PROPOSAL THREE: APPROVAL OF AN AMENDMENT TO THE COMPANY’S 2016 INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES ISSUABLE BY 3,000,000
Introduction
We are asking our stockholders to approve an amendment to the Mustang Bio, Inc. 2016 Incentive Plan (the “Plan”). Our Plan is the only plan under which equity-based compensation may currently be awarded to our executive officers and employees. In order to enable us to continue to offer meaningful equity-based incentives, as well as cash-based incentives, to our employees, officers, directors and consultants, our board of directors believes that it is both necessary and appropriate to increase the number of shares of our common stock available for these purposes. As a result, on April 30, 2018, the Board of Directors adopted, subject to stockholder approval at the Annual Meeting, an amendment to add 3,000,000 shares to the Plan.
If the amendment to the Plan is approved by our stockholders at the Annual Meeting, it will become effective on the date of the Annual Meeting. If the amendment is not approved by our stockholders, then the Plan will remain in effect as it presently exists.
Background and Number of Shares Requested
In setting the number of proposed shares issuable under our Plan, the Board considered a number of factors, including historical share usage and future share needs. The following are several factors that you should consider in evaluating the proposal to increase the share reserve under the Plan:
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The Plan originally included authorization for the issuance of 2,000,000 shares of common stock or other securities exercisable into common stock. As of the record date, there were 169,325 shares of our common stock remaining available for the grant of equity awards under the Plan. The additional 3,000,000 shares requested under the Plan, together with the remaining shares under the Plan, represent the shares the Company anticipates needing for the next year under normal circumstances.
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Although we must manage our share reserve under the possibility that performance awards will be earned at the maximum level, this will only occur if we achieve the maximum performance under each metric in each award, which is not expected to be the case. Our actual share usage will also vary from our estimate based upon changes in market grant values, changes in the number of recipients, changes in our stock price, changes in the structure of our long-term incentive program, changes in our dividend rate and forfeitures of outstanding awards. We believe that the proposed share reserve reflects an appropriate balance between our desire to allow maximum flexibility in a competitive labor market and stockholder interests of limiting dilution.
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Our Amended and Restated Certificate of Incorporation authorizes the issuance of (i) fifty million (50,000,000) shares of Common Stock, with $0.0001 par value, of which one million (1,000,000) shares are designated as “Class A Common Stock” and the remainder are undesignated Common Stock, and (ii) 2,000,000 shares of Preferred Stock, 250,000 of which are designated as Class A Preferred Stock and the remainder are undesignated Preferred Stock. As of our record date, there were 26,104,885 shares of common stock and 1,000,000 shares of Class A common stock issued and outstanding, and the closing price of a share of our common stock as of that date was $10.19.
Summary of the 2016 Incentive Plan
The material terms of the Plan are described below. The following summary is qualified in its entirety by reference to the complete text of the Plan which is provided with this proxy statement as Appendix A.
Purpose
. The purpose of Plan is to promote the success, and enhance the value, of Mustang Bio, Inc. by linking the personal interests of employees, officers, directors and consultants of the Company or any its Affiliates (defined below) to those of Company stockholders and by providing such persons with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of employees, officers, directors and consultants upon