change in Control, or (ii) the Plan2019 LTIP is terminated by us or our successor following a Change in Control without provision for the assumption, continuation or substitution of outstanding awards under the Plan,2019 LTIP, all options, SARs and related awards which have not otherwise expired will become immediately exercisable and all other awards will become fully vested; provided, however, that all awards with conditions and restrictions relating to the attainment of performance goals shall become vested assuming the higher of (A) achievement of all relevant performance goals at the target level of performance(pro-rated based upon the length of time within the performance period that has elapsed prior to the Change of Control) or (B) actual achievement of the performance goals as of the date of the Change of Control. A participant’s employment or service will be deemed to have been terminated by us or our successor for reasons other than for cause if the participant terminates employment or service after a substantial adverse alteration in the nature of the participant’s status or responsibilities from those in effect immediately prior to the Change in Control or a material reduction in the participant’s annual base salary and target bonus, or in the case of an outside director his annual compensation, as in effect immediately prior to the Change in Control. Special rules apply if, upon a Change in Control, awards in other shares or securities are substituted for outstanding awards under the Plan2019 LTIP and if, immediately prior to the Change in Control, the participant becomes an employee or a director of, as applicable, the successor to us.
Amendment and Termination.The Board may, at any time, amend or terminate the Plan,2019 LTIP, and the Board or the Compensation Committee may amend any award agreement, provided that no amendment or termination may, in the absence of written consent to the change by the affected participant (or, if the participant is not then living, the affected beneficiary), adversely affect the rights of any participant or beneficiary under any award granted under the Plan2019 LTIP prior to the date such amendment is adopted by the Board (or the Compensation Committee, if applicable). Adjustments to the Plan2019 LTIP and awards on account of business transactions (as
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described above) are not subject to the foregoing prohibition. The provisions of the Plan2019 LTIP that prohibit repricing of options and SARs or exchanges of an option or SAR for another award or cash payment if the exercise price is below fair market value on the date of the repricing or exchange cannot be amended unless the amendment is approved by our shareholders.stockholders. No other amendment may be made to the Plan2019 LTIP without approval of our shareholdersstockholders if such approval is required by law or the rules of any stock exchange on which the stock is listed.
U.S. Federal Income Tax Implications of the Plan
2019 LTIP
The discussion that follows is a summary, based on U.S. federal tax laws and regulations presently in effect, of some significant U.S. federal income tax considerations relating to awards under the Plan.2019 LTIP. The applicable laws and regulations are subject to change, and the discussion does not purport to be a complete description of the federal income tax aspects of the Plan.2019 LTIP. This summary does not discuss state, local or foreign laws.
Stock Options.The tax treatment of a stock option depends on whether the option is an NQO or an ISO.
The grant of an NQO will not result in taxable income to the participant. Except as described below, the participant will realize ordinary income at the time of exercise in an amount equal to the excess of the fair market value of the shares of stock acquired over the exercise price for those shares of common stock, and we will be entitled to a corresponding deduction.
The grant of an ISO will not result in taxable income to the participant. The exercise of an ISO will not result in taxable income to the participant provided that the participant was, without a break in service, an employee of us and our eligible subsidiaries (determined under tax rules) during the period beginning on the date of the grant of the ISO and ending on the date three months prior to the date of exercise (one year prior to the date of exercise if the participant is disabled, as that term is defined in the Code).
The excess of the fair market value of the shares of common stock at the time of the exercise of an ISO over the exercise price is an adjustment that is included in the calculation of the participant’s alternative minimum taxable income for the tax year in which the ISO is exercised. For purposes of determining the participant’s alternative minimum tax liability for the year of disposition of the shares of common stock acquired pursuant to the ISO exercise, the participant will have a basis in those shares of common stock equal to the fair market value of the shares of common stock at the time of exercise.
If the participant does not sell or otherwise dispose of the shares of common stock within two years from the date of the grant of the ISO or within one year after receiving the transfer of such shares of common stock, then, upon disposition of such shares of common stock, any amount realized in excess of the exercise price will be taxed to the participant as capital gain, and we will not be entitled to any deduction for Federal income tax purposes.
If the foregoing holding period requirements are not met, the participant will generally realize ordinary income, and a corresponding deduction will be allowed to us, at the time of the disposition of the shares of common stock, in an amount equal to the lesser of (a) the excess of the fair market value of the shares of common stock on the date of exercise over the exercise price, or (b) the excess, if any, of the amount realized upon disposition of the shares of common stock over the exercise price.
Special rules apply if an option is exercised through the exchange of previously acquired stock
SARs.A participant will not be deemed to have received any income upon the grant of a SAR. Generally, when a SAR is exercised, the excess of the market price of common stock on the date of exercise over the exercise price will be taxable to a participant as ordinary income. We are entitled to a deduction in the year of exercise equal to the amount of income taxable to the individual.
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Full Value Awards.The federal income tax consequences of a Full Value Award will depend on the type of award. The tax treatment of the grant of shares of common stock depends on whether the shares are subject to a substantial risk of forfeiture (determined under Code rules) at the time of the grant. If the shares are subject to a substantial risk of forfeiture, the participant will not recognize taxable income at the time of the grant and when the restrictions on the shares lapse (that is, when the shares are no longer subject to a substantial risk of forfeiture), the participant will recognize ordinary taxable income in an amount equal to the fair market value of the shares at that time. If the shares are not subject to a substantial risk of forfeiture or if the participant elects to
be taxed at the time of the grant of such shares under Code Section 83(b), the participant will recognize taxable income at the time of the grant of shares in an amount equal to the fair market value of such shares at that time, determined without regard to any of the restrictions. If the shares are forfeited before the restrictions lapse, the participant will be entitled to no deduction on account thereof. The participant’s tax basis in the shares is the amount recognized by him or her as income attributable to such shares. Gain or loss recognized by the participant on a subsequent disposition of any such shares is capital gain or loss if the shares are otherwise capital assets.
In the case of other Full Value Awards, such as restricted stock units or performance stock units, the participant generally will not have taxable income upon the grant of the award provided that there are restrictions on such awards that constitute a substantial risk of forfeiture under applicable Code rules. Participants will generally recognize ordinary income when the restrictions on awards lapse, on the date of grant if there are no such restrictions or, in certain cases, when the award is settled. At that time, the participant will recognize taxable income equal to the cash or the then fair market value of the shares issuable in payment of such award, and such amount will be the tax basis for any shares received. In the case of an award which does not constitute property at the time of grant (such as an award of units), participants will generally recognize ordinary income when the award is paid or settled.
We generally will be entitled to a tax deduction in the same amount, and at the same time, as the income is recognized by the participant.
Section 162(m) and Section 280G. Compensation that qualifies as “Performance-Based Compensation” is excluded from the $1 million deductibility cap of Code Section 162(m), and therefore remains fully deductible by the Company paying it. The Tax Reform and Jobs Act of 2017 (the “Act”) eliminated the Performance-Based Compensation exception of Code Section 162(m) for taxable years beginning after December 31, 2017, such that compensation paid to our covered executive officers in excess of $1 million will not be deductible (assuming that it would have had the exception not been eliminated). Although an exception applies for certain awards in effect in place as of November 2, 2017, we do not believe that awards under the Plan will be covered by the exception.
Compensation to certain employees resulting from the earning or vesting of awards in connection with a change in control or termination following a change in control also may benon-deductible under Code Sections 4999 and 280G.
The foregoing provides only a general description of the application of federal income tax laws to certain awards under the Plan.2019 LTIP. This discussion is intended for the information of shareholdersstockholders considering how to vote at the Annual Meeting and not as tax guidance to participants in the Plan,2019 LTIP, as the consequences may vary with the types of awards made, the identity of the recipients and the method of payment or settlement.
The following table sets forth time-vesting restricted stock units and performance-vesting performance stock units granted by the Company to the persons and groups named below under the Potbelly Corporation 2019 Long-Term Incentive Plan, contingent on shareholder approval of the amendment and restatement of our Plan. Should shareholder approval not be obtained, these awards will be automatically forfeited. The time-vesting RSUs vest over three years, beginning on the first anniversary of the grant date. The performance-vesting PSUs will vest in 25% increments contingent upon the Company’s common stock hitting certain share price hurdles. The number of PSUs included in the table below assumes that the applicable performance goal is achieved. The Company has not granted awards to other employees or non-executive directors subject to shareholder approval.
Name and Position | Dollar value | |||
Alan Johnson President and Chief Executive Officer | $ | 1,000,000 | ||
Steven Cirulis SVP, Chief Financial Officer and Chief Strategy Officer | $ | 510,000 | ||
Julie Younglove-Webb SVP, Chief Restaurant Operations Officer | $ | 470,668 | ||
Brandon Rhoten SVP, Chief Marketing Officer | $ | 525,300 | ||
Matthew Revord SVP, Chief Legal Officer, Chief People Officer | $ | 498,478 | ||
Executive Group | $ | 3,424,446 | ||
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE PLAN.
| (a) | (b) | (c) | ||||||||||
Plan Category | Number of Securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
Equity compensation plans approved by security holders (1) | 1,774,410 | $ | 11.34 | 1,559,576 | (2) | |||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
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Total | 1,774,410 | $ | 11.34 | 1,559,576 | ||||||||
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In addition to Alan Johnson,Robert D. Wright, our President and Chief Executive Officer,CEO, whose biography is included under the heading “Director Biographies,” our executive officers, their ages as of December 29, 2019,25, 2022, and a brief account of their business experience follows:follows.
  | STEVEN
Senior Vice President, Chief Financial Officer and Chief Strategy Officer
Age:
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Experience
Steven Cirulis has been our Senior Vice President, Chief Financial Officer and Chief Strategy Officer since April 2020. Mr. Cirulis previously served in a strategic planning, finance and analytical consulting role for the Company sincefrom December 2019.2019 until his appointment as Chief Financial Officer in April 2020. Prior to that, Mr. Cirulis served as Senior Vice President, Strategic Projects at Panera Bread from April 2017 to July 2018. Prior to his role at Panera Bread, Mr. Cirulis was the Global Vice President, Corporate Strategy, at McDonald’s Corporation from August 2011 to September 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 October 2006 to May 2011.
  |
Senior Vice President, Chief
Age:
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Experience
Julie Younglove-WebbAdam Noyes has been our Senior Vice President since August 2020 and Chief of Restaurant OperationsOperating Officer since December 2018, havingJanuary 2023 (having previously served as our Senior Vice President ofChief Operations since May 2015. Ms. Younglove-Webb joined Potbelly in 2008 as a General Manager, assuming various operations roles before reaching her current position.Officer from August 2020 to January 2023). Prior to joining Potbelly, Ms. Younglove-Webb was Senior Vice President and General Manager of Sears Essentials at Sears Holding Corporation, a role she assumed in 2005 after Sears’ acquisition of KMart Corporation. Prior to that acquisition, Ms. Younglove-WebbMr. Noyes held various roles of increasing responsibility beginning when she joined KMart in 1999at Checkers and Rally’s from April 1991 through December 2019, including serving as Manager, Information TechnologyChief Administrative Officer and culminating with her role asExecutive Vice President Marketing.from 2016 to 2019.
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Age:
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Experience
Brandon RhotenAdiya Dixon has been our Senior Vice PresidentChief Legal Officer and Secretary since December 2020, has served as our Chief MarketingCompliance Officer since June 2018. He is responsible forMarch 2023 and oversees all marketing activities, including brand marketing, digital & social medialegal matters of the Company. Prior to joining Potbelly, Ms. Dixon worked as an attorney at AAD Squared, a legal consulting firm, from February 2020 to December 2020. In July 2018, Ms. Dixon founded Yubi Beauty, an e-commerce consumer products company and consumer insights. Mr. Rhoten joined Potbelly from Papa John’s International, Inc., where he served as Global Chief Marketing OfficerPresident from May 2017its inception through May 2018.November 2020. Prior to Papa John’s, Mr. Rhotenfounding Yubi Beauty, Ms. Dixon was Vice President of Advertising, Media and Digital/Social atemployed by Wendy’s International, which owns and operates a chain of quick service restaurants, serving as Director, International Counsel from May 2011 through May 2017. Mr. Rhoten started his career in marketing at the advertising agency Gyro.July 2016 to July 2018 and Director, Corporate Counsel from October 2013 to July 2016.
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Experience
Matthew Revord has been our Senior Vice President, Chief Legal Officer, Chief People Officer and Secretary since May 2018 and oversees all legal matters and human resources matters of the Company. In February 2014 Mr. Revord became the Company’s Chief Legal Officer having joined Potbelly in January 2007 as our Senior Vice President, General Counsel and Secretary. From January 2002 to January 2007, Mr. Revord served as Deputy General Counsel of Brunswick Corporation and General Counsel of Brunswick New Technologies.
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Experience
Daniel Lecocq has been our Senior Vice President, Franchise & Corporate Development since January 2020. Mr. Lecocq joined our Company from Dine Brands Global, where he served as the Vice President of Development and Finance for Dine Brands’ international business since 2016. Prior to Dine Brands, Mr. Lecocq was the Vice President, Business Development at Coffee Bean and Tea Leaf from 2014-2015. Prior to that, Mr. Lecocq served as the Vice President, Development and Administration at Krispy Kreme Doughnut Corporation from 2005-2014. Mr. Lecocq has held various management positions at Williams-Sonoma, The Gap and Yum International.
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Senior Vice President, Chief Information Officer
Age:
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| A Wreck with mustard
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Experience
Jeffrey Douglas has been our Senior Vice President and Chief Information Officer of Potbelly Corporation since September 2019. Mr. Douglas joined Potbelly from Levy Restaurants, where he served as the Senior Vice President of Information Technology from February 2016 through September 2019. Prior to Levy, Mr. Douglas was the Vice President of Technology for The Options Clearing Corporation.Corporation from December 2000 to January 2016.
 | LARRY STRAIN Chief Development Officer Age: 49 | |||
| Italian | |||
Experience
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 | DAVID DANIELS Chief Marketing Officer Age: 51 | |||
| Italian with hot peppers | |||
Experience
David Daniels has been our Chief Marketing Officer since August 2021. Prior to joining Potbelly, Mr. Daniels served as Senior Vice President of Marketing at The Food Hall Co., a developer and operator of food halls, from October 2018 to August 2021. Prior to that, Mr. Daniels served as Vice President of Marketing at Pizza Hut, a QSR brand, from March 2015 to March 2018. Prior to his time at Pizza Hut, Mr. Daniels served in various marketing and sales leadership roles at Anheuser-Busch InBev from 1993 to December 2014.
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COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis section is intended to provide our shareholdersstockholders with a clear understanding of our compensation philosophy, objectives and practices; our compensation setting process; our executive compensation program components; and the decisions made with respect to the 20192022 compensation of each of our Named Executive Officers (“NEOs”NEOs”). For 20192022, our NEOs were:
Alan Johnson,Robert D. Wright, President and CEO
Steven Cirulis, Senior Vice President, Chief ExecutiveFinancial Officer and Chief Strategy Officer
Tom Fitzgerald,Adam Noyes, Senior Vice President and Chief FinancialOperating Officer (resigned effective December 27)
Julie Younglove-Webb,Jeffrey Douglas, Senior Vice President and Chief Restaurant OperationsInformation Officer
Brandon Rhoten, Senior Vice President and Chief Marketing Officer
Matthew Revord, Senior Vice President,Adiya Dixon, Chief Legal, Officer, Chief PeopleCompliance Officer and Secretary
Performance Overview for 2019. Fiscal year 20192022
During 2022, we had positive sales momentum and results from the implementation of our “Traffic-Driven Profitability” Strategic Plan that was announced in 2020. While we experienced higher operating costs as a transition yearresult of shortages in labor and wage and inflationary pressure due to the macroeconomic environment, our management team was able to accomplish the following:
Financial and Operational Performance
Strengthened revenue growth across all shop types, supporting same store sales growth of 18.5% in 2022.
Improved Adjusted EBITDA significantly to $15.7 million compared to Adjusted EBITDA of $0.5 million in 2021.
Achieved record average unit volume sales (“AUVs”) driven by traffic growth, operations strength, strategic price increases, marketing effectiveness, accelerated performance at CBD and airport shops, as well as strength in the catering channel.
Continued momentum towards long-term franchising goals with Shop Development Area Agreements (SDAAs) for our business51 new shop commitments signed over the next 7 to 8 years, and our leadership team as we continued to execute our strategies to return to sustainable and long-term profitable growth. We launched initiatives to increase our sales and traffic, which included rolling out new menu options, addingoff-premise sales options, and increasingsignificant expansion of the pipeline for potential franchisees.
Ongoing success of enhanced marketing and brand awareness programs. We made the investments requireddigital efforts, as well as promotional activity including LTOs and tested new ideas to drive brand awareness, interestdigital offerings, driving customer acquisition and purchase intent,loyalty.
Furthered operational efficiencies through improved staffing and to support our topline, margin, profitabilitytraining, increased throughput and growth aspirations. While we achieved meaningful progress toward our objectives, and the fourth quarter of fiscal year 2019 represented our best comparable same-store salessignificant improvement in over three years, we recognized that there is still work to be done as our actions did not translate into share price performance in 2019.customer satisfaction scores.
| • | Expanded testing and implementation of Potbelly Digital Kitchen (PDK) in both company owned and franchise shop locations, improving in-shop operations, processes and customer experiences. |
Our incentive compensation plans worked as intended in 2019.2022. The payouts under those plans were strongly aligned with our financial and stock price performance – demonstrating our commitment to structure an executive compensation program that pays for performance.
2019 Pay Actions. As a result of the above, our 2019 executive compensation was significantly impacted. There were no cash bonuses to our named executive officers and base salary increases were limited. In addition, the long-term incentive equity awards granted to our executive officers were restructured to 50% performance units and 50% restricted stock units, which further tied executive pay to the Company’s and individual’s annual performance.
Compensation Philosophy and Objectives
Our compensation philosophy is to pay for performance, rewarding employees when challenging performance targets are met. Following are key components of our philosophy:
Our compensation programs are designed to ensure alignment of interests between the management team and stockholders.
Merit increases, annual incentive compensation, equity awards, and incremental paid time off are all tied to performance and results. Our compensation programs are designed to attract, retain, motivate, and reward employees.
Our pay program is designed to compensate employees commensurate with the scope and influence of the employee’s role and the extent to which an employee contributes to the achievement of key initiatives and financial targets, and demonstrates our values.
All of our compensation programs are designed to alignenhance our ability to attract, retain, motivate and reward actions that we believe contribute to our competitiveness and encourage superior performance.
We evaluate our executives onemployees for strong performance in a scale of one through five. A score of three means the executive is a “Contributor,” four is a “High Contributor” and five is a “Star.” Annual cash compensation varies based on the executive’s score, other individual performance measures, Company performance, and contributions to Potbelly.competitive environment.
Executive pay is tied to both the Company’s and the individual’s annual performance. Merit increases, annual incentive compensation and equity compensation, when granted, and paid time off are generally awarded in March
or April of each year, following completion of the first quarter annual performance review cycle, the annual financial audit and approval from the Compensation Committee. The employment agreements of our named executive officers specify each executive’s annual incentive bonusaward target under our current bonusannual incentive program. In addition, at the discretion of the Compensation Committee in the case of our Chief Executive Officer,CEO, and at the discretion of our Chief Executive OfficerCEO and upon the approval of the Compensation Committee in the case of our other executive officers, there may be an increase or decrease applied to the annual bonusincentive awarded to an executive, including the other named executive officers, in order to account for exceptional circumstances. However, it is anticipated that such bonusesadditional incentives would only be awarded under unusual circumstances to further the objectives of our compensation program.
Elements of Executive Compensation
The following table provides information regarding the elements of our executive compensation program.
Element | Form | Objectives and Basis | ||
| Base Salary | Cash | Attract and retain highly qualified executives. Determined based on the | ||
| Annual Incentive Plan | Cash | Determined under our company-wide Annual Incentive Plan, which provides for variable payouts based on financial performance againstpre-established | ||
| Long-Term Incentive | RSUs, PSUs and PPSUs | Aligns the incentives of our executive officers with stockholder interests and rewards the creation of stockholder value; retain executives through long-term vesting. | ||
Other Compensation Policies.Policies. In addition to the principal compensation elements described above, we provide our executive officers with access to the same benefits we provide all of our full-time employees. Our officers also receive certain limited perquisites and other personal benefits that we believe are reasonable and consistent with our compensation objectives. These perquisites have been identified in the “Summary Compensation Table.” We also providesign-on bonuses andnew-hire equity awards (subject to a time-based vesting period) when the Compensation Committee determines it is necessary and appropriate to advance the Company’s interests, including to attracttop-executive talent from other companies.Sign-on bonuses and new hire equity awards are an effective means of offsetting the compensation opportunities executives forfeit when they leave a former employer to join the Company.
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Our Executive Compensation Process
Compensation for our executive officers is comprised of base salary, target value of long-term incentive awards, and target annual incentive bonus.compensation. Executive compensation is designed to be competitive with peer companies and market data, as explained below under “Role of Market Data and Our Peer Group.”
Roles and Responsibilities of the Compensation Committee, Compensation Consultant and the CEO in Setting Executive Officer Compensation.
Compensation Committee
The Compensation Committee reports to the Board. In accordance with its obligations as set forth in its amended and restated charter, the Compensation Committee retains an independent consultantsConsultant and counsel to assist it in evaluating compensation
as well as working with the CEO and the CFOChief Financial Officer to set performance goals. The Compensation Committee determines and approves executive compensation (other than CEO compensation) annually, with base salaries, bonusannual incentive payments (for performance the prior fiscal year), and performance goals for long-term incentive grants and annual incentive bonuses approved during the first quarterhalf of the fiscal year.
Compensation Consultant
In 2022, the Compensation Committee again retained the Rewards Solutions practice at Aon plc (“Aon”) to provide executive compensation consulting services. Aon attended Compensation Committee meetings when requested and worked as directed to gather and review information to support the Compensation Committee in carrying out its obligations. Aon also advised the Compensation Committee on the appropriateness and competitiveness of our compensation programs relative to market practice, our strategy and our internal processes. This process allows the Compensation Committee to consider comprehensive information, including the Company’s performance and each named executive officer’s individual performance during the prior fiscal year, when making final compensation decisions.
Compensation Consultant
In 2019, the Compensation Committee retained the Rewards Solutions practice at Aon plc to provide executive compensation consulting services. Aon attended Compensation Committee meetings when requested and worked with management as necessary to gather and review information required to carry out its obligations. Aon also advised the Compensation Committee on the appropriateness and competitiveness of our compensation programs relative to market practice, our strategy and our internal processes.
CEO
Mr. Johnson,Wright, our CEO, and other members of the management team support the Compensation Committee in the executive compensation process and regularly attend portions of committee meetings. Mr. JohnsonWright provides the Compensation Committee with his perspective regarding the performance of his executive leadership team, including the other named executive officers. Mr. JohnsonWright makes recommendations to the Compensation Committee on the full range of annual executive compensation decisions, except with regard to his own compensation. In accordance with NASDAQ rules, Mr. JohnsonWright was not present when his compensation for fiscal 2019 was being discussed and did not vote on executive compensation matters, and neither Mr. JohnsonWright nor other members of management attended executive sessions of the Compensation Committee.
Role of Market Data and Our Peer Group.Group. As part of the annual executive compensation process, the Compensation Committee reviews compensation levels and practices for executives holding comparable positions at peer group companies and also includes broader compensation survey data. Our market for executive recruiting is generally other restaurant or retail companies. In evaluating the competitiveness of our executive compensation program, we compare our executive’s compensation against the restaurant industry, specifically the limited-service restaurant segment, and national and local competitors to help ensure we are competitive, focusing on items such as equity awards, merit pay, incentive pay and paid time off.
TheWhile the Compensation Committee does not explicitly benchmark our executive officers’considers compensation todata of the Company’s peer group but the peer group data isas one of multiple reference points used to evaluate our executive compensation programs.programs, the Compensation Committee does not explicitly benchmark our executive officer’s compensation to the peer group.
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20192022 Peer Group.Group. Our peer group consists of casual dining, fine dining, quick casual and quick service restaurants with similar market capitalization and revenue. The Compensation Committee and independent directors considered the peer group in connection with their fiscal 2019year ended December 25, 2022 executive compensation decisions. The Compensation Committee reviews the composition of the peer group periodically and will make adjustments to the peer group in response to changes in the size of business operations of the Company and of companies in the peer group, companies in the peer group being acquired or taken private, and other companies in the restaurant industry becoming public. The table below lists the companies that were considered forduring the fiscal 2019.year ended December 25, 2022 which remains consistent with prior years.
Casual Dining
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Ark Restaurants Corp. Chuy’s Holdings, Inc. Denny’s Corporation J. Alexander’s Holdings, Inc. Luby’s Inc. Fine Dining Ruth’s Hospitality Group, Inc. Quick Casual Fiesta Restaurant Group, Inc. Noodles & Company Quick Service El Pollo Loco Holdings, Inc. Del Taco Restaurants, Inc.
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The Compensation Committee generally reviews, and approves adjustments to, base salaries annually during its meetings in the first quarter with new salaries becoming effective inmid-April. For fiscal 2019,annually. In February 2022, the Compensation Committee reviewed and approved the base salaries shown below (and with respect to Mr. Johnson,for the Company’s senior leadership team, taking into account individual and Company performance among other factors. After considering recommendations from the Chief Executive Officer and the Company’s compensation consultant, Aon, the Compensation Committee recommended salary increases of $40,000 for Ms. Dixon, $17,255 for Mr. Cirulis, $24,000 for Mr. Noyes and $12,240 for Mr. Douglas, and such increases were approved by the independent directors approved). As the named executive officers did not receive any merit, equity or bonus compensationBoard in fiscal year 2018, Ms. Young-love Webb and Mr. Revord were granted merit increases for fiscal year 2019.February 2022.
| Base Salary (Annualized Rate) | ||||||||||||
Named Executive Officer | Fiscal 2019 | Fiscal 2018 | % Change | |||||||||
Alan Johnson | $ | 746,750 | $ | 725,000 | 3 | % | ||||||
Tom Fitzgerald (1) | $ | 425,000 | $ | 425,000 | 0 | % | ||||||
Julie Younglove-Webb | $ | 380,800 | $ | 340,000 | 12 | % | ||||||
Brandon Rhoten (2) | $ | 425,000 | $ | 425,000 | 0 | % | ||||||
Matthew Revord | $ | 403,300 | $ | 370,000 | 9 | % | ||||||
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The Company has established the Support Center Annual Incentive Plan to provide annual cash incentive compensation to executives in its corporate offices (the “Support Center”“Support Center”). The graphic below illustrates the weighting of the metrics and the calculation of the objective component of the Annual Incentive Plan.
This plan sets a threshold, target, stretch and maximum payout level for each of these metrics applicable to all executive officers, and the amounts paid are based on the actual results achieved by the Company. The targets are set for the year by the Compensation Committee based on recommendations from the CEO and the CFOChief
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Financial Officer and are communicated to executives at the beginning of each year. To be eligibleIn 2022, the Compensation Committee determined to (i) increase the maximum payout level to 200% of target rather than 150% of target to reward employees for exceptional levels of performance and achieving challenging performance targets, based on competitive market data and (ii) add an award underadditional stretch level at 150% of target to reward employees when the plan,Company exceeds target performance but does not achieve the named executive officer must receive an annual individualnow more challenging maximum performance appraisal rating of “Contributor” or higher. targets.
The threshold, target, stretch and maximum criteria and actual fiscal year 2019ended December 25, 2022 results for Adjusted EBITDA and Same Store Sales and Adjusted EBITDA are as follows.
| Threshold (80%) | Target (100%) | Maximum (150%) | 2019 Actual Performance | Payout Percentage | Threshold (50%) | Target (100%) | Stretch (125%) | Stretch (150%) | Maximum (200%) | 2022 Actual Performance | Achievement Percentage | Weight | Payout Percentage | |||||||||||||||||||||||||||||||||||||||||||
Adjusted EBITDA | $ | 10.174 | $ | 16.024 | $ | 17.024 | $ | 18.024 | $ | 21.024 | $ | 15.740 | 96 | % | 70 | % | 67 | % | ||||||||||||||||||||||||||||||||||||||
Same Store Sales | 0.8% | 2.4% | 4.9% | -3.0% | 0 | % | 11.4 | % | 16.3 | % | 17.6 | % | 18.8 | % | 21.3 | % | 18.5 | % | 145 | % | 30 | % | 44 | % | ||||||||||||||||||||||||||||||||
Adjusted EBITDA (in millions) | $ | 33.0 | $ | 35.4 | $ | 38.6 | $ | 25.5 | 0 | % | ||||||||||||||||||||||||||||||||||||||||||||||
The chart below sets forth the threshold, target, stretch and maximum percentages of base salary for awards under the Support Center Annual Incentive Plan in 2019,2022 which remain consistent with our 2021 percentages, together with the actual bonus levels to be paid to our NEOs, based on actual Company results.
Named Executive Officer | Threshold | Target | Maximum | Bonus Earned | ||||||||||
| (%) of Target | ($) | |||||||||||||
Alan Johnson | — | 100% of base salary | 200% of base salary | 0% | $0 | |||||||||
Tom Fitzgerald | 48% of base salary | 60% of base salary | 90% of base salary | 0% | $0 | |||||||||
Julie Younglove-Webb | 48% of base salary | 60% of base salary | 90% of base salary | 0% | $0 | |||||||||
Brandon Rhoten | 48% of base salary | 60% of base salary | 90% of base salary | 0% | $0 | |||||||||
Matthew Revord | 48% of base salary | 60% of base salary | 90% of base salary | 0% | $0 | |||||||||
| Threshold | Target | Stretch | Maximum | Bonus Earned | ||||||||||||
Named Executive | (%) of Target | ($) | ||||||||||||||
Robert D. Wright | 60% of base salary | 115% of base salary | — | 200% of base salary | 111 | % | $ | 925,463 | ||||||||
Steven Cirulis | 30% of base salary | 60% of base salary | 75% of base salary | 90% of base salary | 111 | % | $ | 336,219 | ||||||||
Adam Noyes | 30% of base salary | 60% of base salary | 75% of base salary | 90% of base salary | 111 | % | $ | 336,219 | ||||||||
Jeffrey Douglas | 30% of base salary | 60% of base salary | 75% of base salary | 90% of base salary | 111 | % | $ | 211,948 | ||||||||
Adiya Dixon | 30% of base salary | 60% of base salary | 75% of base salary | 90% of base salary | 111 | % | $ | 233,100 | ||||||||
For fiscal year 2019, the Company did not achieve the threshold level for either of the metrics. Accordingly, no annual cash incentive awards were paid to the named executive officers under the Support Center Annual Incentive Plan for fiscal 2019 performance.
Long-term incentive awards are currently granted under our 2019 Long-Term Incentive Plan (the “Plan”), which replaced the Potbelly Corporation Amended and Restated 2013 Incentive Plan (the “Prior Plan”) (provided that outstanding awards under the Prior Plan will continue to be subject to the terms of the Prior Plan).LTIP. The Plan2019 LTIP is administered by the Compensation Committee. We have adopted amendments to the Plan, subject to approval by our shareholders. A description of the amendments to the Plan is included in Proposal 4.
Equity awards represent an important component of our named executive officer compensation. Beginning with grants in 2019, theThe equity mix for executive officers changed from 50% stock options and 50% restricted stock units tois 50% performance stock units and 50% restricted stock units. The change from stock options to performance stock units served to further align the interests of our shareholders and our executive officers by increasing the proprietary interest of our executive officers in the Company’s growth and success; advance the Company’s interests by attracting and retaining qualified employees over time; and motivate our executives to act in the long-term best interests of our shareholders. To be eligible for an award, the named executive officer must receive an annual individual performance appraisal rating of “Contributor” or higher the previous year. All of our named executive officers, other than Mr. Fitzgerald, who joined the Company in December 2018, were eligible to receive an award in 2019. The graphic below illustrates the weighting of the metrics and the calculation of the long-term incentive award.
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Performance Stock Units
Annual performance stock units were granted to our named executive officers on March 15, 2019April 1, 2022. The number of Target PSUs that shall become earned and vested pursuant to this award will be determined and shall be based on (i) the Prior Plan.Base Price as compared to the Target Stock Price as of April 1, 2025 or (ii) the relative Total Shareholder Return (TSR) metric vs. the Russell 3000 Travel & Leisure Index (T&L Index). The performance period is from April 1, 2022 to April 1, 2025. If either of the performance criteria are satisfied, the award will vest based on the percentages indicated in the chart below. The vesting date for these performance stock units have3-year cliff vesting and the earning of the grants is based on achievement of adjusted EBITDA and same store sales goals over the three-year performance period. These two metrics were chosen based on (1) the criteria that the awards would be aligned to the Company’s long-term strategy and (2) a comparison with the compensation metrics used by the Company’s peer group and the broader industry. The specific targets are designated at the beginning of the performance period by the Compensation Committee. To reflect performance above or below target, the value of the grants is determined by a sliding scale that provides for payouts greater than target (up to a maximum 200% payout) or less than target (down to a 50% payout for threshold performance, below which the payout would be 0%).April 1, 2025. The table below outlines the threshold, target and maximum valuesshare price achievement levels for the performance period from December 31, 2018 to December 26, 2021.period.
| Threshold (50%) | Target (100%) | Maximum (200%) | ||||||||||
Same Store Sales –3-year average | +1.2% | +2.4% | +3.0% | |||||||||
Adjusted EBITDA(1) (in millions) – 3 years cumulative | $ | 110.0 | $ | 117.5 | $ | 122.0 | ||||||
| Threshold Grant Value (50%) | Target Grant Value (100%) | Target Grant Value (150%) | Max Grant Value (200%) | |||||||||||||
Target Stock Price Per Share | $ | 6.70 | $ | 8.37 | $ | 9.77 | $ | 13.95 | ||||||||
Relative TSR Percentile Performance vs. T&L Index | >40th Percentile | >66th Percentile | >78th Percentile | >90th Percentile | ||||||||||||
The number of performance stock units granted to our named executive officers in 2022 are reflected in the “Grants of Plan-Based Awards” table on page 44.
Restricted Stock Units
Annual restricted stock units were granted to our named executive officers on March 15, 2019 pursuant to the Prior Plan.April 1, 2022. The restricted stock units vest overin three years,equal annual installments, beginning on the first anniversary of the grant datedate.
The number of restricted stock units granted to our named executive officers in 2022 are reflected in the “Grants of Plan-Based Awards in 2022” table on page 44.
Other Plans
Our named executive officersNEOs are eligible to participate in our 401(k) plan. The Company matches 50% of the contributions that our employees, including our named executive officers,NEOs, make to the 401(k) plan, with a maximum matching contribution of $3,000 per year.
The Company established in fiscal 2014 anon-qualified deferred compensation plan which allows highly compensated employees to defer a portion of their base salary and variable compensation each plan year. The Company matches 50% of the contributions that our highly-compensated employees, including our named executive officers,NEOs, make to the deferred compensation plan, with a maximum matching contribution of $3,000 per year. If an employee participates in both the 401(k) plan and thenon-qualified deferred compensation plan, the total maximum matching contribution is $3,000 per year.
Executive Stock Ownership Guidelines
Our stock ownership guidelines were established for executive officers to encourage them to have a long-term equity stake in the Company and to align their interests with shareholders. The Board expects that all executive officers own, or acquire within the later of (i) August of 2022, and (ii) five years of first becoming an executive officer, shares of Potbelly common stock (including restricted shares, but not options, under Potbelly’s equity-linked incentive plans) having a market value of a multiple of such executive officer’s annual base salary. For the Chief Executive Officer, the multiple is four (4) times annual base salary and for all other executive officers the multiple shall be one andone-half (1.5) times annual base salary.
Under the Company’s Anti-Hedging Policy, our directors, officers and employees are prohibited from engaging in any kind of hedging transaction that could reduce or limit such person’s holdings, ownership or interest in or to any securities of the Company, including without limitation outstanding stock options, deferred share units, restricted share units, or other compensation awards the value of which are derived from, referenced to or based on the value or market price of securities of the Company. Prohibited transactions include the purchase by a director, officer or employee of financial instruments, including, without limitation, prepaid variable forward contracts, instruments for short sale or purchase or sale of call or put options, equity swaps, collars, or units of exchangeable funds, that are designed to or that may reasonably be expected to have the effect of hedging or offsetting a decrease in the market value of any securities of the Company.
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Clawbacks and Forfeiture Provisions
On October 2019, the Company adopted an executive compensation recoupment policy that provides for the potential recoupment of any incentive-based award paid to all current and former executive officers. In the event that the Company is required to restate its financial results due to material noncompliance with any financial reporting requirement as a result of any gross negligence, intentional misconduct, theft, embezzlement, fraud or other serious misconduct by an executive officer, the result of which is that any performance-based compensation received by such executive officer during the three-year period preceding the publication of the restated financial statement would have been lower had it been calculated based on such restated results, the Compensation Committee may seek to recover the excess of the incentive compensation paid to the executive based on the erroneous data.
The following is a summary of the employment agreements and similar agreements the Company has entered into with eachcertain of the named executive officers.
Chief Executive OfficerCEO Employment Agreement.Mr. JohnsonAgreement
The Company entered into an employment agreement with Mr. Wright (the “Wright Agreement”) with a term commencing on July 20, 2020 and ending on July 20, 2023 (unless terminated earlier in accordance with its terms). Under the Company effective as of November 29, 2017 and as amended effective May 14, 2018 (collectively, the “JohnsonWright Agreement,”) pursuant to which he will serve as our President and Chief Executive Officer. The Johnson Agreement provides for a Mr. Wright was paid an initial base salary of $725,000, subject$1.00 for the period commencing on July 20, 2020 through June 30, 2021, which increased to increase from time to time in the discretion of the Board. For the 2019 calendar year, Mr. Johnson’san annual base salary of $650,000. Mr. Wright received a cash sign-on bonus of $400,000 on July 1, 2021. The Wright Agreement also provided, among other things, that: (i) Mr. Wright was $746,750. The Johnson Agreement provides
that beginning with the 2018eligible to receive an annual cash incentive for each calendar year Mr. Johnson is eligible for an annual bonus amount to be determined by the Compensation Committee. For the 2019 calendar year, Mr. Johnson was eligible for an annual target bonus of 100% of base salary, with a maximum bonus of 200% of base salary, subject to satisfaction of applicable Company and individual performance targets. The Johnson Agreement also provides for the reimbursement of relocation expenses actually incurred, including transportation expenses, temporary housing, moving household goods, real estate commissions and closing costs incurred with the sale of his current residence and with the purchase of a residence in the Chicago area.
The Johnson Agreement contemplates that Mr. Johnson may be granted equity awards under the Company’s equity incentive plan beginning with calendar year 20192021, based on satisfaction of performance conditions as determined in the sole discretion of the Board of Directors of (A) sixty percent (60%) of his base salary at the threshold level of performance, (B) one hundred and fifteen percent (115%) of his base salary at the target level of performance, and (C) two hundred percent (200%) of his base salary at the maximum level of performance. Mr. Wright is also eligible to participate in all customary employee benefit plans or programs of the Company generally made available to the Company’s senior executive officers, and the Company will reimburse all reasonable business expenses incurred by Mr. Wright in performing services to the Company.
On November 2, 2022, the Company and Mr. Wright entered into an amendment to the Wright Agreement (the “Amended Wright Agreement”) which, among other things, (i) extended Mr. Wright’s term of employment to December 31, 2025, (ii) increased Mr. Wright’s base salary to $725,000 effective on January 1, 2023, (iii) provides that Mr. Wright is eligible to receive an annual bonus in an amount equal to 50%, 115% or 200% of Mr. Wright’s annual base salary based on satisfaction of performance conditions as determined in the sole discretion of the Board of Directors, (iv) provides that Mr. Wright is eligible to receive an annual grant of restricted stock units with a target awardvalue equal to $500,000, which will vest in monthly installments over three years, (v) provides that Mr. Wright is eligible to receive an annual grant of performance stock units with a value of $1,000,000,$500,000, which shall vest pursuant to the 2019 LTIP, (vi) provides that Mr. Wright is eligible to receive an annual grant of price performance stock unit awards with a value equal to $500,000, which will vest in three installments if the actual value45-day volume weighted average price of a share of common stock of the equity award for any year determined byCompany exceeds (a) $8.00, (b) $10.00 and (c) $12.00. Under the Compensation CommitteeAmended Wright Agreement, in its sole discretion.
The Johnson Agreement terminates upon death, disability, termination by us with orthe event Mr. Wright’s employment is terminated (a) prior to December 31, 2025 without cause or resignationtermination by Mr. JohnsonWright for good reason, any unvested portion of price performance stock units will remain eligible to vest for 90 days following the termination date or (b) after December 31, 2025 for any reason other than cause, death or disability and Mr. Wright assists the Board with or without good reason. The Johnsonthe transition of his position, all outstanding performance stock units and price performance stock units will continue to vest subject to the terms of the awards. In the event of a change of control, the Amended Wright Agreement generally defines “cause” as Mr. Johnson’s (i) willful and continued failure to substantially perform his dutiesprovides for the Company (other than duevesting of all unvested restricted stock units and all or some portion of the performance stock units and price performance stock units.
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Mr. Wright is also entitled to receive severance upon his disability); (ii) willful engagementagreement to a general release of claims in conduct which is demonstrably and materially injurious tofavor of the Company monetarily or otherwise; (iii) engaging in egregious misconduct involving serious moral turpitude to the extent that, in the reasonable judgment of the Board, Mr. Johnson’s credibility and reputation no longer confirm to the standard of the Company’s executives; (iv) indictment for the commission of a crime that constitutes a felony; or (v) a breach of his confidentiality,non-competition,non-interference and intellectual property agreement. The Johnson Agreement generally defines “good reason” as (1) assignment of duties that are materially inconsistent with his position and that result in a substantial diminution of the duties applicable to the position; (2) material reduction in base salary; (3) relocation to a place more than 50 miles from Chicago; or (4) material breach of the agreement by us.
Mr. Johnson is also a party to a confidentiality, noncompetition, noninterference and intellectual property agreement, with the noncompetition and noninterference covenants lasting for one year afterfollowing termination of employment. For information regarding the severance benefitsemployment as described in more detail below under the Johnson Agreement as well as the treatment of Mr. Johnson’s outstanding equity awards upon a qualifying termination or a corporate transaction/change in control, see “Potential Payments Upon Termination of Employment or a Corporate Transaction/Change in Control – Alan JohnsonControl.”
Other Current NEO Employment Agreement,” on page 57 of this Proxy Statement.Agreements
Named Executive OfficerCirulis Employment Agreements.Mr. Fitzgerald (our former Senior Vice President and Chief Financial Officer)Agreement. On April 6, 2020, the Company entered into an employment agreement with Mr. Cirulis (the “Cirulis Agreement”). Under the Cirulis Agreement, Mr. Cirulis will be paid an annual base salary and also provides, among other things, that: (i) Mr. Cirulis is eligible to receive an annual cash incentive at a target rate of 60% of his base salary based on the attainment of mutually agreed upon performance goals; (ii) Mr. Cirulis is eligible for annual equity grants as determined by the Compensation Committee; (iii) the Company effective asshall reimburse all reasonable business expenses incurred by Mr. Cirulis in performing services to the Company; and (iv) Mr. Cirulis will be entitled to severance and change of December 3, 2018.control benefits under certain circumstances following termination of employment. Mr. Rhoten serves as our Senior Vice President and Chief Marketing Officer pursuantCirulis will also be eligible to an employment agreement withparticipate in all customary employee benefit plans or programs of the Company effective as of June 4, 2018. Ms. Younglove-Webbgenerally made available to the Company’s senior executive officers. In January 2023, the Committee approved an increase to Mr. Cirulis’ annual cash incentive target rate from 60% to 65%.
Noyes Employment Agreement. On August 28, 2020, the Company entered into an employment agreement with Mr. Noyes (the “Noyes Agreement”). Under the Company effective as of May 1, 2015. Her employment agreement designates Ms. Younglove-Webb as our Senior Vice President, Operations, however she has since been promoted to Senior Vice President and Chief Restaurant Operations Officer.Noyes Agreement, Mr. Revord entered into a new employment agreement effective as of July 25, 2013, and amended effective April 22, 2015, designating him as our Senior Vice President, General Counsel and Secretary. Mr. Revord has since taken on additional responsibilities and currently serves as our Senior Vice President, Chief Legal Officer, Chief People Officer and Secretary.
Each NEO’s employment agreement provides for aNoyes will be paid an annual base salary subjectand also provides, among other things, that: (i) Mr. Noyes is eligible to increase from time to timereceive an annual cash incentive at a target rate of 60% of his base salary based on the attainment of mutually agreed upon performance goals; (ii) beginning in calendar year 2021, Mr. Noyes is eligible for annual equity grants as determined by the Compensation Committee; (iii) the Company shall reimburse all reasonable business expenses incurred by Mr. Noyes in performing services to the Company; and (iv) Mr. Noyes will be entitled to severance and change of control benefits under certain circumstances following termination of employment. Mr. Noyes 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. In January 2023, the Committee atapproved an increase to Mr. Noyes’ annual cash incentive target rate from 60% to 65%.
Douglas Employment Agreement. On September 3, 2019, the recommendation of our President and Chief Executive Officer.Company entered into an employment agreement with Mr. Douglas (the “Douglas Agreement”). Under the employment agreements,Douglas Agreement, Mr. Douglas will be paid an annual base salary and also provides, among other things, that: (i) Mr. Douglas is eligible to receive an annual cash incentive at a target rate of 60% of his base salary based on the NEOs are eachattainment of mutually agreed upon performance goals; (ii) Mr. Douglas is eligible for an annual bonus in accordance with incentive plan metrics recommended by the CEO and CFO and approvedequity grants as determined by the Compensation Committee. TheCommittee; (iii) the Company shall reimburse all reasonable business expenses incurred by Mr. Douglas in performing services to the Company; and (iv) Mr. Douglas will be entitled to severance and change of control benefits under certain circumstances following termination of employment. Mr. Douglas 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.
Dixon Employment Agreement. On November 11, 2020, the Company entered into an employment agreements also provide the executives with standard benefits and perquisites. The employment agreements contemplate that the executives may be granted equity awards under our equity incentive plans.
Our NEOs each continue to be parties to a confidentiality, noncompetition, noninterference and intellectual property agreement with Ms. Dixon (the “Dixon Agreement”). Under the noncompetitionDixon Agreement, Ms. Dixon will be paid an annual base salary and noninterference covenants lasting for onealso provides, among other things, that: (i) beginning in calendar year after termination of employment.
Executive Officer Retention Awards.On July 17, 2017, the Compensation Committee authorized the Company to enter into retention agreements with each of2021, Ms. Younglove-Webb and Mr. Revord. Subject to the restrictions set forth in the retention agreements, each of Ms. Younglove-Webb and Mr. Revord wereDixon is eligible to receive an annual cash incentive at a cash retention awardtarget rate of 60% of her base salary based on the attainment of mutually agreed upon performance goals; (ii) beginning in an amount equalcalendar year 2021, Ms. Dixon was eligible for annual equity grants as determined by the Compensation Committee; and (iii) Ms. Dixon will be entitled to $382,500,severance and $416,250, respectively,change of control benefits under certain circumstances following termination of employment. Also beginning in the event hecalendar year 2021, Ms. Dixon was eligible to participate in all customary employee benefit plans or she remained continuously employed withprograms of the Company through December 31, 2018. The retention awards were payable only ifgenerally made available to the Company’s senior executive (1) remained employed in good standing through the retention date, or was terminated by the Company other than for cause (as defined in the Retention Agreements); and (2) delivered a valid and irrevocable release and waiver in the form provided by the Company. The retention payments were payable in one lump sum payment sixty days following the earlier of (i) the executive’s termination date (as defined in the Retention Agreement) or (ii) December 31, 2018. Ms. Younglove-Webb and Mr. Revord earned, and were paid, their respective retention awards in fiscal year 2019.officers.
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The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included in this Proxy Statement with management. Based on such review, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement for filing with the SEC.
Susan Chapman-Hughes,Chairman
Marla GottschalkDavid Near, Chairperson
David Head
Ben RosenzweigJill Sutton
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EXECUTIVE COMPENSATION
2019 Summary Compensation Table
The following table summarizes compensation for the years endingended December 29, 2019,25, 2022, December 30, 201826, 2021, and December 31, 201727, 2020 earned by our named executive officers.officers which for the year ended December 25, 2022 includes (i) our principal executive officer, (ii) our principal financial officer and (iii) our next three most highly compensated executive officers who were serving as executive officers as of December 25, 2022.
Name and Principal Position | Year | Salary | Bonus (1) | Stock Awards (2) | Option Awards | Non-Equity Incentive Plan Compensation | All Other Compensation (3) | Total | ||||||||||||||||||||||||
Alan Johnson (4) | 2019 | $ | 746,750 | $ | — | $ | 1,250,000 | $ | — | $ | — | $ | 18,519 | $ | 2,015,269 | |||||||||||||||||
Chief Executive Officer (Principal Executive Officer) | 2018 | $ | 725,000 | $ | 543,750 | $ | 0 | $ | — | $ | — | $ | 399,114 | $ | 1,667,854 | |||||||||||||||||
| 2017 | $ | 36,250 | $ | — | $ | 1,000,000 | $ | 1,000,000 | $ | — | $ | — | $ | 2,036,250 | ||||||||||||||||||
Thomas Fitzgerald (5) Former Chief Financial | 2019 | $ | 444,615 | $ | — | $ | — | $ | — | $ | — | $ | 4,828 | $ | 449,443 | |||||||||||||||||
| 2018 | $ | 16,346 | $ | — | $ | 350,000 | $ | 350,000 | $ | — | $ | — | $ | 716,346 | ||||||||||||||||||
Julie Younglove-Webb | 2019 | $ | 380,800 | $ | 382,500 | $ | 782,000 | $ | — | $ | — | $ | 1,318 | $ | 1,546,618 | |||||||||||||||||
Chief Restaurant Operations | 2018 | $ | 340,000 | $ | 51,000 | $ | — | $ | — | $ | — | $ | — | $ | 391,000 | |||||||||||||||||
Officer | 2017 | $ | 335,961 | $ | — | $ | 195,000 | $ | 195,000 | $ | — | $ | — | $ | 725,961 | |||||||||||||||||
Brandon Rhoten (6) | 2019 | $ | 425,000 | $ | — | $ | 281,972 | $ | — | $ | — | $ | 217 | $ | 707,189 | |||||||||||||||||
Chief Marketing Officer | 2018 | $ | 228,846 | $ | 36,678 | $ | 250,000 | $ | 250,000 | $ | — | $ | 21,125 | $ | 786,649 | |||||||||||||||||
Matthew Revord | 2019 | $ | 403,300 | $ | 416,250 | $ | 481,000 | $ | — | $ | — | $ | 3,000 | $ | 1,303,550 | |||||||||||||||||
Chief Legal Officer, Chief | 2018 | $ | 370,000 | $ | 205,500 | $ | — | $ | — | $ | — | $ | — | $ | 575,500 | |||||||||||||||||
People Officer | 2017 | $ | 367,442 | $ | — | $ | 150,000 | $ | 150,000 | $ | — | $ | — | $ | 667,442 | |||||||||||||||||
Name and Principal Position | Year | Salary (5) | Bonus (6) | Stock Awards (7) | Option Awards | Non-Equity Incentive Plan Compensation (8) | All Other Compensation (9) | Total | ||||||||||||||||||||||||
Robert D. Wright President and Chief Executive | | 2022 2021 | | $ $ $ | 680,000 324,815 1 | | $ $ $ | — 400,000 — | | $ $ $ | — — 2,206,000 | | $ $ $ | — — — | | $ $ $ | 925,463 837,000 — | | $ $ $ | — 107,842 7,325 | | $ $ $ | 1,605,463 1,669,657 2,213,326 | | ||||||||
Steven Cirulis Senior Vice President, Chief Financial Officer and Chief Strategy Officer (2) | | 2022 2021 | | $ $ $ | 448,630 444,002 293,618 | | $ $ $ | — — 100,000 | | $ $ $ | 399,996 504,000 693,301 | | $ $ $ | — — — | | $ $ $ | 310,356 289,884 — | | $ $ $ | — 27,500 2,517 | | $ $ $ | 1,158,982 1,265,386 1,089,436 | | ||||||||
Adam Noyes Senior Vice President and Chief Operating Officer (3) | | 2022 2021 | | $ $ $ | 424,000 348,942 107,500 | | $ $ $ | — 100,000 — | | $ $ $ | 499,997 449,998 324,998 | | $ $ $ | — — — | | $ $ $ | 310,356 268,800 — | | $ $ $ | — 13,656 3,467 | | $ $ $ | 1,234,353 1,081,396 535,965 | | ||||||||
Jeffrey Douglas Senior Vice President and Chief Information Officer | | 2022 2021 | | $ $ $ | 318,240 318,029 298,125 | | $ $ $ | — — — | | $ $ $ | 249,995 249,996 209,999 | | $ $ $ | — — — | | $ $ $ | 211,948 205,632 — | | $ $ $ | — 11,121 6,052 | | $ $ $ | 780,183 784,778 514,176 | | ||||||||
Adiya Dixon Chief Legal Officer, Chief Compliance Officer and Secretary (4) | | 2022 2021 | | $ $ $ | 315,000 275,000 31,761 | | $ $ $ | — — — | | $ $ $ | 299,995 300,000 — | | $ $ $ | — — — | | $ $ $ | 233,100 184,800 — | | $ $ $ | — 1,344 108 | | $ $ $ | 848,095 761,144 31,869 | | ||||||||
| (1) |
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| (2) | Mr. Cirulis joined the Company as Senior Vice President, Chief Financial Officer and Chief Strategy Officer in April 2020. |
| (3) | Mr. Noyes joined the Company as Senior Vice President and Chief Operations Officer in August 2020. |
| (4) | Ms. Dixon joined the Company as Chief Legal Officer and Secretary of the Company in December 2020. |
| (5) | Reflects a 25% temporary salary reduction to mitigate some of the impact from COVID-19, which reduction ceased on August 10, 2020. The Company repaid 50% of the reduction in base salary in 2020 and repaid the remaining 50% of the reduction in February 2021. Reflects Mr. Wright’s initial base salary of $1. Pursuant to his employment agreement, Mr. Wright’s base salary increased to $650,000 in July 2021. |
| (6) | For 2021, represents a sign-on bonus of $400,000 received by Mr. Wright pursuant to his employment agreement. For 2020, represents sign-on bonuses of $100,000 received by each of Mr. Cirulis and Mr. Noyes upon joining the Company. |
| (7) | Represents the aggregate grant date fair value calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation – Stock Compensation (“FASB ASC Topic |
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Grants of Plan-Based Awards in 20192022
The following table sets forth information regarding fiscal 2019year ended December 25, 2022 annual incentive bonus awards and equity awards granted to our NEOs for the fiscal 2019year ended December 25, 2022 performance.
| All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options | Exercise or Base Price of Option Awards ($/SH) | Grant Date Fair Value of Stock and Option Awards ($) | |||||||||||||||||||||||||||||||||||||||||||
Estimated Future Payouts UnderNon-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards(1) | |||||||||||||||||||||||||||||||||||||||||||||
Name | Award | Grant Date) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||||||||
Alan Johnson | AIP(2) | — | — | $ | 746,750 | $ | 1,483,500 | |||||||||||||||||||||||||||||||||||||||
| RSUs(3) | 3/15/2019 | 59,102 | 500,000 | |||||||||||||||||||||||||||||||||||||||||||
| PSUs(4) | 3/15/2019 | 44,326 | 88,652 | 177,304 | 750,000 | |||||||||||||||||||||||||||||||||||||||||
Thomas Fitzgerald | AIP(2) | — | $ | 204,000 | $ | 255,000 | $ | 400,154 | ||||||||||||||||||||||||||||||||||||||
Julie Younglove-Webb | AIP(2) | — | $ | 182,784 | $ | 228,480 | $ | 382,500 | ||||||||||||||||||||||||||||||||||||||
| RSUs(3) | 3/15/2019 | 46,217 | 391,000 | |||||||||||||||||||||||||||||||||||||||||||
| PSUs(4) | 3/15/2019 | 23,109 | 46,217 | 92,434 | 391,000 | |||||||||||||||||||||||||||||||||||||||||
Brandon Rhoten | AIP(2) | — | $ | 204,000 | $ | 255,000 | $ | 382,500 | ||||||||||||||||||||||||||||||||||||||
| RSUs(3) | 3/15/2019 | 16,665 | 140,986 | |||||||||||||||||||||||||||||||||||||||||||
| PSUs(4) | 3/15/2019 | 8,333 | 16,665 | 33,330 | 140,986 | |||||||||||||||||||||||||||||||||||||||||
Matthew Revord | AIP(2) | — | $ | 193,584 | $ | 241,980 | $ | 362,970 | ||||||||||||||||||||||||||||||||||||||
| RSUs(3) | 3/15/2019 | 28,428 | 240,500 | |||||||||||||||||||||||||||||||||||||||||||
| PSUs(4) | 3/15/2019 | 14,214 | 28,428 | 56,856 | 240,500 | |||||||||||||||||||||||||||||||||||||||||
Name | Award | Grant Date | Estimated Future Payouts Under Equity Incentive Plan Awards(1)(2) | All Other Stock Awards: Number of Shares of Stock or Units (#)(1)(3) | Grant Date Fair Value of Stock and Option Awards ($) | |||||||||||||||||||||||
| Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||
Robert D. Wright | — | — | — | — | — | — | — | |||||||||||||||||||||
Steven Cirulis | RSU | 4/01/2022 | — | — | — | 30,488 | $ | 200,001 | ||||||||||||||||||||
| PSU | 4/01/2022 | 7,622 | 15,242 | 30,487 | — | $ | 199,995 | |||||||||||||||||||||
Adam Noyes | PSU | 4/01/2022 | 7,622 | 15,242 | 30,487 | — | $ | 199,995 | ||||||||||||||||||||
| | RSU RSU |
| | 4/01/2022 4/01/2022 |
| | — — |
| | — — |
| | — — |
| | 30,488 15,244 |
| $ $ | 200,001 100,001 |
| ||||||||
Jeffrey Douglas | RSU | 4/01/2022 | — | — | — | 19,055 | $ | 125,001 | ||||||||||||||||||||
| PSU | 4/01/2022 | 4,764 | 9,527 | 19,054 | — | $ | 124,994 | |||||||||||||||||||||
Adiya Dixon | RSU | 4/01/2022 | — | — | — | 22,866 | $ | 150,001 | ||||||||||||||||||||
| PSU | 4/01/2022 | 5,716 | 11,433 | 22,865 | — | $ | 149,994 | |||||||||||||||||||||
| (1) | All equity awards are denominated in shares of common stock and were granted under the Potbelly Corporation Amended and Restated |
| (2) |
|
|
Reflects performance stock units, |
| (3) | Reflects restricted stock units that represent a right to receive one share of common stock for each restricted stock unit. The restricted stock units vest in three equal installments beginning on the first anniversary of the grant date. |
Outstanding Equity Awards at FiscalYear-End
The following table summarizes outstanding stock options and stock awards for each named executive officer as of December 31, 2019.25, 2022.
| Options Awards | Stock Awards | |||||||||||||||||||||||||||
| Number of Securities Underlying Unexercised Options (#) | Number of Units of Stock That Have Not Vested | Market Value of Units of Stock That Have Not Vested (2) | ||||||||||||||||||||||||||
Named Executive Officer | Exercisable | Unexercisable (1) | Option Exercise Price Per Share | Option Expiration Date | ||||||||||||||||||||||||
Alan Johnson | 100,200 | 100,201 | $ | 14.08 | 11/29/2027 | 26,041 | (3) | $ | 110,414 | |||||||||||||||||||
| 59,102 | (4) | $ | 250,592 | |||||||||||||||||||||||||
| 88,652 | (5) | $ | 375,884 | |||||||||||||||||||||||||
Tom Fitzgerald | 23,339 | 0 | $ | 9.37 | 12/3/2028 | |||||||||||||||||||||||
Brandon Rhoten | 11,878 | 35,635 | $ | 13.05 | 6/4/2028 | 12,771 | (3) | $ | 54,149 | |||||||||||||||||||
| 16,665 | (4) | $ | 70,660 | |||||||||||||||||||||||||
| 16,665 | (5) | $ | 70,660 | |||||||||||||||||||||||||
Julie Younglove-Webb | 3,709 | 0 | $ | 7.00 | 7/1/2020 | 5,882 | (3) | $ | 24,940 | |||||||||||||||||||
| 10,000 | 0 | $ | 7.22 | 5/10/2021 | 46,217 | (4) | $ | 195,960 | ||||||||||||||||||||
| 20,000 | 0 | $ | 8.16 | 3/5/2022 | 46,217 | (5) | $ | 195,960 | ||||||||||||||||||||
| 20,000 | 0 | $ | 9.47 | 3/5/2023 | ||||||||||||||||||||||||
| 25,000 | 0 | $ | 14.00 | 10/4/2023 | ||||||||||||||||||||||||
| 7,185 | 0 | $ | 20.53 | 3/6/2024 | ||||||||||||||||||||||||
| 95,000 | 0 | $ | 14.22 | 5/8/2025 | ||||||||||||||||||||||||
| 21,108 | 7,037 | $ | 13.73 | 3/4/2026 | ||||||||||||||||||||||||
| 22,169 | 22,170 | $ | 11.05 | 5/11/2027 | ||||||||||||||||||||||||
Matthew Revord | 7,000 | 0 | $ | 7.00 | 7/1/2020 | 4,525 | (3) | $ | 19,186 | |||||||||||||||||||
| 49,427 | 0 | $ | 7.22 | 5/10/2021 | 28,428 | (4) | $ | 120,535 | ||||||||||||||||||||
| 75,000 | 0 | $ | 14.00 | 10/4/2023 | 28,428 | (5) | $ | 120,535 | ||||||||||||||||||||
| 14,369 | 0 | $ | 20.53 | 3/6/2024 | ||||||||||||||||||||||||
| 75,000 | 0 | $ | 12.98 | 3/5/2025 | ||||||||||||||||||||||||
| 18,998 | 6,333 | $ | 13.73 | 3/4/2026 | ||||||||||||||||||||||||
| 17,053 | 17,054 | $ | 11.05 | 5/11/2027 | ||||||||||||||||||||||||
| Stock Awards | ||||||||||
Named Executive Officer | Number of Units of Stock That Have Not Vested | Value of Units of Stock That Have Not Vested (1) | ||||||||
Robert D. Wright | 43,750(2) | $ | 244,563 | |||||||
Steven Cirulis | 10,000(3) | $ | 55,900 | |||||||
| 38,461(9) | $ | 214,997 | ||||||||
| 10,000(4) | $ | 55,900 | ||||||||
| 20,000(5) | $ | 111,800 | ||||||||
| 16,806(6) | $ | 93,946 | ||||||||
| 25,210(8) | $ | 140,924 | ||||||||
| 30,487(10) | $ | 170,422 | ||||||||
| 30,488(11) | $ | 170,428 | ||||||||
Adam Noyes | 26,358(7) | $ | 147,341 | |||||||
| 25,210(6) | $ | 140,924 | ||||||||
| 37,815(8) | $ | 211,386 | ||||||||
| 30,487(10) | $ | 170,422 | ||||||||
| 30,488(11) | $ | 170,428 | ||||||||
| 15,244(11) | $ | 85,214 | ||||||||
Jeffrey Douglas | 15,837(9) | $ | 88,529 | |||||||
| 14,005(6) | $ | 78,288 | ||||||||
| 21,008(8) | $ | 117,435 | ||||||||
| 19,054(10) | $ | 106,512 | ||||||||
| 19,055(11) | $ | 106,517 | ||||||||
Adiya Dixon | 16,806(6) | $ | 93,946 | |||||||
| 25,210(8) | $ | 140,924 | ||||||||
| (1) |
|
| ||||||||
| ||||||||
| ||||||||
| ||||||||
| ||||||||
|
Represents restricted stock unit awards |
| (3) | Represents restricted stock unit awards that vest on April 6, 2023. |
| (4) | Represents restricted stock unit awards that vest on October 6, 2023. |
| (5) | Represents restricted stock unit awards that vest in equal installments on April 6, 2023 and April 6, 2024. |
| (6) | Represents restricted stock unit awards that vest in equal installments on April 26, 2023 and April 26, 2024. |
| (7) | Represents restricted stock unit awards that vest on August 28, 2023. |
| (8) | Represents performance stock unit awards that vest, if at all, on April 26, 2024 based on the achievement of certain performance metrics. |
| (9) | Represents restricted stock unit awards that vest on June 24, 2023. |
| (10) | Represents performance stock unit awards that vest, if at all, on April 1, 2025 based on the achievement of certain performance metrics. |
| (11) | Represents restricted stock unit awards that vest in three equal installments on |
|
|
45
Option Exercises and Stock Vested
The following table provides information regarding stock options that were exercised by our named executive officers and stock awards that vested during the fiscal 2019. Option award value realized is calculated by subtracting the aggregate exercise price of the options exercised from the aggregate market value of the shares of common stock acquired on the date of exercise.year ended December 25, 2022. Stock award value realized is calculated by multiplying the number of shares shown in the table by the closing price of our stock on the date the stock awards vested.
| Option Awards | Stock Awards | |||||||||||||||||||
Name | Grant Date | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) (1) | Number of Shares Acquired on Vesting (#) (2) | Value Realized on Vesting ($) | |||||||||||||||
Alan Johnson | 11/29/2017 | 26,042 | 131,773 | |||||||||||||||||
Tom Fitzgerald | 12/3/2018 | 12,451 | 57,773 | |||||||||||||||||
Julie Younglove-Webb | 5/11/2017 | 5,882 | 50,115 | |||||||||||||||||
Brandon Rhoten | 6/4/2018 | 6,386 | 31,738 | |||||||||||||||||
Matthew Revord | 1/22/2009 | 12,200 | 2,196 | |||||||||||||||||
| 7/29/2013 | 6,000 | 1,080 | ||||||||||||||||||
| 5/11/2017 | 4,525 | 38,553 | ||||||||||||||||||
| Stock Awards | ||||||||||||
Name | Grant Date | Number of Shares Acquired on Vesting (#) (1) | Value Realized on Vesting ($) | |||||||||
Robert D. Wright | 08/10/2020 | 6,250 | $ | 35,313 | ||||||||
| 08/10/2020 | 6,250 | $ | 34,625 | |||||||||
| 08/10/2020 | 6,250 | $ | 38,563 | |||||||||
| 08/10/2020 | 6,250 | $ | 41,094 | |||||||||
| 08/10/2020 | 6,250 | $ | 33,250 | |||||||||
| 08/10/2020 | 6,250 | $ | 32,438 | |||||||||
| 08/10/2020 | 6,250 | $ | 32,438 | |||||||||
| 08/10/2020 | 6,250 | $ | 38,938 | |||||||||
| 08/10/2020 | 6,250 | $ | 30,750 | |||||||||
| 08/10/2020 | 6,250 | $ | 30,625 | |||||||||
| 08/10/2020 | 6,250 | $ | 35,563 | |||||||||
| 08/10/2020 | 6,250 | $ | 33,688 | |||||||||
Steven Cirulis | 05/18/2020 | 10,000 | $ | 66,700 | ||||||||
| 05/20/2021 | 10,000 | $ | 66,700 | |||||||||
| 04/26/2021 | 8,404 | $ | 54,710 | |||||||||
| 06/24/2020 | 38,462 | $ | 197,695 | |||||||||
| 11/20/2020 | 10,000 | $ | 46,400 | |||||||||
Adam Noyes | 04/26/2021 | 12,605 | $ | 82,059 | ||||||||
| 08/28/2020 | 26,358 | $ | 158,148 | |||||||||
Jeffrey Douglas | 04/26/2021 | 7,003 | $ | 45,590 | ||||||||
| 06/24/2020 | 15,837 | $ | 81,402 | |||||||||
| 11/08/2019 | 23,664 | $ | 107,198 | |||||||||
Adiya Dixon | 04/26/2021 | 8,404 | $ | 54,710 | ||||||||
| (1) |
|
The value realized on vesting is calculated by multiplying the number of shares of our common stock that vested by the fair market value of a share of our common stock on the vesting date. The fair market value of a share of our common stock is based on the closing price of a share of our common stock on the vesting date as reported on NASDAQ. |
Nonqualified Deferred Compensation
The Company established in fiscal 2014 anon-qualified deferred compensation plan which allows highly compensated employees to defer up to 80% of their salary and up to 100% of their bonus each plan year. The Company matches 50% of the contributions that our highly-compensated employees, including our named executive officers, make to the deferred compensation plan, with a maximum matching contribution of $3,000 per year. If an employee participates in both the 401(k) plan and thenon-qualified deferred compensation plan, the total maximum matching contribution is $3,000 per year. Our matching contribution vests over six years starting on the first day of the participant’s service with the Company, such that an eligible employee with six years of service will be 100% vested in our matching contributions. Our matching contribution also fully vests upon the participant’s retirement at 65 or older, death, disability or a change of control. If the participant separates from the Company prior to his or her seniority date (the earlier the participant attains 62 years of age or 10 years of
46
service from date of hire) or upon a change of control or death, the distribution payment will be made as a lump sum to the participant’s account. If the participant separates from the Company after his or her seniority date, or upon disability, the participant may elect to receive the distribution as a lump sum payment or in up to five annual installments. The Company matching contribution was suspended in March 2020 through June 2021 in an effort to mitigate the negative impact of COVID-19.
The following table shows the contributions, earnings and account balances for the named executive officers under the nonqualified deferred compensation plan for the fiscal year ended December 29, 2019:
| Name | Executive Contributions in Last Fy | Registrant Contributions in Last Fy | Aggregate Earnings in Last Fy | Aggregate Withdrawals/ Distributions | Aggregate Balance at Last Fye | |||||||||||||||
Alan Johnson | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Tom Fitzgerald | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Julie Younglove-Webb | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Brandon Rhoten | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Matthew Revord | $ | 55,207 | $ | — | $ | 35,278 | $ | — | $ | 210,157 | ||||||||||
Potential Payments Upon Termination of Employment or a Corporate Transaction/Change in Control
Each of our named executive officers serves at the pleasure of our Board of Directors. Our employment agreements with the named executive officers include provisions requiring us to make post-termination payments upon certain qualifying termination events. The disclosure below describes certain compensation that may become payable as a result of a qualifying termination of employment, based on the employment agreement in effect for each executive on December 27, 2020,25, 2022, the last business day of fiscal year 2020.ended December 25, 2022. In addition, the following disclosure describes the impact of a qualifying termination of employment (where a “qualifying terminationtermination” means a termination by the Company without cause or termination by the named executive officer for good reason), a corporate transaction or a change in control, termination due to death or disability, or retirement under the terms of the our named executive officers’ employment agreements and equity awards held by each of our named executive officers as of December 27, 2020.25, 2022. These benefits are in lieu of benefits generally available to salaried employees. Mr. Fitzgerald did not receive any payments or benefits upon termination other than base salary and vacation accrued through his termination date.
Alan JohnsonRobert D. Wright Employment Agreement.Agreement. The JohnsonWright Agreement providesprovided for severance pay and benefits if Mr. JohnsonWright is terminated in a qualifying terminationfor any reason or if Mr. Johnson’sWright’s employment is terminated due to death or disability. In the event Mr. Johnson’sWright’s employment terminated for any reason, including due to death or disability, Mr. Wright was entitled to receive any accrued amounts otherwise owed as of the date of termination. In the event Mr. Wright’s employment terminated in a qualifying termination prior to a Change in Control, Mr. Wright was entitled to a cash severance payment equal to 12 months of his annual base salary ($650,000) payable in installments over 12 months; payment equal to the amount of the annual bonus that Mr. Wright would have received for the year in which the termination occurred pro-rated through the date of termination and based on the target level of performance for the year of termination; subsidized COBRA benefits for 12 months; and all of Mr. Wright’s equity awards would have vested in accordance with their terms. Under the Amended Wright Agreement, in the event Mr. Wright’s employment is terminated (a) prior to December 31, 2025 for any reason any unvested portion of Price Performance Awards will remain eligible to vest for 90 days following the termination date or (b) after December 31, 2025 for any reason other than cause, death or disability and Mr. Wright assists the Board with the transition of his position, all outstanding PSUs and Price Performance Awards will continue to vest subject to the terms of the awards. In the event of a change of control, the Amended Wright Agreement provides for the vesting of all unvested RSUs and all or some portion of the PSUs and Price Performance Awards.
Steven Cirulis Employment Agreement. The Cirulis Agreement provides for severance pay and benefits if Mr. Cirulis is terminated for any reason or if Mr. Cirulis’ employment is terminated due to death or disability. In the event Mr. Cirulis’ employment terminates for any reason, including due to death or disability, Mr. Cirulis is entitled to receive any accrued amounts otherwise owed as of the date of termination. In the event Mr. Cirulis’ employment terminates by reason of death or disability, Mr. Cirulis (or his estate) is entitled to receive the annual bonus Mr. Cirulis would have received for the year in which the termination occurs pro-rated through the date of termination and based on the actual level of performance for the year of termination. In the event Mr. Cirulis’ employment terminates in a qualifying termination prior to a Change in Control, Mr. Johnson is entitled to a cash severance payment equal to 12 months of base salary payable in installments over 12 months; the amount of any annual bonus earned for the most recently completed fiscal year, to the extent it hasn’t already been paid; and a payment equal to the amount of the annual bonus that Mr. Johnson would have received for the year in which the termination occurspro-rated through the date of termination and based on actual performance for the year of termination; and subsidized COBRA benefits for 12 months, all subject to a release. In the event Mr. Johnson’s employment terminates in a qualifying termination on or within 12 months after a Change in Control, Mr. Johnson is entitled to a lump sum payment equal to 18 months of base salary plus his target annual bonus for the year in which the termination date occurs; any annual bonus earned with respect to the most recently completed fiscal year; subsidized COBRA benefits for 12 months; and all equity awards shall vest and shall be exercisable. Payments and benefits in connection with a Change in Control are not subject to a release. If termination occurs due to death or disability, Mr. Johnson will receive any accrued amounts otherwise owed.
Named Executive Officer Employment Agreements.The employment agreements for the named executive officers (other than Mr. Johnson) provide for severance pay and benefits if the executive is terminated in a qualifying termination or if the executive’s employment is terminated due to death or disability. In the event the executive’s employment terminates in a qualifying termination prior to a Change in Control, the executiveCirulis is entitled to a cash severance payment equal to 12 months of base salary payable in installments over 12 months and subsidized COBRA benefits for 12 months, all subject to a release.months. In the event the executive’sMr. Cirulis’ employment terminates in a qualifying termination on or within 12 months aftertwo years following a Change in Control, the executiveMr. Cirulis is entitled to the samea cash severance payments andpayment equal to 12 months of base salary payable in installments over 12 months; subsidized COBRA benefits described abovefor 12 months; and a paymentcash amount equal to the amount of the annual bonus that Mr. Cirulis would have received for the executiveyear in
47
which the termination occurs pro-rated through the date of termination and based on the actual level of performance for the year of termination.
Adam Noyes Employment Agreement. The Noyes Agreement provides for severance pay and benefits if Mr. Noyes is terminated for any reason or if Mr. Noyes’ employment is terminated due to death or disability. In the event Mr. Noyes’ employment terminates for any reason, including due to death or disability, Mr. Noyes is entitled to receive any accrued amounts otherwise owed as of the date of termination. In the event Mr. Noyes’ employment terminates in a qualifying termination, Mr. Noyes is entitled to a cash severance payment equal to 12 months of base salary payable in installments over 12 months and subsidized COBRA benefits for 12 months.
Jeffrey Douglas Employment Agreement. The Douglas Agreement provides for severance pay and benefits if Mr. Douglas is terminated for any reason or if Mr. Douglas’ employment is terminated due to death or disability. In the event Mr. Douglas’ employment terminates for any reason, including due to death or disability, Mr. Douglas is entitled to receive any accrued amounts otherwise owed as of the date of termination. In the event Mr. Douglas’ employment terminates by reason of death or disability, Mr. Douglas (or his estate) is entitled to receive the annual bonus Mr. Douglas would have received for the year in which the termination occurspro-rated through the date of termination and based on the actual level of performance for the year of termination. In the event Mr. Douglas’ employment terminates in a qualifying termination (the “Pro-rated Bonus”). Payments and benefits in connection withprior to a Change in Control, are not subjectMr. Douglas is entitled to a release. Ifcash severance payment equal to 12 months of base salary payable in installments over 12 months and subsidized COBRA benefits for 12 months. In the event Mr. Douglas’ employment terminates in a qualifying termination on or within two years following a Change in Control, Mr. Douglas is entitled to a cash severance payment equal to 12 months of base salary payable in installments over 12 months; subsidized COBRA benefits for 12 months; and a cash amount equal to the amount of the annual bonus that Mr. Douglas would have received for the year in which the termination occurspro-rated through the date of termination and based on the actual level of performance for the year of termination.
Adiya Dixon Employment Agreement. The Dixon Agreement provides for severance pay and benefits if Ms. Dixon is terminated for any reason or if Ms. Dixon’s employment is terminated due to death or disability. In the event Ms. Dixon’s employment terminates for any reason, including due to death or disability, in additionMs. Dixon is entitled to receive any accrued amounts otherwise owed to the executive, the executive will receive thePro-rated Bonus, subject to a release. The NEOs’ employment agreements generally define “cause” as the executive’s (i) intentional misrepresentation of material information, (ii) felony indictment, (iii) commission of an act involving moral turpitude, (iv) material breach or material default of written obligations that remain unremedied for 30 days after notice, (v) fraud, (vi) embezzlement, (vii) failure to comply with our Board of Director’s written lawful direction that remains unremedied for 30 days after notice, or (viii) willful action to harm the Company or its affiliates. Their employment agreements generally define “good reason” as (1) reduction in base salary or target or maximum bonus percentages, (2) material reduction in position, authority, office, responsibilities or duties, (3) material breach of the agreement by us, or (4) relocation to a place more than 50 miles from Chicago, in each case without the executive’s consent.
Options Granted Prior to 2011.Options granted to our named executive officers prior to 2011 generally contain the following termination and change in control provisions:
If an executive’s employment with the Company terminates for any reason other than cause, disability or death, vested options may thereafter be exercised by the executive until the earlier to occur of: (i) the date that is 90 days after the effective date of the executive’s termination of employment, and (ii) the expiration date of the option, and to the extent the options are not so exercised, they shall terminate upon such earlier date. If the executive dies following a termination for other than cause during the period described in the preceding sentence, vested options may thereafter be exercised by the executive’s legal representative until the earlier to occur of: (i) the date that is one year after the effective date of the executive’s termination of employment, and (ii) the expiration date, and to the extent the options are not so exercised, they shall terminate upon such earlier date.
If an executive’s employment with the Company terminates by reason of disability or death, vested options may thereafter be exercised by the executive or the executive’s legal representative until the earlier to occur
|
If an executive is terminated for cause or the executive breaches a covenant in an agreement with the Company, the options automatically terminate.
termination. In the event ofMs. Dixon’s employment terminates in a Corporate Transaction, the Board of Directors may take action such as (i) providing for the optionsqualifying termination, Ms. Dixon is entitled to be assumed, or equivalent options to be substituted, by the acquiring company; (ii) providing for termination of vested but unexercised options unless exercised prior to the transaction; (iii) providing for receipt by the executive of a cash severance payment based on the difference between the transaction priceequal to 12 months of base salary payable in installments over 12 months and the exercise price; and/or (iv) providingsubsidized COBRA benefits for accelerated vesting prior to the transaction and termination following such transaction.12 months.
48
The following table quantifies the potential payments and benefits to which the named executive officers would have been entitled to receive if one of several different termination of employment or change in control events occurred on December 29, 2019.25, 2022. All employees are also entitled to life insurance benefits of up to the amount of such employee’s base salary, up to a maximum amount of $125,000, if death occurs while actively employed, which benefit is also not included in the table below. With regard to all options and RSUs subject to time-based vesting at December 29, 2019,25, 2022, the assumed values of the awards are shown in the table in the applicable columns. The value of each stock option as to which vesting is accelerated is assumed to be equal to the product of the number of shares underlying the option multiplied by the difference between the exercise price per share and $4.24, the closing price of our common stock on December 27, 2019 (the last business day of the fiscal year). For RSUs, the value shown in the table is based on the number of RSUs multiplied by $4.24.$5.59, the closing price of our common stock on December 23, 2022 (the last business day of the fiscal year).
Name | Benefit | Voluntary Termination For Good Reason or Involuntary Termination Without Cause | Qualifying Termination (following Change in Control) | Death/ Disability(1) | ||||||||||
Alan Johnson | Cash Severance | $ | 746,750 | $ | 1,120,125 | $ | — | |||||||
| Cash Bonus | $ | — | $ | — | $ | — | ||||||||
| Subsidized COBRA | $ | 4,492 | $ | 4,492 | $ | — | ||||||||
| Options | $ | — | $ | — | $ | — | ||||||||
| RSUs | $ | — | $ | 361,006 | $ | — | ||||||||
|
|
|
|
|
| |||||||||
| TOTAL | $ | 751,242 | $ | 1,485,623 | $ | — | ||||||||
|
|
|
|
|
| |||||||||
Julie Younglove-Webb | Cash Severance | $ | 340,000 | $ | 340,000 | $ | — | |||||||
| Cash Bonus | $ | — | $ | — | $ | — | ||||||||
| Options | $ | — | $ | — | $ | — | ||||||||
| Subsidized COBRA | $ | 11,590 | $ | 11,590 | $ | — | ||||||||
| RSUs | $ | — | $ | 220,900 | $ | — | ||||||||
|
|
|
|
|
| |||||||||
| TOTAL | $ | 351,590 | $ | 572,490 | $ | — | ||||||||
|
|
|
|
|
| |||||||||
Brandon Rhoten | Cash Severance | $ | 425,000 | $ | 425,000 | $ | — | |||||||
| Cash Bonus | $ | — | $ | — | $ | — | ||||||||
| Subsidized COBRA | $ | 6,125 | $ | 6,125 | $ | — | ||||||||
| Options | $ | — | $ | — | $ | — | ||||||||
| RSUs | $ | 124,809 | ||||||||||||
|
|
|
|
|
| |||||||||
| TOTAL | $ | 431,125 | $ | 555,214 | $ | — | ||||||||
|
|
|
|
|
| |||||||||
Matthew Revord | Cash Severance | $ | 370,000 | $ | 370,000 | $ | — | |||||||
| Cash Bonus | $ | — | $ | — | $ | — | ||||||||
| Options | $ | — | $ | — | $ | — | ||||||||
| Subsidized COBRA | $ | 6,125 | $ | 6,125 | $ | — | ||||||||
| RSUs | $ | 139,721 | ||||||||||||
|
|
|
|
|
| |||||||||
| TOTAL | $ | 376,125 | $ | 515,845 | $ | — | ||||||||
|
|
|
|
|
| |||||||||
Name | Benefit | Voluntary Termination For Good Reason or Involuntary Termination Without Cause | Qualifying Termination (following Change in Control) | Death/ Disability(1) | ||||||||||
Robert D. Wright | Cash Severance | $ | 680,000 | $ | 680,000 | $ | — | |||||||
| Subsidized COBRA | $ | 14,950 | $ | 14,950 | $ | — | ||||||||
| RSUs | $ | — | $ | 244,563 | $ | — | ||||||||
| TOTAL | $ | 694,950 | $ | 939,513 | $ | — | ||||||||
Steven Cirulis | Cash Severance | $ | 448,630 | $ | 448,630 | $ | 289,884 | |||||||
| Subsidized COBRA | $ | — | $ | — | $ | — | ||||||||
| RSUs | $ | — | $ | 1,014,317 | $ | — | ||||||||
| TOTAL | $ | 448,630 | $ | 1,462,947 | $ | 289,884 | ||||||||
Adam Noyes | Cash Severance | $ | 424,000 | $ | 424,000 | $ | — | |||||||
| Subsidized COBRA | $ | 13,949 | $ | 13,949 | $ | — | ||||||||
| RSUs | $ | — | $ | 925,715 | $ | — | ||||||||
| TOTAL | $ | 437,949 | $ | 1,363,664 | $ | — | ||||||||
Jeffrey Douglas | Cash Severance | $ | 318,240 | $ | 318,240 | $ | 205,632 | |||||||
| Subsidized COBRA | $ | — | $ | — | $ | — | ||||||||
| RSUs | $ | — | $ | — | $ | — | ||||||||
| TOTAL | $ | 318,240 | $ | 318,240 | $ | 205,632 | ||||||||
Adiya Dixon | Cash Severance | $ | 315,000 | $ | 315,000 | $ | — | |||||||
| Subsidized COBRA | $ | — | $ | — | $ | — | ||||||||
| RSUs | $ | — | $ | — | $ | — | ||||||||
| TOTAL | $ | 315,000 | $ | 315,000 | $ | — | ||||||||
| (1) | As noted above, if |
As required by Section 953(b) of the Dodd-Frank Act, and Item 402(u) of RegulationS-K, we are providing the information about the relationship of the annual total compensation of our employees and the annual total
compensation of our CEO, Mr. Johnson.Wright. Because the SEC rules for identifying the median employee and calculating the pay ratio permit companies to use various methodologies and assumptions, apply certain exclusions, and make reasonable estimates that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable with the pay ratio that we have reported.
The following table sets forth a summary of the median of the annual total compensation of employees of the Company (other than the CEO), the annual total compensation of our CEO and the ratio of such amounts.
CEO Pay Ratio | ||||||||
Median employee total compensation | $ | 13,520 | $ | 16,744 | ||||
CEO total compensation | $ | 2,015,269 | $ | 1,927,558 | ||||
Ratio of CEO to Median employee compensation | 149:1 | 115:1 | ||||||
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As of December 29, 2019,25, 2022, the Company employed over 6,000approximately 5,836 persons, including Mr. Johnson. In determiningWright. As permitted by applicable SEC rules, we have elected to use the same median employee identified for purposes of the 2020 pay ratio disclosed in the “CEO Pay Ratio” section of our proxy statement for the 2021 annual meeting of stockholders filed with the SEC on March 26, 2021. There has been no change in our employee population or employee compensation arrangements as of December 25, 2022 that we believe would significantly impact our pay ratio disclosure.
To identify the median employee, a listing was preparedwe used the gross pay of all of our employees, asexcluding our CEO. We did not make any cost-of-living or other adjustments in identifying the median employee and we annualized the pay of December 29, 2019. Compensation was annualized for thoseany employees who were not employed for the full yearyear. We then calculated the 2022 total annual compensation of 2019. This resulted in identification of athe median employee in accordance with the requirements of the executive compensation rules for the Summary Compensation Table (Item 402(c)(2)(x) of Regulation S-K). Under this calculation, the median employee’s annual total compensation of $13,520. This total compensation figure reflects employment on a part-time basis, and is not necessarily representative of the compensation of other shop employees or of our overall compensation practices.was $16,744. With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of the “Summary Compensation Table” above.
Year | Summary Compensation Total for PEO (1) | Compensation Actually Paid to PEO (2) | Average Summary Compensation Table Total for Non-PEO NEOs (3) | Average Compensation Actually Paid to Non-PEO NEOs (4) | Value of Initial Fixed $100 Investment Based on Total Shareholder Return (5) | Net Income (Loss) (in thousands) (6) | ||||||||||||||||||
2022 | $ | 1,605,463 | $ | 1,641,526 | $ | 1,005,403 | $ | 1,028,777 | $ | 129.10 | $ | 4,345 | ||||||||||||
2021 | $ | 1,669,657 | $ | 3,602,820 | $ | 973,176 | $ | 1,161,419 | $ | 121.71 | $ | (23,784 | ) | |||||||||||
| (1) | Amounts in this column represent the amounts reported for Mr. Wright, our Chief Executive Officer and President for 2022 and 2021 in the “Total” column of the Summary Compensation Table for each applicable year. |
| (2) | Amounts in this column represent the amount of “compensation actually paid,” as computed in accordance with SEC rules. The dollar amounts do not reflect the actual amount of compensation earned by or paid during the applicable year. In accordance with SEC rules, the following adjustments were made to total compensation to determine the compensation actually paid: |
Year | Reported Summary Compensation Table Total for PEO | LESS: Reported Value of Equity Awards (a) | PLUS: Equity Award Adjustments (b) | Compensation Actually Paid to PEO | ||||||||||||
2022 | $ | 1,605,463 | — | $ | 36,063 | $ | 1,641,526 | |||||||||
2021 | $ | 1,669,657 | — | $ | 1,933,163 | $ | 3,602,820 | |||||||||
| (a) | Amounts in this column represent the amounts reported in the “Stock Awards” columns in the Summary Compensation Table for each applicable year. |
| (b) | The amounts deducted or added in calculating the equity award adjustments are as set forth in the following table. |
Year | Year End Fair Value of Outstanding and Unvested Equity Awards Granted in the Applicable Year ($) | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards ($) | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Applicable Year ($) | Year over Year Change in Fair Value of Equity Awards Grant In Prior Years that Vested in the Applicable Year ($) | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Applicable Year ($) | Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value ($) | Total Equity Award Adjustments ($) | |||||||||||||||||||||
2022 | — | $ | 14,000 | — | $ | 22,063 | N/A | N/A | $ | 36,063 | ||||||||||||||||||
2021 | — | $ | 111,625 | — | $ | 1,821,538 | N/A | N/A | $ | 1,933,163 | ||||||||||||||||||
| (3) | Amounts in this column represent the average of the amounts reported for the Company’s NEOs as a group, excluding our CEO, in the “Total” column of the Summary Compensation Table for each applicable year. The NEOs included for purposes of calculating the average amounts for each applicable year are Ms. Dixon and Messrs. Cirulis, Noyes, and Douglas. |
| (4) | Amounts in this column represent the average amount of “compensation actually paid,” to the Company’s NEOs as a group, excluding our CEO, as computed in accordance with SEC rules. The dollar amounts do not reflect the actual amount of compensation earned by or paid during the applicable year. In accordance with SEC rules, the following adjustments were made to average total compensation for the NEOs as a group, excluding our CEO, to determine the compensation actually paid, using the same methodology described above in Note (2): |
Year | Average Reported Summary Compensation Table Total for Non-PEO NEOs | LESS: Average Reported Value of Equity Awards | PLUS: Average Equity Award Adjustments (see yearly tabs) | Average Compensation Actually Paid to Non-PEO NEOs | ||||||||||||
2022 | $ | 1,005,403 | $ | 362,496 | $ | 385,869 | $ | 1,028,777 | ||||||||
2021 | $ | 973,176 | $ | 375,999 | $ | 564,242 | $ | 1,161,419 | ||||||||
| (a) | Amounts in this column represent the amounts reported in the “Stock Awards” columns in the Summary Compensation Table for each applicable year. |
| (b) | The amounts deducted or added in calculating the equity award adjustments are as set forth in the following table. |
Year | Year End Fair Value of Outstanding and Unvested Equity Awards Granted in the Applicable Year ($) | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards ($) | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Applicable Year ($) | Year over Year Change in Fair Value of Equity Awards Grant In Prior Years that Vested in the Applicable Year ($) | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Applicable Year ($) | Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value ($) | Total Equity Award Adjustments ($) | |||||||||||||||||||||
2022 | $ | 356,378 | $ | 14,659 | N/A | $ | 14,832 | N/A | N/A | $ | 385,869 | |||||||||||||||||
2021 | $ | 368,893 | $ | 52,870 | N/A | $ | 142,480 | N/A | N/A | $ | 564,242 | |||||||||||||||||
| (5) | Cumulative TSR is calculated by dividing the difference between the Company’s share price at the end of the measurement period and the beginning of the measurement period (December 24, 2020) by (ii) the Company’s share price at the beginning of the measurement period (December 24, 2020). |
| (6) | Represents the amount of net (loss) income reflected in the Company’s audited financial statements for each applicable year. |
In connection with the Settlement Agreement with the Vann Group, the Company issued 130,000 shares of common stock (including 41,311 shares issued to the Vann A. Avedisian Trust U/A 8/29/85, 43,571 shares issued to KGT Investments, LLC and 45,118 shares issued to The Khimji Foundation) to reimburse the Vann Group for its documented out-of-pocket costs, fees and expenses incurred in connection with the Settlement Agreement. Based on a report of Schedule 13G filed March 30, 2020 by the Vann Group, the Vann Group beneficially owns 8.3% of the common stock of the Company.
Indemnification AgreementsRestaurant Development Experts
We haveOn May 20, 2021, the Company entered into indemnification agreementsa master services agreement with our current directorsRestaurant Development Experts (“RDE”), a company 70% owned by Larry Strain (the “RDE Agreement”) pursuant to which RDE agreed to provide certain services pursuant to work orders agreed upon by the parties from time to time.
The Company and executive officers,RDE executed four work orders on May 20, 2021 under the RDE Agreement as described in the table below:
Work | Term | Description of Services | Fee | |||
| 1 | 12 months | Larry Strain will serve as the Company’s Chief Development Officer | $25,000 per month | |||
| 2 | 12 months | RDE will engage franchise salespersons to recruit franchisees for the Company | $10,000 per month per salesperson engaged plus commissions for franchise shops sold | |||
| 3 | 36 months from the engagement date for each selected designated market area | RDE will perform certain site selection and trade area mapping and real estate support for new franchise shops | Fees are designated market area-specific | |||
| 4 | 12 months | RDE will represent the Company in all lease and ground lease transactions and all purchase and sale transactions | Commission payable by seller | |||
In 2022, the Company paid RDE a total of $778,229, including $325,000 for Mr. Strain’s services as the Company’s Chief Development Officer and $330,000 for RDE’s services in recruiting franchisees for the Company, $46,000 for commissions for franchise shops sold and $15,000 for real estate support for new franchise shops.
Indemnification Agreements
In addition to the indemnification provided for in our certificate of incorporation and Bylaws.Bylaws, we provide indemnification to Messrs. Cirulis, Douglas and Wright through the Cirulis Agreement, Douglas Agreement and Wright Agreement, respectively, and have entered into indemnification agreements with Mr. Noyes, Ms. Dixon, Mr. Daniels and our current directors. These agreements, among other things, provide for indemnification of our directors and executive officers for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts incurred by any such person in any action or proceeding, including any action by or in the right of our Company, arising out of such person’s services as a director or executive officer of ours. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and executive officers.
Review, Approval or Ratification of Transactions with Related Persons
We have adopted a written policy relating to the approval of related party transactions. Our Audit Committee will review certain financial transactions, arrangements and relationships between us and any of the following related parties:
any of our directors, director nominees or executive officers;
any beneficial owner of more than 5% of our outstanding stock;
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any immediate family member of any of the foregoing; and
any entity in which any of the foregoing is employed or has more than a 5% beneficial ownership.
Any member of the Audit Committee who is a party to a transaction under review will not be permitted to participate in the discussions, consideration or approval of such transaction. Prior to entering into any related party transaction, the interested director or officer shall provide notice of such transaction to our Chief Legal Officer. The Audit Committee shall review any such submissions and shall consider all relevant facts and circumstances of such transaction. The Audit Committee shall approve only those proposed transactions that are in, or not inconsistent with, the best interests of Potbelly and its shareholders.stockholders.
In the event management determines a related party transaction exists which was not approved by the Audit Committee, management will submit the transaction to the Audit Committee for consideration. The Audit Committee shall consider all relevant facts and circumstances of such transaction, and shall evaluate all options, including but not limited to ratification, amendment, termination or rescission of the transaction.
The policy lists certain types of transactiontransactions in which an officer or director may have an interest that are deemed not to require review as a related party transaction, including (i) transactions in the ordinary course of business not exceeding $25,000, (ii) certain charitable contributions, and (iii) certain approved compensation arrangements.
BENEFICIAL OWNERSHIP OF OUR COMMON STOCK
Except where indicated by footnote, the following tables set forth information as of May 19, 2020April 3, 2023 as to the beneficial ownership of our common stock by:
each person (or group of affiliated persons) known to us to beneficially own more than 5 percent of our common stock;
each of our executive officers;
each of our directors and director nominees; and
all of our executive officers and directors as a group.
The number of shares beneficially owned by each shareholderstockholder is determined under SEC rules and generally includes shares for which the holder has voting or investment power. The information does not necessarily indicate beneficial ownership for any other purpose. Unless otherwise indicated below, the address for each listed director, officer and shareholderstockholder is c/o Potbelly Corporation, 111 North Canal Street, Suite 850,325, Chicago, Illinois 60606. The percentage of beneficial ownership shown in the following tables is based on 23,812,99929,423,495 outstanding shares of common stock as of May 19, 2020,April 3, 2023, the latest practicable date prior to the publication of this Proxy Statement. For purposes of calculating each person’s or group’s percentage ownership, shares of common stock issuable pursuant to the terms of stock options or restricted stock units exercisable or vesting within 60 days of May 19, 2020April 3, 2023 are included as outstanding and beneficially owned for that person or group, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person or group.
| Name of Beneficial Owner | Number of Shares Beneficial Owned | Percentage of Class Beneficially Owned | ||||||
Beneficial Owners of 5% or more of outstanding common stock | ||||||||
Vann Group (1) | 2,085,444 | 8.7 | % | |||||
Renaissance Technologies LLC (2) | 1,890,500 | 7.9 | % | |||||
Blackrock Inc. (3) | 1,649,877 | 6.9 | % | |||||
Dimensional Fund Advisors LP (4) | 1,517,289 | 6.4 | % | |||||
180 Degree Capital Corp. (5) | 1,410,346 | 5.9 | % | |||||
Agman Investments LLC (6) | 1,359,791 | 5.7 | % | |||||
Kennedy Capital Management, Inc. (7) | 1,295,022 | 5.4 | % | |||||
Chain of Lakes Investment Fund, LLC/Christopher B. Woodruff (8) | 1,269,938 | 5.3 | % | |||||
Ancora Advisors, LLC (9) | 1,258,373 | 5.3 | % | |||||
Directors and Executive Officers | ||||||||
Alan Johnson (10) | 151,043 | * | ||||||
Tom Fitzgerald (11) | 12,451 | * | ||||||
Steven Cirulis (12) | 10,000 | * | ||||||
Julie Younglove-Webb (13) | 264,036 | 1.1 | % | |||||
Brandon Rhoten (14) | 38,290 | * | ||||||
Matthew Revord (15) | 300,800 | 1.3 | % | |||||
Jeffrey Douglas (16) | 0 | * | ||||||
Daniel Lecocq (17) | 0 | * | ||||||
Joseph Boehm (18) | 27,610 | * | ||||||
Adrian Butler (19) | 8,296 | * | ||||||
Susan Chapman-Hughes (20) | 44,561 | * | ||||||
Dan Ginsberg (21) | 54,001 | * | ||||||
Marla Gottschalk (22) | 162,436 | * | ||||||
David Head (23) | 10,000 | * | ||||||
David Near (24) | 0 | * | ||||||
Benjamin Rosenzweig (25) | 19,418 | * | ||||||
Todd Smith (26) | 0 | * | ||||||
All directors and executive officers as a group (17 people) | 1,102,942 | 4.6 | % | |||||
| Name of Beneficial Owner | Number of Shares Beneficial Owned | Percentage of Class Beneficially Owned | ||||||
Beneficial Owners of 5% or more of outstanding common stock | ||||||||
Nierenberg Investment Management Company, Inc. (1) | 2,710,320 | 9.2 | % | |||||
Agman Investments LLC (2) | 2,444,415 | 8.3 | % | |||||
Archon Capital Management LLC (3) | 2,325,509 | 7.9 | % | |||||
180 Degree Capital Corp. (4) | 2,283,777 | 7.8 | % | |||||
Vann Group (5) | 1,986,133 | 6.8 | % | |||||
Ancora Advisors, LLC (6) | 1,624,762 | 5.5 | % | |||||
Soviero Asset Management, LP (7) | 1,482,000 | 5.0 | % | |||||
Renaissance Technologies LLC (8) | 1,468,354 | 5.1 | % | |||||
Directors and Executive Officers | ||||||||
Robert D. Wright (9) | 587,581 | 2.0 | % | |||||
Steven Cirulis (10) | 213,921 | * | ||||||
Adam Noyes (11) | 177,273 | * | ||||||
Jeffrey Douglas (12) | 98,108 | * | ||||||
Adiya Dixon (13) | 30,794 | * | ||||||
Vann Avedisian (14) | 701,220 | 2.4 | % | |||||
Joseph Boehm (15) | 165,559 | * | ||||||
Adrian Butler (16) | 59,383 | * | ||||||
David Head (17) | 110,385 | * | ||||||
David Near (18) | 101,309 | * | ||||||
Dave Pearson (19) | 16,753 | * | ||||||
Jill Sutton (20) | 26,212 | * | ||||||
Todd Smith (17) | 79,322 | * | ||||||
All directors and executive officers as a group (16 people) (21) | 2,412,302 | 8.2 | % | |||||
| * | Represents less than 1.0% |
| (1) | Based solely on |
| (2) | Based solely on the Schedule 13G filed on February 6, 2023 by Agman Investments LLC (“Agman”) and Howard Scott Silverman (“Silverman”). Agman and Silverman have shared voting and dispositive power over 2,444,415 shares, which includes 89,561 shares that may be acquired upon the exercise of warrants. The address for Agman and Silverman is 10 E. Ohio St., Second Floor, Chicago, IL 60611. |
| (3) | Based solely on the Schedule 13G filed on February 13, 2023 by Archon Capital Management LLC (“Archon”) and Constantinos Christofilis (“Christofilis”). Reflects 2,325,509 shares owned by advisory clients of Archon which is controlled by Christofilis. Archon and Christofilis have shared voting and dispositive power over 2,325,509 shares. The address for Archon and Christofilis is c/o Archon Capital Management LLC, 1100 19th Avenue E, Seattle, Washington 98112. |
| (4) | Based solely on the Schedule 13D filed on February 11, 2021 by 180 Degree Capital Corp (“180 Degree”). 180 Degree has shared voting and dispositive power over 2,283,777 shares. The address for this entity is 7 N. Willow Street, Suite 4B, Montclair, NJ 07042. |
| (5) | Based solely on the Schedule 13D filed on August 17, 2020 by Vann A. Avedisian Trust U/A 8/29/85, Intrinsic Investment Holdings, LLC, Bryant L. Keil, Neil Luthra, KGT Investments, LLC and The Khimji Foundation (collectively, the “Vann Group”). Vann A. Avedisian Trust U/A 8/29/85 has sole voting and dispositive power over |
Based solely on |
| (7) | Based solely on the Schedule 13G filed on January 27, 2023 by Soviero Master Fund, L.P. (the “Master Fund”), Soviero Advisors, LLC (“Soviero Advisors”), Soviero Asset Management, LP (“Soviero Asset Management”), Soviero GP, LLC (“Soviero GP”) and Thomas Soviero (“Soviero”). The Master Fund beneficially owns and has shared voting and dispositive power over 1,392,000 shares. Soviero Advisors, as the general partner of the Master Fund, may be deemed to beneficially own the 1,392,000 shares beneficially owned by the Master Fund. Soviero Asset Management, as the investment manager of the Master Fund, may be deemed to beneficially own the 1,392,000 shares owned by the Master Fund. Soviero GP, as the general partner of Soviero Asset Management, may be deemed to beneficially own the 1,392,000 shares beneficially owned by Soviero Asset Management. Soviero, as the Managing Member of Soviero Advisors and as the Managing Member of Soviero GP, may be deemed to beneficially own the 1,392,000 shares beneficially owned by Soviero Advisors and Soviero GP, respectively. Soviero also owns 90,000 shares that he holds directly. The address for these parties is 3 Columbus Circle, Suite 1588, New York, NY 10019. |
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| (8) | Based solely on the Schedule 13G filed on February 13, |
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| (12) | Includes 7,003 shares issuable in settlement of |
| (13) | Includes 8,403 shares issuable in settlement of |
| (14) | Includes (i) 513,163 shares of common stock held by the |
the beneficiary, (ii) 101,585 shares owned by Intrinsic and warrants owned by Intrinsic to purchase 40,634 shares, (iii) 21,514 shares owned directly by Mr. |
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| (21) | Includes 272,487 shares issuable in settlement of restricted stock units which vest within 60 days of April 3, 2023. |
Delinquent Section 16(a) Reports
Compliance with Section 16(a) of the Exchange Act requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC.
Based solely on a review of the copies of such reports filed with the SEC and on written representations from our executive officers and directors, we believe that during 20192022 all Section 16(a) filing requirements were complied with on a timely basis, except that (1)each of Scott Swayne, Jeffrey Douglas, David HeadDaniels, Adam Noyes, Will Atkins and Robert D. Wright was late in filing one transaction on one required report on Form 3 and (2) William Atkins was late in filing one transaction on one required report on Form 4, in each case due to an administrative error and Steven Cirulis was late in filing two required reports on Form 4, in each case due to an administrative error.
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Why am I receiving these materials?
Our Board of Directors is soliciting proxies in connection with the Annual Meeting. The Company will bear the cost of preparing, printing and mailing the materials in connection with this solicitation of proxies. The Company has retained DF King for certain advisory and solicitation services at a fee of approximately $10,000. Proxies also may be solicited on the Company’s behalf by officers and other employees who will be separately compensated for their efforts. The Company will reimburse banks and brokers for their reasonable out-of-pocket expenses related to forwarding Proxy Materials to beneficial owners of stock or otherwise in connection with this solicitation. We are mailing these Proxy Materials to stockholders of record as of the close of business on March 22, 2023, the Record Date.
You are receiving this Proxy Statement as a stockholder of the Company. We request that you promptly use the enclosed proxy card to vote, by telephone, Internet, or mail, in the event you desire to express your support of or opposition to the proposals.
THE BOARD UNANIMOUSLY RECOMMENDS VOTING “FOR” THE ELECTION OF EACH OF THE NINE DIRECTOR NOMINEES NAMED IN PROPOSAL 1 AND “FOR” PROPOSALS 2, 3 AND 4.
Where and when is the Annual Meeting?
We will hold the Annual Meeting virtually on May 18, 2023, at 8:00 a.m., Central Time (login beginning at 7:45 a.m., Central Time), exclusively via live audio webcast. Please go to www.virtualshareholdermeeting.com/PBPB2023 for instructions on how to participate in the Annual Meeting.
What am I being asked to vote on at the Annual Meeting?
We are asking our stockholders to consider the following proposals at the Annual Meeting:
| • | Proposal 1: the election of nine director nominees to serve on the Board of Directors for a term of one year or until their successors are duly elected or appointed and qualified. |
| • | Proposal 2: the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023. |
| • | Proposal 3: a non-binding advisory vote on a resolution to approve the 2022 compensation of our named executive officers. |
| • | Proposal 4: to approve the 2019 LTIP to increase the number of shares of common stock authorized for issuance thereunder; and |
| • | Proposal 5: any other business properly brought before the Annual Meeting. |
Who can vote?
Stockholders of record at the close of business on March 22, 2023, the Record Date, may vote at the Annual Meeting.
As of the Record Date, there were 29,423,495 shares of our common stock outstanding.
How many votes do I have?
You have one vote for each share of our common stock that you owned as of the Record Date. These shares include shares held by you as a “stockholder of record” and as a “beneficial owner.”
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What is the difference between holding shares as a “stockholder of record” and as a “beneficial owner”?
If your shares are registered directly in your name with our transfer agent, you are considered the “stockholder of record” with respect to those shares. We have sent these Proxy Materials directly to you.
If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the “beneficial owner” of the shares held in street name. Your broker, bank or other nominee who is considered the stockholder of record with respect to those shares has forwarded these Proxy Materials to you. You should direct your broker, bank or other nominee on how to vote your shares by using the voting instruction form included in the mailing or by following their instructions for voting by telephone or the Internet.
What is a proxy?
If you legally designate another person to vote the shares you own at a meeting of stockholders according to your instruction, that person is your proxy. If you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card. We have designated two of our officers to serve as proxies for the Annual Meeting: Robert D. Wright and Adiya Dixon.
How can I vote my shares?
Stockholders of Record. Stockholders of record may vote their shares or submit a proxy to have their shares voted by one of the following methods:
| • | By Internet |
Before the Annual Meeting – You may submit your proxy online via the Internet by following the instructions provided on the enclosed proxy card. Internet voting facilities will be available 24 hours a day and will close at 11:59 p.m., Eastern Time, on May 17, 2023.
| • | During the Annual Meeting – You may attend the meeting via the Internet at www.virtualshareholdermeeting.com/PBPB2023 and vote during the meeting by following the instructions provided on the enclosed proxy card. |
| • | By Telephone – You may vote your shares by touch-tone telephone by calling the toll-free number on the enclosed proxy card. Telephone voting facilities will be available 24 hours a day and will close at 11:59 p.m., Eastern Time, on May 17, 2023. |
| • | By Mail – You may submit your proxy by completing, signing and dating your proxy card and returning it in the reply envelope included with these Proxy Materials. |
Beneficial Owners. If you are the beneficial owner of your shares (that is, you hold your shares in “street name” through an intermediary such as a broker, bank or other nominee), you will receive a voting instruction form from your bank, broker or other nominee.
Your bank, broker or other nominee will not vote your shares on Proposals 1, 3 or 4 unless you provide them instructions on how to vote your shares. You should instruct your bank, broker or other nominee how to vote your shares by following the directions provided by your bank, broker or other nominee.
General. If you submit your proxy using any of the methods above, Robert D. Wright or Adiya Dixon will vote your shares in the manner you indicate. You may specify whether your shares should be voted for all, some, or none of the nominees for director, and for, and against or abstain from voting for Proposals 2, 3 and 4 and any other proposals properly introduced at the Annual Meeting. If you vote by telephone or Internet and choose to vote with the recommendation of our Board of Directors, or if you vote by mail, sign your proxy card, and do not indicate specific choices, your shares will be voted FOR the election of each of the nine director nominees
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(Proposal 1); FOR ratification of the appointment of Deloitte & Touche LLP to serve as our independent public accounting firm (Proposal 2); FOR the non-binding resolution to approve our 2022 named executive officer compensation (Proposal 3); and FOR the amendment of the 2019 LTIP (Proposal 4).
If a matter to be considered at the Annual Meeting is timely submitted pursuant to Rule 14a-4(c)(1) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), your proxy will authorize Robert D. Wright or Adiya Dixon to vote your shares in their discretion with respect to any such matter subsequently raised at the Annual Meeting. At the time this Proxy Statement was filed, we knew of no matters to be considered at the Annual Meeting other than those referenced in this Proxy Statement.
How can I revoke my proxy?
You may revoke a proxy in any one of the following three ways:
submit a valid, later-dated proxy, or vote again by Internet or by phone after your original vote;
notify our corporate secretary in writing before the Annual Meeting that you have revoked your proxy; or
vote online at the Annual Meeting.
If I have already voted by proxy on one or more proposals, can I change my vote?
Yes. To change your vote by proxy, simply sign, date and return the enclosed proxy card or voting instruction form in the accompanying postage pre-paid envelope, or vote by proxy via telephone or the Internet in accordance with the instructions on the proxy card or voting instruction form. We strongly urge you to vote by proxy “FOR” the election of each of the nine director nominees named in Proposal 1 and “FOR” Proposals 2, 3 and 4. Only your latest dated proxy will count at the Annual Meeting.
What “quorum” is required for the Annual Meeting?
In order to have a valid stockholder vote, a quorum must exist at the Annual Meeting. At the Annual Meeting a quorum exists when stockholders holding a majority of the issued and outstanding shares entitled to vote are present in person or represented by proxy at the meeting.
Votes withheld, abstentions and broker-non votes (discussed below under “– What is the effect of abstentions and broker non-votes?”) will be counted as present or represented for purposes of determining whether a quorum exists. In the absence of a quorum, the Annual Meeting may be adjourned by a majority of the votes entitled to be cast either present in person or represented by proxy or by any officer entitled to preside at the Annual Meeting.
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What vote is required to approve each proposal?
| Proposal 1 | Vote Required | Broker Discretionary Voting Allowed | ||
| Election of nine director nominees to serve a term of one year | Plurality of votes cast | No | ||
| Proposal 2 | ||||
| Ratification of the appointment of Deloitte & Touche LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2023 | Majority of shares present in person or represented by proxy and entitled to vote | Yes | ||
| Proposal 3 | ||||
| Non-binding, advisory vote on resolution to approve our 2022 named executive officer compensation | Majority of shares present in person or represented by proxy and entitled to vote | No | ||
| Proposal 4 | ||||
| Amendment of the 2019 LTIP to increase the number of shares of common stock authorized for issuance thereunder | Majority of shares present in person or represented by proxy and entitled to vote | No | ||
How are the voting results determined?
For the election of directors, your vote may be cast “for” each of the nominees or your vote may be “withheld” with respect to one or more of the nominees. The nominees receiving the largest number of “for” votes will be elected as directors, up to the maximum number of directors to be chosen for election. Each of Proposals 2, 3 and 4 will pass if the total votes cast “for” such proposal exceed the total number of votes cast “against” and “abstain” for such proposal.
What is the effect of abstentions and broker non-votes?
Because the election of directors is determined on the basis of a plurality of the votes cast, abstentions have no effect on the outcome of the election of nine nominees to the Board of Directors (Proposal 1), although abstentions will result in directors receiving fewer votes.
Because the approval of a majority of shares present and entitled to vote is required to ratify the appointment of Deloitte & Touche LLP as our independent public accountants for the fiscal year ending December 31, 2023 (Proposal 2), to approve on an advisory basis, the non-binding resolution to approve our 2022 named executive officer compensation (Proposal 3) and to amend the 2019 LTIP to increase the number of shares of common stock authorized for issuance thereunder, abstentions have the effect of a vote against those proposals.
Broker non-votes occur when brokers do not have discretionary voting authority to vote certain shares held in “street name” on particular “non-routine” proposals, including the election of directors, and the “beneficial owner” of those shares has not instructed the broker to vote on those proposals. Shares registered in the name of a broker, bank or other nominee, for which proxies are voted on some, but not all matters, will be considered to be represented at the Annual Meeting and voted only as to those matters for which the broker, bank or other nominee has authority to vote. Broker non-votes will have no direct effect on the outcome of the election of directors or the advisory resolution on executive compensation.
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Will my shares be voted if I do nothing?
If your shares are registered in your name, you must sign and return a proxy card in order for your shares to be voted, unless you vote via telephone or the Internet or vote online at the Annual Meeting. If you submit (including by telephone or Internet) your proxy card with no instructions on how to vote, your shares will be voted in accordance with the recommendations of the Board.
If your shares of our common stock are held in “street name,” your bank, broker or other nominee has enclosed a proxy card or voting instruction form with this Proxy Statement. We strongly encourage you to authorize your bank, broker or other nominee to vote your shares by following the instructions provided on the proxy card or voting instruction form. If you sign (including electronic confirmation in the case of Internet or telephone voting) your broker voting instruction form with no instructions on how to vote, your stock will be voted in the broker’s discretion only with respect to “routine” matters but will not be voted with respect to “non-routine” matters. The only routine matter on the ballot for the Annual Meeting is the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023 (Proposal 2).
Please return your proxy card or voting instruction form to your bank, broker or other nominee by proxy by signing, dating and returning the enclosed proxy card or voting instruction form in the accompanying postage pre-paid envelope or vote by proxy via telephone or the Internet in accordance with the instructions in the proxy card or voting instruction form. Please contact the person responsible for your account to ensure that a proxy card or voting instruction form is voted on your behalf.
We strongly urge you to vote by proxy “FOR” the election of each of the nine director nominees named in Proposal 1 and “FOR” Proposals 2, 3 and 4.
What are the fiscal year end dates?
This Proxy Statement provides information about the matters to be voted on at the Annual Meeting and additional information about Potbelly and its executive officers and directors. Some of the information is provided as of the end of our 2020, 2021 or 2022 fiscal years as well as some information being provided as of a more current date. Our fiscal year 2020 ended December 27, 2020; our fiscal year 2021 ended December 26, 2021 and our fiscal year 2022 ended December 25, 2022.
Where can I find the voting results?
We intend to announce preliminary voting results at the Annual Meeting. We will disclose the preliminary results in a Current Report on Form 8-K, which we expect to file on or before May 24, 2023. You can obtain a copy of the Form 8-K by logging on to our website at http://investors.potbelly.com/financial-information/sec-filings, or through the EDGAR system at www.sec.gov. Information on our website does not constitute part of this Proxy Statement.
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OTHER MATTERS
ShareholderStockholder Proposals for the 20212024 Annual Meeting
Pursuant toRule 14a-8 under the Exchange Act, in order to be included in the Company’s proxy materialsProxy Materials for the 20212024 Annual Meeting, a shareholderstockholder proposal must be received in writing by the Company by the close of business on January 20, 2021December 1, 2023 and otherwise comply with all requirements of the SEC for shareholderstockholder proposals. The Company’s address is 111 N. Canal Street, Suite 850,325, Chicago, IL 60606.
In addition, our Bylaws provide that any shareholderstockholder who desires to bring a proposal before an annual meeting, or to nominate persons for election as directors, must give timely written notice of the proposal to the Company’s Secretary. To be timely, the notice must be delivered by the close of business to the above address not less than 90 nor more than 120 calendar days prior to the first anniversary of the date on which the Company held the preceding year’s annual meeting. Accordingly, to be timely, a notice must be received no earlier than February 24, 2021January 18, 2024 and no later than March 26, 2021February 17, 2024 (assuming the meeting is held not more than 30 days before or more than 60 days after June 24, 2021)May 18, 2024). The notice must describe the shareholderstockholder proposal in reasonable detail and provide certain other information required by our Bylaws.Bylaws and, with respect to director nominees, must include the information requirements of Rule 14a-19(b)(2) and (3).
Upon written request and at no charge, we will provide a copy of any of our filings with the SEC, including our Annual Report on Form10-K, with financial statements and schedules for our most recent fiscal year. We may impose a reasonable fee for expenses associated with providing copies of separate exhibits to the report when such exhibits are requested. These documents are also available on our website athttp://investors.potbelly.com/financial-information/sec-filings, and the website of the SEC at www.sec.gov.www.sec.gov.
SEC rules allow delivery of a single annual report and proxy materials to households at which two or more shareholdersstockholders reside, unless the affected shareholderstockholder has provided contrary instructions. Accordingly, shareholdersstockholders sharing an address who have been previously notified by their broker or its intermediary will receive only one set of the annual report and other proxy materials, unless the shareholderstockholder has provided contrary instructions. Individual proxy cards or voting instruction forms (or electronic voting facilities), as applicable, will, however, continue to be provided for each shareholderstockholder account. This procedure, referred to as “householding,” reduces the volume of duplicate information received by shareholders,stockholders, as well as our expenses. ShareholdersStockholders having multiple accounts may have received householding notifications from their respective brokers and, consequently, such shareholdersstockholders may receive only one set of the annual report and other proxy materials. Upon written or oral request, Potbelly Corporation will promptly deliver a separate set of our annual report and proxy materials to any beneficial owner at a shared address to which a single copy of any of those documents was delivered. To receive a separate set of our annual report and proxy materials, you may write or call Potbelly Corporation at Potbelly Corporation, 111 North Canal Street, Suite 850,325, Chicago, Illinois 60606, Attention: Corporate Secretary, telephone (312)951-0600. Shareholders Stockholders currently sharing an address with another shareholderstockholder who wish to have only one set of our annual report and other proxy materials delivered to the household in the future should also contact our corporate secretary.
By order of the Board of Directors,
Matthew J. RevordAdiya Dixon
Senior Vice President, Chief Legal Officer, Chief PeopleCompliance Officer and Secretary
May 20, 2020April 5, 2023
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ANNEX A
APPENDIX A – POTBELLY CORPORATION 2019 LONG TERM INCENTIVE PLAN, AS AMENDED AND RESTATED
AMENDMENT TO THE POTBELLY CORPORATION 2019 LONG-TERM
INCENTIVE PLAN
(As Amended and Restated Effective June (AS AMENDED AND RESTATED EFFECTIVE JUNE 24, 2020)
1. GENERAL
1.1 Purposes.WHEREAS, Potbelly Corporation, a Delaware corporation (the “Company”) has establishedmaintains the Potbelly Corporation 2019 Long-Term Incentive Plan (the “Plan”) to: (a) align, which was previously approved by the interestsCompany’s Board of Directors (the “Board”) on March 26, 2019, as further amended and restated effective as of June 24, 2020 and approved by the stockholders of the Company;
WHEREAS, the Board believes that the number of shares of common stock remaining available for issuance under the Plan has become insufficient for the Company’s stockholders andanticipated future needs under the recipients of Awards under this Plan by increasingPlan;
WHEREAS, the proprietary interest of such recipientsBoard has determined that it is in the Company’s growth and success, (b) advance thebest interests of the Company by attracting and retaining qualified employees, Outside Directors and other persons providing services to amend the Company and/orPlan, subject to its Related Companies, and (c) motivate Participantsstockholder approval, to actincrease the aggregate number of Shares (as defined in the long-term best interests ofPlan) available for issuance under the Company’s stockholders. The following provisions constitute an amendment and restatementPlan by 1,100,000 shares (the “Amendment”);
WHEREAS, Section 7 of the Plan provides that the Board may amend the Plan from time to time; and
WHEREAS, this Amendment will become effective June 24, 2020.upon approval by the Company’s stockholders at the Company’s 2023 Annual Meeting of Stockholders and if, for any reason, the Company’s stockholders fail to approve this Amendment, the existing Plan shall continue in full force and effect.
1.2 Definitions. For purposesNOW, THEREFORE:
1. Section 2.1(b) of the Plan the following definitions shall apply:
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For purposes of determining the Fair Market Value of Common Stock that is sold pursuant to a cashless exercise program, Fair Market Value shall be the price at which such Common Stock is sold.
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1.3 Participation. For purposes of the Plan, a “Participant” is any person to whom an Award is granted under the Plan. Subject to the terms and conditions of the Plan, the Committee shall determine and designate, from time to time, from among the Eligible Persons those persons who will be granted one or more Awards under the Plan and, subject to the terms and conditions of the Plan, a Participant may be granted any Award permitted under the provisions of the Plan and more than one Award may be granted to a Participant. Except as otherwise agreed by the Company and the Participant, or except as otherwise provided in the Plan, an Award under the Plan shall not affect any previous Award under the Plan or an award under any other plan maintained by the Company or any of the Related Companies. No Eligible Person or other person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of Eligible Persons, or holders or beneficiaries of Awards, or of multiple Awards granted to an Eligible Person. The terms and conditions of Awards and the Committee’s
determinations and interpretations with respect thereto need not be the same with respect to each Eligible Person (whether or not such Eligible Persons are similarly situated).
2. SHARES RESERVED AND LIMITATIONS
2.1 Shares Available and Other Amounts Subject to the Plan. The shares of Common Stock for which Awards may be granted under the Plan shall be subject to the following:
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| (b) | Subject to the provisions of subsection 2.2, the number of shares of Common Stock that may be issued with respect to Awards under the Plan shall be equal to the sum of (1) |
| (i) | Shares of Common Stock covered by an Award shall only be counted as used to the extent that they are actually used. A share of Common Stock issued in connection with any Award under the Plan shall reduce the total number of shares of Common Stock available for issuance under the Plan by one. |
| (ii) | Any shares of Common Stock (A) that are subject to Awards granted under the Plan or (B) that are subject to awards granted under the Prior Plan that are outstanding on the Approval Date (and immediately prior to approval), in any case that terminate by reason of expiration, forfeiture, cancellation, or otherwise, without the issuance of such shares, or that are settled in cash, shall thereafter again be available for issuance under the Plan (the shares described in subparagraphs (A) and (B), collectively, “Recycled Shares”). Recycled Shares shall be added back to the number of shares of Common Stock reserved for issuance under the Plan on a one for one basis; provided, however, that (A) Recycled Shares attributable to any Full Value Award granted under the Plan and (B) Recycled Shares attributable to any Full Value Awards granted under the Prior Plan, in either case, shall be added back on the same basis that such award reduced the number of total shares available under the Plan or Prior Plan, as applicable, at the time such award was granted. |
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2.2 Adjustments to Shares of Common Stock. In the event of a stock dividend, stock split, reverse stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation,split-up,spin-off, exchange of shares, sale of assets or subsidiaries, combination, or other corporate transaction that affects the Common Stock such that the Committee determines, in its sole discretion, that an adjustment is warranted in order to preserve the benefits or prevent the enlargement of benefits of Awards under the Plan, the Committee shall, in the manner it determines equitable in its sole discretion, (a) adjust the number and kind of shares which may be delivered under the Plan (including adjustments to the number and kind of shares that may be granted to an individual during any specified time as described in subsection 2.1); (b) adjust the number and kind of shares subject to outstanding Awards; (c) adjust the Exercise Price of outstanding Options and SARs; and (d) make any other adjustments that the Committee determines to be equitable (which may include, without limitation, (i) replacement of Awards with other awards which the Committee determines have comparable value and which are based on stock of a company resulting from the transaction, and (ii) cancellation2. Effective Date of the Award in return for cash payment of the current value of the Award, determined as though the Award is fully vested at the time of payment, provided that in the case of an Option or SAR, the amount of such payment may be the excess of value of the shares of Common Stock subject to the Option or SAR at the time of the transaction over the exercise price)Amendment.
2.3 Change in Control. In the event that (a) a Participant is employed or otherwise in service on the date of a Change in Control and the Participant’s employment or service, as applicable, is terminated by the Company or the successor to the Company (or a Related Company which is his or her employer) for reasons other than Cause within 24 months following the Change in Control, or (b) the Plan is terminated by the Company or its successor following a Change in Control without provision for the assumption, continuation or substitution of outstanding Awards hereunder, all Options, SARs and related Awards which have not otherwise expired This Amendment shall become immediately exercisable and all other Awards shall become fully vested; provided, however, that all Awards with conditions and restrictions relating to the attainment of performance goals shall become vested assuming the higher of (A) achievement of all relevant performance goals at the target level of performance (pro rated basedeffective upon the length of time within the performance period that has elapsed prior to the Change in Control) or (B) actual achievement of the performance goals as of the date of the Change in Control. For purposes of this subsection 2.3, a Participant’s employment or service shall be deemed to be terminated by the Company or the successor to the Company (or a Related Company) if the Participant terminates employment or service after (i) a substantial adverse alteration in the nature of the Participant’s status or responsibilities from those in effect immediately prior to the Change in Control, or (ii) a material reduction in the Participant’s annual base salary and target bonus, if any, or, in the case of a Participant who is an Outside Director, the Participant’s annual compensation, as in effect immediately prior to the Change in Control. If, upon a Change in Control, awards in other shares or securities are substituted for outstanding Awards pursuant to subsection 2.2, and immediately following the Change in Control the Participant becomes employed by (if the Participant was an employee immediately prior to the Change in Control) or a board member of (if the Participant was an Outside Director immediately prior to the Change in Control) the entity into which the Company merged, or the purchaser of substantially all of the assets of the Company, or a successor to such entity or purchaser, the Participant shall not be treated as having terminated employment or service for purposes of this subsection 2.3 until such time as the Participant terminates employment or service with the merged entity or purchaser (or successor), as applicable.
2.4 Limits Applicable toNon-Employee Directors. Notwithstanding any other provision of the Plan to the contrary, the aggregate value of all Awards granted under the Plan to any Outside Director for any calendar year shall not exceed (a) $300,00 in total value or (b) in the event such Outside Director is first appointed or elected to the Board in such calendar year, $400,000 in total value. For purposes of the foregoing limitation, the value of an Award shall be its grant date fair value, as determined in accordance with ASC 718 or successor provision but excluding the impact of estimated forfeitures related to service-based vesting conditions.
3. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
3.1 Options and SARs. The Committee shall designate the Participants to whom Options or SARs are to be granted under this Section 3 and shall determine the number of shares of Common Stock subject to each such Option or SAR and the other terms and conditions thereof, not inconsistent with the Plan. Without limiting the generality of the foregoing, the Committee may not grant dividend equivalents (current or deferred) with respect to any Option or SAR granted under the Plan. An Option will be deemed to be aNon-Qualified Option unless it is specifically designated by the Committee as an Incentive Stock Option.
3.2 Exercise Price. The “Exercise Price” of each Option and SAR granted under this Section 3 shall be established by the Committee at the time the Option or SAR is granted; provided, however, that in no event shall such price be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant (or, if greater, the par value of a share of Common Stock).
3.3 Limits on Incentive Stock Options. If the Committee grants Incentive Stock Options, then to the extent that the aggregate fair market value of shares of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any individual during any calendar year (under all plans of the Company and all Subsidiaries) exceeds $100,000, such Options shall be treated asNon-Qualified Stock Options to the extent required by section 422 of the Code. Any Option that is intended to constitute an Incentive Stock Option shall satisfy any other requirements of section 422 of the Code and, to the extent such Option does not satisfy such requirements, the Option shall be treated as aNon-Qualified Stock Option.
3.4 Term and Exercisability. Except as otherwise expressly provided in the Plan, an Option or SAR granted under the Plan shall be exercisable in accordance with the following:
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3.5 Payment of Exercise Price. The payment of the Exercise Price of an Option granted under this Section 3 shall be subject to the following:
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3.6 Post-Exercise Limitations. The Committee, in its discretion, may impose such restrictions on shares of Common Stock acquired pursuant to the exercise of an Option as it determines to be desirable, including, without limitation, restrictions relating to disposition of the shares and forfeiture restrictions based on service, performance, Common Stock ownership by the Participant, conformity with the Company’s recoupment or clawback policies as in effect from time to time, compliance with restrictive covenants, and such other factors as the Committee determines to be appropriate.
3.7 No Repricing. Except for either adjustments pursuant to subsection 2.2 of the Plan (relating to the adjustment of shares), or reductions of the exercise price approved by the Company’s stockholders, the exercise price for any outstanding Option or SAR may not be decreased after the date of grant nor may an outstanding Option or SAR granted under the Plan be surrendered to the Company as consideration for the grant of a replacement Option or SAR with a lower exercise price or a Full Value Award. Except as approved by the Company’s stockholders, in no event shall any Option or SAR granted under the Plan be surrendered to the Company in consideration for a cash payment if, at the time of such surrender, the exercise price of the Option or SAR is greater than the then current Fair Market Value of a share of Common Stock. In addition, no repricing of an Option shall be permitted without the approval of the Company’s stockholders if such approval is required under the rules of any stock exchange on which the Common Stock is listed.
3.8 Tandem Common Stock Options and SARs. A Option may but need not be in tandem with an SAR, and an SAR may but need not be in tandem with an Option (in either case, regardless of whether the original award was granted under this Plan or another plan or arrangement). If an Option is in tandem with an SAR, the exercise price of both the Option and SAR shall be the same, and the exercise of the Option or SAR with respect to a share of Common Stock shall cancel the corresponding tandem SAR or Option right with respect to such share. If an SAR is in tandem with an Option but is granted after the grant of the Option, or if an Option is in tandem with an SAR but is granted after the grant of the SAR, the later granted tandem Award shall have the same exercise price as the earlier granted Award, but the exercise price for the later granted Award may not be less than the Fair Market Value of the Common Stock at the time of such grant.
3.9 Expiration Date. The “Expiration Date” with respect to an Option or SAR means the date established as the Expiration Date by the Committee at the time of the grant (as the same may be modified in accordance with the terms of the Plan); provided, however, that the Expiration Date with respect to any Option or SAR shall not be later than the earliest to occur of theten-year anniversary of the date on which the Option or SAR is granted or the following dates, unless the following dates are determined otherwise by the Committee:
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In no event shall the Expiration Date of an Option or SAR be later than theten-year anniversary of the date on which the Option or SAR is granted (or such shorter period required by law or the rules of any stock exchange on which the Common Stock is listed).
4. FULL VALUE AWARDS
A “Full Value Award” is a grant of one or more shares of Common Stock or a right to receive one or more shares of Common Stock in the future (including restricted stock, restricted stock units, performance shares, and performance units) which is contingent on continuing service, the achievement of performance objectives during a specified period performance, or other restrictions as determined by the Committee or in consideration of a Participant’s previously performed services or surrender or other compensation that may be due. The grant of
Full Value Awards may also be subject to such other conditions, restrictions and contingencies, as determined by the Committee, including provisions relating to dividend or dividend equivalent rights and deferred payment or settlement. Notwithstanding the foregoing, no dividends or dividend equivalent rights will be paid or settled on Full Value Awards that have not been earned or vested.
5. COMMITTEE
5.1 Administration. The authority to control and manage the operation and administration of the Plan shall be vested in the committee described in subsection 5.2 (the “Committee”) in accordance with this Section 5. If the Committee does not exist, or for any other reason determined by the Board, the Board may take any action under the Plan that would otherwise be the responsibility of the Committee.
5.2 Selection of Committee. So long as the Company is subject to Section 16 of the Exchange Act, the Committee shall be selected by the Board and shall consist of not fewer than two members of the Board or such greater number as may be required for compliance with Rule16b-3 issued under the Exchange Act and shall be comprised of persons who are independent for purposes of applicable stock exchange listing requirements. Notwithstanding any other provision of the Plan to the contrary, with respect to any Awards to Outside Directors, the Committee shall be the Board.
5.3 Powers of Committee. The authority to manage and control the operation and administration of the Plan shall be vested in the Committee, subject to the following:
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Without limiting the generality of the foregoing, it is the intention of the Company that, to the extent that any provisions of this Plan or any Awards granted hereunder are subject to section 409A of the Code, the Plan and the Awards comply with the requirements of section 409A of the Code and that the Plan and Awards be administered in accordance with such requirements and the Committee shall have the authority to amend any outstanding Awards to conform to the requirements of section 409A.
5.4 Delegation by Committee. Except to the extent prohibited by applicable law or the rules of any stock exchange on which the Common Stock is listed, the Committee may allocate all or any portion of its
responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time.
5.5 Information to be Furnished to Committee. The Company and the Related Companies shall furnish the Committee such data and information as may be required for it to discharge its duties. The records of the Company and the Related Companies as to an employee’s or Participant’s employment or provision of services, termination of employment or cessation of the provision of services, leave of absence, reemployment and compensation shall be conclusive on all persons unless determined to be incorrect. Participants and other persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the terms of the Plan.
5.6 Liability and Indemnification of Committee. No member or authorized delegate of the Committee shall be liable to any person for any action taken or omitted in connection with the administration of the Plan unless attributable to his own fraud or willful misconduct; nor shall the Company or any Related Company be liable to any person for any such action unless attributable to fraud or willful misconduct on the part of a director or employee of the Company or Related Company. The Committee, the individual members thereof, and persons acting as the authorized delegates of the Committee under the Plan, shall be indemnified by the Company against any and all liabilities, losses, costs and expenses (including legal fees and expenses) of whatsoever kind and nature which may be imposed on, incurred by or asserted against the Committee or its members or authorized delegates by reason of the performance of a Committee function if the Committee or its members or authorized delegates did not act dishonestly or in willful violation of the law or regulation under which such liability, loss, cost or expense arises. This indemnification shall not duplicate but may supplement any coverage available under any applicable insurance.
5.7 Special Vesting Rules. Except for (a) Awards granted under the Plan with respect to shares of Common Stock which do not exceed, in the aggregate, fivepercent of the total number of shares of Common Stock reserved for issuance pursuant to subsection 2.1, (b) Awards granted in lieu of other compensation, or (c) Awards that are a form of payment of earned performance awards or other incentive compensation provided that the performance period relating to such performance or incentive awards was at least one year, if a Participant’s right to become vested in an Award is conditioned on the completion of a specified period of service with the Company or any Related Company Subsidiaries being required, then the required period of service shall be at least one (1) year, except if accelerated in the event of the participant’s death or Disability, or involuntary termination.
6. MISCELLANEOUS
6.1 Effective Date and Term. This Plan, as amended and restated, shall be effective as of the date that it is approved by the Board (the “Effective Date”).The Plan shall be unlimitedCompany’s stockholders in durationaccordance with applicable laws and in the event of Plan termination, shall remain in effectregulations.
3. Other Provisions. Except as long as any shares of Common Stock awarded under it are outstanding and not fully vested; provided, however, that no new Awards will be made under the Plan on or after the tenth anniversary of the Effective Date Any awards granted under the Prior Plan or the Plan prior to the Approval Date shall be subject to the terms and conditions of the Prior Plan or the Plan as in effect at the time of grant.
6.2 Limit on Distribution. Distribution of Common Stock orset forth above, all other amounts under the Plan shall be subject to the following:
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6.3 Liability for Cash Payments. Subject to the provisions of this Section 6, each Related Company shall be liable for payment of cash due under the Plan with respect to any Participant to the extent that such payment is attributable to the services rendered for that Related Company by the Participant. Any disputes relating to liability of a Related Company for cash payments shall be resolved by the Committee.
6.4 Withholding. All Awards and other payments under the Plan are subject to withholding of all applicable taxes, which withholding obligations may be satisfied, with the consent of the Committee, through the surrender of Common Stock which the Participant already owns or to which a Participant is otherwise entitled under the Plan; provided, however, previously-owned Common Stock that has been held by the Participant or Common Stock to which the Participant is entitled under the Plan may only be used to satisfy the minimum tax withholding required by applicable law (or other rates that will not have a negative accounting impact).
6.5 Transferability. Awards under the Plan are not transferable except as designated by the Participant by will or by the laws of descent and distribution or, unless otherwise provided by the Committee, pursuant to a qualified domestic relations order (within the meaning of the Code and applicable rules thereunder). To the extent that the Participant who receives an Award under the Plan has the right to exercise such Award, the Award may be exercised during the lifetime of the Participant only by the Participant. Notwithstanding the foregoing provisions of this subsection 6.5, unless otherwise provided by the Committee, Awards may be transferred to or for the benefit of the Participant’s family (including, without limitation, to a trust or partnership for the benefit of a Participant’s family), subject to such procedures as the Committee may establish. In no event shall an Incentive Stock Option be transferable to the extent that such transferability would violate the requirements applicable to such option under section 422 of the Code.
6.6 Notices. Any notice or document required to be filed with the Committee under the Plan will be properly filed if delivered or mailed by registered mail, postage prepaid, to the Committee, in care of the Company or the Related Company, as applicable, at its principal executive offices. The Committee may, by advance written notice to affected persons, revise such notice procedure from time to time. Any notice required under the Plan (other than a notice of election) may be waived by the person entitled to notice.
6.7 Form and Time of Elections. Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification or revocation thereof, shall be in writing filed with the applicable Committee at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of the Plan, as the Committee shall require.
6.8 Agreement With the Company or Related Company. At the time of an Award to a Participant under the Plan, the Committee may require a Participant to enter into an agreement with the Company or the Related Company, as applicable (the “Agreement”), in a form specified by the Committee, agreeing to the terms and conditions of the Plan and to such additional terms and conditions, not inconsistent with the Plan, as the Committee may, in its sole discretion, prescribe.
6.9 Limitation of Implied Rights.
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6.10 Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties.
6.11 Action by the Company or Related Company. Any action required or permitted to be taken by the Company or any Related Company shall be by resolution of its board of directors or governing body or by action of one or more members of the board or governing body (including a committee of the board or governing body) who are duly authorized to act for the board or, in the case of any Related Company which is a partnership, by action of its general partner or a person or persons authorized by the general partner, or (except to the extent prohibited by applicable law or the rules of any stock exchange on which the Common Stock is listed) by a duly authorized officer of the Company.
6.12 Gender and Number. Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular.
6.13 Applicable Law. The provisions of the Plan shall be construed in accordance with the laws of the State of Delaware, without giving effect to choice of law principles.remain unchanged.
6.14 Foreign Employees. Notwithstanding any other provision of the Plan to the contrary, the Committee may grant Awards to eligible persons who are foreign nationals on such terms and conditions different from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to foster and promote achievement of the purposes of the Plan. In furtherance of such purposes, the Committee may make such modifications, amendments, procedures and subplans as may be necessary or advisable to comply with provisions of laws in other countries or jurisdictions in which the Company or a Related Company operates orIN WITNESS WHEREOF, this Amendment has employees. The foregoing provisions of this subsection 6.14 shall not be applied to increase the share limitations of Section 2 or to otherwise change any provision of the Plan that would otherwise require the approval of the Company’s stockholders.
6.15 Recoupment/Forfeiture.Notwithstanding any other provision of the Plan or any Award Agreement to the contrary, unless otherwise specified by the Committee, any Awards under the Plan and any shares of Common Stock or cash issued pursuant to the Plan shall be subject to the Company’s compensation recovery, clawback, and recoupment policies as in effect from time to time.
7. AMENDMENT AND TERMINATION.
The Board may, at any time, amend or terminate the Plan, and the Board or the Committee may amend any Award Agreement, provided that no amendment or termination may, in the absence of written consent to the
change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), adversely affect the rights of any Participant or beneficiary under any Award granted under the Plan prior to the date such amendment isbeen adopted by the Board (or the Committee, if applicable); and further provided that adjustments pursuant to subsection 2.2 shall not bethis 4th day of April 2023, subject to the foregoing limitations of this Section 7; and further provided that the provisions of subsection 3.7 (relating to Option and SAR repricing) cannot be amended unless the amendment is approvedapproval by the Company’s stockholders; and provided further that, no other amendment shall be made to the Plan without the approval ofstockholders at the Company’s stockholders if such approval is required by law or the rules2023 Annual Meeting of any stock exchange on which the Common Stock is listed. It is the intention of the Company that, to the extent that any provisions of this Plan or any Awards granted hereunder are subject to section 409A of the Code, the Plan and the Awards comply with the requirements of section 409A of the Code and that the Board shall have the authority to amend the Plan as it deems necessary to conform to section 409A. Notwithstanding the foregoing, the Company does not guarantee that Awards under the Plan will comply with section 409A and the Committee is under no obligation to make any changes to any Award to cause such compliance.Stockholders.
POTBELLY CORPORATION 111 NORTH CANAL STREET SUITE 850 CHICAGO, IL 60606SCAN TO VIEW MATERIALS & VOTE VOTE BY INTERNET Before The Meeting - Go to INTERNET—www.proxyvote.com or scan the QR Barcode above POTBELLY CORPORATION Use the Internet to transmit your voting instructions and for electronic delivery of information up until111 NORTH CANAL STREET information. Vote by 11:59 p.m. Eastern Time,P.M. ET on June 23, 2020.05/17/2023. Have your proxy card in hand when SUITE 325 CHICAGO, IL 60606 you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/PBPB2020 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - PHONE—1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up untilinstructions. Vote by 11:59 p.m. Eastern Time,P.M. ET on June 23, 2020.05/17/2023. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D13432-P39907 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY POTBELLY CORPORATION For Withhold For All To withhold authority to vote for any All All Except individual nominee(s), mark “For All Except” and write the number(s) of the The Board of Directors recommends you vote FOR each of the following nominees: nominee(s) on the line below. 0 0 0 SCAN TO VIEW MATERIALS & VOTE VOTE BY INTERNET—www.proxyvote.com or scan the QR Barcode above POTBELLY CORPORATION Use the Internet to transmit your voting instructions and for electronic delivery of 111 NORTH CANAL STREET information. Vote by 11:59 P.M. ET on 05/17/2023. Have your proxy card in hand when SUITE 325 CHICAGO, IL 60606 you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. VOTE BY PHONE—1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. ET on 05/17/2023. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. For Withhold For All To withhold authority to vote for any All All Except individual nominee(s), mark “For All Except” and write the number(s) of the The Board of Directors recommends you vote FOR each of the following nominees: number(s) of the nominee(s) on the line below. 0 0 0 1. Election of tennine director nominees to serve on the Board of Directors. Nominees:Nominees 01) Adrian Butler 06) David HeadVann Avedisian 02) Joseph Boehm 07) Alan Johnson 03) Susan Chapman-Hughes 08)Adrian Butler 04) David Head 05) David Near 04) Dan Ginsberg06) Dave Pearson 07) Todd Smith 08) Jill Sutton 09) Benjamin Rosenzweig 05) Marla Gottschalk 10) Todd SmithRobert D. Wright The Board of Directors recommends you vote FOR the following proposals: For Against Abstain 2. Ratification of the appointment of Deloitte & Touche LLP to serve as the Company’s independent registered 0 0 0 public accounting firm for the fiscal year ending December 27, 2020.31, 2023. 3. A non-binding, advisory vote on a resolution to approve the 20192022 compensation of the Company’s named executive 0 0 0 officers. 4. Approval of the amendment to the Company’s Amended and restatement of the Potbelly CorporationRestated 2019 Long-Term Incentive Plan.Plan to increase the 0 0 0 number of shares of common stock authorized for issuance thereunder. NOTE: Such other business as may properly come before the meeting or any adjournment thereof. Signature [PLEASE SIGN WITHIN BOX] Date . 6 . 0 . 0 R1 _ 1 Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or 0000603034 partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and& Proxy Statement and Annual Report on Form 10-K are available at www.proxyvote.com. D13433-P39907www.proxyvote.com POTBELLY CORPORATION ANNUAL MEETING OF SHAREHOLDERSSTOCKHOLDERS ON JUNE 24, 2020MAY 18, 2023 at 8:00 AM CDT This proxy is solicited by the Board of Directors The undersigned appoints Alan JohnsonRobert D. Wright and Matt RevordAdiya Dixon and each of them, as proxies, each with full power of substitution and revocation and authorizes each of them to represent and to vote, as designated on the reverse hereof, all of the shares of common stock of POTBELLY CORPORATION, that the shareholder(s)stockholder(s) is/are entitled to vote at the Annual Meeting of ShareholdersStockholders of Potbelly CorporationPOTBELLY CORPORATION to be held at 8:00 AM local timeCDT on June 24, 2020,May 18, 2023, at www.virtualshareholdermeeting.com/PBPB2020,PBPB2023, and any adjournment or postponement thereof. This proxy, when properly executed, will be voted as directed herein. If no direction is given, this proxy will be voted FOR the election of each of the tennine director nominees listed on the reverse side, and FOR proposals 2, 3 and 4. This proxy revokes any previously executed proxy with respect to all proposals that properly come before the Annual Meeting. 0000603034_2 R1.0.0.6 (Continued, and to be marked, dated and signed, on the other side)