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CHIPOTLE MEXICAN GRILL INC filed this Form 8-K on 12/01/2017
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12117_8K_Executive Transition



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 8-K

 



CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 28, 2017

 



CHIPOTLE MEXICAN GRILL, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

 

 

Delaware

 

1-32731

 

84-1219301

(State or other jurisdiction of

incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

1401 Wynkoop Street, Suite 500

Denver, CO 80202

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (303) 595-4000

Not Applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 



 


 









Item 5.02.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 Chief Executive Officer of Chipotleand the founder of the company in 1993will 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 appointment of, a new Chief Executive Officer of the company.



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 company 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 (3accelerated 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 business 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 ChipotleThe 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 company 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 company announcing the aforementioned transition is attached hereto as Exhibit 99.1.







Item 9.01.Financial Statements and Exhibits. 



Exhibit Index





SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chipotle Mexican Grill, Inc.

 

 

 

 

December 1, 2017

 

 

 

By:

 

/s/ Jack Hartung

 

 

 

 

 

 

Name:

  

Jack Hartung

 

 

 

 

 

 

Title:

  

Chief Financial Officer


















12117_Exhibit 101_Executive Chairman Agreement

EXHIBIT 10.1

Executive Chairman Agreement

THIS EXECUTIVE CHAIRMAN AGREEMENT (this “Agreement”), dated as of November 28, 2017, is entered into by and between Chipotle Mexican Grill, Inc., a Delaware corporation (the “Company”), and Steve Ells (the “Executive”).

WHEREAS, the Executive currently serves as (a) Chief Executive Officer of the Company (“CEO”), and (b) Chairman of the Board of Directors of the Company (the “Board”);

WHEREAS, the Board and the Executive have mutually determined that the Executive shall transition to the role of Executive Chairman of the Board, effective as of and subject to the Company’s appointment of a new CEO (the “Appointment” and, the effective date of the Appointment, the “Appointment Date”);

WHEREAS, between the date hereof and the Appointment Date, the Executive shall continue to serve as CEO and shall continue to be eligible to receive the salary and cash and non-cash benefits provided to the Executive as of the date hereof in accordance with the terms and conditions thereof, other than as stated herein; and

WHEREAS, the Company and the Executive now desire to enter into a mutually satisfactory arrangement concerning, among other things, the Executive’s role as Executive Chairman following the Appointment Date, post-employment restrictive covenants to which the Executive will be subject, and other matters related thereto.

NOW, THEREFORE, in consideration of the premises and the mutual promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive hereby agree as follows:

1. Appointment as Executive Chairman.

(a) Appointment Date.  Effective as of and subject to the occurrence of the Appointment Date and the Executive’s continued employment through the Appointment Date, the Executive shall continue to be employed by the Company as Executive Chairman of the Board and shall cease to be the CEOThe Executive acknowledges and agrees that the Executive’s appointment as Executive Chairman shall not constitute Good Reason (as defined in Exhibit A hereto) or a similar term of like meaning for purposes of any employee benefit plans, programs, agreements, or arrangements of the Company.

(b) Hiring of CEO.  The Company and the Executive shall each use reasonable best efforts to identify and hire a CEO promptly following the date hereof.  The new CEO will report to the Board and have ultimate authority with respect to all business operations of the Company as set forth in the Bylaws of the Company as in effect from time to time.

(c) Reporting.  While serving as Executive Chairman, the Executive shall report to the Board.

 


 

2. Compensation.

(a) Base SalaryPrior to the Appointment Date and subject to the Executive’s continued employment as CEO, the Company shall continue to pay the Executive his base salary as in effect as of the date hereof in accordance with the Company’s regular payroll practicesEffective as of the Appointment Date and subject to the Executive’s continued employment as Executive Chairman, the Company shall pay the Executive a base salary for the Company’s 2018 fiscal year at an annualized rate of $900,000, payable in accordance with the Company’s regular payroll practices.    The Executive’s base salary as in effect from time to time is referred to herein as “Base Salary.”  Following the 2018 fiscal year, the Base Salary shall be determined by the Compensation Committee of the Board (the “Compensation Committee”) in its sole discretion.

(b) Annual BonusFollowing the Appointment Date and subject to the Executive’s continued employment as Executive Chairman, the Executive shall be eligible to receive an annual cash bonus (the “Annual Bonus”) under the Company’s 2014 Cash Incentive Plan (as it may be amended or supplemented from time to time, the “Cash Incentive Plan”), with a target bonus opportunity of 100% of the Base Salary and a maximum bonus opportunity equal to 225% of the Base Salary.  The actual amount of the Executive’s Annual Bonus shall be determined by the Compensation Committee based on the achievement of the applicable performance goals in accordance with the Cash Incentive Plan.  Any earned Annual Bonus shall be paid to the Executive in accordance with the Cash Incentive Plan.  Following the 2018 fiscal year, any Annual Bonus shall be determined by the Compensation Committee of the Board in its sole discretion.

(c) Prorated Payments.    For the year in which the Appointment Date occurs, the Executive’s Base Salary and Annual Bonus shall be prorated as between amounts determined for his service as CEO and his service as Executive Chairman, based on the portion of such year served in each such capacity.

(d) Special Option Grant.  On or about January 2, 2018 (the “Grant Date”), the Company shall make a grant to the Executive of a stock option (the “Stock Option”) to purchase 175,000 shares of common stock, par value $0.01 per share, of the Company (“Common Stock”), having an exercise price per share equal to the greater of  $500 and  the Fair Market Value (as defined in the Amended and Restated Chipotle Mexican Grill, Inc. 2011 Stock Incentive Plan (the “Equity Plan”)) of a share of Common Stock on the Grant Date, subject to the Executive’s continued employment with the Company through the Grant Date.  The Stock Option shall be granted under, and be subject to the terms and conditions of, the Equity Plan and Section 4The Stock Option shall vest on the date that is 18 months following the Grant Date (the “Vesting Date”), subject to  the Executive’s continued employment with the Company through the Vesting Date and  the occurrence of the Appointment Date prior to the Vesting Date;  provided,  however, that, if the Executive’s employment is terminated prior to the Vesting Date by the Company without Cause (as defined in Exhibit A hereto), by the Executive with Good Reason, or due to the Executive’s death or disability, then, subject, in the case of any such termination of employment other than due to the Executive’s death, to the Executive’s execution and delivery of a customary general release of claims in favor of the Company and its affiliates in substantially the form used by the Company for senior executives

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generally (the “Release”) (and non-revocation thereof) within the time period set forth therein, the Stock Option shall become fully vested as of the date on which the Release becomes non-revocable.  The Stock Option (1) if vested, shall first be exercisable on January 4, 2021, (2) shall expire  on January 4, 2022, (3) in the event of a change in control of the Company shall be treated on a basis no less favorable than that generally applicable to stock options held by other senior executives of the Company, and (4) shall otherwise have terms and conditions (excluding vesting and retirement terms and conditions) that are consistent with stock options granted to senior executives of the Company.    Subject to applicable law and the Company’s Insider Trading Policy as in effect from time to time, the Company shall permit the Executive to exercise the Stock Option pursuant to net physical settlement or other method of cashless exercise.

(e) Benefits; PerquisitesWhile serving as Executive Chairman, the Executive shall  be provided with retirement benefits, health and welfare benefits, fringe benefits, and perquisites that are consistent with the benefits and perquisites provided to the Executive as of the date hereof and  be entitled to use of a  private aircraft for valid business purposes.

(f) Expense Reimbursement.  While the Executive is serving as Executive Chairman, the Company shall reimburse the Executive for all reasonable expenses incurred by him in the performance of his duties under this Agreement in accordance with the Company’s policies applicable to the Company’s senior executives from time to time.    

3. Restrictive Covenant Payment.  If the Executive’s employment with the Company is terminated by the Company without Cause or by the Executive with Good Reason, then, subject to the Executive’s continued compliance with Section 4, the Company shall continue to pay the Executive the Base Salary at the rate in effect as of the date of such termination of employment during the Restricted Period (as defined below) in accordance with the Company’s regular payroll practices (collectively, the “Restrictive Covenant Payments”).    

4. Restrictive Covenants.

(a) Confidential Information.  The Executive agrees to hold the Confidential Information (as defined below) in the strictest of confidence and further agrees that, during the Executive’s employment and at all times after the Executive’s termination of employment for any reason, the Executive shall not, in any capacity, directly or indirectly, use, disclose, publish, or make available to any person or entity any Confidential Information, except such as may be necessary on behalf of the Company, on a “need to know” basis, in the ordinary course of the Executive’s employment with the Company.  Notwithstanding the foregoing, the confidentiality obligations under this Section 4(a) shall not apply to any  information that is now in the public domain or subsequently enters the public domain by publication or otherwise through no action or fault of the Executive; or  information required to be disclosed by law or by a government agency or necessary to defend or prosecute a claim brought against the Executive.  For purposes of this Agreement, “Confidential Information” means the Company’s and its affiliates’ trade secrets and other secret or confidential information, knowledge, or data concerning the Company’s and its affiliates’ businesses, strategies, operations, clients, customers, prospects, financial affairs, organizational and personnel matters, policies, procedures, and other nonpublic matters, or concerning those of third parties.

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(b) Noncompetition.  The Executive acknowledges that, in the course of his employment with and service to the Company and its affiliates (including their predecessor and any successor entities), the Executive has become familiar with Confidential Information, and that the Executive’s employment with the Company has been of special, unique, and extraordinary value to the Company and its affiliates.  Therefore, the Executive agrees that, during the Executive’s employment with the Company and for the two-year period commencing on the date on which the Executive’s employment terminates for any reason (the “Restricted Period”), the Executive shall not, directly or indirectly, own, manage, operate, control, be employed by (whether as an employee, director, consultant, independent contractor, or otherwise, and whether or not for compensation), or render services, advice, or assistance in any capacity to, a Competing Business (as defined below) anywhere in the continental United States where the Company or any of its affiliates conducts business.  For purposes of this Agreement, a “Competing Business” means any person, firm, corporation, or other entity, in whatever form, that operates fast-casual, quick-service, or casual dining restaurants (excluding casual dining restaurants that (i) provide table service, (ii) have an average entrée price of at least two times the average entrée price of the Company, and (iiioperate in five or fewer units).  Nothing herein shall prohibit the Executive from being a passive owner of not more than 1% of the outstanding equity interest in any entity that is publicly traded, so long as the Executive has no active participation in the business of such entity.

(c) Nonsolicitation.  The Executive agrees that, during the Restricted Period, the Executive shall not  recruit or hire or attempt to recruit or hire, directly or by assisting others, any individual who is, on the date on which the Executive’s employment terminates for any reason (the “Termination Date”) (or was, during the six-month period prior to the Termination Date), employed by the Company or its affiliates to terminate or refrain from renewing or extending such employment or to become employed by or become a consultant to any other individual or entity other than the Company or its affiliates,  contact or communicate with any employees of the Company or its affiliates for the purpose of inducing other employees to terminate their employment with the Company or its affiliates, or  induce or attempt to induce any supplier, licensee, or other business relation of the Company or its affiliates to cease doing business with the Company or its affiliates, or in any way interfere with the relationship between any such supplier, licensee, or business relation, on the one hand, and the Company or its affiliates, on the other hand.

(d) Nondisparagement.  The Executive shall not at any time make any written or oral statements, representations, or other communications that disparage the business or reputation of the Company or any of its affiliates or any officer, director, employee, stockholder, agent, or representative of, or consultant to, the Company or any of its affiliates, other than to the extent necessary to respond in an appropriate and truthful manner to any legal process or give appropriate and truthful testimony in a legal or regulatory proceeding.  The Company shall instruct its officers and directors not to make any written or oral statements, representations, or other communications that disparage the business or reputation of the Executive, other than to the extent necessary to respond in an appropriate and truthful manner to any legal process or give appropriate and truthful testimony in a legal or regulatory proceeding.    Nothing in this Section 4(d) is intended to  prevent either party from conferring in confidence with his or its legal representatives, or  prevent either party from responding publicly to incorrect,

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disparaging, or derogatory public statements to the extent reasonably necessary to correct or refute such statements.

(e) Remedies.  The Executive acknowledges and agrees that:   the purpose of the restrictive covenants set forth in this Section 4 is to protect the goodwill and trade secrets and other Confidential Information of the Company; and  because of the nature of the business in which the Company and its affiliates are engaged and because of the nature of the trade secrets and other Confidential Information to which the Executive has access, it would be impractical and excessively difficult to determine the actual damages of the Company if the Executive breached the restrictive covenants set forth in this Section 4.  The Executive understands that the restrictive covenants set forth in this Section 4 may limit the Executive’s ability to earn a livelihood in a Competing Business.  The Executive acknowledges that the Company would be irreparably injured by a violation of this Section 4 and that it is impossible to measure in money the damages that will accrue to the Company by reason of a failure by the Executive to perform any of the Executive’s obligations under this Section 4.  Accordingly, if the Company institutes any action or proceeding to enforce any of the provisions of this Section 4, to the extent permitted by applicable law, the Executive hereby waives the claim or defense that the Company has an adequate remedy at law or that such covenants are unfair or unreasonable, are not supported by sufficient or valid consideration, or impose any greater restraint than is necessary to protect the goodwill and other legitimate business interests of the Company, and the Executive shall not urge any such claim or defense in any such action or proceeding.  In the event of the Executive’s breach of this Section 4 (which breach, if curable, is not cured within 30 days following the Company’s written notification to the Executive of such breach (the “Cure Period”)),   the Stock Option, if outstanding and unexercised as of expiration of the applicable Cure Period (if any), shall be cancelled without consideration effective as of the expiration of the Cure Period;  the Executive shall be required to repay to the Company any shares of Common Stock received by the Executive upon exercise of the Stock Option within 12 months prior to the expiration of the Cure Period (or a cash amount equal to the amount received by the Executive upon the sale of any such shares of Common Stock), and  the Company shall be entitled to cease payment of the Restrictive Covenant Payments (if any).  The Company shall respond promptly to any inquiry by the Executive regarding whether a proposed action to be taken by the Executive would constitute a breach of this Section 4In addition to the foregoing remedies and other remedies that may be available, the Company shall be entitled to specific performance and other injunctive relief, without the requirement to post a bond.  If any portion of the covenants set forth in this Section 4 is finally held to be invalid, illegal, or unenforceable (whether in whole or in part), such covenant shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality, or unenforceability and the remaining covenants shall not be affected thereby.

5. Section 409A.

(a) The intent of the parties is that payments and benefits under this Agreement comply with, or be exempt from, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations and guidance promulgated thereunder, and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.  For purposes of Section 409A of the Code, the Executive’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive

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a series of separate and distinct payments.  In no event may the Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement that is considered nonqualified deferred compensation.

(b) With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A of the Code,   the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit,  the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, and  such payments shall be made on or before the last day of the Executive’s taxable year following the taxable year in which the expense was incurred.

(c) Notwithstanding any other provision of this Agreement to the contrary, if the Executive is considered a “specified employee” for purposes of Section 409A of the Code (as determined in accordance with the methodology established by the Company as in effect on the Termination Date), any payment that constitutes nonqualified deferred compensation within the meaning of Section 409A of the Code that is otherwise due to the Executive under this Agreement during the six-month period following his separation from service (as determined in accordance with Section 409A of the Code) on account of his separation from service shall be accumulated and paid to the Executive on the first business day of the seventh month following his separation from service (the “Delayed Payment Date”).  The Executive shall be entitled to interest on any delayed cash payments from the date of termination to the Delayed Payment Date at a rate equal to the applicable federal short-term rate in effect under Section 1274(d) of the Code for the month in which the Executive’s separation from service occurs.  If the Executive dies during the period between the Termination Date and the Delayed Payment Date, the amounts and entitlements delayed on account of Section 409A of the Code shall be paid to the personal representative of his estate on the first to occur of the Delayed Payment Date or 30 days after the date of the Executive’s death.

6. Miscellaneous.

(a) Successors and Assigns.  This Agreement shall be binding upon, inure to the benefit of and be enforceable by, as applicable, the Company and the Executive and their respective personal or legal representatives, executors, administrators, successors, assigns, heirs, distributees, and legatees.  This Agreement is personal in nature and the Executive shall not, without the written consent of the Company, assign, transfer, or delegate this Agreement or any rights or obligations hereunder.

(a) Governing Law; Jurisdiction; Venue.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to such state’s laws and principles regarding the conflict of laws.  The Company and the Executive  agree that any suit, action, or legal proceeding with respect to this Agreement shall be brought in the courts of record of the State of New York in New York County or the court of the United States, Southern District of New York;   consent to the jurisdiction of each such court in any suit, action, or proceeding; and  waive any objection that they may have to the laying of venue of any such suit, action, or proceeding in any of such courts.

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(b) Amendment; Entire Agreement.  No provision of this Agreement may be amended, modified, waived, or discharged unless such amendment, modification, waiver, or discharge is agreed to in writing and such writing is signed by the Company and the Executive.  From and after the date hereof, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof, except as otherwise explicitly provided herein.  The Company acknowledges and confirms its obligations to indemnify the Executive pursuant to that certain Indemnification Agreement, dated as of April 26, 2007, by and between the Company and the Executive.

(c) Severability.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and this Agreement shall be construed as if such invalid or unenforceable provision were omitted (but only to the extent that such provision cannot be appropriately reformed or modified).

(d) Waiver of Breach.  No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, shall operate or be construed as a waiver of any subsequent breach by such other party of any similar or dissimilar provisions and conditions at the same or any prior or subsequent time.  The failure of any party hereto to take any action by reason of such breach will not deprive such party of the right to take action at any time while such breach continues.

(e) Notice.  All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

if to the Executive:

At the address most recently on the books and records of the Company.

if to the Company:

Chipotle Mexican Grill, Inc.
1401 Wynkoop Street
Suite 500
Denver, Colorado 80202
Attention:  General Counsel

with a copy (which shall not constitute notice) to:

Messner Reeves LLP
1430 Wynkoop Street
Suite 300
Denver, Colorado 80202
Attention:  Bryant “Corky” Messner, Esq.

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or to such other address as either party shall have furnished to the other in writing in accordance herewith.  Notice and communications shall be effective when actually received by the addressee.

(f) Withholding.  The Company may withhold from any amounts payable under this Agreement such federal, state, local, or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.  In addition, the Company may report the value of any benefits provided under this Agreement to the applicable tax authorities as required by any applicable law or regulation.

(g) Headings.  The headings of this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

(h) Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first above written.

CHIPOTLE MEXICAN GRILL, INC.


By: _/s/ Jack Hartung______________________
     Name:  Jack Hartung
     Title:  Chief Financial Officer

EXECUTIVE

_/s/ Steve Ells____________________________
Steve Ells

 

[Signature Page to Executive Chairman Agreement]


 

Exhibit A
Certain Definitions

For purposes of this Agreement, the following terms shall have the meanings ascribed to them below.

Cause” means:

(a)the Executive’s willful failure to substantially perform his duties (other than as a result of physical or mental illness or injury);

(b)the Executive’s willful misconduct or gross negligence, which is materially injurious to the Company;

(c)a breach by the Executive of his fiduciary duty or duty of loyalty to the Company;

(d)the Executive’s conviction of or plea of guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent) or a serious crime involving moral turpitude;

(e)the Executive’s unauthorized disclosure of Confidential Information; or

(f)the Executive’s material breach of any material obligation under this Agreement or any other written agreement between the Executive and the Company.

For purposes of this provision, no act or failure to act on the part of the Executive shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company.  Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company.

Termination of the Executive’s employment shall not be deemed to be for Cause unless and until the Company delivers to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the Board (after reasonable written notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that the Executive has engaged in the conduct described in any of clauses (a)–(f) above.  Except for a failure, breach, or refusal which, by its nature, cannot reasonably be expected to be cured, the Executive shall have 30 days from the delivery of written notice by the Company within which to cure any acts constituting Cause.

Good Reason” means the occurrence of any of the following, in each case, during the Executive’s employment without the Executive’s written consent:

(a)a decrease in the Executive’s Base Salary or Annual Bonus opportunity, other than a decrease in Annual Bonus opportunity that applies to all senior executives of the Company;  

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(b)a material diminution in the Executive’s duties and responsibilities as Executive Chairman (other than temporarily while the Executive is physically or mentally incapacitated), or an adverse change in the reporting structure applicable to the Executive;

(c)a relocation of the Executive’s primary work location more than 30 miles from the Executive’s primary work location on the date hereof;

(d)any material breach by the Company of any material provision of this Agreement or any material provision of any other agreement between the Executive and the Company;

(e)the Company’s failure to nominate the Executive for election to the Board; or

(f)failure of any successor to the Company to assume this Agreement, except where such assumption occurs by operation of law;

provided that, within 30 days following the occurrence of any of the events set forth in clauses (a)–(f), the Executive shall have delivered written notice to the Company of his intention to terminate his employment with Good Reason, which notice specifies in reasonable detail the circumstances claimed to give rise to the Executive’s right to terminate employment with Good Reason, and the Company shall not have cured such circumstances within 30 days following the Company’s receipt of such notice.

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12117_Exhibit 991_Press Release

Exhibit 99.1

 

 

 

Picture 10

Media Contact:

Investor Relations:

Chris Arnold

Mark Alexee

303.222.5912

303.605.1042

Carnold@Chipotle.com

Malexee@Chipotle.com

 



CHIPOTLE BEGINS SEARCH FOR NEW CEO



Current Chairman, CEO and Founder Steve Ells to Become Executive Chairman

with Primary Focus on Innovation Upon Completion of Search



Denver -- November 29, 2017 -- Chipotle Mexican Grill (NYSE: CMG) today announced that Steve Ells, chairman and CEO – and the founder of the company in 1993 – will become executive chairman following the completion of a search to identify a new CEO. The Board has formed a search committee comprised of Directors Robin Hickenlooper and Ali Namvar, as well as Ells, to identify a new leader with demonstrated turnaround expertise to help address the challenges facing the company, improve execution, build customer trust, and drive sales. 



“I am incredibly proud of Chipotle and our people – and grateful to our loyal customers – and while we are continuing to make progress, it is clear that we need to move faster to make improvements,” said Ells. “Simply put, we need to execute better to ensure our future success. The Board and I are committed to bringing in an experienced leader with a passion for driving excellence across every aspect of our business, including the customer experience, operations, marketing, technology, food safety, and training.”



Added Ells, “Bringing in a new CEO is the right thing to do for all our stakeholders. It will allow me to focus on my strengths, which include bringing innovation to the way we source and prepare our food. It will ultimately improve our ability to provide our guests with delicious food that is prepared with high quality ingredients that are raised responsibly and served in a way that is accessible to everyone. I am confident that this will allow us to deliver value for our shareholders, and provide rewarding opportunities for our employees. Chipotle has vast unrealized potential. As we work hard to restore our brand, I believe we can capitalize on opportunities, including in areas such as the digital experience, menu innovation, delivery, catering, and domestic and international expansion, to deliver significant growth.”



Chipotle lead independent director Neil W. Flanzraich said, “Steve is a visionary leader and one of the most successful restauranteurs in history, having grown Chipotle from a single restaurant in Colorado to more than 2,350 restaurants today. Steve made the decision, and the Board agreed, that now is the right time to identify a new CEO who can reinvigorate the brand and help the company achieve its potential. We are committed to recruiting a world-class CEO for this incredible opportunity.”



The Board has retained the services of leading executive recruitment firm Spencer Stuart to assist in the search for a new CEO. 



ABOUT CHIPOTLE

Steve Ells, founder, chairman and CEO, started Chipotle with the idea that food served fast did not have to be a typical fast food experience. Today, Chipotle continues to offer a focused menu of burritos, tacos, burrito bowls, and salads made from fresh, high-quality raw ingredients, prepared using classic cooking methods and


 

 

 

 

 

Media Contact:

Investor Relations:

Chris Arnold

Mark Alexee

303.222.5912

303.605.1042

Carnold@Chipotle.com

Malexee@Chipotle.com

 

served in an interactive style allowing people to get exactly what they want. Chipotle seeks out extraordinary ingredients that are not only fresh, but that are raised responsibly, with respect for the animals, land, and

people who produce them. Chipotle prepares its food using without the use of added colors, flavors or preservatives typically found in fast food. Chipotle opened with a single restaurant in Denver in 1993 and now operates more than 2,350 restaurants. For more information, visit Chipotle.com.



Forward-Looking Statements

Certain statements in this press release, including statements regarding the CEO search, future plans for Chipotle, and expressions of confidence in Chipotle’s future, are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. We use words such as “anticipate”, “believe”, “could”, “continue”, “should”, “estimate”, “expect”, “intend”, “may”, “predict”, “project”, “target”, and similar terms and phrases, including references to assumptions, to identify forward-looking statements. The forward-looking statements in this press release are based on information available to us as of the date any such statements are made and we assume no obligation to update these forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include, but are not limited to, the following: risks associated with management transitions, including potential difficulties in implementing new strategies and tactics developed by a new leadership team, and possible disruptions in the event of further changes in the management team; the uncertainty of our ability to achieve expected levels of comparable restaurant sales due to factors such as changes in consumers’ perceptions of our brand, including as a result of food-borne illness incidents, the impact of competition, including from sources outside the restaurant industry, decreased overall consumer spending, or our possible inability to increase menu prices or realize the benefits of menu price increases; the risk of food-borne illnesses and other health concerns about our food or dining out generally; factors that could affect our ability to achieve and manage our planned expansion, such as the availability of a sufficient number of suitable new restaurant sites and our ability to identify, hire and train qualified employees to operate restaurants to our high standards; the performance of new restaurants and their impact on existing restaurant sales; increases in the cost of food ingredients and other key supplies or higher food costs due to changes in supply chain protocols; the potential for increased labor costs or difficulty retaining qualified employees, including as a result of market pressures, enhanced food safety procedures in our restaurants, or new regulatory requirements; risks related to our marketing and advertising strategies, which may not be successful and may expose us to liabilities; security risks associated with the acceptance of electronic payment cards or electronic storage and processing of confidential customer or employee information; risks relating to our expansion into new markets; the impact of federal, state or local government regulations relating to our employees, our restaurant design, or the sale of food or alcoholic beverages; risks associated with our Food With Integrity philosophy, including supply shortages and potential liabilities from advertising claims and other marketing activities related to Food With Integrity; risks relating to litigation, including possible governmental actions related to food-borne illness incidents, as well as class action litigation regarding employment laws, advertising claims or other matters; risks relating to our insurance coverage and self-insurance; our dependence on key personnel; risks regarding our ability to protect our brand and reputation; risks associated with our ability to effectively manage our growth; and other risk factors described from time to time in our SEC reports, including our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, all of which are available on the investor relations page of our website at ir.chipotle.com.


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