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2016 Plan as of such date, taking into account the proposed increase described herein, the maximum aggregate market value of the ordinary shares that could potentially be issued under the Second
A&R 2016 Plan is US$771,008,181. The ordinary shares underlying any awards under the Second A&R 2016 Plan or the 2011 Plan that are forfeited, cancelled, held back upon exercise or settlement to
satisfy the exercise price or tax withholding, reacquired prior to vesting, or are otherwise terminated (other than by exercise) are added back to the ordinary shares available for issuance under the
Second A&R 2016 Plan.
Rationale for Share Increase
Given our increased headcount and our continued efforts to develop and commercialize our product portfolio, which will require further expansion
of our organizational structure, the share increase contemplated by the Second A&R 2016 Plan is critical to our ongoing effort to build shareholder value. We currently anticipate that we may exhaust
all the shares available for issuance under our 2016 Plan by mid-2019 if the Second A&R 2016 Plan is not approved (and such shares may be exhausted sooner if we continue to increase the size of our
organization, including increases in headcount).
August 2018, in accordance with the HK Listing Rules, we removed the "evergreen" feature that provided for an automatic annual increase of 5% of our outstanding ordinary shares to the
number of shares reserved under the 2016 Plan. The increase of 38,553,159 shares, or 5% of our outstanding shares as of September 30, 2018, to the aggregate number of shares contemplated by the
Second A&R 2016 Plan is intended to approximate the 5% increase that would have been added on January 1, 2019, had the evergreen remained in place. As the "evergreen" provision was removed,
there will not be an automatic increase in the number of shares reserved under the 2016 Plan on January 1, 2019 or in future years.
equity incentive program is broad-based and equity incentive awards are also an important component of our executive and non-executive employees' compensation. We operate in an
industry and in geographies where there is an incredibly competitive market for the hiring and retention of a talented workforce, which we believe is critical for our success. Our Compensation
Committee and Board of Directors believe that we must continue to offer a competitive equity compensation program in order to attract, retain and motivate the talented and qualified employees
necessary for our continued growth and success.
attempt to manage our long-term shareholder dilution by limiting the number of equity incentive awards granted annually. The Compensation Committee carefully monitors our annual net
burn rate, total dilution, and equity expense in order to maximize shareholder value by granting only the appropriate number of equity incentive awards that it believes is necessary to attract,
reward, and retain employees. Our "burn rate", as detailed below, has been higher than some of our peers in recent years due to the tremendous growth in our employee workforce, which increased from
approximately 321 employees in 2016 to over 1,700 employees today. Our compensation philosophy reflects broad-based eligibility for equity incentive awards, and we grant awards to substantially all of
our employees. By doing so, we link employee interests with shareholder interests throughout the organization and motivate our employees to act as owners of the business.
Since the beginning of 2016, our employee workforce has increased by approximately 885%, from 192 employees at December 31, 2015 to more
than 1,700 employees as of September 30, 2018. Given that we grant equity awards to substantially all of our employees, this has substantially stressed the