Chipotle 2005 Annual Report Download - page 24

We’re controlled by McDonald’s, whose interests may conflict with those of our investors.
Currently, McDonald’s beneficially owns no shares of our class A common stock, but owns about
90% of our outstanding class B common stock, representing 87% of the combined voting power of our
outstanding stock and 65% of the economic interest in our outstanding common stock. Accordingly, as
it has since 1998 when we became its subsidiary, McDonald’s continues to exercise significant influence
over our business policies and affairs, including the composition of our board of directors and any
action requiring the approval of our shareholders, including the adoption of amendments to our
certificate of incorporation, the issuance of additional shares of equity securities, the payment of
dividends and the approval of mergers or a sale of substantially all of our assets. The concentration of
ownership may also make some transactions, including mergers or other changes in control, more
difficult or impossible without the support of McDonald’s. McDonald’s interests may conflict with your
interests as a shareholder.
Conflicts of interest between McDonald’s and us could be resolved in a manner unfavorable to us.
Various conflicts of interest between McDonald’s and us could arise. Many of our officers own
stock in McDonald’s, in some cases it could be more than the amount of Chipotle common stock they
own. In addition, one of our directors, Mats Lederhausen, is Managing Director of our controlling
shareholder, McDonald’s Ventures, LLC. Ownership interests of directors or officers of McDonald’s in
the common stock of Chipotle, or a person’s service as either a director or officer of both companies,
could create or appear to create potential conflicts of interest when those directors and officers are
faced with decisions that could have different implications for McDonald’s and Chipotle. These
decisions could, for example, relate to:
• disagreement over corporate opportunities;
• competition between us and McDonald’s;
• management stock ownership;
• employee retention or recruiting;
• our dividend policy; and
• the services and arrangements from which Chipotle benefits as a result of its relationship with
McDonald’s.
Potential conflicts of interest could also arise if we enter into any new commercial arrangements
with McDonald’s in the future. Our directors and officers who have interests in both McDonald’s and
us may also face conflicts of interest with regard to the allocation of their time between McDonald’s
and Chipotle. Our restated certificate of incorporation includes the following provisions relating to
corporate opportunities of us and McDonald’s, which provisions will remain in effect for so long as
McDonald’s owns at least 5% of our outstanding common stock or at least one person who is a
director or officer of us is also a director or officer of McDonald’s:
• McDonald’s will not have a duty to refrain from engaging directly or indirectly in the same or
similar business activities or lines of business as us, and neither McDonald’s nor any of its
officers or directors will be liable to us or our shareholders for breach of any duty by reason of
any such activities.
• If McDonald’s acquires knowledge of a potential transaction or matter that may be a corporate
opportunity for McDonald’s and us, McDonald’s will have no duty to communicate or offer such
corporate opportunity to us and will not be liable to us or our shareholders for breach of any
duty as our shareholder if McDonald’s pursues or acquires such corporate opportunity for itself,
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