El Pollo Loco 2016 Annual Report Download - page 26

affirmativevoteofamajorityofourcommonstock,and(ii)stockholdersrepresenting40%orgreaterownershipmaycausespecialstockholdermeetingstobe
called.
Thisconcentrationofownershipmaydelay,deter,orpreventactsthatwouldbefavoredbyourotherstockholders.TheinterestsofTrimaranandFreemanSpogli
maynotalwayscoincidewithourinterestsortheinterestsofourotherstockholders.Thisconcentrationofownershipmayalsohavetheeffectofdelaying,
deterring,orpreventingachangeincontrolofus.Also,TrimaranandFreemanSpoglimayseektocauseustotakecoursesofactionthat,intheirjudgments,could
enhancetheirinvestmentsinus,butthatmightinvolveriskstoourotherstockholdersoradverselyaffectusorourotherstockholders.Asaresult,themarketprice
ofourcommonstockcoulddecline,orstockholdersmightnotreceiveapremiumoverthethen-currentmarketpriceofourcommonstockuponachangeincontrol.
Inaddition,thisconcentrationofownershipmayadverselyaffectthetradingpriceofourcommonstock,becauseinvestorsmayperceivedisadvantagesinowning
sharesofacompanywithsignificantstockholders.
The interests of Trimaran and Freeman Spogli may conflict with ours or our stockholders’ in the future.
TrimaranandFreemanSpogliengageinarangeofinvestingactivities,includinginvestmentsinrestaurantsandotherconsumer-relatedcompaniesinparticular.In
theordinarycourseoftheirbusinessactivities,TrimaranandFreemanSpoglimayengageinactivitieswheretheirinterestsconflictwithourinterestsorthoseof
ourstockholders.OuramendedandrestatedcertificateofincorporationprovidesthatnoneofLLCoranyofitsofficers,directors,employees,agents,shareholders,
members,partners,principals,affiliatesandmanagers(including,interalia,TrimaranandFreemanSpogli)hasadutytorefrainfromengaging,directlyor
indirectly,inthesamebusinessactivitiesorsimilarbusinessactivitiesorlinesofbusinessinwhichweoperate.TrimaranandFreemanSpoglialsomaypursue
acquisitionopportunitiesthatmaybecomplementarytoourbusiness,and,asaresult,thoseacquisitionopportunitiesmaynotbeavailabletous.Inaddition,
TrimaranandFreemanSpoglimayhaveaninterestinpursuingacquisitions,divestitures,andothertransactionsthat,intheirjudgment,couldenhancetheir
investmentinus,eventhoughthosetransactionsmightinvolveriskstoyou,suchasdebt-financedacquisitions.
We are not yet subject to all of the corporate governance rules of the NASDAQ.
Atthetimeofourinitialpublicoffering,weweremajority-ownedbyLLC,classifyingusasacontrolledcompanyunderNASDAQrules.NASDAQrulesexempt
controlledcompaniesfromrulesthatrequire(i)themajorityofthemembersoftheirboardsofdirectorstobeindependentand(ii)compensationcommittees,and
nominatingandcorporategovernancecommittees,tobecomprisedentirelyofindependentdirectors.
OnMay19,2015,LLCsoldenoughstocktodropbelow50%butremainabove40%ownershipofourcommonstock.Accordingly,wearenolongeracontrolled
companyunderNASDAQrules.Acompanythathasceasedtobeacontrolledcompanyispermittedtophaseinitsindependentnominationandcompensation
committeesandmajorityindependentboardonthesamescheduleasifthecompanywerenewlylistedinconjunctionwithitsinitialpublicoffering.Accordingly,
(i)atthetimeofthesale,onememberofeachcommitteewasrequiredtobeindependent,(ii)within90daysofthesale(i.e.,byAugust17,2015),amajorityof
eachcommitteewasrequiredtobeindependent,(iii)withinoneyearofthesale(i.e.,byMay19,2016),allcommitteemembersmustbeindependent,and(iv)
withinoneyearofthesale,amajorityofourboardmustbeindependent.
Ourcontrolledcompanystatusdidnotmodifytheindependencerequirementsforourauditcommittee,andwecomplywiththerequirementsoftheSarbanes–
OxleyActof2002andtheNASDAQbyhavinganauditcommitteecomprisedentirelyofindependentdirectors.
Currently,threeofourdirectorsareindependent.Allauditcommitteemembersareindependent.Twoofthreecompensationcommitteemembersareindependent.
Twoofthreenominatingandcorporategovernancecommitteemembersareindependent.
Duringourphase-inperiod,wemaynothavethemajority-independentboardandthefullyindependentcommitteescontemplatedbytheNASDAQrules.
Accordingly,youmaynotreceivethebenefitstocorporategovernancethatthesewouldbestow.
We are a holding company with no operations, and we rely on our operating subsidiaries to provide us with the funds necessary to meet our financial
obligations and to pay dividends.
Weareaholdingcompanywithnomaterialdirectoperations.Ourprincipalassetsaretheequityintereststhatweindirectlyholdinouroperatingsubsidiary,EPL,
whichownsouroperatingassets.Asaresult,wearedependentonloans,dividends,andotherpaymentsfromEPL,ouroperatingcompanyandindirectwholly
ownedsubsidiary,andfromEPLIntermediate,Inc.(“Intermediate”),ourdirectwhollyownedsubsidiary,togeneratethefundsnecessarytomeetourfinancial
obligationsandtopaydividendsonourcommonstock.Oursubsidiariesarelegallydistinctfromusandmaybeprohibitedorrestrictedfrompayingdividendsor
otherwisemakingfundsavailable
23