PBPB Potbelly Corporation

EXECUTIVE AND DIRECTOR COMPENSATION

Introduction

Our compensation philosophy is to pay for performance, rewarding employees when performance targets are met. 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. Pay is 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 align and reward actions that we believe contribute to our competitiveness and encourage superior performance.

For 2013, in preparation for our IPO, management engaged compensation consultants, Aon Hewitt, to conduct an analysis of our compensation programs and provide recommendations for how best the executive pay programs could be designed after our IPO. In addition to providing advice about broad-based plans generally available to all salaried employees, Aon Hewitt provided:

The compensation committee considered Aon Hewitt’s recommendations as well as relevant market practices when setting executive compensation to align our executive compensation program with the market for which we compete for executive talent. Our market for executive recruiting is generally other restaurant or retail concepts. For non-operations executives, we look at the general restaurant industry. In evaluating the competitiveness of our executive compensation program, we target 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. We evaluate our executives on 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.

Executive pay is tied to both the Company’s and the individual’s annual performance. Merit increases, annual incentive compensation, stock options, 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 bonus target under our current bonus program. In addition, at the discretion of the compensation committee in the case of our Chief Executive Officer, and at the discretion of our Chief Executive Officer 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 bonus awarded to an executive, including the other named executive officers, in order to account for exceptional circumstances. However, it is anticipated that such bonuses would only be awarded under unusual circumstances to further the objectives of our compensation program. For example, the named executive officers received a discretionary cash bonus for the performance in fiscal year 2016. See “–Non-Equity Incentive Awards–2016 Discretionary Bonus” below.

In 2015, the compensation committee engaged Aon Hewitt to conduct an analysis of and provide recommendations for our director compensation programs. The compensation committee considered the benchmarking analysis provided by Aon Hewitt as well as market practice when forming their recommendation to the Board of Directors concerning appropriate compensation for members of our Board of Directors. The compensation committee also engaged Aon Hewitt in 2015 to conduct a competitive analysis of executive compensation. In 2016, Aon Hewitt provided consulting services modeling possible equity plan share request size and compliance with institutional shareholder advisor governance guidelines. Aon Hewitt is currently benchmarking executive equity compensation and is also engaged in a review of the CEO’s executive employment agreement. Aon Hewitt also provides the Company with consulting services concerning employee benefit plans.

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2016 Summary Compensation Table

The following table summarizes compensation for the years ending December 25, 2016 and December 27, 2015 earned by our principal executive officer and our two other most highly compensated executive officers. These individuals are referred to as our named executive officers.

Employment Agreements

The following is a summary of the employment agreements the Company has entered into with each of the named executive officers. The summary below does not contain complete descriptions of all provisions of the employment agreements of the named executive officers and is qualified in its entirety by reference to such employment agreements. Mr. Lewis’ employment agreement was filed as an exhibit to our registration statement on form S-1-registration number 333-190893. Mr. Coyne’s employment agreement was filed as an exhibit to form 8-K filed on April 8, 2015. Mr. Revord’s employment agreement was filed as an exhibit to our form 10-K on February 22, 2017. We have also entered into indemnification agreements with our directors and executive officers. See “Related party Transactions–Indemnification Agreements.”

Aylwin Lewis

Mr. Lewis entered into a new Executive Employment Agreement effective as of August 8, 2013 (the “Lewis Agreement”) pursuant to which he will continue to serve as our President and Chief Executive Officer. Under the Lewis Agreement, the term of Mr. Lewis’ employment continues until August 7, 2017. The Lewis Agreement terminates upon death, disability, termination by us with or without cause or resignation by the executive with or without good reason. If, at least 30 days prior to August 7, 2017, (1) we do not offer to extend Mr. Lewis’ employment past the last day of the term on terms reasonably consistent with the terms of his current agreement or (2) we offer to extend Mr. Lewis’ employment past the last day of the term but the parties are unable to reach an agreement on the terms of such continuing employment by August 7, 2017, then Mr. Lewis’ termination of employment upon expiration of the term of the Lewis Agreement will be treated as a termination by us without cause subject to Mr. Lewis’ requests during negotiations being reasonable and consistent with the terms of the Lewis Agreement. The Lewis Agreement generally defines “cause” as Mr. Lewis’ (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

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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. The Lewis Agreement generally defines “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, (4) Mr. Lewis’ failure to be re-elected to the Board of Directors as Chairman while employed as President and Chief Executive Officer, or (5) relocation to a place more than 50 miles from Chicago, in each case without Mr. Lewis’ consent.

A reduction in Mr. Lewis’ rate of base salary or target or maximum bonus which does not exceed the percentage reduction of an across the board salary or bonus reduction for management employees will not be treated as an event of “good reason.”

The Lewis Agreement provides Mr. Lewis with a base salary of $725,000 which shall not be increased. The Lewis Agreement also provides that, under our current bonus program, Mr. Lewis is eligible for an annual target bonus of 100% of his base salary and a maximum (stretch) target of 200% of his base salary. For bonus years beginning 2013, the annual bonus amount and terms and conditions are determined in accordance with incentive plan metrics determined by the compensation committee (but subject to the same targets described in the previous sentence). The compensation committee determined that for fiscal year 2015 the incentive plan metrics applicable to our executive officers were the Company’s total company revenue, adjusted net income, and adjusted EBITDA (where adjusted EBITDA represents net income (loss) before depreciation and amortization expense, interest expense, provision for income taxes and pre-opening costs, adjusted to eliminate the impact of other items, including certain non-cash as well as certain other items that we do not consider representative of our on-going operating performance). For fiscal year 2015, the metrics for Mr. Lewis, as an executive officer, were weighted as follows: (a) 40%—total company revenue; (b) 30%—adjusted net income; and (c) 30%—adjusted EBITDA. Beginning with fiscal year 2016, the metrics for Mr. Lewis, as an executive officer, were: (a) 50%—total company revenue; and (b) 50%—adjusted EBITDA. See “—Non-Equity Incentive Awards—2016 Discretionary Bonus” below for a discussion of bonus determinations for fiscal 2016 performance. The Lewis Agreement also provides Mr. Lewis with standard benefits and perquisites, a payment of up to $20,000 for legal fees in connection with the negotiation of the employment agreement and review of related agreements and a minimum four weeks of vacation.

Pursuant to the Lewis Agreement, Mr. Lewis was granted a stock option with a Black-Scholes value of $1,200,000 (227,187 shares) on August 8, 2013 (the “Effective Date Grant”). The Effective Date Grant has an exercise price of $10.59. The Lewis Agreement provides that all stock options held by Mr. Lewis prior to the date of the Lewis Agreement (other than the Effective Date Grant) became fully vested on August 8, 2013. The Lewis Agreement also contemplates that Mr. Lewis may be granted equity awards under the Company’s equity incentive plans beginning after August 8, 2015 with a target value of $600,000 (subject to increase or decrease as determined by the compensation committee based on performance).

Mr. Lewis is also a party to a confidentiality, noncompetition, noninterference and intellectual property agreement, with the noncompetition and noninterference covenants lasting for one year after termination of employment. For information regarding the severance benefits under the Lewis Agreement as well as the treatment of Mr. Lewis’ 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—Aylwin Lewis Employment Agreement.”

Michael Coyne and Matthew Revord

Mr. Coyne entered into an employment agreement with the Company effective as of May 1, 2015. Mr. Revord entered into a new Employment Agreement effective as of July 25, 2013 and amended effective April 22, 2015. Pursuant to the Employment Agreements, Mr. Coyne serves as our Senior Vice President and Chief Financial Officer and Mr. Revord serves as our Senior Vice President, General Counsel and Secretary. Mr. Revord has since been appointed as Chief Legal Officer. Mr. Coyne’s agreement provides for a base salary of $375,000, and Mr. Revord’s agreement provides for a base salary of $310,000. The salaries may be increased from time to time by the compensation committee at the recommendation of our Chief Executive Officer. The employment agreement for Mr. Coyne provides that he is eligible for an annual target bonus of 60% of base salary. The employment agreement for Mr. Revord provides that for bonus years beginning on or after an IPO, that he shall be eligible for an annual bonus amount to be determined in accordance with incentive plan metrics recommended by the CEO and approved by the compensation committee. For 2016, Mr. Revord was eligible for an annual target bonus of 60% of base salary. For the current bonus year, the annual bonus amount and terms and conditions for each of these executives are determined in accordance with incentive plan metrics recommended by our Chief Executive Officer and approved by the compensation committee. The compensation committee determined that for fiscal year 2016 the incentive plan metrics applicable to our executive officers would be the Company’s total company revenue and adjusted EBITDA (where adjusted EBITDA represents net income (loss) before depreciation and amortization expense, interest expense, provision for income taxes and pre-opening costs, adjusted to eliminate the impact of other items, including certain non-cash as well as certain other items that we do not consider

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representative of our on-going operating performance). Further, for Mr. Coyne and Mr. Revord, as executive officers, the metrics for fiscal year 2016 were weighted as follows: (a) 50%—total company revenue; and (b) 50%—adjusted EBITDA. See “—Non-Equity Incentive Awards—2016 Discretionary Bonus” below for a discussion of bonus determinations for fiscal 2016 performance. The Employment Agreements also provide the executives with standard benefits and perquisites and a minimum of four weeks of paid time off for Mr. Coyne, and five weeks of paid time off for Mr. Revord. The Employment Agreements contemplate that the executives may be granted equity awards under our equity incentive plans.

Each of the Employment Agreements terminates upon death, disability, termination by us with or without cause or resignation by the executive without good reason. The Employment Agreements for Mr. Coyne and Mr. Revord define “cause” and “good reason” in a manner that is comparable to the corresponding terms in the Lewis Agreement (except with respect to election to the Board and nomination as Chairman of the Board). For information regarding the severance benefits under the Employment Agreements and the treatment of Mr. Coyne’s and Mr. Revord’s outstanding equity awards upon a qualifying termination of employment or a corporate transaction/change in control, see “—Potential Payments Upon Termination of Employment or a Corporate Transaction/Change in Control—Employment Agreements.”

Mr. Coyne and Mr. Revord each continue to be parties to a confidentiality, noncompetition, noninterference and intellectual property agreement, with the noncompetition and noninterference covenants lasting for one year after termination of employment.

Equity Awards

Equity awards represent an important component of our executive compensation. We believe long-term incentive awards align the interests of our stockholders and our executives by increasing the proprietary interest of our executives in the Company’s growth and success; advance the Company’s interests by attracting and retaining qualified employees; and motivate our executives to act in the long-term best interests of our stockholders. Long-term incentive awards are issued under our Amended and Restated 2013 Long-Term Incentive Plan (the “2013 Long-Term Incentive Plan”), which replaced the Potbelly Corporation 2004 Incentive Plan (provided that awards under the 2004 Incentive Plan will continue to be subject to the terms of the 2004 Incentive Plan). The 2013 Long-Term Incentive Plan provides for grants of options (including nonqualified stock options and incentive stock options), stock appreciation rights, full value awards, and cash incentive awards. The 2013 Long-Term Incentive Plan is administered by the compensation committee. Under our Insider Trading Policy, our directors and executive officers are prohibited from engaging in short sales or investing in other kinds of hedging transactions or financial instruments that are designed to hedge or offset any decrease in the market value of our securities.

The equity compensation for our named executive officers (other than Mr. Lewis) is determined by the compensation committee upon the recommendation of Mr. Lewis. In 2017, the compensation committee engaged Aon Hewitt to perform a review of executive equity compensation. Once that review is complete, the compensation committee will determine the equity compensation for Mr. Coyne and Mr. Revord in recognition of their respective individual performance during the 2016 fiscal year and make a recommendation to the Board with regard to Mr. Lewis’ equity compensation for his individual performance during the 2016 fiscal year. In March of 2016, Mr. Coyne received a grant of 28,145 stock options and Mr. Revord received a grant of 25,331 stock options, each in recognition of his respective individual performance during the 2015 fiscal year. In May of 2015, Mr. Coyne received a grant of 150,000 stock options in connection with the signing of his employment agreement. The equity compensation for Mr. Lewis is determined by the Board of Directors (other than Mr. Lewis) upon the recommendation of compensation committee. Mr. Lewis received a grant of 100,000 stock options in March of 2016 and a grant of 50,000 stock options in May of 2016 in recognition of his individual performance during the 2015 fiscal year. Under the terms of his employment agreement, Mr. Lewis was not eligible to receive equity compensation as part of the Company’s annual incentive compensation program in March 2014 or March 2015.

Non-Equity Incentive Awards

Support Center Annual Incentive Plan . The Company has established the Support Center Annual Incentive Plan to provide annual non-equity incentive compensation to executives. Starting with fiscal year 2016, incentives for executive officers were earned based on the following metrics and weighting: (a) 50%—total company revenue; and (b) 50%—adjusted EBITDA (where adjusted EBITDA represents net income (loss) before depreciation and amortization expense, interest expense, provision for income taxes and pre-opening costs, adjusted to eliminate the impact of other items, including certain non-cash as well as certain other items that we do not consider representative of our on-going operating performance). This plan sets a threshold, target, and maximum level for each of these

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metrics applicable to all executive officers, and the amounts paid are based on the actual figures achieved by the Company. For fiscal year 2016, all executive officers utilized the same metrics and weightings. The targets are set for the year by the compensation committee based on recommendations from Mr. Lewis and Mr. Coyne and are communicated to executives at the beginning of each year. To be eligible for an award under the plan, the executive must receive an annual individual performance appraisal rating of “Contributor” or higher. For fiscal year 2016, the threshold level for these metrics was not achieved. Accordingly, no annual cash incentive awards were paid to the named executive officers under the Support Center Annual Incentive Plan for fiscal 2016 performance.

For fiscal year 2015, incentives for named executive officers were earned based on the achievement of pre-established targets for performance weighted as follows: (a) 40%—total company revenue; (b) 30%—adjusted net income; and (c) 30%—adjusted EBITDA.

The chart below sets forth the threshold, target, and maximum percentages of base salary for awards under the Support Center Annual Incentive Plan in 2016, together with the percentage of actual or weighted salary received, based on actual Company results:

2016 Discretionary Bonus . Under certain circumstances, the compensation committee may deem it appropriate to award discretionary bonuses to certain named executive officers. Following the compensation committee’s conclusion that the threshold metrics under the Support Center Incentive Plan were not achieved for fiscal year 2016, the compensation committee determined it was appropriate to grant a discretionary bonus to the named executive officers in recognition of their numerous contributions to the Company and their respective significant accomplishments in fiscal year 2016. For example, in assessing Mr. Lewis’ performance and determining the amount of his discretionary bonus, the compensation committee and the Board of Directors considered Mr. Lewis’ strong leadership and positive impact on the Company’s long-term strategy and shareholder value creation. Mr. Coyne’s award recognized his strong leadership of the finance group and accomplishments in achieving strong profit growth. With respect to Mr. Revord, the compensation committee acknowledged his dual role as Chief Legal Officer and head of international franchise as well as his effective management of legal matters and strong leadership on corporate governance matters.

The compensation committee also considered internal equity that would arise from the payment of a bonus to others in the Company. The compensation committee approved for all bonus-eligible employees, including the named executive officers, a discretionary bonus. For employees other than executives, the discretionary bonus amount was equal to approximately 49% of each employee’s 2016 target annual cash incentive award. Mr. Lewis’ discretionary bonus award represented approximately 41% of what he would have received under the Support Center Incentive Plan had his target metric been met. Mr. Coyne’s discretionary bonus award represented approximately 48% of what he would have received under the Support Center Incentive Plan had his target metric been met. Mr. Revord’s discretionary bonus award represented approximately 46% of what he would have received under the Support Center Incentive Plan has his target metric been met.

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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 25, 2016. In addition, the following disclosure describes the impact of a qualifying termination of employment, a corporate transaction or a change in control under the terms of the equity awards held by each of our named executive officers as of December 25, 2016 and modifications to such awards pursuant to the employment agreements. These benefits are in lieu of benefits generally available to salaried employees.

Aylwin Lewis Employment Agreement. Pursuant to the Lewis Agreement, Mr. Lewis will be entitled to receive severance pay and severance benefits if his employment terminates as a result of a qualifying termination (including if we fail to offer to extend Mr. Lewis’ employment or our failure to reach an agreement with Mr. Lewis as to the term of such extension as described above). If terminated as the result of a qualifying termination prior to a Change in Control (which is defined in the 2013 Long-Term Incentive Plan), Mr. Lewis will be eligible to receive severance equal to one year of his then-current base salary and health and dental coverage at active employee contribution rates for 12 months, and all of his outstanding unvested stock options will vest

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(provided that if the qualifying termination occurs as a result of our failure to offer to extend the term of Mr. Lewis’ employment or our failure to reach an agreement with Mr. Lewis as to the term of such extension as described above, only those unvested stock options granted in 2015 and 2016 will fully vest upon the qualifying termination), all subject to a release. If his employment terminates (1) as a result of a qualifying termination on or within six months prior to a Change in Control and at a time when we are a party to a letter of intent relating to transactions, or we are in negotiations regarding a transaction, which if consummated would constitute a Change in Control, (2) three months prior to a Change in Control or (3) within two years after a Change in Control, Mr. Lewis will be entitled to the severance payments and benefits described above except that his cash severance payment will be equal to the sum of his base salary and annual target bonus and the payments and benefits are not subject to a release.

In addition, if Mr. Lewis’ termination occurs by reason of death or disability, he will be entitled to a cash payment equal to the amount of the annual bonus that he would have received for the bonus year in which the termination date occurs, pro-rated for the portion of the year prior to his termination date and payable at the same time that bonuses are payable in accordance with our normal bonus plan and all stock options that would have vested within one year of his termination will be vested on his termination date.

Under certain of Mr. Lewis’ option award agreements, in the event of a Corporate Transaction (which term generally includes transactions involving a 50% change in ownership of the Company, whether through acquisition of common stock or voting power or through consummation of a reorganization, merger, consolidation or asset sale), the Board of Directors may take action such as (i) providing for the options 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; and (iii) providing for receipt by Mr. Lewis of a cash payment based on the difference between the transaction price and the exercise price.

Michael Coyne and Matthew Revord Employment Agreements. The Employment Agreements for Mr. Coyne and Mr. Revord 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 executive 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. In the event the executive’s employment terminates in a qualifying termination on or within 12 months after a Change in Control, the executive is entitled to the same severance payments and benefits described above and a payment equal to the amount of the annual bonus that the executive would have received for the year in which the termination occurs pro-rated through the date of termination and based on actual performance for the year of termination (the “Pro-rated Bonus”). Payments and benefits in connection with a Change in Control are not subject to a release. If termination occurs due to death or disability, in addition to any accrued amounts otherwise owed to the executive, the executive will receive the Pro-rated Bonus, subject to a release. The Employment Agreements for Mr. Coyne and Mr. Revord include the definitions of “cause” and “good reason” in a manner that is comparable to the corresponding terms in Mr. Lewis’ employment agreement (except for election to the Board and nomination as chairman of the Board).

Options Granted Prior to 2011. Options granted to Mr. Lewis and Mr. Revord prior to 2011 generally contain the following termination and change in control provisions:

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Other Plans

Our named executive officers are eligible to participate in our 401(k) plan. The Company matches 50% of the contributions that our employees, including our named executive officers, make to the 401(k) plan, with a maximum matching contribution of $3,000 per year.

The Company established in fiscal 2014 a non-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, 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 the non-qualified deferred compensation plan, the total maximum matching contribution is $3,000 per year.

2016 Director Compensation

The following table summarizes the amounts earned and paid to our non-employee members of our Board of Directors for 2016. Mr. Lewis, our President, Chief Executive Officer and Chairman of the Board receives no additional compensation for his service on our Board of Directors:

Our Board of Directors approved a director compensation plan pursuant to the Potbelly Corporation 2013 Long-Term Incentive Plan, effective beginning in 2016. Under the director compensation plan, each non-employee Director who was a member of the Board of Directors as of the 2016 Annual Meeting of the Stockholders (the “2016 Annual Meeting”) was eligible to receive $110,000 in annual compensation, with an increase to $135,000 starting with the 2017 Annual Meeting of the Stockholders (the “2017 Annual Meeting”). Additional retainers will be paid to the Lead Director and certain Committee Chairs as described below. Each non-employee Director may elect between the following forms of payment for his or her annual compensation: (1) the non-employee Director receives RSUs having a grant date Fair Market Value of $110,000 in 2016 (to be increased to $135,000

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starting in 2017) (with a grant date on or before the end of the respective second fiscal quarter); or (2) the non-employee Director receives: (a) $50,000 in cash in 2016 (to be increased to $60,000 starting in 2017) (half of which will be paid on before the end of the respective second fiscal quarter and half of which will be paid on or before the end of the respective fiscal year); plus (b) RSUs having a grant date Fair Market Value of $60,000 in 2016 (to be increased to $75,000 starting in 2017) (with a grant date on or before the end of the respective second fiscal quarter).

Beginning in 2016, the Lead Director as of the Annual Meeting received an additional $20,000 annual retainer. The Audit Committee Chair as of the 2016 Annual Meeting received an additional $10,000 retainer in 2016 (with an increase to $15,000 starting with the 2017 Annual Meeting), and the Compensation Committee Chair as of the 2016 Annual Meeting received an additional $7,500 retainer in 2016 (with an increase to $10,000 starting with the 2017 Annual Meeting). The Lead Director, Audit Committee Chair and Compensation Committee Chair may each elect between the following forms of payment for such additional retainer: (1) RSUs having a grant date Fair Market Value equal to such additional retainer amount (with a grant date on or before the end of the respective second fiscal quarter); or (2) Cash in an amount equal to one-half such additional retainer amount (half of which will be paid on before the end of the respective second fiscal quarter and half of which will be paid on or before the end of the respective fiscal year); plus RSUs having a grant date Fair Market Value of half of such additional retainer amount (with a grant date on or before the end of the respective second fiscal quarter).

RSUs shall vest as follows: fifty percent (50%) on the first anniversary of the grant date, and fifty percent (50%) on the second anniversary of the grant date.

Stockownership 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 the later of (i) five years of first becoming a director and (ii) five years after our IPO, 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 compensation for directors (excluding any additional retainer received for service as Lead Director or as Chair of any Board committee) offered to directors (regardless of whether the director elects to receive such compensation in cash).

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RELATED PARTY TRANSACTIONS

Indemnification Agreements

We have entered into indemnification agreements with our current directors and executive officers, in addition to the indemnification provided for in our certificate of incorporation and Bylaws. 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 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 General Counsel. 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 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 transaction 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.

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BENEFICIAL OWNERSHIP OF OUR COMMON STOCK

The following tables set forth information as of March 6, 2017 as to the beneficial ownership of shares of our common stock by:

The number of shares beneficially owned by each stockholder 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 stockholder is c/o Potbelly Corporation, 111 North Canal Street, Suite 850, Chicago, Illinois 60606. The percentage of beneficial ownership shown in the following tables is based on 25,087,125 outstanding shares of common stock as of March 6, 2017. For purposes of calculating each person’s or group’s percentage ownership, shares of common stock issuable pursuant to the terms of stock options exercisable or vesting within 60 days after March 6, 2017 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.

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Section 16(a) Beneficial Ownership Reporting Compliance

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. Officers, directors and greater than 10% stockholders are required by SEC rules to furnish us with copies of all Section 16(a) forms they file.

Based solely on a review of the copies of such forms furnished to the Company and on written representations from our officers and directors, we believe that during 2016, all Section 16(a) filing requirements were complied with on a timely basis, except that each of (1) our former Section 16 officer, John Morlock; (2) Ms. Gottschalk; and (3) Mr. Bassi was late in filing one required report on Form 4 relating to one transaction, in each case due to administrative error.

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