PROPOSAL NO. 3:
APPROVAL OF 2019 STOCK INCENTIVE PLAN
At the Annual
Meeting, we will request that our stockholders vote in favor of approving the MoSys 2019 Stock Incentive Plan, or the 2019 Plan, which was adopted by our board of directors on June 25, 2019. Under the proposed 2019 Plan, 3,650,000 shares
of common stock may be issued or made subject to awards. If approved by our stockholders, the 2019 Plan will replace our Amended and Restated 2010 Equity Incentive Plan, or the 2010 Plan, which, by its terms, prevents us from issuing awards
beginning in May 2020. Our board of directors has determined that if the stockholders approve the 2019 Plan at the Annual Meeting, our board of directors will terminate the 2010 Plan immediately after the Annual Meeting. As a result, no future
grants of awards will be made under the 2010 Plan, and the remaining balance of the shares available for grant under that plan will be canceled. However, the 2010 Plan will continue to govern prior awards, and the issuance of the shares subject to
such awards, until all awards granted under the 2010 Plan have been exercised, forfeited, canceled, expired or otherwise terminated in accordance with the terms of such awards. As applicable, figures for reserved shares and shares subject to
outstanding awards presented in this section have been adjusted to reflect the
1-for-10
reverse stock split effected in February 2017.
As of May 31, 2019, under the 2010 Plan, we had 628,882 shares currently available for issuance with respect to future awards, which
represented approximately 1.5% of our shares of common stock outstanding and approximately 0.8% of our fully diluted shares outstanding, which we have calculated as the sum of (1) total shares of common stock outstanding, (2) shares of
common stock subject to existing
stock-based
compensation awards, (3) shares of common stock exercisable under
pre-funded
warrants and common stock warrants and
(4) shares of common stock issuable upon conversion of $2,749,092 par amount of our 10% senior secured convertible notes due August 15, 2023. The 2010 Plan also provides for an annual increase of 50,000 shares on January 1 of each
year, and, under this provision, an additional 50,000 shares would have been added to the 2010 Plan on January 1, 2020. Considering the loss of unused shares under the 2010 Plan, the approval of the 2019 Plan will have the net effect of
increasing the number of shares available for issuance under new awards by approximately 2,971,118 shares, which represents 6.9% and 3.1% of total shares outstanding and fully diluted shares outstanding, respectively.
In addition, as of May 31, 2019, under the 2010 Plan, we had 3,776,479 shares of common stock subject to existing
stock-based
compensation awards, which represented approximately 8.7% of our shares of common stock outstanding and approximately 3.9% of our fully diluted shares outstanding. The shares of common stock subject to
existing
stock-based
compensation awards consisted of the following at May 31, 2019:
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1,628,479 shares subject to outstanding stock options with a weighted average exercise price of $1.00 per share
and of which 280,204 were exercisable and the remaining 1,348,275 vest between now and February 2022; and
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2,148,000 shares subject to outstanding restricted stock unit awards, which vest between August 2019 and May
2022.
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If the 2019 Plan is approved by the stockholders, the total shares subject to existing
stock-based
compensation awards shares and available for issuance with respect to future awards will be 7,426,479, which represents 17.2% of common stock outstanding and approximately 7.7% of our fully diluted
shares outstanding. We recognize the need to balance stockholder concerns over the potentially dilutive effects of the increased number of authorized shares under the proposed 2019 Plan with our ability to attract, motivate, reward and retain our
employees and
non-employee
directors, who are critical to driving our business plan and increasing stockholder value. We believe the dilutive effect of our equity awards has been reasonable and consistent with
these essential requirements. We are managing our equity awards closely, and intend to continue doing so. For
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