5. Shareholders' Equity (Continued)
The Series B convertible preferred stock is convertible into common stock based on the original purchase price of such series divided by the conversion
price at the option of the holder or upon an initial public offering of the Company meeting certain conditions. The initial conversion price equals the per share price purchase price of $2.01. The
conversion price is subject to adjustment under provisions designated to protect against dilution as set forth in the Company's Certificate of Incorporation but does not include a beneficial
conversion feature. As of December 31, 2004, the Series B convertible preferred shares could be converted into 8,034,009 shares of common stock. The Series B convertible preferred
stock has a liquidation preference of $2.01 per share plus 8% per annum from the closing date and any accrued, unpaid dividends. The liquidation preference was $23,434, $25,309 and $27,334 at
December 31, 2002, 2003 and 2004 respectively.
of Series B convertible preferred stock are entitled to vote on matters submitted to a vote of the stockholders of the Company and would receive a vote equal to the number
of common shares the holder would be entitled to if the respective preferred share were converted to common stock. If at any time, the Company pays dividends to the common shareholders, the Company
shall pay the holders of Series B convertible preferred stock the dividends each holder would receive had each holder converted its preferred stock into common stock as of the date of the
dividend. No dividends have been declared as of December 31, 2004.
The Series C and Series D junior convertible preferred stock have similar terms to those described above for the Series B convertible preferred stock, except for the
liquidation preferences which are subordinate to the Series B convertible preferred stock. The Series C junior convertible preferred stock has a liquidation preference ($7,890 at
December 31, 2002, 2003 and 2004) of $2.01 per share plus any accrued, unpaid dividends and was convertible into 3,925,125 shares of common stock as of December 31, 2004. The
Series D junior convertible preferred stock has a liquidation preference ($20,000 at December 31, 2002, 2003 and 2004) of $2.35 per share and any accrued, unpaid dividends and was
convertible into 8,510,639 shares of common stock as of December 31, 2004. No dividends have been declared.
6. Stock Based Compensation
In 2002, the Company adopted the Chipotle Executive Stock Option Plan (the Option Plan). Under the plan, 3,000,000 shares of common stock have been reserved for
issuance to eligible employees. The Option Plan is administered by the Board of Directors, which has the authority to select the individuals to whom awards will be granted and to determine when the
options are to be granted, the number of shares to be covered by each award, the vesting schedule and all other terms and conditions of the awards. The exercise price for options granted under the
Option Plan cannot be less than fair market value at the date of grant. The options granted vest three years from the date of grant and expire after five years and six months.