El Pollo Loco 2015 Annual Report Download - page 36

Table of Contents
subordinated notes, debt securities convertible into equity, or shares of preferred stock. Opening new company-operated restaurants in existing
and new markets could require substantial additional capital in excess of cash from operations. We would expect to finance the capital required
for new company-operated restaurants through a combination of additional issuances of equity, corporate indebtedness, and cash from
operations.
Issuing additional shares of our common stock or other equity securities or securities convertible into equity may dilute the economic and voting
rights of our existing stockholders, reduce the market price of our common stock, or both. In a liquidation, holders of any such debt securities or
preferred stock, and lenders with respect to other borrowings, could receive distributions of our available assets prior to the holders of our
common stock. Debt securities convertible into equity could be subject to adjustments in their conversion ratios under certain circumstances,
increasing the number of equity securities issuable upon conversion. Preferred stock, if issued, could have a preference with respect to
liquidating distributions, or a preference with respect to dividend payments that could limit our ability to pay dividends to the holders of our
common stock. Our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control that
may adversely affect the amount, timing, or nature of our future offerings. Thus, holders of our common stock bear the risk that our future
offerings may reduce the market price of our common stock and dilute their stockholdings in us.
The market price of our common stock could be negatively affected by sales of substantial amounts of our common stock in the public
markets.
The market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market, and the
perception that these sales could occur could also depress the market price of our common stock or impede our ability to raise equity capital.
Following our follow-on offering in November 2014, approximately 34.2% and 19.6% of our outstanding common stock remains beneficially
owned by Trimaran and Freeman Spogli, respectively, and able to be resold into the public markets in the future in accordance with the
requirements of Rule 144.
Lock-up periods associated with either our IPO or our follow-on offering have expired, along with all restrictions associated with stock held by
Trimaran, Freeman Spogli, and certain other stockholders. Shares beneficially owned by Trimaran and Freeman Spogli may be sold in the U.S.
public market, subject to prior U.S. registration, if required, or in reliance upon an exemption from U.S. registration, including, in the case of
shares held by affiliates or control persons, compliance with the volume and other restrictions of Securities Act Rules 144 and 701.
Pursuant to our stockholders agreement, LLC and, in certain instances, Freeman Spogli, may require us to file registration statements under the
Securities Act at our expense, covering resales of our common stock held by them or LLC or piggyback on a registration statement in certain
circumstances. Any such sales, or the prospect of any such sales, could materially impact the market price of our common stock. For a further
description of our stockholders agreement, see Item 13, “Certain Relationships and Related Transactions, and Director Independence—
Stockholders Agreement.”
The future issuance of additional common stock in connection with our incentive plan, acquisitions, or otherwise will dilute all other
stockholdings.
As of February 28, 2015, we had an aggregate of 158,177,310 shares of common stock authorized, unissued, and not reserved for incentive plan
issuance. We may issue all of these shares of common stock without any action or approval by our stockholders, subject to certain exceptions.
Any common stock issued in connection with our incentive plan, the exercise of outstanding stock options, or otherwise would dilute the
percentage ownership held by all other stockholders.
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