UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Current Report
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Item 1.01 Entry into a Material Definitive Agreement
Securities Purchase Agreement
On February 9, 2021, Potbelly Corporation (the “Company”), entered into a securities purchase agreement (the “Securities Purchase Agreement”) with accredited Purchasers (the “Purchasers”), pursuant to which the Company agreed to issue and sell to the Purchasers in a private placement an aggregate of (i) 3,249,668 shares (the “Shares”) of the Company’s common stock, par value $0.01 per share (the “Common Stock”) and (ii) warrants (the “Warrants”) to purchase an aggregate of 1,299,861 shares of common stock, for an aggregate purchase price of approximately $16 million (the “Offering”). The Warrants will be exercisable at an exercise price of $5.45 per share at any time on or after August 13, 2021 and will and expire five years from the date of issuance.
The Offering is expected to close on or about February 12, 2021, subject to the satisfaction of customary closing conditions. The Company expects to receive aggregate gross proceeds of approximately $16 million, before deducting placement agent fees and offering expenses, and excluding the exercise of any warrants. The Company will pay placement agent fees of approximately $1 million. William Blair & Company, L.L.C. is acting as sole placement agent in connection with the Offering.
Warrants
The Warrants to be issued will be exercisable for shares of the Company’s Common Stock at any time after August 13, 2021 and on or prior to the fifth anniversary of the closing at an exercise price of $5.45 per share. The Warrants will be exercisable by net exercise.
Registration Rights Agreement
In connection with the closing of the Offering, the Company expects to enter into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers, pursuant to which the Company will agree to register for resale the Shares, as well as the shares of the Company’s common stock issuable upon exercise of the Warrants (the “Warrant Shares”). Under the Registration Rights Agreement, the Company has agreed to file a registration statement covering the resale by the Purchasers of their Shares and Warrant Shares (together, the “Registrable Securities”) within 30 days following the closing of the Offering. The Company has agreed to use commercially reasonable efforts to cause such registration statement to become effective and to keep such registration statement effective until the date the Shares and Warrant Shares covered by such registration statement have been sold or may be resold pursuant to Rule 144 without restriction. The Company has agreed to be responsible for all fees and expenses incurred in connection with the registration of the Registrable Securities.
In the event (i) the registration statement is not filed within 30 days following the closing date, (ii) the registration statement is not declared effective prior to the earlier of five trading days after the date which the Company is notified by the Securities and Exchange Commission (the “SEC”) that the registration statement will not be reviewed by the SEC staff or is not subject to further comment by the SEC staff, (iii) the registration statement has not been declared effective within 90 days following the closing date, or (iii) after the registration statement has been declared effective by the SEC, sales cannot be made pursuant to the registration statement for any reason other than certain specified reasons, then the Company has agreed to make pro rata payments to each Investor as liquidated damages in an amount equal to 1% of the aggregate amount invested by each such Investor in the Registrable Securities per 30-day period or pro rata for any portion thereof for each such month during which such event continues.
The Company has granted the Purchasers customary indemnification rights in connection with the registration statement. The Purchasers have also granted the Company customary indemnification rights in connection with the registration statement.
The foregoing descriptions of the Securities Purchase Agreement, the Warrants and the Registration Rights Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the Securities Purchase Agreement, the Warrants and the Registration Rights Agreement, the forms of which are filed as Exhibits 10.1, 10.2 and 10.3 hereto, respectively, and incorporated by reference herein.
The representations, warranties and covenants contained in the Securities Purchase Agreement, the Warrants and the Registration Rights Agreement were made solely for the benefit of the parties thereto and may be subject to limitations agreed upon by the contracting parties. Accordingly, the Securities Purchase Agreement, Warrants and the Registration Rights Agreement are incorporated herein by reference only to provide Purchasers with information regarding the terms thereof and not to provide Purchasers with any other factual information regarding the Company or its business, and should be read in conjunction with the disclosures in the Company’s periodic reports and other filings with the SEC.
Item 3.02 Unregistered Sales of Equity Securities.
The information contained above in Item 1.01 is hereby incorporated by reference into this Item 3.02. Based in part upon the representations of the Purchasers in the Securities Purchase Agreement, the offering and sale of the Shares, the Warrants and the Warrant Shares will be exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The offer and sale of the Shares, Warrants and Warrants Shares will not be registered under the Securities Act or any state securities laws and the Shares, Warrants and Warrant Shares may not be offered or sold in the United States absent registration with the SEC or an applicable exemption from the registration requirements. The sale of the securities will not involve a public offering and will be made without general solicitation or general advertising. The Purchasers have represented that they are accredited investors, as such term is defined in Rule 501(a) of Regulation D under the Securities Act, and that they are acquiring the Shares, Warrants and Warrant Shares for investment purposes only and not with a view to any resale, distribution or other disposition of the Shares, Warrants and Warrant Shares in violation of the United States federal securities laws.
Item 8.01 Other Events.
On February 10, 2021, the Company issued a press release announcing the Offering. The Company also announced that it had reached an agreement in principle with its lender, JP Morgan, to amend its existing senior secured revolving credit facility. Following the amendment, the Company will have a senior secured revolving credit facility of $25 million that matures on January 31, 2023 with revised covenants through January 31, 2022. The full text of the press release issued in connection with this announcement is attached as Exhibit 99.1 to this Form 8-K and incorporated herein by reference.
Forward-Looking Statements
In addition to historical information, this Current Report on Form 8-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended and the Private Securities Litigation Reform Act of 1995. Forward-looking statements, written, oral or otherwise made, represent the Company’s expectation or belief concerning future events. Without limiting the foregoing, the words “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “strives,” “goal,” “estimates,” “forecasts,” “projects” or “anticipates” or the negative of these terms and similar expressions are intended to identify forward-looking statements. Forward-looking statements may include, among others, statements relating to: our future financial position and results of operations, business strategy, budgets, projected costs and plans and objectives of management for future operations. By nature, forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statement, due to reasons including, but not limited to, risks related to the COVID-19 outbreak; compliance with our Credit Agreement covenants, competition; general economic conditions; our ability to successfully implement our business strategy; the success of our initiatives to increase sales and traffic; changes in commodity, energy and other costs; our ability to attract and retain management and employees; consumer reaction to industry-related public health issues and perceptions of food safety; our ability to manage our growth; reputational and brand issues; price and availability of commodities; consumer confidence and spending patterns; and weather conditions. In addition, there may be other factors of which we are presently unaware or that we currently deem immaterial that could cause our actual results to be materially different from the results referenced in the forward-looking statements. All forward-looking statements contained in this Current Report on Form 8-K are qualified in their entirety by this cautionary statement. Although we believe that our plans, intentions and
expectations are reasonable, we may not achieve our plans, intentions or expectations. Forward-looking statements are based on current expectations and assumptions and currently available data and are neither predictions nor guarantees of future events or performance. You should not place undue reliance on forward-looking statements, which speak only as of the date hereof. See “Risk Factors” and “Cautionary Statement on Forward-Looking Statements” included in our most recent annual report on Form 10-K and other risk factors described from time to time in subsequent quarterly reports on Form 10-Q or other subsequent filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| 10.1 | Form of Securities Purchase Agreement, dated February 9, 2021, by and among the Company and the persons party thereto | |
| 10.2 | Form of Warrant to Purchase Common Stock to be issued pursuant to the Securities Purchase Agreement | |
| 10.3 | Form of Registration Rights Agreement to be entered into by and among the Company and the persons party thereto | |
| 99.1 | Press release dated February 10, 2021 | |
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| POTBELLY CORPORATION
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| By: | /s/ STEVE CIRULIS | |
| Name: Steve Cirulis | ||
| Title: Senior Vice President, Chief Financial Officer and Chief Strategy Officer | ||
Date: February 10, 2021