El Pollo Loco 2016 Annual Report Download - page 29

Future offerings of debt or equity securities by us may adversely affect the mar ket price of our common stock.
Inthefuture,wemayattempttoobtainfinancing,ortofurtherincreaseourcapitalresources,byissuingadditionalsharesofourcommonstockorbyofferingother
equitysecurities,ordebt,includingsenioror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.Nolock-upagreementspresentlyare
ineffect.LLCpresentlyownsapproximately43.7%ofouroutstandingcommonstockandcouldsellstockpubliclyeitherifthestockwereregisteredorifthe
exemptionrequirementsofRule144weresatisfied.
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.
The future issuance of additional common stock in connection with our incentive plan, acquisitions, or otherwise will dilute all other stockholdings.
AsofFebruary29,2016,wehadanaggregateof158,669,405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.
Delaware law, our organizational documents, and our existing and future debt agreements may impede or discourage a takeover, depriving our investors of the
opportunity to receive a premium for their shares.
WeareaDelawarecorporation,andtheanti-takeoverprovisionsofDelawarelawimposevariousimpedimentstotheabilityofathirdpartytoacquirecontrolof
us,evenifachangeofcontrolwouldbebeneficialtoourexistingstockholders.Inaddition,provisionsofouramendedandrestatedcertificateofincorporationand
by-lawsmaymakeitdifficultfor,orprevent,athirdpartyfromacquiringcontrolofuswithouttheapprovalofourboardofdirectors.Amongotherthings,these
provisions:
·provideforaclassifiedboardofdirectorswithstaggeredthree-yearterms;
·donotpermitcumulativevotingintheelectionofdirectors,whichwouldallowaminorityofstockholderstoelectdirectorcandidates;
·delegatethesolepowertoamajorityoftheboardofdirectorstofixthenumberofdirectors;
·providethepowertoourboardofdirectorstofillanyvacancyonourboardofdirectors,whethersuchvacancyoccursasaresultofanincreaseinthe
numberofdirectorsorotherwise;
·authorizetheissuanceof“blankcheck”preferredstockwithoutanyneedforactionbystockholders;
·eliminatetheabilityofstockholderstocallspecialmeetingsofstockholders;
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