Item 5.0
2
.
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
.
On
February
11
, 201
8
,
Chipotle Mexican Grill, Inc.
(“Chipotle”)
entered into an
offer letter
with
Brian R. Niccol
for
Mr.
Niccol
to become Chief Executive Officer and a member of the Board of Directors of Chipotle
on
March
5
, 2018.
Mr. Niccol
,
43
,
previously
served as Chief Executive Officer of Taco Bell, a division of Yum! Brands, Inc., since 2015. He joined Taco Bell in 2011 as Chief Marketing and Innovation Officer and served as President of Taco Bell from 2013 to 2014. Prior to his service at Taco Bell, from 2005 to 2011, he served in various executive positions at Pizza Hut, another division of Yum! Brands, including General Manager and Chief Marketing Officer. Before joining Yum! Brands, Mr. Niccol spent
10
years at Procter & Gamble Co., serving in various brand management positions. Mr. Niccol holds an undergraduate degree from Miami University and an MBA from the University of Chicago Booth School of Business.
He
serves
as a director of Harley-Davidson, Inc. (NYSE: HOG).
There are no arrangements or understandings between Mr.
Niccol
and any other persons pursuant to which Mr.
Niccol
was selected as Chief Executive Officer
or as a member of the Board of Directors
. There are no family relationships between Mr.
Niccol
and any director, executive officer, or person nominated or chosen by
Chipotle
to become a director or executive officer.
Chipotle
has not entered into any transactions
in which
Mr.
Niccol
may have a direct or indirect
material
interest
that would require disclosure pursuant to Item 404(a) of Regulation S-K under the Securities Exchange Act of 1934.
The
offer letter
provides that Mr.
Niccol
will have an annualized base salary of $1.2 million, a target annual bonus opportunity for the 2018 fiscal year of 150% of his base salary, and a maximum annual bonus opportunity for the 2018 fiscal year of 225% of his base salary, and further provides that payment of his 2018 target annual bonus is guaranteed, subject to his continued employment through the date annual bonuses are paid to Chipotle’s senior executives generally. In addition, the
offer letter
provides that on or about March 5, 2018 and subject to his commencing employment with the company, Mr.
Niccol
will receive
the following
equity awards
:
(i)
an annual equity award grant for 2018 consisting of (A)
performance shares with a target value of $3.0 million as of the grant date,
which will have
the same terms and conditions as applicable to
annual 2018
performance share awards granted to senior executives of
Chipotle
generally
;
and
(
B
)
stock appreciation rights with a grant date value of $2.0 million and an exercise price equal to the closing price of Chipotle’s common stock on the grant date,
which will
vest in equal amounts on the first, second and third anniversaries of the grant date
, subject to possible acceleration
of vesting
in the event of a termination of employment by Chipotle without cause or by Mr.
Niccol
for good reason,
and a seven
-
year term; (ii)
a
sign-on
award consisting of
stock appreciation rights with a grant date value of $4.0 million and an exercise price equal to 125% of the closing price of Chipotle’s common stock on the grant date,
which will
vest in equal amounts on the first, second and third anniversaries of the grant date
, subject to possible acceleration
of vesting
as previously described,
and a seven
-
year term;
and
(i
ii
)
a make-whole award consisting of
(A)
stock appreciation rights with a grant date value of $
9
.
6
5
million and an exercise price equal to 110% of the closing price of Chipotle’s common stock on the grant date,
which will vest
in equal amounts on the first, second and third anniversaries of the grant date
, subject to possible acceleration
of vesting
as previously described,
and a seven
-
year term; and (
B
)
restricted stock units with a
grant date
value of $
9
.
6
5 million,
which will vest
in equal amounts on the
first,
second and third anniversaries of the grant date
, subject to possible acceleration
of vesting
as previously described
. The
offer letter
further provides that if Mr.
Niccol
’s employment is terminated by Chipotle without cause, or by Mr.
Niccol
with good reason,
in either case
prior to the
fifth
anniversary of the commencement of his employment with the company, Mr.
Niccol
will be entitled to a severance payment of two times the sum of his annual base salary and target annual bonus opportunity
(or, if higher,
the amount of the annual bonus paid to
him
for the fiscal
year immediately preceding the fiscal year in which such termination of employment occurs
)
. The
offer letter
also entitles Mr.
Niccol
to employee benefits generally offered by Chipotle from time to time
, and further provides for the payment to Mr.
Niccol
of a $1.0
million signing bonus, which must be repaid if Mr.
Niccol
’s employment is terminated
by Chipotle
for cause or by Mr.
Niccol
without good reason, in either case prior to the first anniversary of
his
start date
with Chipotle
.
Under the
offer letter
, Mr.
Niccol
has agreed that, (i)
while he is employed by Chipotle and for a one-year period thereafter, he will not
, 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 operating fast-casual, quick-service or casual dining restaurants
in the continental United States
where Chipotle or any of its affiliates conduct business, and (ii)
while he is employed by Chipotle and for a two-year period thereafter, he will not (a)
solicit or
hire Chipotle’s employees, or (b) 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
offer letter
also includes customary confidentiality and
mutual
non-disparagement provisions.
The foregoing description of the
offer letter
does not purport to be complete and is qualified in its entirety by reference to the full text of the
offer letter
, which is attached hereto as Exhibit
10.1 and incorporated herein by reference.
A copy of the press release issued by
Chipotle
announcing
the appointment of Mr.
Niccol
is attached hereto as Exhibit
99.
1
.