El Pollo Loco 2016 Annual Report Download - page 27

tousundercertainconditions.Althoughwedonotexpecttopaydividendsonourcommonstockfortheforeseeablefuture,ifweareunabletoobtainfundsfrom
oursubsidiaries,wemaybeunableto,orourboardmayexerciseitsdiscretionnotto,paydividends.
Underoursecuredrevolvingcreditfacility,Holdingsmaynotmakecertainpaymentssuchascashdividends,exceptthatitmay,interalia,(i)payupto$1million
peryeartorepurchaseorredeemqualifiedequityinterestsofHoldingsheldbyourpastorpresentofficers,directors,oremployees(ortheirestates)upondeath,
disability,orterminationofemployment,(ii)payundertheTRA,and,(iii)solongasnodefaultoreventofdefaulthasoccurredandiscontinuing,(a)makenon-
cashrepurchasesofequityinterestsinconnectionwiththeexerciseofstockoptionsbydirectorsandofficers,providedthatthoseequityinterestsrepresenta
portionoftheconsiderationoftheexercisepriceofthosestockoptions,(b)payupto$2.5millionperyearpursuanttostockoptionplans,employmentagreements,
orincentiveplans,(c)makeupto$5millioninotherrestrictedpaymentsperyear,and(d)makeotherrestrictedpayments,providedthatsuchpaymentswouldnot
cause,ineachcase,onaproformabasis,(x)itslease-adjustedconsolidatedleverageratiotoequalorexceed4.25timesand(y)itsconsolidatedfixedcharge
coverageratiotobelessthan1.75times.
We do not anticipate paying any dividends on our common stock in the foreseeable future.
Wedonotexpecttodeclareorpayanycashorotherdividendsintheforeseeablefutureonourcommonstock,becauseweintendtousecashflowgeneratedby
operationstogrowourbusiness.Oursecuredrevolvingcreditfacilityrestrictsourabilitytopaycashdividendsonourcommonstock.Wemayalsoenterintoother
creditagreementsorotherborrowingarrangementsinthefuturethatrestrictorlimitourabilitytopaycashdividendsonourcommonstock.
As a public company, we incur significant costs to comply with the laws and regulations affecting public companies, which could harm our business and results
of operations.
Asapubliccompany,wearesubjecttothereportingrequirementsoftheExchangeActandoftheSarbanes-OxleyActof2002,asamended(the“Sarbanes-Oxley
Act”),tothelistingrequirementsoftheNASDAQ,andtootherapplicablesecuritiesstatutesandregulations.Thesestatutesandregulationshaveincreased,and
willcontinuetoincrease,ourlegal,accounting,andfinancialcompliancecosts,andhavemade,andwillcontinuetomake,someactivitiesmoretime-consuming
andcostly,particularlyafterweceasetobean“emerginggrowthcompany,”asdefinedintheJOBSAct.Forexample,thesestatutesandregulationscouldmakeit
moredifficultandcostlyforustoobtaindirectorandofficerliabilityinsurance,andwemayberequiredtoacceptreducedpolicylimitsandcoverageortoincur
substantialcoststomaintainthesameorsimilarcoverage.Thesestatutesandregulationscouldalsomakeitmoredifficultforustoattractandretainqualified
individualstoserveonourboardofdirectors,onboardcommittees,orasexecutiveofficers.Ourmanagementandotherpersonneldevoteasubstantialamountof
timetocomplianceinitiatives.Asaresult,management’sattentionmaybedivertedfromotherbusinessconcerns,whichcouldharmourbusinessandoperating
results.Althoughwehavehiredadditionalemployeestocomplywiththeserequirements,wemayneedtohiremoreemployeesinthefuture,whichwillincrease
ourcostsandexpenses.
Ourmanagementteamandotherpersonneldevoteasubstantialamountoftimetonewcomplianceinitiatives,andwemaynotsuccessfullyorefficientlymanage
ourtransitiontobeingapubliccompany.Tocomplywiththerequirementsofbeingapubliccompany,includingtheSarbanes–OxleyAct,wemayneedto
undertakevariousactions,suchasimplementingnewinternalcontrolsandprocedures,andhiringaccountingorinternalauditstaff,whichwouldrequireustoincur
additionalexpenses,andcouldharmourresultsofoperations.
For as long as we are an emerging growth company, we will not be required to comply with certain reporting requirements, including those relating to
accounting standards and disclosure about our executive compensation, that apply to other public companies.
Wearean“emerginggrowthcompany,”asdefinedinSection2(a)oftheSecuritiesAct,asmodifiedbytheJOBSAct.Assuch,weareeligibletotakeadvantage
ofcertainexemptionsfromvariousreportingrequirementsthatareapplicabletootherpubliccompaniesthatarenot“emerginggrowthcompanies,”including,but
notlimitedto,notbeingrequiredtocomplywiththeauditorattestationrequirementsofSection404(b)oftheSarbanes–OxleyAct,reduceddisclosureobligations
regardingexecutivecompensationinourperiodicreportsandproxystatements,andexemptionsfromtherequirementsofholdinganon-bindingadvisoryvoteon
executivecompensationandofstockholderapprovalofanygoldenparachutepaymentsnotpreviouslyapproved.Wemaytakeadvantageofsomeofthese
exemptions.Ifwedo,wedonotknowifsomeinvestorswillfindourcommonstocklessattractiveasaresult.Theresultmaybealess-activetradingmarketfor
ourcommonstockandincreasedstockpricevolatility.
Inaddition,Section107oftheJOBSActprovidesthatan“emerginggrowthcompany”cantakeadvantageoftheextendedtransitionperiodprovidedin
Section7(a)(2)(B)oftheSecuritiesActforcomplyingwithneworrevisedaccountingstandards.Inotherwords,an“emerginggrowthcompany”candelaythe
adoptionofcertainaccountingstandardsuntilthosestandardswouldotherwiseapplytoprivatecompanies.Wehaveirrevocablyelectednottoavailourselvesof
thisexemptionand,therefore,wewillbesubjecttothesameneworrevisedaccountingstandardsasotherpubliccompaniesthatarenotemerginggrowth
companies.
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