Chipotle 2013 Annual Report Download - page 98

type of award permitted under the plan. The 2011 Stock Incentive Plan contains a fungible share reserve feature.
Under this feature, a distinction is made between the number of shares in the reserve attributable to stock options
and stock appreciation rights and Full Value Awards. Full Value Awards initially count as 2 shares against the
share reserve whereas stock option and stock appreciation right grants count as only 1 share. We are also asking
shareholders to approve that shares withheld by us to satisfy the tax withholding obligations on Full Value
Awards not count against the share reserve.
Expanded Eligibility
Currently, the 2011 Stock Incentive Plan only allows for the grant of equity awards to employees and
non-employee directors. From time to time it may be in Chipotle’s best interests to grant equity awards to other
persons. Chipotle is requesting that shareholders approve the expansion of eligible persons who may receive
equity awards under the 2011 Stock Incentive Plan to include consultants or advisors to Chipotle or any of its
subsidiaries who may be offered securities registrable on Form S-8, SEC Rule 701 or otherwise, and prospective
employees, directors, officers, consultants or advisors who have accepted offers of employment or consultancy
from Chipotle or its subsidiaries.
Material Terms of Performance Goals
The 2011 Stock Incentive Plan has been structured in such a manner so that the Compensation Committee
can, in its sole discretion, elect to grant equity awards that satisfy the requirements of performance-based
compensation within the meaning of Section 162(m) of the Internal Revenue Code. In general, under
Section 162(m), in order for Chipotle to be able to deduct compensation in excess of $1 million paid in any one
year to either of our Co-CEOs or any of our other named executive officers (other than our CFO or any officer
who is not subject to U.S. income tax), such compensation must qualify as performance-based. One of the
requirements of performance-based compensation for purposes of Section 162(m) is that the material terms of the
performance goals under which compensation may be paid must be disclosed to and approved by shareholders.
For purposes of Section 162(m), the material terms include the employees eligible to receive compensation, a
description of the business criteria on which the performance goal is based, and the maximum amount of
compensation that can be paid to an employee under the performance goal. Each of these terms as proposed to
apply for grants of equity awards on and after the 2014 Annual Meeting under the amended and restated 2011
Stock Incentive Plan is discussed below. Shareholder approval of this proposal will constitute approval of the
material terms of the 2011 Stock Incentive Plan as amended and restated for purposes of Section 162(m) with
respect to grants made after the 2014 Annual Meeting. However, nothing in this proposal precludes Chipotle or
the Compensation Committee from granting equity awards that do not qualify for tax deductibility under
Section 162(m), nor is there any guarantee that equity awards intended to qualify for tax deductibility under
Section 162(m) will ultimately be viewed as so qualifying by the Internal Revenue Service.
Administrative Changes
The amendment and restatement to the 2011 Stock Incentive Plan provides for administrative changes and
clarifications. With respect to stock options and stock appreciation rights, our Compensation Committee will be
authorized to establish rules for automatic exercise at the end of the award’s exercise period, to toll the exercise
period under certain circumstances, to impose minimum amounts for partial exercises and to determine the fair
market value of our stock from alternative valuation methods recognized by IRS regulations issued under
Section 409A of the Internal Revenue Code. Clarifications have been made that dividend equivalents are not to
be paid prior to meeting performance criteria on Full Value Awards, a change in control can occur in one or a
series of related transactions and payments of nonqualified deferred compensation shall not be made on account
of a change in control if doing so would violate Section 409A of the Internal Revenue Code. The Compensation
Committee is also authorized to establish special rules in order to comply with non-U.S. legal and tax law
requirements with respect to grants of equity awards outside the United States. Default rules have also been
included for tax compliance.
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Proxy Statement