What are 'Permitted Liens' in the context of Potbelly Sandwich Works' asset conveyance?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
"Permitted Liens" means (i) Liens for taxes or other governmental charges or levies that are not yet due or payable or that are being contested in good faith by appropriate proceedings, (ii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen, repairmen and other Liens imposed by Law for amounts not yet due, (iii) zoning, building and other generally-applicable land-use restrictions, (iv) in the case of Assigned Contracts (or rights or interests therein), Liens arising from the terms of such Assigned Contracts, (v) Liens created by this Agreement or any of the other Transaction Agreements or any of the transactions contemplated hereby or thereby, (vi) Liens created by or arising from actions of Purchaser or any Guarantor, and (vii) other Liens that do not, individually or in the aggregate, materially detract from the value of the Assets or materially interfere with the present use of the Assets in the operation of the Business.
Source: Item 23 — RECEIPTS (FDD pages 79–355)
What This Means (2025 FDD)
According to Potbelly Sandwich Works' 2025 Franchise Disclosure Document, a 'Permitted Lien' outlines specific encumbrances or claims that can exist on the assets being transferred during an asset purchase agreement. These liens do not necessarily impede the asset transfer.
Specifically, 'Permitted Liens' include (i) liens for taxes or governmental charges not yet due or being contested in good faith, (ii) statutory liens of landlords and liens of carriers, warehousemen, mechanics, materialmen, repairmen, and other liens imposed by law for amounts not yet due, (iii) zoning, building, and other generally applicable land-use restrictions, (iv) liens arising from the terms of assigned contracts, (v) liens created by the Asset Purchase Agreement itself, (vi) liens resulting from actions of the Purchaser or any Guarantor, and (vii) other liens that do not significantly reduce the asset value or interfere with their current use in the business operation.
For a prospective Potbelly Sandwich Works franchisee, understanding 'Permitted Liens' is crucial because it clarifies what types of existing claims or encumbrances might be present on the assets they are acquiring. This knowledge helps in assessing the true value and potential risks associated with the asset purchase. It also ensures that the franchisee is aware of any pre-existing obligations or restrictions that come with the assets, allowing for informed decision-making and potentially negotiating terms to mitigate any adverse impacts.
It is important for the franchisee to conduct thorough due diligence to identify and evaluate any such liens before finalizing the asset purchase. This may involve consulting with legal and financial advisors to fully understand the implications of these 'Permitted Liens' on their investment and business operations.