Shake Shack 2016 Annual Report Download - page 39

Table of Contents
We will continue to incur relatively outsized costs as a result of becoming a public company and in the administration of our complex organizational structure.
As a newly public company, we will incur significant legal, accounting, insurance and other expenses that we did not incur as a private company, including costs
associated with public company reporting requirements. We have also incurred and will continue to incur costs associated with compliance with the Sarbanes-
Oxley Act and related rules implemented by the Securities and Exchange Commission ("SEC"). The expenses incurred by public companies generally for reporting
and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make
some activities more time-consuming. These laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including
director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or
similar coverage. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines,
sanctions and other regulatory action and potentially civil litigation.
Our organizational structure, including our Tax Receivable Agreement, is very complex and we require the expertise of various tax, legal and accounting advisers
to ensure compliance with applicable laws and regulations. We have and will continue to incur significant expenses in connection with the administration of our
organizational structure. As a result, our expenses for legal, tax and accounting compliance may be significantly greater than other companies of our size that do
not have a similar organizational structure or a tax receivable agreement in place.
Our anti-takeover provisions could prevent or delay a change in control of our Company, even if such change in control would be beneficial to our
stockholders.
Provisions of our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law could discourage,
delay or prevent a merger, acquisition or other change in control of our Company, even if such change in control would be beneficial to our stockholders. These
provisions include:
▪authorizing the issuance of "blank check" preferred stock that could be issued by our Board of Directors to increase the number of outstanding shares and
thwart a takeover attempt;
▪ establishing a classified board of directors so that not all members of our Board of Directors are elected at one time;
▪ the removal of directors only for cause;
▪ prohibiting the use of cumulative voting for the election of directors;
▪ limiting the ability of stockholders to call special meetings or amend our bylaws;
▪ requiring all stockholder actions to be taken at a meeting of our stockholders; and
▪ establishing advance notice and duration of ownership requirements for nominations for election to the Board of Directors or for proposing matters that
can be acted upon by stockholders at stockholder meetings.
These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to
take other corporate actions you desire. In addition, because our Board of Directors is responsible for appointing the members of our management team, these
provisions could in turn affect any attempt by our stockholders to replace current members of our management team.
In addition, the Delaware General Corporation Law (the "DGCL"), to which we are subject, prohibits us, except under specified circumstances, from engaging in
any mergers, significant sales of stock or assets or business combinations with any stockholder or group of stockholders who owns at least 15% of our common
stock.
37 | Shake Shack Inc. Form 10-K