What are the 'Liabilities to be Assumed' as detailed in Section 2.04 of the Potbelly Sandwich Works agreement?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
- Section 2.04 Liabilities to be Assumed. On the terms and subject to the conditions of this Agreement, in partial consideration of the sale, transfer, conveyance and assignment to Purchaser of the Assets, as of the Effective Time, Purchaser shall assume the following debts, liabilities and obligations of Seller and/or its Affiliates (collectively, the "Assumed Liabilities"):
- (a) all taxes, assessments and other liabilities of Seller for which Purchaser receives a credit pursuant to Section 3.03;
- (b) the obligations and liabilities of Seller under the Assigned Contracts that accrue or arise from and after the Effective Time;
- (c) to the extent not otherwise covered by Section 2.04(b), the obligations and liabilities of Seller and/or its Affiliates that arise from and after the Effective Time described in Section 6.05(a), Section 6.06, Section 6.09(b) and Section 6.09(c);
- (d) all liabilities and obligations of Purchaser relating to severance or similar costs associated with terminated employees set forth in Section 7.01; and
- (e) all other liabilities and obligations arising out of or relating to Purchaser's ownership or operation of the Business and the Assets on or after the Effective Time.
Source: Item 23 — RECEIPTS (FDD pages 79–355)
What This Means (2025 FDD)
According to Potbelly Sandwich Works' 2025 Franchise Disclosure Document, Section 2.04 outlines the liabilities that the purchaser assumes from the seller. These 'Assumed Liabilities' include taxes, assessments, and other liabilities of the seller for which the purchaser receives credit as per Section 3.03 of the agreement. This means if the purchaser is given a financial benefit or credit related to certain taxes or assessments, they also take on the responsibility for those liabilities.
The purchaser also assumes obligations and liabilities of the seller under the 'Assigned Contracts' that accrue or arise after the effective time of the agreement. This indicates that any contracts transferred to the purchaser come with the responsibility for fulfilling their terms from the point of transfer onward. Additionally, the purchaser assumes specific obligations and liabilities of the seller or its affiliates that arise after the effective time, as detailed in Sections 6.05(a), 6.06, 6.09(b), and 6.09(c) of the agreement.
Furthermore, the purchaser takes on all liabilities and obligations relating to severance or similar costs associated with terminated employees, as outlined in Section 7.01. This means the purchaser may be responsible for covering severance packages or related expenses for employees who are let go as part of the transaction. Finally, the purchaser assumes all other liabilities and obligations arising out of or relating to the purchaser's ownership or operation of the business and the assets on or after the effective time. This is a broad clause that essentially makes the purchaser responsible for any liabilities connected to running the business from the moment they take ownership.