Item 5.0
2
.
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
.
On
November
29
, 2017
,
Chipotle Mexican Grill, Inc.
announced that Steve Ells, Chairman and C
hief
E
xecutive
O
fficer
of Chipotle
—
and the founder of the
c
ompany in 1993
—
will
cease to serve
as Chief Executive Officer, and
be appointed
Executive Chairman
of Chipotle’s Board of Directors,
effective as of
the completion of a search to identify
,
and appoint
ment of,
a new C
hief Executive Officer
of the
c
ompany
.
In connection with the planned transition, Chipotle and Mr. Ells entered into
an Executive Chairman Agreement,
dated November
28
, 2017.
The agreement provides that, upon his appointment as Executive Chairman, Mr. Ells will have an annualized base salary for the 2018 fiscal year of $900,000, a target annual bonus opportunity of 100% of his base salary, and a maximum annual bonus opportunity of 225% of his base salary
.
In addition, on or about January 2, 2018
and subject to his continued employment through such date
, the
c
ompany will make Mr. Ells a one-time grant of a stock option to purchase 175,000 shares of
Chipotle
common stock having a per share exercise price equal to the greater of $500 and the fair market value of a share of common stock on the date of grant. The stock option will vest on the date that is 18 months following the date of grant, subject to
(1
) Mr. Ells
’s
continued employment through the vesting date,
(2
) the appointment of a new Chief Executive Officer prior to
the vesting date, and (3
)
accelerated vesting upon Mr. Ells’s earlier termination of employment by
Chipotle
without cause, by Mr. Ells with good reason, or due to his death or disability. The stock option, if vested, will first be exercisable on January 4, 2021, and will expire on January 4, 2022.
Under the agreement, Mr. Ells has agreed that, while he is employed
by Chipotle
and for a two-year period thereafter, he will not
,
(a)
directly or indirectly, own, manage, operate, control, be employed
,
or engaged in any capacity (whether or not for compensation) by, or render services, advice, or assistance in any capacity to, a busin
ess competing with
Chipotle
in the continental United States
, (b) recruit, hire, or solicit
Chipotle’s
employees, or (c) induce any of
Chipotle’s
suppliers, licensees, or other business relations to cease doing business with
Chipotle
or interfere with the relationship between any such supplier, licensee, or other business relation and
Chipotle
.
The agreement also includes customary confidentiality provisions and a mutual non
-
disparagement covenant.
If Mr. Ells’s employment is terminated by
Chipotle
without cause or by Mr. Ells with good reason, then, subject to his continued compliance with the restrictive covenants set forth in the agreement, the
c
ompany will continue to pay Mr. Ells his then-current base salary during the applicable restricted period.
The foregoing description of the
agreement
with Mr.
Ells
does not purport to be complete and is qualified in its entirety by reference to the full text of the
Executive Chairman Agreement
, which is attached hereto as Exhibit
10.1 and incorporated herein by reference.
A copy of the press release issued by the
c
ompany
announcing the
aforementioned transition
is attached hereto as Exhibit
99.
1
.